New study detects lottery-like behavior in cryptocurrency markets • Hacker News Board

Re: New study detects lottery-like behavior in cryptocurrency markets

#151

Post by retrac » Thu, Apr 01, 2021, 9:08 PM UTC

matthias509 wrote: post #43

toolz wrote: post #26

Earlier quoted context omitted.

maybe for developed nations - that doesn't represent much of the world

So high tech crypto is the solution to making trading with the developing world easier? Aren’t these the same sorts of places which struggle to have reliable electricity, let alone internet access?

Even in developed countries a non-trivial proportion of the population is not banked. (Estimate for Canada: 6% of adults do not have any form of bank account.) It can be the large majority in many developing countries, including ones where most people have electricity at home and a smartphone can be bought for a few day's wages. Sending a small amount of cash from Brazil to Canada is not trivial in many cases.

And of course, many people here on Hacker News have a rather privileged Western notion, that you can, in fact, legally send money just wherever. That's not universal. Capital controls restrict that heavily in many places, such that it can be illegal for people to send money out of the country. So the formal banking system is no help there.

Assuming that you can trade Bitcoin on both ends, it really is often the simplest way to simply move money between people outside the formal banking system, especially internationally. For better and worse, it cuts right through all of the red tape: no wire transfer declarations, no capital control declarations, no government-mandated exchange rates, no tax reporting, no KYC requirements, no ID requirements.

Re: New study detects lottery-like behavior in cryptocurrency markets

#152

Post by anonporridge » Thu, Apr 01, 2021, 9:11 PM UTC

bko wrote: post #125

anonporridge wrote: post #109

Earlier quoted context omitted.

Even years ago before the previous bull run, the most compelling narrative was that bitcoin would first displace gold as a store of value, and then maybe become a global currency. Some people did still cling to the 'digital cash for everyone' narrative, but it's pretty clear that doesn't scale. It's not clear if bitcoin will scale for global payments with second layers, but it seems like the most compelling approach.…

I read that gold actually outperformed the stock market since the end of the gold standard in the US (1971). I didn't really believe it , but it sort of did, depending on when you bought gold [0]. Not that gold is a good investment, but it does say something that its increased at ~7% a year since introduction of a completely fiat currency. I'm not smart enough to have a story to explain what that all means, but let's…

This is really only true if you were lucky enough to buy gold in early 1971. Even a couple years later, market indexes would have been a significantly better bet. [0]

The more interesting observation in my opinion, is that priced in gold, market index growth isn't nearly as impressive as dollar denominated numbers would lead you to believe. Priced in gold (excluding dividends) the S&P 500 still hasn't recovered from the dotcom bubble, it's just barely made it back to pre global financial crisis levels, and even that is on par with the 60s. [1]

The fiat standard distorts our view of the world and tricks us into seeing growth that isn't real. It's like if the CGPM [2] cut off a sliver from the meter stick every year (before pegging to universal constants) which makes it seem like you're growing in height your entire life, even though in reality you stop growing in your 20s and even start shrinking in old age.

[0] https://www.longtermtrends.net/stocks-vs-gold-comparison/

[1] https://www.macrotrends.net/1437/sp500-to-gold-ratio-chart

[2] https://en.wikipedia.org/wiki/General_Conference_on_Weights_...

Re: New study detects lottery-like behavior in cryptocurrency markets

#153

Post by ptr » Thu, Apr 01, 2021, 9:12 PM UTC

bko wrote: post #138

webinvest wrote: post #136

Earlier quoted context omitted.

From Jan 1st 1971 to Dec 31st 2020, the US stock market grew by 10.91%/year CAGR if you include dividends which you should. 7.70%/year CAGR if you don’t include dividends. In that time frame, $1 has grown to $177.33. I did the math to find out what the melt value of a $10 1913 gold coin would be today in 2021. Over that more than 100 year time frame, the CAGR of gold is 5%/year. Since 10.91% is far higher than 5% or…

I don't disagree. I addressed this in my post. I don't claim to have a definitive claim that it has outperformed nor do I believe it has. But its curious that it's even up for debate. A fixed supply of something, basically a unit of account. If you denominate prices of "productive assets" in terms of gold, the return is considerably lower when compared to that of fiat. Gold appreciation was ~0% from 1930-1970. Post f…

That the appreciation was 0% makes a lot of sense since the dollar pas pegged to the gold. Maybe it just means that having a currency that increases in value by 7% per year was untenable since it doesn’t incentivize people to invest in more productive ventures. It’s deflationary.

