4 ms·

Why would you use anything but a logarithmic scale to understand an asset over long periods of time?

by MarkPNeyer 4y ago

ceejayoz 4y ago
Because “lost nearly 80% YOY” shows up better this way.
- andreygrehov 4y ago
  In 2011 it crashed 94% ($35 -> $2) In 2013 it crashed 83% ($260 -> $45) In 2015 it crashed 87% ($1,140 -> $150) In 2017 it crashed 82% ($19,900 -> $3,540) In 2022 it crashed 76% ($66,938 -> $15,853) - so far.. As we can see, 80% crash for Bitcoin has not been that scary.
  - Gigachad 4y ago
    Past performance is not indicative of future performance. It's very realistic that one of these crashes is the last one. If we could be sure it wasn't, it never would have crashed to begin with. It's just a long game of pass the bomb where everyone bets on which year it really does explode.
    - andreygrehov 4y ago
      Agreed, but have we ever had an asset type that is accessible to pretty much every single person in the world? I get that it cannot go up all the time and I'm sure the price will get more or less stable at some point in the future. On the other hand, since the asset type is so widely accessible, it could go up proportionally to the population of the Earth. Just speculating.
      - Gigachad 4y ago
        There is no reason to be sure BTC will stabilize on anything even close to it's current value. The volatility represents this. It says the vast majority of speculators do not trust the current value to remain. Even if you fully believe crypto is the future, it's very hard to convincingly explain why BTC is the future and not one of the other coins which implement more features. Someone 20 years ago could have been right about the internet being the future but picked the wrong companies that would win.
      - mr_toad 4y ago
        > I'm sure the price will get more or less stable at some point in the future. I’m not. Most of the demand for crypto is only because it is going up. If it stops going up then speculators will look at alternatives, and it crash again. Once it’s low enough that small gains represent a higher rate of return then investors will return and the cycle begins again. This sawtooth pattern is probably inevitable, and will probably continue indefinitely.
      - thunky 4y ago
        > have we ever had an asset type that is accessible to pretty much every single person in the world? We still don't. Assets have value.
  - rsj_hn 4y ago
    I agree that it's volatile, but that doesn't necessarily recommend it as an an investment vehicle, nor is it the case that we have a lot of assurance that the bottom has been reached. The main downside of bitcoin is that because it has no cashflow, no one knows how to price it. I agree that in some sense, this democratizes investment in bitcoin, but resistance to any rational investment thesis sure seems a lot like gambling.
  - danans 4y ago
    You left out the difference in market cap. > In 2011 it crashed 94% ($35 -> $2) In 2011 Bitcoin's market cap was 23.6 million > In 2022 it crashed 76% ($66,938 -> $15,853) - so far.. In 2022 Bitcoin's starting market cap was $891B. In this context, I understand "scary" to mean "destructive economic impact", and from that perspective a 76% crash is very scary.
    - notch656a 4y ago
      Market cap only represents the unrealized, fictional value that presumes the latest price multiplied across every coin. A destruction of say 76% of the market cap in no way means 76% of the value of the instruments used to obtain the BTC was destroyed. That is, it's possible for it to be impossible to ever realize losses anywhere near the market cap. An example. A thousand people pay $1 for a coin. Then two people pay $1000 for a coin. The market cap is now about a million even though only about $3k USD were traded for the coins. A massive reduction in market cap would give the misleading idea the better part of 1M was destroyed, when in fact there can't be more than $3k in realized losses.
      - danans 4y ago
        > Market cap only represents the unrealized, fictional value that presumes the latest price multiplied across every coin. A destruction of say 76% of the market cap in no way means 76% of the value of the instruments used to obtain the BTC was destroyed. That is, it's possible for it to be impossible to ever realize losses anywhere near the market cap. That goes out the window the moment that the current "market cap" value of the coin is used as collateral for transactions involving "real" money and assets.
  - chimen 4y ago
    russian roulette
  - Animatronio 4y ago
    This time it might play out differently, just because the real economy is tanking (or it will in 2023) and the supply of real money towards crypto purchases will dwindle to nothing.
deleted 4y ago
[deleted]

