S&P Dow Jones Indices to launch cryptocurrency indexes in 2021 • Hacker News Board

Re: S&P Dow Jones Indices to launch cryptocurrency indexes in 2021

#91

Post by iamspoilt » Thu, Dec 03, 2020, 5:12 PM UTC

aboodman wrote: post #84

iamspoilt wrote: post #72

Earlier quoted context omitted.

Thanks for the input. It does put things into some perspective but I am still wondering. So something analogous to owning a part of the network, would it be correct to say that, for instance, governments own and auction telecom spectrums to businesses. They do make money out of that ownership through the initial auction price and then potentially tax you later. So a cryptocurrency could be looked at in a similar way…

That's right. Selling a piece of spectrum is a very good analogy. Another easy analogy would be IP addresses. Early on in the internet huge chunks were just given out for free. Now they're valuable because they're scarce and the demand for them has skyrocketed as the internet grew. You need spectrum to participate in the radio business (and other kinds of businesses). You need IP addresses to participate in the inter…

But there is another factor for cryptocurrencies. Anyone can create a new network and do an ICO and as long as the protocol is sound and audited, the new network can still enable money transfers the same way as a Bitcoin network. The collection of networks can potentially never become as scarce as, for instance, IPV4 range or the radio spectrum for telephony in the earlier analogy that I mentioned.

Re: S&P Dow Jones Indices to launch cryptocurrency indexes in 2021

#92

Post by fractionalhare » Thu, Dec 03, 2020, 5:14 PM UTC

cortesoft wrote: post #65

vesinisa wrote: post #59

Earlier quoted context omitted.

> We truly have no idea what the future of X is What an excellent reason not to invest in X!

That is what risk is.... not knowing. If you want high reward from an investment, you need to take high risks, which means you will invest without knowing something. Now, some risks are smarter than others...

That's not necessarily a good idea. You don't need to take on higher risk for a higher return. It's usually better to leverage risk-adjusted returns rather than chase high total returns with commensurate risk.

You can take on more risk that if you have the appetite, but if that's the case you could also just use levered beta (e.g. 3x levered S&P 500). This would significantly improve your portfolio while still being fundamentally much easier to understand than a novel asset.

If your portfolio has a decent risk adjusted return and very low volatility and beta exposure, it's safer to just leverage it up to the same risk as the S&P 500. This reduces the chance of you blowing up your capital in the long run.

I would argue there are very few investment goals for which extreme risk is sound (especially if it's unhedged!).

Re: S&P Dow Jones Indices to launch cryptocurrency indexes in 2021

#93

Post by gruez » Thu, Dec 03, 2020, 5:14 PM UTC

Alex3917 wrote: post #49

baron_harkonnen wrote: post #43

Earlier quoted context omitted.

I recommend you read some of Stephen Deihl's thoughts on the subject[0]. You're not alone if you feel that cryptocurrency doesn't make sense as an investment vehicle, but the HN community will make you feel crazy for not seeing what a great thinking this is an incredible new opportunity and "things are different this time!" There is no better indication of a bubble then people telling you that you're the crazy one fo…

As a store of value it's better than gold in some ways, because you don't need to physically store it. But unlike gold, which can appreciate in value indefinitely, Bitcoin is mathematically capped in how much it can appreciate in value because the expected value of mining and purchasing need to go to par.

>But unlike gold, which can appreciate in value indefinitely, Bitcoin is mathematically capped in how much it can appreciate in value because the expected value of mining and purchasing need to go to par.

I don't think you're using the term "appreciate in value" correctly. I think what you meant to say is that gold can be mined infinitely (on earth, in space) and therefore has potentially infinite supply, whereas the total supply of bitcoins is capped at 21 million.

Re: S&P Dow Jones Indices to launch cryptocurrency indexes in 2021

#94

Post by didibus » Thu, Dec 03, 2020, 5:14 PM UTC

iamspoilt wrote: post #30

Someone please explain this to me: How is any cryptocurrency even considered an investment vehicle? I would classify myself as Boglehead and I believe in the fundamentals of investing in stocks because in all it's technicality (and given the buy-and-hold strategy), you are investing in a business by owning a part of it which naturally means that you will and do get the returns on it, both in terms of profits (dividen…

When you buy into a Crypto you're investing into the technology itself.

If you believe that more and more payments will be handled through it, its value will go up, thus making it a good investment.

If you take Bitcoin, there's a small pool of total Bitcoin and that's guaranteed by the technology. Each new coin costs real money to mine, due to needing physical compute resource to do so, and it gets harder and harder overtime. That means as more and more people transact in Bitcoin, the demand for Bitcoins will go up, thus your Bitcoins are going to be worth more.

Similarly for Ethereum2, there's not a fixed maximum, but there are set rates and limits that affect how much new Ether per year will be added. So there's some guarantees that there's a restricted supply. So again, if you believe that more and more people will rely on its network to transact, the demand for Ether will go up, thus its value.

Re: S&P Dow Jones Indices to launch cryptocurrency indexes in 2021

#95

Post by seibelj » Thu, Dec 03, 2020, 5:15 PM UTC

baron_harkonnen wrote: post #43

iamspoilt wrote: post #30

Someone please explain this to me: How is any cryptocurrency even considered an investment vehicle? I would classify myself as Boglehead and I believe in the fundamentals of investing in stocks because in all it's technicality (and given the buy-and-hold strategy), you are investing in a business by owning a part of it which naturally means that you will and do get the returns on it, both in terms of profits (dividen…

I recommend you read some of Stephen Deihl's thoughts on the subject[0]. You're not alone if you feel that cryptocurrency doesn't make sense as an investment vehicle, but the HN community will make you feel crazy for not seeing what a great thinking this is an incredible new opportunity and "things are different this time!" There is no better indication of a bubble then people telling you that you're the crazy one fo…

> but the HN community will make you feel crazy for not seeing what a great thinking this is an incredible new opportunity and "things are different this time!"

