There's a few cryptocurrency index funds already, where the fund itself is completely automated and shares of the index are tokens on an ethereum contract. So you buy in with ethereum, then can liquidate you shares back to ethereum whenever you want. Still relies on a real-world organization, but pretty cool.
S&P Dow Jones Indices to launch cryptocurrency indexes in 2021
101–110 of 571 posts
Re: S&P Dow Jones Indices to launch cryptocurrency indexes in 2021
#102Earlier 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.
[deleted]
Re: S&P Dow Jones Indices to launch cryptocurrency indexes in 2021
#103Earlier quoted context omitted.
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.
Anybody could create a new protocol that competes with IP (many did). So that part of your argument doesn't hold.
The reason that IP addresses are scarce is not because it's not possible to invent a new protocol, but because everyone else uses IP so only IP addresses are useful.
Spectrum might initially appear to be fundamentally scarce, but even then, people can invent other ways to communicate (and they did! copper wires! IP!).
These are all examples of networks - their value is proportional to their popularity. So yes, anybody can create a new cryptocurrency, but currencies are mainly valuable because of who you can use them with. Dollars are valuable because so many people accept them!
So if one cryptocurrency really gains traction, it will be hard for any other cryptocurrency to compete unless it offers something fundamentally new and different.
Re: S&P Dow Jones Indices to launch cryptocurrency indexes in 2021
#104Earlier quoted context omitted.
Stocks are shares in profitable companies. They have risks, sure, but they also have expected returns based on sound fundamentals and a long history of generating income.
You could say the same about Ethereum's ETH. It's a capital asset that when staked to validate blocks generates an expected return. You can discount those expected returns to the present like you would with any business. Investing in profitable companies by itself does not generate above average returns. Only 1 of the original companies of the Dow Jones is still in it today, G.E. and it's performance as investment ha…
> Only 1 of the original companies of the Dow Jones is still in it today
Small companies become bigger, driving returns. That's why you don't just buy the DJIA but rather index the whole market. Of course there will be turnover - the point isn't to lock into any one stock - don't look for the needle, buy the haystack (i.e. a broader-market index).
If you want to include crypto in the haystack, sure, fine, whatever, but at market weights, it's going to be a very small portion of the investable market of stocks, bonds, cash and other asset classes. At some point, it's enough to just keep it simple and broad. A fraction of percent of this or that won't make or break a diversified portfolio.
Re: S&P Dow Jones Indices to launch cryptocurrency indexes in 2021
#105Earlier quoted context omitted.
I'll try to use my elevator pitch: With cryptocurrency, you're right they're not an "investment" in the traditional sense. Right now more of a long-term gamble. In my opinion the value is in the network and the ability to move money instantly (or at very least faster than traditional methods), securely, to anywhere in the world for a fraction of a cent. That ability alone is valuable and hasn't existed until now. The…
> In my opinion the value is in the network and the ability to move money instantly (or at very least faster than traditional methods), securely, to anywhere in the world for a fraction of a cent. That ability alone is valuable and hasn't existed until now. I spent some time working in a relatively-unknown but high volume clearing bank. Banks can and do move billions instantly, and have done so for years through SWIF…
SWIFT gpi can't compete with Ripple on a number of important issues. Ripple transfers don't pass through multiple banks and the actual value of the XRP is transferred, not just the data (of the SWIFT ledger).
> Banks can and do move billions instantly
We're not just talking about banks, and if I open my own bank tomorrow I can't use SWIFT the same day (the way I can with Ripple), I have no relationships with correspondent banks.
This is the added value to existing infrastructure.
Re: S&P Dow Jones Indices to launch cryptocurrency indexes in 2021
#106Someone 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…
Sign value.
Re: S&P Dow Jones Indices to launch cryptocurrency indexes in 2021
#107Earlier quoted context omitted.
