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"Vast Majority of People Who Invest Inevitably Lose Money". Yep. That's always held true. Speculators gonna speculate. Somehow the concept of cryptocurrency has

"Vast Majority of People Who Invest Inevitably Lose Money". Yep. That's always held true. Speculators gonna speculate. Somehow the concept of cryptocurrency has been lost in all the scamming and speculating since 2015. If you just use cryptocurrency as a currency there's no problem at all. It's the speculators with their completely off-chain normal finance hijinks that everyone gets upset and confused about. It's a shame that's what people think cryptocurrency is.

burkaman 4y ago
Is that true? At least in the US, the "vast majority of people who invest" are probably people with 401ks and not much else. In that case, most people who invest do not lose money.
harimau777 4y ago
Do the speculators mess up the value of the various coins for the people who intend to use them as currency?
tablespoon 4y ago
> "Vast Majority of People Who Invest Inevitably Lose Money". Yep. That's always held true. I don't think that's true, otherwise people wouldn't pile so much money into stock funds in their 401ks.
- randomdata 4y ago
  Let's assume, for argument's sake, all investments lose money. People are still going to try and invest in the places where they expect to lose the least. Humans tend to be very loss averse. Hanging onto what they've got, to the greatest extent possible, may be their priority and doesn't necessarily disprove the earlier assertion.
  - pessimizer 4y ago
    Except that if the mean investment loses money, the place where you expect to lose the least is cash. e.g. if you are very loss averse, you don't buy lottery tickets at all. You don't just buy the safest ones where you expect to lose the least.
    - jovial_cavalier 4y ago
      Not necessarily. If you have 5% inflation, and the best returns on securities are -2% in real terms, you're still better off investing in securities.
      - pessimizer 4y ago
        If you rewrite half of the equation to be about real losses, of course that's true, but that wouldn't make sense to do. However, securities denominated in dollars are also affected by inflation, so the only way to discuss their losses coherently is also against the inflation-adjusted dollar. e.g. lottery winnings are also affected by inflation.
        randomdata 4y ago
        > If you rewrite half of the equation to be about real losses There is nothing in need of rewrite. The original claim was about money, not currency. As money is defined as the assets, property, or resources owned by someone (i.e. wealth), we can substitute currency with any other asset. Let's use cars, as is convention, and works well as they tend to decline in value much like currency does. So, you trade your car for a security. Some years go by and you decide you want a car again, track down the guy who you sold your car to, and offer to trade the security back for the car. He agrees and now you've got your car back. You didn't lose any cars. You are back to one car, just like you had originally. However, the car is scratched up a little, needs new tires, etc. and as such isn't worth as much as it was when you first traded it. And so, while you haven't lost any cars, you have lost money. The car isn't what it used to be; your wealth has declined. You might not lose any currency in an exchange of assets, you might even gain currency in the deal, but that doesn't necessarily mean you haven't lost money.
- welshwelsh 4y ago
  Individual investors usually have terrible investment habits. They buy trendy stocks after hearing about them on the news, and then sell after they crash This same crowd gets interested in Bitcoin at every ATH because of the news coverage. I got so many people asking me how to buy Bitcoin when it hit 20k in 2017 and 60k in 2021. That's when the vast majority of people buy. Yes, if you put money in your 401k and don't take it out until retirement you will make money. That doesn't describe the vast majority of investors though
  - retrac 4y ago
    > That doesn't describe the vast majority of investors though Doesn't it? My mother did it that way. Made regular payments into her selected cooperative low-risk mutual fund that built up a reasonable retirement pension. I know a lot of people that do that. I suppose the difference is that they don't think of themselves as investors.
  - deleted 4y ago
    [deleted]
  - cortesoft 4y ago
