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

#241

Post by smabie » Thu, Dec 03, 2020, 7:02 PM UTC

misnamed wrote: post #139

fractionalhare wrote: post #68

Earlier quoted context omitted.

Gold is a good portfolio asset for reducing overall risk in a long term investment strategy. You can beat the market over time with less risk by holding the S&P 500 and gold and weighting each according to respective volatility. This also has a lower beta exposure than just holding stocks. Gold (and commodities more generally) have fundamentals - just different ones from equities. You can't take advantage of the univ…

We have fairly little data on gold as a freely available modern asset class (around 50 years), but yes, in small amounts it can limit volatility and potentially even increase returns (or at least: risk-adjusted returns). That said, over the long haul, independently, it has tended to roughly track inflation. I'm not against it, just see it as something of limited utility to an ordinary investor.

Using minimum variance optimization with gold and spy produces a portfolio that is often 50% or more of gold. This beats the risk adjusted return of spy by a reasonable margin.

So I guess the point I'm making is that often a lot of gold makes sense too.

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

#242

Post by Erlich_Bachman » Thu, Dec 03, 2020, 7:02 PM UTC

nofunphil wrote: post #229

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…

Buying Bitcoin is becoming similar to buying gold. It’s a Store of Value. Why is gold an investment? Because it’s scarce and we have, as a society, decided it’s an investment. There may be nuances here, but that’s the basic idea. Bitcoin is digital gold. Most other tokens are similar buying fiat currencies which can help if you local fiat currency is hyper-inflating. But then some tokens give access to de-fi which a…

Yep, store of value is actually a useful function for many indivudals and companies, and we are betting on that storing of value will become more and more valueable as we progress.

Storing of value is not just "hoarding", useless activity. It is an important ingredient in making many of the business processes and just things work in general. It is a very impotant function. And thus if we have tools that make that function work well, - they will be valueable.

And as it turns out, there aren't that many things that work well as a store of value. It's not like you can take any thing or instrument or contract or whatever else, and make it work as a store of value. In some sense, the ability to act as a store of value is scarce in itself. We already have some instruments, like gold, properties, land, etc. Stocks and ETFs and such are also kinda a store of value, but have a lot problems (but also other functions besides just storing the value). So yes, we welcome another way to store value, this market is by no means saturated as it turns out. Gold has it's own problems.

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

#243

Post by mrlala » Thu, Dec 03, 2020, 7:04 PM UTC

nofunphil wrote: post #229

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…

Buying Bitcoin is becoming similar to buying gold. It’s a Store of Value. Why is gold an investment? Because it’s scarce and we have, as a society, decided it’s an investment. There may be nuances here, but that’s the basic idea. Bitcoin is digital gold. Most other tokens are similar buying fiat currencies which can help if you local fiat currency is hyper-inflating. But then some tokens give access to de-fi which a…

Honestly that is just bs.

Gold is a physical thing that is scarce and has real uses other than being treated as 'money'. We have only mined a cube with 28 meter sides of gold from the dawn of time! It's useful- that's why it has value.

If it wasn't useful (pretty for jewelry and an essential industry product) then it would be fairly worthless.

You say crypto is scarce? The scarcity is artificial, and you can create an infinite number of crypto currencies...

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

#244

Post by pashamur » Thu, Dec 03, 2020, 7:04 PM UTC

misnamed wrote: post #104

bgitarts wrote: post #63

Earlier quoted context omitted.

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, b…

That depends on how good you are at finding needles :)

The thing not many people seem to talk about is that the 20th century had unprecedented growth in terms of population around the world (which has slowed significantly in the last few decades, although the effects usually lag by quite a bit - when the children enter the workforce and such). We're making up for some of it with technological progress, but ultimately what impact that makes is up to everyone to think about individually (look at Japan as a potential leading indicator of what demographic change can do).

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

#245

Post by Erlich_Bachman » Thu, Dec 03, 2020, 7:04 PM UTC

root_axis wrote: post #240

nofunphil wrote: post #229

Earlier quoted context omitted.

Buying Bitcoin is becoming similar to buying gold. It’s a Store of Value. Why is gold an investment? Because it’s scarce and we have, as a society, decided it’s an investment. There may be nuances here, but that’s the basic idea. Bitcoin is digital gold. Most other tokens are similar buying fiat currencies which can help if you local fiat currency is hyper-inflating. But then some tokens give access to de-fi which a…

Cryptocurrency isn't actually scarce though, it may be "scarce-like" but the scarcity is an artificial property that can be arbitrarily changed, unlike gold's scarcity which is an unalterable property of reality.

In all practical senses it is scarce. It is the protocol and consensus of the people using it that makes it scarce. If you disagree, go ahead just make your own BTC and see how "easy" it is to convince other people to use it instead of BTC or some other mainstream coin. (Some people even tried exactly that...)