Re: New study detects lottery-like behavior in cryptocurrency markets

#154

Post by ac29 » Thu, Apr 01, 2021, 9:22 PM UTC

bko wrote: post #138

webinvest wrote: post #136

Earlier quoted context omitted.

From Jan 1st 1971 to Dec 31st 2020, the US stock market grew by 10.91%/year CAGR if you include dividends which you should. 7.70%/year CAGR if you don’t include dividends. In that time frame, $1 has grown to $177.33. I did the math to find out what the melt value of a $10 1913 gold coin would be today in 2021. Over that more than 100 year time frame, the CAGR of gold is 5%/year. Since 10.91% is far higher than 5% or…

I don't disagree. I addressed this in my post. I don't claim to have a definitive claim that it has outperformed nor do I believe it has. But its curious that it's even up for debate. A fixed supply of something, basically a unit of account. If you denominate prices of "productive assets" in terms of gold, the return is considerably lower when compared to that of fiat. Gold appreciation was ~0% from 1930-1970. Post f…

> Gold appreciation was ~0% from 1930-1970. Post fiat-currency it grew at 5-7%. That has to mean something...

Gold was nationalized by the US Government in the 1930s and it wasnt legal for US citizens to own or trade again until the 1970s. https://en.wikipedia.org/wiki/Gold_Reserve_Act

Re: New study detects lottery-like behavior in cryptocurrency markets

#155

Post by anonporridge » Thu, Apr 01, 2021, 9:33 PM UTC

cmehdy wrote: post #48

henvic wrote: post #9

It's trivial. Just say any is pure speculation of thin air and you'll be right. There's no sense in the currently existing crypto currencies. They're all fiat money. Peter Schiff was right back then... https://www.youtube.com/watch?v=sgRGBNekFIw and he's still right now. https://twitter.com/peterschiff/status/1345427870546538509

I always feel like a fish out of the water when talking about money-related subjects, so I looked up what the actual definition of fiat money is, and followed a dozen or so different sources. Unless I am mistaken, it seems like cryptocurrencies that currently exist can all be called fiduciary money but not fiat money, as the fiat term seems to tightly connect with government decrees and issuing. There might be a form…

Based on the descriptions in this link, I don't think crypto neatly fits into any of these categories.

It's not quite fiduciary money because there is no issuer that gives any promises of convertibility. Perhaps you could argue there is some implied promise of convertibility due to the prominence of fiatcrypto exchanges?

It seems closest to commodity money, because it's value depends on asset scarcity, but it's not a real commodity with utility in and of itself. Then again, it's not clear that gold was actually valuable to people before they started using it as money. It's possible that use as jewelry emerged after use as money to peacock and show off wealth, and industrial use is a relatively modern invention.

Crypto is a novel invention of self-securing abstract scarcity. It's a scarce number in a database. Its scarcity is assured by the properties of the network, rather than trust in an issuing authority. It just doesn't fit perfectly in any of our pre-existing categories.

Re: New study detects lottery-like behavior in cryptocurrency markets

#156

Post by reasonabl_human » Thu, Apr 01, 2021, 9:42 PM UTC

anonporridge wrote: post #152

bko wrote: post #125

Earlier quoted context omitted.

I read that gold actually outperformed the stock market since the end of the gold standard in the US (1971). I didn't really believe it , but it sort of did, depending on when you bought gold [0]. Not that gold is a good investment, but it does say something that its increased at ~7% a year since introduction of a completely fiat currency. I'm not smart enough to have a story to explain what that all means, but let's…

This is really only true if you were lucky enough to buy gold in early 1971. Even a couple years later, market indexes would have been a significantly better bet. [0] The more interesting observation in my opinion, is that priced in gold, market index growth isn't nearly as impressive as dollar denominated numbers would lead you to believe. Priced in gold (excluding dividends) the S&P 500 still hasn't recovered from…

The priced in gold insight is frightening to me as someone who holds currency... time to move into appreciating assets

Re: New study detects lottery-like behavior in cryptocurrency markets

#157

Post by anonporridge » Thu, Apr 01, 2021, 9:59 PM UTC

reasonabl_human wrote: post #156

anonporridge wrote: post #152

Earlier quoted context omitted.

