10 ms·

Bitcoin appears to be an alternative.

mlyle 4y ago
If your concern is that equities are priced above fundamentals of how much the underlying businesses will return, cryptocurrency is no salve: the underlying fundamentals of cryptocurrency are zero.
- unboxingelf 4y ago
  Bitcoin is a scarce asset, there will only ever be 21M. So based on the number of people on the planet and Bitcoin’s growing adoption with both individual and institutional investors, I’d say the fundamentals look pretty good.
  - Out_of_Characte 4y ago
    Not really, I could fork bitcoin and mine bitcoins that no one wants. Which you might argue is unfairly representing your particular cryptocurrency but you'll have to admit that any better cryptocurrency at any point can reduce the value of bitcoin by 100%. Just because it has never happend doesn't mean it cant. This differs significantly from real estate or gold, which is backed by a tangible representation. With a virtual currency, there is no floor to the amount of losses. Theres also no dependent economic activity to support it right now and any dependent economic activity could be replaced all the same.
  - wombat-man 4y ago
    It isn't guaranteed at all that it'll be important in the future. Pogs are a scarce asset. Pontiac Azteks are a scarce asset.
  - mlyle 4y ago
    A worthless stock (no underlying fundamentals) can be a scarce asset too. We can all decide that shares of Worthless, Inc. are worth a bunch of money and collect them. But we can't really expect dividends or an acquisition premium in the future.
- koshnaranek 4y ago
  What would be instead?
  - mlyle 4y ago
    Who knows what's best to buy right now in this environment. I'm just making the point that, if stock A trades for $10, and one is concerned because they believe the "true" net present value of its share of the business of $5... that the situation isn't improved by buying asset B that trades for $10 but has a zero underlying net present value. (Asset B may very well do better, because underlying values are not the only reason we buy assets...)
electric_mayhem 4y ago
DOGE has genuinely been my best investment in the last couple years. Everything else is down a bunch; I’m considerably up on my doge position.
- foepys 4y ago
  All Terra/LUNA holders were also considerably up until they weren't within 2 hours.
Out_of_Characte 4y ago
From an investment perspective, bitcoin does not have a significant advantage as a store of value as you would think. Its expenditures are in energy+equiment hash rate, which is going up at the rate of value being put in. and its profits are based on transaction costs, which are also going up in tandem with the value put in. Take away the speculation and you'll have a zero-sum game which always leverages power costs trough transaction processing. So the store of value is a benchmark of computational energy. index funds will have better track records than bitcoin, even if all index funds drop 50% tommorrow.
- unboxingelf 4y ago
  don’t the incentives drive miners to cheaper sources of energy? how does that non linear variable factor into your zero sum argument? re speculation— I don’t think you can remove it from the equation. Equities are highly speculative. The market can remain irrational longer than you can remain solvent. I can’t count the number of times positive earning reports are expressed in negative movements.
  - Out_of_Characte 4y ago
    If your source of energy gets cheaper, you would capitalise on that by increasing your hash rate in order to get an advantage in the hash checksum lottery. The profitability of bitcoin mining has always been your hashrate/cost, and your cost has always been the total cost of ownership of your equipment. That includes power. Speculation would be fine if it helped price discovery but it has become clear to me that bitcoin is far too irrational for me to partake in other than keeping the little exposure that I've had so far. I'm sure there is some mathematical hash algorithm/proof of stake/distributed accounting that could serve a better job as a financial tool than relying on government-issued currency with a high risk of inflation as a result of poor debt management. But no crypto can satisfy all factors that investors would like. * Decrease in transaction costs as the new protocol matures This is historically what happened as technology, computing power, bandwidth improved. Bitcoin would require changes in protocol in order to make this happen, like Ethereum did. * significantly better balance between early investors and late investors. A million increase in value between early and late investors just destroys the store of value idea as its a pure speculation instrument. A currency with a very stable inflation rate could outperform the dollar if enough markets used it. * better integration with long-standing agreements like insurance against theft, loss, recalls and other tools everyone expects to be able to use from a functioning society.
skookum 4y ago
"Worried about a bubble? Could I interest you in a ponzi instead?"