The HN community is strongly hostile to crypto. Few people here like the downvotes when they speak positively about crypto, although I keep taking them!

Re: S&P Dow Jones Indices to launch cryptocurrency indexes in 2021

#96

Post by seibelj » Thu, Dec 03, 2020, 5:17 PM UTC

anm89 wrote: post #21

wp381640 wrote: post #6

Earlier quoted context omitted.

Probably the best strategy tbh, you only have to go to a few spots down to find some bad coins and the edge of the top 10 to find some outright scams

Bitcoin cash comes in at #7 on coinmarket cap and while I wouldn't call it a scam, it's not a respectable project IMO. And it quickly gets worse from there over the next 10. Strongly agree that the best bucket is going to be composed of a vast majority of bitcoin and ethereum. I don't believe crypto is on the whole in a bubble right now but the fact that Bitcoin Cash has a market cap of >$5B is one of the biggest thi…

Bitcoin Cash is a solid project, multiple implementations of the client, real developers. I don't personally own any, but it isn't a fraud.

Re: S&P Dow Jones Indices to launch cryptocurrency indexes in 2021

#97

Post by gruez » Thu, Dec 03, 2020, 5:21 PM UTC

safog wrote: post #61

anthonyhodlbot wrote: post #35

I built a way to enable users to index the cryptocurrency market via exchange APIs and have been operating it for about 3 years now. We've done about 100M in transactions. Some of the indices we built were a top 20 by market cap (10% cap), top 30 by squared root market cap. If you guys want to check it out: https://www.hodlbot.io

Hey - this looks great. Couple of questions: - Does re-balancing create a taxable event? If so, given a bunch of these cryptos trade in BTC pairs, do you generate all the documents necessary to file taxes? - What do you feel about the top 10 currencies changing so rapidly over time? I think every month (or maybe two) the top 10 list significantly changes. Doesn't that accumulate a lot of trading activity and fees? Gi…

>Does re-balancing create a taxable event?

if the rebalancing involves selling something, then yes you have to pay capital gains on it. The only way to avoid this is wrapping your trading activity in a ETF.

Re: S&P Dow Jones Indices to launch cryptocurrency indexes in 2021

#98

Post by Der_Einzige » Thu, Dec 03, 2020, 5:21 PM UTC

baron_harkonnen wrote: post #43

iamspoilt wrote: post #30

Someone please explain this to me: How is any cryptocurrency even considered an investment vehicle? I would classify myself as Boglehead and I believe in the fundamentals of investing in stocks because in all it's technicality (and given the buy-and-hold strategy), you are investing in a business by owning a part of it which naturally means that you will and do get the returns on it, both in terms of profits (dividen…

I recommend you read some of Stephen Deihl's thoughts on the subject[0]. You're not alone if you feel that cryptocurrency doesn't make sense as an investment vehicle, but the HN community will make you feel crazy for not seeing what a great thinking this is an incredible new opportunity and "things are different this time!" There is no better indication of a bubble then people telling you that you're the crazy one fo…

You are crazy for not buying a house in 2007. I can't think of a better investment to have right now than a house purchased in 2007...

Re: S&P Dow Jones Indices to launch cryptocurrency indexes in 2021

#99

Post by wskinner » Thu, Dec 03, 2020, 5:21 PM UTC

phkahler wrote: post #83

nostrademons wrote: post #67

Earlier quoted context omitted.

It's analogous to investing money in USD or GBP before those countries were given a license to print as many USD and GBP as they wanted. Before then (1931 for the pound and 1933 for the dollar, though they maintained de-facto parity with gold until 1971), dollars and pounds were considered good investments. That's why we had bank runs: people thought their money would be safer under their mattress, and preferred to o…

>> Not so with Bitcoin: the total supply is fixed at 21M, forever, and there's no central authority with the power to change that. But as TFA indicates, there are over 500 other crypto coins. When anyone can create a new one they become irrelevant.

Bitcoin, and to a slightly lesser extent Ethereum, are schelling points for crypto. There are good reasons for this. Both bitcoin and ethereum created something new and interesting. In a world where you are trying to pick the coin that everyone else is going to pick, which one will you pick? The Nth of its kind, or the one that created the kind to begin with? That’s why they account for a huge majority of total value of all crypto currencies.

Edit: obviously this is an oversimplification and there are other factors like quality of governance, quality of the underlying tech, and so on. But I believe the above is the crucial factor.

Re: S&P Dow Jones Indices to launch cryptocurrency indexes in 2021

#100

Post by deeviant » Thu, Dec 03, 2020, 5:22 PM UTC

iamspoilt wrote: post #30

Someone please explain this to me: How is any cryptocurrency even considered an investment vehicle? I would classify myself as Boglehead and I believe in the fundamentals of investing in stocks because in all it's technicality (and given the buy-and-hold strategy), you are investing in a business by owning a part of it which naturally means that you will and do get the returns on it, both in terms of profits (dividen…

Investing is buying things that gain value over time.

Bitcoin was originally worthless, now it's ~19k a coin. Anybody that bought or mined a large amount of coins back in the day and held on to them, is now rich, so a pretty good investment. The same forces that acted on bitcoin and brought it from worthless to 19k are still acting on it now.

Doesn't seem like it's very difficult to understand why bitcoin is considered an investment vehicle.

There are certainly good arguments for why may or may not be a poor investment vehicle or not the right one for a particular strategy, but arguments of whether it is one are moot.