    > That doesn't describe the vast majority of investors though I think you have a skewed view of the average investor. About 58% of Americans own stock, but only 35% of Americans own any outside their 401k. That means 40% of investors only have money in their 401k. I couldn’t find the numbers for how many of those investing outside of their 401k just owned index or mutual funds, but I even if it was only a small percentage it would mean a majority of investors aren’t buying individual stocks. There is a vocal minority who invest speculatively. It makes sense that this number would seem larger than it actually is, because they are the ones who talk about investing. You don’t see questions or posts from people just investing in their 401k and index funds, but there are more of them than the speculators. https://news.gallup.com/poll/266807/percentage-americans-owns-stock.aspx https://news.gallup.com/poll/266807/percentage-americans-own... https://www.pewresearch.org/fact-tank/2020/09/25/few-in-u-s-owned-stocks-outside-of-401ks-in-2019-fewer-said-market-had-a-big-impact-on-their-view-of-economy/ https://www.pewresearch.org/fact-tank/2020/09/25/few-in-u-s-...
- elil17 4y ago
  Bonds, stocks, private equity, futures, and real estate are cash flow producing assets. The expected rate of return of cash flow producing assets is positive. I don't mean statistically, I mean logically. People value having money now more than they value having money in the future, so people will sell you cash flow producing assets for less than they're worth over the long run. Commodities and currencies (including crypto currencies) are not cash flow producing assets. There's no value in them that can't be accessed immediately, so no one's going to sell them to you for less than their long run worth.
  - tablespoon 4y ago
    So basically: the GGP's overgeneralization "Vast Majority of People Who Invest Inevitably Lose Money" was wrong, because they lumped all kinds of investments together and failed to make important distinctions.
    - elil17 4y ago
      The story is slightly more complicated than that. Most people who put money into their 401ks end up with positive real returns. If you invest in the whole market, you're going to get positive real returns in something like 96% of historical 30 year periods. [1] Most mutual funds/ETFs invest in a large enough portion of the market that this number isn't far off. People who buy a small number of individual stocks end up in a different situation. While their average return is positive, those results have a large degree of skewness (meaning most stocks stagnate or fall, but the meteoric rise of those that do well makes up for it on average). If you picked a random stock in 1992, you'd quite likely have lost money by now. [1]: https://rationalreminder.ca/podcast/224 https://rationalreminder.ca/podcast/224
- dpweb 4y ago
  Stock prices are tethered, albeit with unfortunate volatility, to the expected cash flow of real companies. Crypto only to the willingness of others to buy crypto.
JumpCrisscross 4y ago
> Yep. That's always held true. No, it's always true in zero sum games. The stock market is not zero sum. Beating the stock market is, which is why most investors don't beat the stock market. But that's different from losing principal in even nominal terms.
- NickM 4y ago
  Exactly. The stock market is positive sum, since companies on average create more value than they destroy. Bitcoin, though, is negative sum, since no new value is created and value is actively destroyed via mining. Investing in BTC is like buying shares of stock in a company that produces nothing and has high ongoing costs that are only paid for by continuing to issue new shares.
  - fragsworth 4y ago
    The existence of an online alternative to gold is potentially valuable (also potentially harmful but I would say the jury is still out), and it's hard to say if mining rewards counteract that.
  - three_seagrass 4y ago
    It's investing in the confidence of the future of a network that can only handle 7 transactions a second, at the expense of a small country's use of electricity.
triceratops 4y ago
Why would most people who invest lose their money? Assuming their investments are diversified and made in well-run businesses, or high-grade bonds.
- rglover 4y ago
  Because they do so foolishly and with a bias toward the short-term. All of the people losing money on Bitcoin and crypto were trying to get rich quick and predictably got burned. Just like people who only hold a stock for a few days or try to get in on an option play like GME or AMC at the last minute.
fn-mote 4y ago
> "Vast Majority of People Who Invest Inevitably Lose Money" I read this as: picking particular stock winners has been known for decades not to beat the market. Yet people still want to believe... I don't think this is particular to crypto. Don't you see the same phenomenon with day traders? Something like 95+% are losing money, as I understand it. To the later commentator: if you're investing in stocks and not beating the market average, then yeah, I think you should consider yourself to be losing money.
- acdha 4y ago
