Ask HN: Why crypto is rising so fast when its not creating value? • Hacker News Board

Re: Ask HN: Why crypto is rising so fast when its not creating value?

#31

Post by SquishyPanda23 » Sun, Nov 07, 2021, 2:34 AM UTC

mdorazio wrote: post #23

philosopher1234 wrote: post #14

Earlier quoted context omitted.

It’s a fallacy to think that just because people want to do something it is valuable. People have wanted to do some insanely wasteful or horrible things in the past.

"Want" has nothing to do with it. If people are willing to pay money for a service, that service is by definition valuable. Many thousands of people are willing to pay money in the form of gas fees to transact on the Ethereum network, so the network must be providing value. Whether you think the endpoints (assets/coins/whatever) themselves have value is irrelevant. I have a feeling that whatever definition you're usi…

> If people are willing to pay money for a service, that service is by definition valuable.

This is only true if you define "value" to mean "people are willing to pay money for it."

But that's a useless and circular definition. It's only tolerated because assuming that money is a proxy for value was useful for making crude models in economics.

Re: Ask HN: Why crypto is rising so fast when its not creating value?

#32

Post by rhizome » Sun, Nov 07, 2021, 2:35 AM UTC

EastOfTruth wrote: post #3

I like crypto a lot to transfer money on my own terms edit: in reply to rhizome below: yeah, I bought drugs, money, goods, etc... But I also lost money when the US Gov messed with BTC-e [1]... I hope that Biden doesn't get too stupid with his regulations. (Hacker News didn't allow me to reply to a reply to my own comment: https://i.imgur.com/rd8qH08.png ) 1. https://en.wikipedia.org/wiki/BTC-e

Have you gone through the process of buying real money with it?

Re: Ask HN: Why crypto is rising so fast when its not creating value?

#33

Post by dicefordeath » Sun, Nov 07, 2021, 2:35 AM UTC

mdorazio wrote: post #23

philosopher1234 wrote: post #14

Earlier quoted context omitted.

It’s a fallacy to think that just because people want to do something it is valuable. People have wanted to do some insanely wasteful or horrible things in the past.

"Want" has nothing to do with it. If people are willing to pay money for a service, that service is by definition valuable. Many thousands of people are willing to pay money in the form of gas fees to transact on the Ethereum network, so the network must be providing value. Whether you think the endpoints (assets/coins/whatever) themselves have value is irrelevant. I have a feeling that whatever definition you're usi…

And what utility are they extracting, exactly? It's incorrect to assume that a willingness to pay is always indicative of durable underlying value. See every bubble ever, for example.

The real problem in the world of crypto is that it's gone through many boom and bust cycles without real innovation to match. The future of what crypto could deliver is as speculative now as it was five years ago.

Re: Ask HN: Why crypto is rising so fast when its not creating value?

#34

Post by rhizome » Sun, Nov 07, 2021, 2:37 AM UTC

mfrager wrote: post #11

Because it's clear from anybody who knows the details about it that crypto is the basis for the next-generation of the financial system.

Not if people who know the details are cryptic and vague about the validity of that basis.

Re: Ask HN: Why crypto is rising so fast when its not creating value?

#35

Post by ivanech » Sun, Nov 07, 2021, 2:37 AM UTC

Crypto has a bunch of narratives around it that are compelling to different groups of people - it should be digital gold, or it will replace centralized applications, or it is a way to bring about a libertarian future, or it'll make transactions cheaper/more accessible, or it'll get you rich quick. They contradict each other, but that's okay because no single person believes all of them. People can hold whichever narrative they want to. Some of them might be true! I don't know.

The other side of this is that certain crypto markets are highly liquid, and liquidity is sticky. Sure, they're subject to high volatility and intense drawdowns, but being a focus of trading is something that lingers a long time. Most traders don't care about fundamentals. This is just another place to speculate to them (that's not a value judgement on my part), and the best places to speculate are places with lots of other participants.

I know that basically boils down to "it's popular because it's popular," but I do think it's self-reinforcing or self-sustaining. Narratives drove money into crypto and to this high point, but I think these reflexive dynamics are also keeping it elevated

Re: Ask HN: Why crypto is rising so fast when its not creating value?