If your concern is that equities are priced above fundamentals of how much the underlying businesses will return, cryptocurrency is no salve: the underlying fundamentals of cryptocurrency are zero.

unboxingelf 4y ago
Bitcoin is a scarce asset, there will only ever be 21M. So based on the number of people on the planet and Bitcoin’s growing adoption with both individual and institutional investors, I’d say the fundamentals look pretty good.
- Out_of_Characte 4y ago
  Not really, I could fork bitcoin and mine bitcoins that no one wants. Which you might argue is unfairly representing your particular cryptocurrency but you'll have to admit that any better cryptocurrency at any point can reduce the value of bitcoin by 100%. Just because it has never happend doesn't mean it cant. This differs significantly from real estate or gold, which is backed by a tangible representation. With a virtual currency, there is no floor to the amount of losses. Theres also no dependent economic activity to support it right now and any dependent economic activity could be replaced all the same.
- wombat-man 4y ago
  It isn't guaranteed at all that it'll be important in the future. Pogs are a scarce asset. Pontiac Azteks are a scarce asset.
- mlyle 4y ago
  A worthless stock (no underlying fundamentals) can be a scarce asset too. We can all decide that shares of Worthless, Inc. are worth a bunch of money and collect them. But we can't really expect dividends or an acquisition premium in the future.
koshnaranek 4y ago
What would be instead?
- mlyle 4y ago
  Who knows what's best to buy right now in this environment. I'm just making the point that, if stock A trades for $10, and one is concerned because they believe the "true" net present value of its share of the business of $5... that the situation isn't improved by buying asset B that trades for $10 but has a zero underlying net present value. (Asset B may very well do better, because underlying values are not the only reason we buy assets...)

electric_mayhem 4y ago

DOGE has genuinely been my best investment in the last couple years. Everything else is down a bunch; I’m considerably up on my doge position.

foepys 4y ago
All Terra/LUNA holders were also considerably up until they weren't within 2 hours.

Out_of_Characte 4y ago

From an investment perspective, bitcoin does not have a significant advantage as a store of value as you would think. Its expenditures are in energy+equiment hash rate, which is going up at the rate of value being put in. and its profits are based on transaction costs, which are also going up in tandem with the value put in. Take away the speculation and you'll have a zero-sum game which always leverages power costs trough transaction processing. So the store of value is a benchmark of computational energy. index funds will have better track records than bitcoin, even if all index funds drop 50% tommorrow.

unboxingelf 4y ago
don’t the incentives drive miners to cheaper sources of energy? how does that non linear variable factor into your zero sum argument? re speculation— I don’t think you can remove it from the equation. Equities are highly speculative. The market can remain irrational longer than you can remain solvent. I can’t count the number of times positive earning reports are expressed in negative movements.
- Out_of_Characte 4y ago
  If your source of energy gets cheaper, you would capitalise on that by increasing your hash rate in order to get an advantage in the hash checksum lottery. The profitability of bitcoin mining has always been your hashrate/cost, and your cost has always been the total cost of ownership of your equipment. That includes power. Speculation would be fine if it helped price discovery but it has become clear to me that bitcoin is far too irrational for me to partake in other than keeping the little exposure that I've had so far. I'm sure there is some mathematical hash algorithm/proof of stake/distributed accounting that could serve a better job as a financial tool than relying on government-issued currency with a high risk of inflation as a result of poor debt management. But no crypto can satisfy all factors that investors would like. * Decrease in transaction costs as the new protocol matures This is historically what happened as technology, computing power, bandwidth improved. Bitcoin would require changes in protocol in order to make this happen, like Ethereum did. * significantly better balance between early investors and late investors. A million increase in value between early and late investors just destroys the store of value idea as its a pure speculation instrument. A currency with a very stable inflation rate could outperform the dollar if enough markets used it. * better integration with long-standing agreements like insurance against theft, loss, recalls and other tools everyone expects to be able to use from a functioning society.

skookum 4y ago

"Worried about a bubble? Could I interest you in a ponzi instead?"