  The difference is the composition: stocks are linked to something real and have regulatory oversight, which although not always sufficient does mean most people profit over time and the losses are usually not complete because there’s some kind of link to revenue other than stock. Day traders usually don’t make as much as they hoped but it doesn’t take a huge amount of skill to avoid major losses, either. Contrast with cryptocurrencies where the value is only based on social consensus. Not being linked to an actual business means that sales can halt instantly and the floor is zero because people only make a disadvantageous transaction if they think it’s going to plummet.
himinlomax 4y ago
> If you just use cryptocurrency as a currency there's no problem at all. Apart from the delays in clearing transactions, the high volatility, the absence of legal recourse when things go wrong, the computer security risks, the high complexity and so on.
- superkuh 4y ago
  It's definitely no panacea. I've been using it regularly (monthly or more) since 2014 or so to pay for online services like VPS and to buy computer hardware. It works well. And it works even better than fiat in situations where authoritarian governments force payment processors to embargo journalists critical of them, and other such situations. I'm not going to replace paying in cash for groceries with bitcoin. But it definitely has it's place as a currency. It's pretty annoying that the only things people ever hear cryptocurrency have almost nothing to do with cryptocurrency at all.
elil17 4y ago
Except that it's impossible to just use it as a currency without speculating due to the volatility (and I get that that's probably the fault of the speculators, but that doesn't change the reality of it).
hn_throwaway_99 4y ago
> If you just use cryptocurrency as a currency there's no problem at all. Exactly, and then you realize there is a lot more difficulty using crypto as a currency than actual currency, and then think "that was dumb". I'm probably one of the few people who has actually purchased real (legal) stuff with crypto (at least in one of the only ways that was really feasible at the time - converting crypto to a gift card at a real store). I remember waiting in the furniture store for nearly an hour hoping for my block to get confirmed to purchase a sofa. "Gosh", my non-tech spouse commented sarcastically, "this really is so much better than a credit card swipe where I'd be done in 10 seconds."
- sakras 4y ago
  I think technology has advanced a lot since then. I see videos of peoples’ transactions on the lightning network being confirmed within a few seconds. It’s taken off in a lot of markets in poorer countries from what I understand.
- hotpotamus 4y ago
  This was my experience with it going on a decade ago. Then my buddy and I both got Coinbase accounts and had fun being able to instantly pay each other with bitcoin (off-chain) - hey here's that money I owe you for lunch... in bitcoin. Of course, since it's off-chain it sort of defeats the purpose of bitcoin, right?
AnIdiotOnTheNet 4y ago
> Somehow the concept of cryptocurrency has been lost in all the scamming and speculating since 2015 What do you expect when you set out to explicitly ignore and bypass everything ever done to prevent this kind of thing?
cortesoft 4y ago
> "Vast Majority of People Who Invest Inevitably Lose Money". This is not true at all, unless you mean in the short term. There has never been a 20 year period where the S&P500 has lost money, and only a few 10 year periods where it has. If you are a long term investor and you invest in a broad index, you will make money. The stock market is not a zero sum game where on person has to lose for someone else to gain. The whole pie is getting bigger.
- potatototoo99 4y ago
  > There has never been a 20 year period Neither in crypto ;) And of course past performance does not guarantee future results.
  - cortesoft 4y ago
    Past performance doesn’t guarantee anything, but it sure is a valuable tool for prediction. A 150 year track record means a lot more than a 10 year one.
  - deleted 4y ago
    [deleted]
chinchilla2020 4y ago
Interestingly, most of the data is from people who never actually owned bitcoin. They owned bitcoin-equivalent on investing apps. These investors didn't control their own private keys and have their own coins.
- codehalo 4y ago
  As the FTX holders of bitcoin-equivalent is finding out, bitcoin-equivalent doesn't mean shit.
akira2501 4y ago
> It's a shame that's what people think cryptocurrency is. It's odd that people think the general use of cryptocurrency would be happening without them. The incentives to just use crypto as a means of transmitting value are exceptionally low, and before exchanges existed, mostly negative due to the difficulty of conversion. Which is probably why only a small set of the criminally minded put any effort into using it as a currency in the first place.