#36

Post by philosopher1234 » Sun, Nov 07, 2021, 2:37 AM UTC

DennisP wrote: post #29

philosopher1234 wrote: post #14

Earlier quoted context omitted.

It’s a fallacy to think that just because people want to do something it is valuable. People have wanted to do some insanely wasteful or horrible things in the past.

The question was why the price of crypto is rising so fast. The answer, at least for Ethereum, is that it provides a service that some people value enough to pay for. The fact that philosopher1234 doesn't value those services just means it's very slightly less valuable than it otherwise would be.

“People will pay money for it” is not a useful definition of value. People pay money for assassination or vengeance and many extremely destructive things. What use is there in labeling these things as valuable?

Re: Ask HN: Why crypto is rising so fast when its not creating value?

#37

Post by jazzyjackson » Sun, Nov 07, 2021, 2:37 AM UTC

Highly recommend episode #231 of Lex Fridman talking to Alex Gladstein - it's a long but interesting discussion on human rights, democracy, totalitarianism, and how money fits into the picture. Alex describes BTC as a trojan horse, a "number go up" technology that attracts buyers by being the best performing asset (certainly a tautology, it keeps performing well because it's been performing well) - once it becomes the currency du jour of dictators, those very dictators that instituted it as currency may find that they've lost control of their citizens, since they can more easily exfiltrate their wealth. (my answer to your question is, people value money that is not controlled by their government, and also serious Fear-Of-Missing-Out)

Don't come counter-arguing to me tho, I'm not the Chief Strategy Officer of the Human Rights Foundation, Alex Gladstein is, he makes the argument better than I.

Re: Ask HN: Why crypto is rising so fast when its not creating value?

#38

Post by anish_m » Sun, Nov 07, 2021, 2:39 AM UTC

Good read on greater money printing: https://blog.ftx.com/blog/the-everything-bubble/

"In the US alone the Fed has bought $4 trillion of bonds in the past 18 months, while the US government is spending $875M per hour in 2021.

This is driving people further out the risk curve, and as we’ve said in the past, “QE Infinity turned your savings account into your checking account, the bond market into your savings account, the equity market into the bond market, the venture market into the equity market, while given rise to the crypto market as the new venture market.”"

Re: Ask HN: Why crypto is rising so fast when its not creating value?

#39

Post by tjr225 » Sun, Nov 07, 2021, 2:39 AM UTC

philosopher1234 wrote: post #27

MisterBiggs wrote: post #26

Earlier quoted context omitted.

Fair point. Not everything happening on smart contract platforms is good and some of it may even be bad. The post was asking if value is created and I think that my argument that the market price of doing things in the ecosystem having a real world cost translates to it having value is correct. There are plenty of insanely wasteful and horrible companies that create real value in the world.

It may have real value, but people paying money for it doesn’t prove that. Genocide requires a lot of money, so is it valuable?

A quarter of a million Afghan civilians died at war in the last 20 years due to a sham war predicated on phony evidence. This alone should tell you that all sorts of horrible atrocities are valuable.

Crypto still looks and smells like a huge sham, tho, so I’m inclined to agree with your other points.

Re: Ask HN: Why crypto is rising so fast when its not creating value?

#40

Post by civilized » Sun, Nov 07, 2021, 2:40 AM UTC

10000truths wrote: post #12

Cryptocurrency is backed by the same thing as any other currency: popularity and consumer confidence. Whether such sentiments are "warranted" or "deserved" is a subjective matter, but that is irrelevant to determining its economic influence - enough people have invested in it for network effects to all but guarantee its continued relevance.

> Cryptocurrency is backed by the same thing as any other currency: popularity and consumer confidence.

I don't think currency is just a confidence game. The most important thing is that the currency is actually used to make transactions that are meaningful to human life. A currency that isn't used to exchange goods is just a collectible. There is no such thing as an abstract "store of value" that has no actual utility other than as a store of value. Crypto will fail when people tire of owning the collectible and want to exchange it for something useful.