Why would you use anything but a logarithmic scale to understand an asset over long periods of time?

ceejayoz 4y ago

Because “lost nearly 80% YOY” shows up better this way.

andreygrehov 4y ago
In 2011 it crashed 94% ($35 -> $2) In 2013 it crashed 83% ($260 -> $45) In 2015 it crashed 87% ($1,140 -> $150) In 2017 it crashed 82% ($19,900 -> $3,540) In 2022 it crashed 76% ($66,938 -> $15,853) - so far.. As we can see, 80% crash for Bitcoin has not been that scary.
- Gigachad 4y ago
  Past performance is not indicative of future performance. It's very realistic that one of these crashes is the last one. If we could be sure it wasn't, it never would have crashed to begin with. It's just a long game of pass the bomb where everyone bets on which year it really does explode.
  - andreygrehov 4y ago
    Agreed, but have we ever had an asset type that is accessible to pretty much every single person in the world? I get that it cannot go up all the time and I'm sure the price will get more or less stable at some point in the future. On the other hand, since the asset type is so widely accessible, it could go up proportionally to the population of the Earth. Just speculating.
    - Gigachad 4y ago
      There is no reason to be sure BTC will stabilize on anything even close to it's current value. The volatility represents this. It says the vast majority of speculators do not trust the current value to remain. Even if you fully believe crypto is the future, it's very hard to convincingly explain why BTC is the future and not one of the other coins which implement more features. Someone 20 years ago could have been right about the internet being the future but picked the wrong companies that would win.
    - mr_toad 4y ago
      > I'm sure the price will get more or less stable at some point in the future. I’m not. Most of the demand for crypto is only because it is going up. If it stops going up then speculators will look at alternatives, and it crash again. Once it’s low enough that small gains represent a higher rate of return then investors will return and the cycle begins again. This sawtooth pattern is probably inevitable, and will probably continue indefinitely.
    - thunky 4y ago
      > have we ever had an asset type that is accessible to pretty much every single person in the world? We still don't. Assets have value.
- rsj_hn 4y ago
  I agree that it's volatile, but that doesn't necessarily recommend it as an an investment vehicle, nor is it the case that we have a lot of assurance that the bottom has been reached. The main downside of bitcoin is that because it has no cashflow, no one knows how to price it. I agree that in some sense, this democratizes investment in bitcoin, but resistance to any rational investment thesis sure seems a lot like gambling.
- danans 4y ago
  You left out the difference in market cap. > In 2011 it crashed 94% ($35 -> $2) In 2011 Bitcoin's market cap was 23.6 million > In 2022 it crashed 76% ($66,938 -> $15,853) - so far.. In 2022 Bitcoin's starting market cap was $891B. In this context, I understand "scary" to mean "destructive economic impact", and from that perspective a 76% crash is very scary.
  - notch656a 4y ago
    Market cap only represents the unrealized, fictional value that presumes the latest price multiplied across every coin. A destruction of say 76% of the market cap in no way means 76% of the value of the instruments used to obtain the BTC was destroyed. That is, it's possible for it to be impossible to ever realize losses anywhere near the market cap. An example. A thousand people pay $1 for a coin. Then two people pay $1000 for a coin. The market cap is now about a million even though only about $3k USD were traded for the coins. A massive reduction in market cap would give the misleading idea the better part of 1M was destroyed, when in fact there can't be more than $3k in realized losses.
    - danans 4y ago
      > Market cap only represents the unrealized, fictional value that presumes the latest price multiplied across every coin. A destruction of say 76% of the market cap in no way means 76% of the value of the instruments used to obtain the BTC was destroyed. That is, it's possible for it to be impossible to ever realize losses anywhere near the market cap. That goes out the window the moment that the current "market cap" value of the coin is used as collateral for transactions involving "real" money and assets.
- chimen 4y ago
  russian roulette
- Animatronio 4y ago
  This time it might play out differently, just because the real economy is tanking (or it will in 2023) and the supply of real money towards crypto purchases will dwindle to nothing.

deleted 4y ago

[deleted]