burkaman 4y ago

Is that true? At least in the US, the "vast majority of people who invest" are probably people with 401ks and not much else. In that case, most people who invest do not lose money.

harimau777 4y ago

Do the speculators mess up the value of the various coins for the people who intend to use them as currency?

tablespoon 4y ago

> "Vast Majority of People Who Invest Inevitably Lose Money". Yep. That's always held true. I don't think that's true, otherwise people wouldn't pile so much money into stock funds in their 401ks.

randomdata 4y ago
Let's assume, for argument's sake, all investments lose money. People are still going to try and invest in the places where they expect to lose the least. Humans tend to be very loss averse. Hanging onto what they've got, to the greatest extent possible, may be their priority and doesn't necessarily disprove the earlier assertion.
- pessimizer 4y ago
  Except that if the mean investment loses money, the place where you expect to lose the least is cash. e.g. if you are very loss averse, you don't buy lottery tickets at all. You don't just buy the safest ones where you expect to lose the least.
  - jovial_cavalier 4y ago
    Not necessarily. If you have 5% inflation, and the best returns on securities are -2% in real terms, you're still better off investing in securities.
    - pessimizer 4y ago
      If you rewrite half of the equation to be about real losses, of course that's true, but that wouldn't make sense to do. However, securities denominated in dollars are also affected by inflation, so the only way to discuss their losses coherently is also against the inflation-adjusted dollar. e.g. lottery winnings are also affected by inflation.
      - randomdata 4y ago
        > If you rewrite half of the equation to be about real losses There is nothing in need of rewrite. The original claim was about money, not currency. As money is defined as the assets, property, or resources owned by someone (i.e. wealth), we can substitute currency with any other asset. Let's use cars, as is convention, and works well as they tend to decline in value much like currency does. So, you trade your car for a security. Some years go by and you decide you want a car again, track down the guy who you sold your car to, and offer to trade the security back for the car. He agrees and now you've got your car back. You didn't lose any cars. You are back to one car, just like you had originally. However, the car is scratched up a little, needs new tires, etc. and as such isn't worth as much as it was when you first traded it. And so, while you haven't lost any cars, you have lost money. The car isn't what it used to be; your wealth has declined. You might not lose any currency in an exchange of assets, you might even gain currency in the deal, but that doesn't necessarily mean you haven't lost money.
welshwelsh 4y ago
Individual investors usually have terrible investment habits. They buy trendy stocks after hearing about them on the news, and then sell after they crash This same crowd gets interested in Bitcoin at every ATH because of the news coverage. I got so many people asking me how to buy Bitcoin when it hit 20k in 2017 and 60k in 2021. That's when the vast majority of people buy. Yes, if you put money in your 401k and don't take it out until retirement you will make money. That doesn't describe the vast majority of investors though
- retrac 4y ago
  > That doesn't describe the vast majority of investors though Doesn't it? My mother did it that way. Made regular payments into her selected cooperative low-risk mutual fund that built up a reasonable retirement pension. I know a lot of people that do that. I suppose the difference is that they don't think of themselves as investors.
- deleted 4y ago
  [deleted]
- cortesoft 4y ago
  > That doesn't describe the vast majority of investors though I think you have a skewed view of the average investor. About 58% of Americans own stock, but only 35% of Americans own any outside their 401k. That means 40% of investors only have money in their 401k. I couldn’t find the numbers for how many of those investing outside of their 401k just owned index or mutual funds, but I even if it was only a small percentage it would mean a majority of investors aren’t buying individual stocks. There is a vocal minority who invest speculatively. It makes sense that this number would seem larger than it actually is, because they are the ones who talk about investing. You don’t see questions or posts from people just investing in their 401k and index funds, but there are more of them than the speculators. https://news.gallup.com/poll/266807/percentage-americans-owns-stock.aspx https://news.gallup.com/poll/266807/percentage-americans-own... https://www.pewresearch.org/fact-tank/2020/09/25/few-in-u-s-owned-stocks-outside-of-401ks-in-2019-fewer-said-market-had-a-big-impact-on-their-view-of-economy/ https://www.pewresearch.org/fact-tank/2020/09/25/few-in-u-s-...
elil17 4y ago
Bonds, stocks, private equity, futures, and real estate are cash flow producing assets. The expected rate of return of cash flow producing assets is positive. I don't mean statistically, I mean logically. People value having money now more than they value having money in the future, so people will sell you cash flow producing assets for less than they're worth over the long run. Commodities and currencies (including crypto currencies) are not cash flow producing assets. There's no value in them that can't be accessed immediately, so no one's going to sell them to you for less than their long run worth.
- tablespoon 4y ago
  So basically: the GGP's overgeneralization "Vast Majority of People Who Invest Inevitably Lose Money" was wrong, because they lumped all kinds of investments together and failed to make important distinctions.
  - elil17 4y ago
    The story is slightly more complicated than that. Most people who put money into their 401ks end up with positive real returns. If you invest in the whole market, you're going to get positive real returns in something like 96% of historical 30 year periods. [1] Most mutual funds/ETFs invest in a large enough portion of the market that this number isn't far off. People who buy a small number of individual stocks end up in a different situation. While their average return is positive, those results have a large degree of skewness (meaning most stocks stagnate or fall, but the meteoric rise of those that do well makes up for it on average). If you picked a random stock in 1992, you'd quite likely have lost money by now. [1]: https://rationalreminder.ca/podcast/224 https://rationalreminder.ca/podcast/224
dpweb 4y ago
Stock prices are tethered, albeit with unfortunate volatility, to the expected cash flow of real companies. Crypto only to the willingness of others to buy crypto.