I'll try to use my elevator pitch: With cryptocurrency, you're right they're not an "investment" in the traditional sense. Right now more of a long-term gamble. In my opinion the value is in the network and the ability to move money instantly (or at very least faster than traditional methods), securely, to anywhere in the world for a fraction of a cent. That ability alone is valuable and hasn't existed until now. The…
> In my opinion the value is in the network and the ability to move money instantly (or at very least faster than traditional methods), securely, to anywhere in the world for a fraction of a cent. That ability alone is valuable and hasn't existed until now. I spent some time working in a relatively-unknown but high volume clearing bank. Banks can and do move billions instantly, and have done so for years through SWIF…
The fundamental point of bitcoin is that you don’t need banks. Whether that’s good or bad will be debated for years to come.
Re: S&P Dow Jones Indices to launch cryptocurrency indexes in 2021
#108Someone 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…
1) Low correlation to other markets. Any 60/40 portfolio that moved just 1% of it's allocation to Bitcoin would have produced a higher sharpe ratio (higher return, less volatility) over past 5 years.
2) Many crypto protocols are already capital assets that generate income streams. These income streams can be discounted to the present just like the income streams of companies. Examples: - Ethereum (ETH): It has multiple use cases such as collateral and gas for execution (think oil) both of which contribute to it's value as usage grows, but it's also a capital asset that can be staked and used to validate transactions to generate an income stream. This is not much different than real estate or farm land being used as a productive asset to generate returns. - MakerDAO: Protocol that generates a stablecoin (DAI) backed by debt based collateral (think mortgages against homes). The interest from minting DAI is repaid to unlock the collateral and burns (think stock buybacks) MKR. - Yearn.finance: Protocol that takes stablecoin (crypto pegged to USD) assets and generates returns across decentralized money markets. Returns have been averaging between 10%-35% APR depending on the pool and strategy.
Finally consider the current macro environment. Stocks generate a stream of future income based in USD and fiat currencies. In 2020, the central banks of the major currencies have not only increased currency supply by over 50% (FED balance sheet in march was 4.3T, today 7.2T) but worked with top level governments to hand out the new printed money directly to consumers which is now money that will be hard to pull back out of the economy and they did it while GDP and economic activity has been stifled.
So a larger amount of currency backed by a smaller amount of economic activity is a depreciating asset. If the return on equity of your profitable companies is smaller rate than the depreciation of the currency you have a negative real return.
In order to prevent this companies may start to transact in a currency that has a deterministic monetary policy and can not be changed by the whims of a select few bureaucrats. As the most stable and longest running crypto network, Bitcoin stands to be such an asset. See Micro strategy (MSTR) and Square (SQ) moving treasury reserves into Bitcoin.
The way you value Bitcoin is you estimate the amount of global GDP (140 Trillion) that will shift to transacting in it and then divide that by the velocity of money or how often it changes hands. This will tell you how large a marketcap it will have in order to support that level of economic activity.
So for example if 1% of global GDP is transacted in Bitcoin and it's velocity becomes something like USD (1.5x) or the Euro, let call it a velocity of 2 then: 140 * 1% / 2 = $700 Billion marketcap.
Re: S&P Dow Jones Indices to launch cryptocurrency indexes in 2021
#109Someone 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 want to believe it's an investment myself, but haven't been able to-- and by sitting it out we've of course lost a lot of money in forgone gains.
Where I get stuck, and maybe someone could help me here-- generally, you don't have to try to hard to imagine a future with cryptocurrency being more useful then it is today. That is, it is more valuable. BUT, why should that mean that its price should be higher? It's like looking at the pithy saying, "price is not value" in reverse.
Re: S&P Dow Jones Indices to launch cryptocurrency indexes in 2021
#110Someone 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'll try to use my elevator pitch: With cryptocurrency, you're right they're not an "investment" in the traditional sense. Right now more of a long-term gamble. In my opinion the value is in the network and the ability to move money instantly (or at very least faster than traditional methods), securely, to anywhere in the world for a fraction of a cent. That ability alone is valuable and hasn't existed until now. The…
The "anywhere in the world" part is really huge. As of now, most cryptocurrencies aren't run by nation states, unlike traditional currencies. Cryptocurrencies have to potential to become a global currency that's fair to all.
I actually think that the nation states really missed out when they didn't mint their own cryptocurrency that has the same value as their physical money. If they controlled a currency completely, they could tax every transaction! Surprised they didn't jump on this.