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> should anyone take cryptocurrency seriously? To me, the only purpose of it is to make money. It's the stock market, but with less rules, and it's 24/7. It's

> should anyone take cryptocurrency seriously? To me, the only purpose of it is to make money. It's the stock market, but with less rules, and it's 24/7. It's not the stock market at all. Not even close. The stock market is a system that enables the buying and selling of shares in productive business - businesses that provide goods and services, that generate revenue and (ideally) profit. As a shareholder you own a fraction of that production, the assets, the profit. That's ultimately what determines the value of a stock over the long-term, its ability to generate sales and profit (and of course the bounds on valuations can swing widely over that time, multiples can contract and expand). You maybe see crypto markets and think: gambling; and so that's where you're making an incorrect connection to stock markets. The stock market, if you're doing it right, is absolutely not gambling. Stocks are supported by the productive capacity of the business in question, ultimately; crypto doesn't work that way (at least not at present, maybe one will in the future). This is why Bitcoin has dramatically more in common with gold than eg stocks (gold isn't a producing asset, it's not going to spit off a dividend from profit every year). The reason an entity like Berkshire Hathaway or Microsoft can so astoundingly trounce gold in generating returns over the long-term, is precisely because they're generative entities and gold is not. There's no compounding action to gold from the consequence of production growth (a lot more production is generally bad for the holders of eg gold or Bitcoin, as their value is based in part on scarcity), it's a hedging device primarily. Whereas if it's 1981 and Microsoft generates $3m in profit, they can plausibly reinvest profit and maybe get $5m the next year by hiring more engineers, launching new products, more advertising, etc. Rolling that expansion process forward is how you end up with $50m in profit instead of $3m. Gold, as with Bitcoin, does not work like that at all, there's no compounding mechanism. It's why gold sucks as an investment compared to eg the S&P index over time; although it's perfectly reasonable as an inflation hedge for a fraction of your assets, if one so desires to diversify.