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

#246

Post by Erlich_Bachman » Thu, Dec 03, 2020, 7:06 PM UTC

mrlala wrote: post #243

nofunphil wrote: post #229

Earlier quoted context omitted.

Buying Bitcoin is becoming similar to buying gold. It’s a Store of Value. Why is gold an investment? Because it’s scarce and we have, as a society, decided it’s an investment. There may be nuances here, but that’s the basic idea. Bitcoin is digital gold. Most other tokens are similar buying fiat currencies which can help if you local fiat currency is hyper-inflating. But then some tokens give access to de-fi which a…

Honestly that is just bs. Gold is a physical thing that is scarce and has real uses other than being treated as 'money'. We have only mined a cube with 28 meter sides of gold from the dawn of time! It's useful- that's why it has value. If it wasn't useful (pretty for jewelry and an essential industry product) then it would be fairly worthless. You say crypto is scarce? The scarcity is artificial, and you can create a…

They already have created an infinite number of them. Nobody is buying them. BTC and a couple of others have the property of being valueable (which is decided in consensus by the users in the real world), while also being scarce. Nobody cares if some shitcoin on the bottom of coinmarketcap is not scarce. It is irrelevant.

So yes, useful cryptocurrencies are scarce.

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

#247

Post by pashamur » Thu, Dec 03, 2020, 7:07 PM UTC

misnamed wrote: post #131

wsc981 wrote: post #126

Earlier quoted context omitted.

I see Bitcoin as a hedge against the USD and EUR as I feel the currencies will be in trouble in the coming years. I see Bitcoin as a store of value. Keeping some of my assets in Bitcoin keeps some of my assets out of the hands of governments and banks and will not be affected by devaluation. There's no risk of a bail-in [0] for example. I don't invest all my assets in Bitcoin, currently perhaps 10% of my net worth. I…

If you want to hedge against inflation, I suggest TIPS and maybe a bit of gold. I would also point out that the market expectation clearly isn't aligned with currencies being 'in trouble' - very low inflation in general right now.

Generally, the only way to make outsized returns in the market is to go against market expectations, otherwise you would just make market returns.

So yes, a bet on crypto is a bet against the market consensus, sort of by definition :)

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

#248

Post by 35fbe7d3d5b9 » Thu, Dec 03, 2020, 7:07 PM UTC

cwkoss wrote: post #219

itodd wrote: post #183

How can this be with Tether existing? Does anyone really honestly think that USDT is legit?

Tether would be silly to include in the index, but not sure how its existence affects crypto indices otherwise.

Because it is almost certainly being used to artificially pump the price of BTC up.

The only question is: "has the market priced this in, so the current price is a floor and we're waiting for USDT to fall away", or "has the market not priced this in and a major shock will happen when that shoe drops?"

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

#249

Post by postingpals » Thu, Dec 03, 2020, 7:07 PM UTC

nofunphil wrote: post #229

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…

Buying Bitcoin is becoming similar to buying gold. It’s a Store of Value. Why is gold an investment? Because it’s scarce and we have, as a society, decided it’s an investment. There may be nuances here, but that’s the basic idea. Bitcoin is digital gold. Most other tokens are similar buying fiat currencies which can help if you local fiat currency is hyper-inflating. But then some tokens give access to de-fi which a…

A store of value is just one aspect to what makes money, money. It also has to be a medium of exchange and a standard of value. Bitcoin's value changes so wildly that it cannot be a standard (right now) and no one uses it to buy things.

Everyone is investing in bitcoin on the promise that its going to be so much more useful than dollars, in the hopes that they will make a lot of... dollars? Do you see the contradiction? If they think it's going to be so much better than dollars what are they going to do with their long term investment dollars if, in the long run, bitcoin surpasses them?

Don't use economics terms to explain the usefulness of bitcoin when economics itself disagrees.

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

#250

Post by mrlala » Thu, Dec 03, 2020, 7:09 PM UTC

eldaisfish wrote: post #215

ur-whale wrote: post #212

Earlier quoted context omitted.

By your reasoning, gold isn't an investment vehicle either (a rather widely-held belief, btw). Yet, a somewhat sizeable category of people still invest in gold ... Could it be that the definition of "investment vehicle" is broader that what you may have willingly restricted yourself to?

You logic is correct. Gold is not an investment, it is a hedge. Gold does no useful work and produced no measurable output. It's "purpose" is simply that society has assigned it a value that most people will agree to exchange for other forms of value. In exactly the same way, crypto or any fiat currency is not an investment.

>Gold does no useful work and produced no measurable output

What? Gold us physically useful and relatively scarce, THAT is why it has value.

You are acting like people just got together and said "hey, let's take this useful hunk of garbage and assign it some value to see how rich we all are".