JumpCrisscross 4y ago

> Yep. That's always held true. No, it's always true in zero sum games. The stock market is not zero sum. Beating the stock market is, which is why most investors don't beat the stock market. But that's different from losing principal in even nominal terms.

NickM 4y ago
Exactly. The stock market is positive sum, since companies on average create more value than they destroy. Bitcoin, though, is negative sum, since no new value is created and value is actively destroyed via mining. Investing in BTC is like buying shares of stock in a company that produces nothing and has high ongoing costs that are only paid for by continuing to issue new shares.
- fragsworth 4y ago
  The existence of an online alternative to gold is potentially valuable (also potentially harmful but I would say the jury is still out), and it's hard to say if mining rewards counteract that.
- three_seagrass 4y ago
  It's investing in the confidence of the future of a network that can only handle 7 transactions a second, at the expense of a small country's use of electricity.

triceratops 4y ago

Why would most people who invest lose their money? Assuming their investments are diversified and made in well-run businesses, or high-grade bonds.

rglover 4y ago
Because they do so foolishly and with a bias toward the short-term. All of the people losing money on Bitcoin and crypto were trying to get rich quick and predictably got burned. Just like people who only hold a stock for a few days or try to get in on an option play like GME or AMC at the last minute.

fn-mote 4y ago

> "Vast Majority of People Who Invest Inevitably Lose Money" I read this as: picking particular stock winners has been known for decades not to beat the market. Yet people still want to believe... I don't think this is particular to crypto. Don't you see the same phenomenon with day traders? Something like 95+% are losing money, as I understand it. To the later commentator: if you're investing in stocks and not beating the market average, then yeah, I think you should consider yourself to be losing money.

