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

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

#101

Post by JohnFen »

lifekaizen wrote: post #60
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.

I'm on the pro-crypto side, but the US dollar has more than consumer confidence, it has the largest armed forces the world has ever seen. So a better comparison is something like gold, I think, that has value because we say it has value (it's shiny! and rare...)... which is fine, just different.

I'm not "anti-crypto", but reason that I won't touch it is that it's not stable. With dollars, I know that the money will have a roughly constant value across time. Cryptocurrencies do the opposite of that. By the measure of stability, gold is also preferable to crytocurrency.

If I were a speculator, that instability would be attractive. But I'm not.

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

#102

Post by mdorazio »

JohnFen wrote: post #96
mdorazio wrote: post #75

Earlier quoted context omitted.

You're welcome to provide a better definition.

"Value" is providing a benefit that is greater than the cost.

Benefit and cost to whom? If I use your definition and apply it to individuals, that's exactly how money works. If I'm willing to pay for something then it must have more value to me than the money I am paying, otherwise I wouldn't pay for it. So if people are paying for crypto or crypto services then those things must be providing enough benefit to be valuable.

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

#103

Post by JohnFen »

mdorazio wrote: post #102
JohnFen wrote: post #96

Earlier quoted context omitted.

"Value" is providing a benefit that is greater than the cost.

Benefit and cost to whom ? If I use your definition and apply it to individuals, that's exactly how money works. If I'm willing to pay for something then it must have more value to me than the money I am paying, otherwise I wouldn't pay for it. So if people are paying for crypto or crypto services then those things must be providing enough benefit to be valuable.

To the parties involved. I think the question is -- what is the value to the party buying cryptocurrency? Outside of gambling, that's not clear to me. Which is not to say there is no value!

> If I'm willing to pay for something then it must have more value to me than the money I am paying, otherwise I wouldn't pay for it.

I disagree. People pay for stuff of no value to them all the time, for various reasons. That someone is willing to pay doesn't automatically mean it has value to them, although it does heavily imply it.

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

#104

Post by civilized »

civilized wrote: post #40
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 utili…

I suppose I should mention a data point that might go against my own thesis: the performance of gold. While gold has some legitimate uses in jewelry and technology, its price in recent years seems to be driven mostly by financial speculation, the same "store of value" theory that drives crypto.

I think this theory is nonsense but it's true that if enough people believe it, it can become sort-of-true for a while, until it's not anymore.

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

#107

Post by supermatt »

thoughtstheseus wrote: post #100
supermatt wrote: post #95

Earlier quoted context omitted.

Inflation refers to the price of goods/services. Stocks are neither.

Stocks represent the present value of future claims on consumption.

Nope. Stock represents the fractional ownership of a company, and its price represents the perceived value thereof.

By all means use it as whatever indicator you like, but lets stick to the facts.

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

#109

Post by DennisP »

JohnFen wrote: post #99
DennisP wrote: post #90

Earlier quoted context omitted.

People manage to come up with mediums of exchange even in the absence of taxing governments.

When has there been a government that doesn't tax?

My claim is that currencies don't depend on taxation in that currency.

Many areas today have local currencies, which are not accepted by any government for taxes. Prisoners use things like cigarettes as currency. On the island of Yap they used giant stones, which nobody attempted to tax.

According to David Graeber, money actually arose as an abstraction of debts. You can have debts between people without having taxes.

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

#110

Post by DennisP »

JohnFen wrote: post #98
DennisP wrote: post #89

Earlier quoted context omitted.

In economics, value is purely subjective. If someone is willing to pay for it, then it has value to that person. To answer OP's simple question of why crypto has a high price, the economic definition is what you need. You're looking at a more absolute definition of value that has little to do with the price of things. That's a worthwhile discussion as well but has little to do with OP's question.

> If someone is willing to pay for it, then it has value to that person. My problem with that definition is that it's a tautology, and therefore holds little actual meaning and provides no insight. "Why is that valuable?" is not a question meaningfully answered by "because people want it". That answer only begs the question. Everything that has value to people only has value because people want it.

Ok then skip the word "value" entirely. People are willing to pay a lot for ETH, because they're willing to pay to issue transactions on the network and that increases the price of the network's currency.

That's not a tautology because it's two different things. If they were only paying for the currency, that could be just a speculative bubble. If the price is based on people paying to issue transactions, that's a price built on actual use.

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