This is really only true if you were lucky enough to buy gold in early 1971. Even a couple years later, market indexes would have been a significantly better bet. [0] The more interesting observation in my opinion, is that priced in gold, market index growth isn't nearly as impressive as dollar denominated numbers would lead you to believe. Priced in gold (excluding dividends) the S&P 500 still hasn't recovered from…

The priced in gold insight is frightening to me as someone who holds currency... time to move into appreciating assets

Yeah. Cash is trash.

Only keep enough cash to handle emergencies, e.g. 3-12 months of expenses to handle job loss. You don't want 100% of your wealth in potentially volatile assets, because job loss will often correlate with market corrections, forcing you to sell your assets at the worst possible time, when you would ideally be buying.

However, one trick you can use is to borrow against your assets. Not only do you not need to sell at a bad time, but you don't get dinged by capital gains tax. There are pitfalls here that can make it dangerous, but here's an example of executing it, https://www.mrmoneymustache.com/2021/01/29/margin-loan-ibkr-...

Re: New study detects lottery-like behavior in cryptocurrency markets

#158

Post by rasengan » Thu, Apr 01, 2021, 10:11 PM UTC

endisneigh wrote: post #27

It makes sense. In my experience the primary goal for most crypto holders is to be a part of a new elite. This is why the most popular currencies have a fixed supply. That way, if they're popular earlier adopters get to be a part of the elite. With such a premise it makes sense to treat crypto like the lottery as the gain/loss likelihood is very similar to say, Mega Millions. I do see value in a crypto that's pinned…

> My biggest concern is a fixed-supply currency gives no government the ability to provide stimulus if necessary.

If people have consensus to fork and create more coins, then so it will be; but that decision will not be made alone by a single actor.

Re: New study detects lottery-like behavior in cryptocurrency markets

#159

Post by jtbayly » Thu, Apr 01, 2021, 10:15 PM UTC

gamblor956 wrote: post #141

bko wrote: post #90

Earlier quoted context omitted.

There is plenty of blame to throw around during interventionist policies during the Great Depression. Take a look at Wickard v Filburn: > An Ohio farmer, Roscoe Filburn, was growing wheat to feed animals on his own farm. The US government had established limits on wheat production, based on the acreage owned by a farmer, to stabilize wheat prices and supplies. Filburn grew more than was permitted and so was ordered t…

It was illegal for farmers to grow wheat above a certain amount... on their own land... to feed their own animals... The wheat limits already assumed that farmers would feed their own animals first and then sell the remainder on the open market. The goal was to prevent the price of wheat from dropping too low by limiting the amount available for non-feed purposes. However, by doing the opposite, selling up to the lim…

> The wheat restrictions worked for the purpose they were intended

And they are unconstitutional.

Re: New study detects lottery-like behavior in cryptocurrency markets

#160

Post by lamontcg » Thu, Apr 01, 2021, 10:42 PM UTC

endisneigh wrote: post #27

It makes sense. In my experience the primary goal for most crypto holders is to be a part of a new elite. This is why the most popular currencies have a fixed supply. That way, if they're popular earlier adopters get to be a part of the elite. With such a premise it makes sense to treat crypto like the lottery as the gain/loss likelihood is very similar to say, Mega Millions. I do see value in a crypto that's pinned…

> My biggest concern is a fixed-supply currency gives no government the ability to provide stimulus if necessary. Many advocates argue that governments shouldn't provide stimulus but history shows that's generally a terrible idea (the gold standard, for example, contributed in some ways to The Great Depression).

Your concern here isn't big enough.

Your implicitly assuming that it functions like Gold and/or USD in some healthy way.

The biggest concern is really that it operates like a distributed wildcat banking system without any kind of FDIC or Fed backing up the currency. Once there is a panic then it will unwind with no kinds of circuit breakers in place.

Everyone treats "the full faith and credit of the US government" as a joke and so think that a financial system that ignores the whole history of bank panics doesn't even need to pay lip service to those ideas and it'll be fine. Economic history shows that this will end badly for crypto -- like a law of gravity. It may also end badly for the US before too long, but everyone is due for a lesson in why those words are there for a reason.

And nobody needs crypto to pay their groceries, rent, mortgage or taxes. Everyone can choose to quit crypto tomorrow and most of the population of the world won't care. It is incredibly difficult to quit the USD.

Arguing about inflationary/deflationary currencies implicitly adopts the language that there's something useful there, when its just a really large distributed ponzi scheme that hasn't collapsed yet.