eric_cc 5y ago
Bitcoin is attempting to BE value better than fiat. There is a possibility that we eventually achieve a bitcoin circular economy. In such a scenario, Bitcoin does not go up or down against fiat because there will be no demand for fiat.
- adventured 5y ago
  There's no potential scenario where that happens (only scenarios with no potential to occur in reality). Governments are not going to give up the critical aspects of economic control and self-determination that come from national currencies, generally. They could already do that with gold, and they overwhelmingly have had absolutely no desire to do it (for obvious reasons). If Bitcoin gets a lot larger and a lot more stable you may see an occasional small nation, in the midst of economic crisis, peg itself to Bitcoin; whenever the confidence crisis wanes, they'll promptly unpeg to regain flexibility and control. The extreme majority of nations will strongly prefer to control their own destiny in terms of currency and retain the vast flexibility and power that comes with that control. One might as well expect nations to give up militaries in the name of peace. That's a similar fantasy outcome that no doubt many millions of people believe could possibly happen (it can't).
  - eric_cc 5y ago
    > There's no potential scenario where that happens Maybe not in your lifetime. But you’re not practicing long-term thinking here. Global, trustless, decentralized networks allow humanity to fundamentally reorganize. Physical, nation-state borders are ignored by such networks. Cooperation for physical resources still does matter but that may also be lessened by technological leaps in sectors like energy and food production. Humanity, if lucky enough to not be oppressed by ultra powerful governments, will likely render federal/central governments much less important and thus much less powerful. Simply put, the value proposition of central governments is now on the decline.
    - nradov 5y ago
      There is no potential scenario where that happens even long term. People have to physically live somewhere. Nation states continue to hold a pretty effective monopoly on violence. They can prevent you from entering, or put you in prison, or seize your assets by force. Global, trustless, decentralized networks can't control government security forces with guns. The value proposition of central governments will continue to grow, not in the sense of people actually liking them but simply because there is no alternative. That is reality and no amount of techo-utopian fantasizing will change it.
adhesive_wombat 5y ago
> The stock market is a system that enables the buying and selling of shares in productive business Ostensibly, yes. But in practice stocks are often pretty disconnected from business realities by algorithmic trading and high-frequency trading. Even manual trades made on a snap basis like a mass sales on a company posting a slightly less than stellar quarter on the back of a proven long-term, solid, growing business: is that company really "worth" 10% less today? Especially since that "value" is then often recouped even before the next quarterly report. Most companies can't even explain many of their own stock price moves.
- adventured 5y ago
  > Ostensibly, yes. But in practice stocks are often pretty disconnected from business realities by algorithmic trading and high-frequency trading. No they're not. Only short-term to a limited extent and only to an extreme in very rare cases. High frequency trading is a laughable triviality to a long-term investor, entirely meaningless. It only matters if you're trading a lot of volume and they're swiping some of your profit by moving faster. I don't care if they take 0.1% of the present value of my trade if I'm buying a stock to hold for years (or if I'm buying at a steep discount to what I value the company at). I buy Teladoc at $61.22 and I plan to hold for years - do I care if HFT swipes $0.02 of that trade? No. I don't care if it swipes $0.20 of that trade in fact. If you're doing it right, if you're calculating the margin for error in the purchase correctly in terms of the value you're buying, you can very easily disregard the margin that that $0.20 represents. That is to say, if a stock isn't a good buy at $61.22, it's not a good buy at $61 either. There's no scenario where I'm going to care about HFT. I also don't base my purchases on what the market (other investors, whether algorithmic or not) thinks a stock is worth. I make my own determination of the worth of the business, its potential, and from there I decide if the current price matches up with the value I think the business represents. As such algorithmic manipulation largely doesn't matter to me, I don't care if they run a stock up or down 5% tomorrow or next week, it doesn't alter my evaluation of what the business is worth; although if they want to crash a good stock by 70% in a few weeks because some people panic and hit the sell button, prompting a cascade of selling, due to something like Covid, then I'm a buyer, I'll happily take advantage of their mistake. > Most companies can't even explain many of their own stock price moves. Again, you're talking about shorter-term volatility, spikes, blips, temporary emotional swings up or down. As a long-term value investor, I don't care much about short-term volatility and will never have to (other than if it happens to provide a rare, freakishly outsized, emotion-based buying or selling opportunity to take advantage of; as with the Covid crash). As an owner, shorter-term concerns, swings, are largely meaningless to me. As they should be to most investors. Why do I care if a company can explain stray volatile stock price movements? That's not the business I want them to be specializing in. I have no need of their explanations unless it's a critical legal matter. Read their quarterly reports, figure out their business and its long-term trajectory - that's what you're properly buying, not the explanation by public relations on the daily movement of the stock.
everfree 5y ago
> Stocks are supported by the productive capacity of the business in question, ultimately; crypto doesn't work that way (at least not at present, maybe one will in the future). Ethereum's revenue is the transaction fees it collects for people to use the network. Its expenses are the rewards it pays out to miners and stakers. Its profit is the difference between the collected fees and rewarded fees. This difference between collected fees and rewarded fees is "burned", or ceases to exist. The process shares some similarities with stock buybacks.
- huijzer 5y ago
  But is there also a regulated annual report? Filled with regulated numbers and audited by independent companies?

eric_cc 5y ago

Bitcoin is attempting to BE value better than fiat. There is a possibility that we eventually achieve a bitcoin circular economy. In such a scenario, Bitcoin does not go up or down against fiat because there will be no demand for fiat.

adventured 5y ago
There's no potential scenario where that happens (only scenarios with no potential to occur in reality). Governments are not going to give up the critical aspects of economic control and self-determination that come from national currencies, generally. They could already do that with gold, and they overwhelmingly have had absolutely no desire to do it (for obvious reasons). If Bitcoin gets a lot larger and a lot more stable you may see an occasional small nation, in the midst of economic crisis, peg itself to Bitcoin; whenever the confidence crisis wanes, they'll promptly unpeg to regain flexibility and control. The extreme majority of nations will strongly prefer to control their own destiny in terms of currency and retain the vast flexibility and power that comes with that control. One might as well expect nations to give up militaries in the name of peace. That's a similar fantasy outcome that no doubt many millions of people believe could possibly happen (it can't).
- eric_cc 5y ago
  > There's no potential scenario where that happens Maybe not in your lifetime. But you’re not practicing long-term thinking here. Global, trustless, decentralized networks allow humanity to fundamentally reorganize. Physical, nation-state borders are ignored by such networks. Cooperation for physical resources still does matter but that may also be lessened by technological leaps in sectors like energy and food production. Humanity, if lucky enough to not be oppressed by ultra powerful governments, will likely render federal/central governments much less important and thus much less powerful. Simply put, the value proposition of central governments is now on the decline.
  - nradov 5y ago
    There is no potential scenario where that happens even long term. People have to physically live somewhere. Nation states continue to hold a pretty effective monopoly on violence. They can prevent you from entering, or put you in prison, or seize your assets by force. Global, trustless, decentralized networks can't control government security forces with guns. The value proposition of central governments will continue to grow, not in the sense of people actually liking them but simply because there is no alternative. That is reality and no amount of techo-utopian fantasizing will change it.

