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The physicality of an underlying asset isn’t what makes people trade stocks, commodities, options or anything else. If you’re day trading soybean futures, it’s
by CapmCrackaWaka 4y ago
The physicality of an underlying asset isn’t what makes people trade stocks, commodities, options or anything else. If you’re day trading soybean futures, it’s not the ideal of soybeans that wakes you up in the morning. It’s the money you could make. Bitcoin is a unique speculative asset because it’s value is based entirely on human interest, nothing else. I think crypto is here to stay as a speculative asset class. Where it’s long term price goes, I have no idea.
- vorpalhex 4y agoThe physicality of the underlying asset does matter though. Soybeans in and of themselves have some fundamental value (food, feed) the same way oil does (fuel, plastics, etc). There is no underlying value in having answers to a random cryptographic problem attested to you.
- CapmCrackaWaka 4y agoSoybeans (and most other assets) have inherent value which gives them a price minimum, but not necessarily a price maximum. Crypto has no price minimum (0 I guess, at which point returns are incalculable) and no price maximum because it has no inherent value. My entire point is that crypto is a unique asset class, so I think it’s here to stay as long as there are people willing to speculate.
- shuntress 4y agoSoybeans exist and people consume them. Obviously you can speculate on whether the price of soy beans will go up or down but they will always (excluding, of course, obviously unreasonable scenarios) have some value because the soybeans themselves have some value. The producers and consumers of soybeans are extremely likely to continue producing and consuming soybeans even if no one speculates on the value of soybeans. This is the "physicality" or "human interest" in soybeans. Why would crypto be "here to stay" when there is zero use for it besides speculation?
- CapmCrackaWaka 4y agoAll kinds of speculative assets exist solely to hedge and make money on. The algorithmic traders on Wall Street aren’t trading soybeans futures because they can eat them. They’re making money. If people see price fluctuations in anything, and I mean literally anything, there will be people trying to capture those alphas. I should also point out I’m not bullish on crypto. I just acknowledge it’s unique asset class, and I don’t think it’ll just disappear.
- shuntress 4y agoI understand that speculative trading exists. I'm saying people will continue to speculate on soybeans because they will always have some value. With a purely speculative asset, the market will eventually run out of "bigger fools". At that point, any speculative trader will look at the asset and say "Why would I pay more for this than the 0 dollars it is worth?"
- fmc30 4y agoAny service can provide value, and Bitcoin does provide value: secure peer to peer transfer of money without a third party, nearly instantly. Why do you say there is zero use case? But like any service, its users decide what it's worth and sometimes that means network effects impact the value. I'm not making an argument for how much value this is or should have, but please stop saying the value is zero. It simply isn't true.