acdha 4y ago
The difference is the composition: stocks are linked to something real and have regulatory oversight, which although not always sufficient does mean most people profit over time and the losses are usually not complete because there’s some kind of link to revenue other than stock. Day traders usually don’t make as much as they hoped but it doesn’t take a huge amount of skill to avoid major losses, either. Contrast with cryptocurrencies where the value is only based on social consensus. Not being linked to an actual business means that sales can halt instantly and the floor is zero because people only make a disadvantageous transaction if they think it’s going to plummet.

himinlomax 4y ago

> If you just use cryptocurrency as a currency there's no problem at all. Apart from the delays in clearing transactions, the high volatility, the absence of legal recourse when things go wrong, the computer security risks, the high complexity and so on.

superkuh 4y ago
It's definitely no panacea. I've been using it regularly (monthly or more) since 2014 or so to pay for online services like VPS and to buy computer hardware. It works well. And it works even better than fiat in situations where authoritarian governments force payment processors to embargo journalists critical of them, and other such situations. I'm not going to replace paying in cash for groceries with bitcoin. But it definitely has it's place as a currency. It's pretty annoying that the only things people ever hear cryptocurrency have almost nothing to do with cryptocurrency at all.

elil17 4y ago

Except that it's impossible to just use it as a currency without speculating due to the volatility (and I get that that's probably the fault of the speculators, but that doesn't change the reality of it).

hn_throwaway_99 4y ago

> If you just use cryptocurrency as a currency there's no problem at all. Exactly, and then you realize there is a lot more difficulty using crypto as a currency than actual currency, and then think "that was dumb". I'm probably one of the few people who has actually purchased real (legal) stuff with crypto (at least in one of the only ways that was really feasible at the time - converting crypto to a gift card at a real store). I remember waiting in the furniture store for nearly an hour hoping for my block to get confirmed to purchase a sofa. "Gosh", my non-tech spouse commented sarcastically, "this really is so much better than a credit card swipe where I'd be done in 10 seconds."

sakras 4y ago
I think technology has advanced a lot since then. I see videos of peoples’ transactions on the lightning network being confirmed within a few seconds. It’s taken off in a lot of markets in poorer countries from what I understand.
hotpotamus 4y ago
This was my experience with it going on a decade ago. Then my buddy and I both got Coinbase accounts and had fun being able to instantly pay each other with bitcoin (off-chain) - hey here's that money I owe you for lunch... in bitcoin. Of course, since it's off-chain it sort of defeats the purpose of bitcoin, right?

AnIdiotOnTheNet 4y ago

> Somehow the concept of cryptocurrency has been lost in all the scamming and speculating since 2015 What do you expect when you set out to explicitly ignore and bypass everything ever done to prevent this kind of thing?

cortesoft 4y ago

> "Vast Majority of People Who Invest Inevitably Lose Money". This is not true at all, unless you mean in the short term. There has never been a 20 year period where the S&P500 has lost money, and only a few 10 year periods where it has. If you are a long term investor and you invest in a broad index, you will make money. The stock market is not a zero sum game where on person has to lose for someone else to gain. The whole pie is getting bigger.

potatototoo99 4y ago
> There has never been a 20 year period Neither in crypto ;) And of course past performance does not guarantee future results.
- cortesoft 4y ago
  Past performance doesn’t guarantee anything, but it sure is a valuable tool for prediction. A 150 year track record means a lot more than a 10 year one.
- deleted 4y ago
  [deleted]

chinchilla2020 4y ago

Interestingly, most of the data is from people who never actually owned bitcoin. They owned bitcoin-equivalent on investing apps. These investors didn't control their own private keys and have their own coins.

codehalo 4y ago
As the FTX holders of bitcoin-equivalent is finding out, bitcoin-equivalent doesn't mean shit.

akira2501 4y ago

> It's a shame that's what people think cryptocurrency is. It's odd that people think the general use of cryptocurrency would be happening without them. The incentives to just use crypto as a means of transmitting value are exceptionally low, and before exchanges existed, mostly negative due to the difficulty of conversion. Which is probably why only a small set of the criminally minded put any effort into using it as a currency in the first place.