adhesive_wombat 5y ago

> The stock market is a system that enables the buying and selling of shares in productive business Ostensibly, yes. But in practice stocks are often pretty disconnected from business realities by algorithmic trading and high-frequency trading. Even manual trades made on a snap basis like a mass sales on a company posting a slightly less than stellar quarter on the back of a proven long-term, solid, growing business: is that company really "worth" 10% less today? Especially since that "value" is then often recouped even before the next quarterly report. Most companies can't even explain many of their own stock price moves.

adventured 5y ago
> Ostensibly, yes. But in practice stocks are often pretty disconnected from business realities by algorithmic trading and high-frequency trading. No they're not. Only short-term to a limited extent and only to an extreme in very rare cases. High frequency trading is a laughable triviality to a long-term investor, entirely meaningless. It only matters if you're trading a lot of volume and they're swiping some of your profit by moving faster. I don't care if they take 0.1% of the present value of my trade if I'm buying a stock to hold for years (or if I'm buying at a steep discount to what I value the company at). I buy Teladoc at $61.22 and I plan to hold for years - do I care if HFT swipes $0.02 of that trade? No. I don't care if it swipes $0.20 of that trade in fact. If you're doing it right, if you're calculating the margin for error in the purchase correctly in terms of the value you're buying, you can very easily disregard the margin that that $0.20 represents. That is to say, if a stock isn't a good buy at $61.22, it's not a good buy at $61 either. There's no scenario where I'm going to care about HFT. I also don't base my purchases on what the market (other investors, whether algorithmic or not) thinks a stock is worth. I make my own determination of the worth of the business, its potential, and from there I decide if the current price matches up with the value I think the business represents. As such algorithmic manipulation largely doesn't matter to me, I don't care if they run a stock up or down 5% tomorrow or next week, it doesn't alter my evaluation of what the business is worth; although if they want to crash a good stock by 70% in a few weeks because some people panic and hit the sell button, prompting a cascade of selling, due to something like Covid, then I'm a buyer, I'll happily take advantage of their mistake. > Most companies can't even explain many of their own stock price moves. Again, you're talking about shorter-term volatility, spikes, blips, temporary emotional swings up or down. As a long-term value investor, I don't care much about short-term volatility and will never have to (other than if it happens to provide a rare, freakishly outsized, emotion-based buying or selling opportunity to take advantage of; as with the Covid crash). As an owner, shorter-term concerns, swings, are largely meaningless to me. As they should be to most investors. Why do I care if a company can explain stray volatile stock price movements? That's not the business I want them to be specializing in. I have no need of their explanations unless it's a critical legal matter. Read their quarterly reports, figure out their business and its long-term trajectory - that's what you're properly buying, not the explanation by public relations on the daily movement of the stock.

everfree 5y ago

> Stocks are supported by the productive capacity of the business in question, ultimately; crypto doesn't work that way (at least not at present, maybe one will in the future). Ethereum's revenue is the transaction fees it collects for people to use the network. Its expenses are the rewards it pays out to miners and stakers. Its profit is the difference between the collected fees and rewarded fees. This difference between collected fees and rewarded fees is "burned", or ceases to exist. The process shares some similarities with stock buybacks.

huijzer 5y ago
But is there also a regulated annual report? Filled with regulated numbers and audited by independent companies?