Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

As an investor, why is crypto so hard to value?

fundamentalinvestor.substack.com

Post reply on HN
Print view View original

101–110 of 193 posts

Re: As an investor, why is crypto so hard to value?

#101

Post by plaidfuji »

sabellito wrote: post #92
plaidfuji wrote: post #88

> The fundamental idea behind investing in a company is that one day they will grow and be so profitable that they will start to send cash back to investors. Is this really the fundamental idea behind equity investing at this point? My impression is that (a) dividends are becoming more rare and (b) the valuation of dividend-paying equities is not explained solely by dividend cash flow. Does anyone expect Tesla, Amazo…

I was following your argument until "[...] on the notion that the entire global economy will just flip a switch one day and become this green tech utopia". I'm no equity investor, but this assumption feels quite exaggerated.

I got a bit carried away there. My point is that some percentage of people’s valuation of crypto, and similarly, Tesla, and some other green tech plays, is based on the assumption that the entire global economy will transition to their way of doing things. Most crypto enthusiasts hope for (or at least would welcome) the death of the fiat system. Tesla’s valuation eclipsing 10 other carmakers (or whatever it is) basically says “I assume Tesla will be making ~half of all cars globally in the near future”. Alt meat is similar - all of these valuations are based on an assumption of market penetration (and cost reduction!) that would require a massive realignment of supporting infrastructure.

Re: As an investor, why is crypto so hard to value?

#102

Post by vmception »

eldelshell wrote: post #89
hnarn wrote: post #82

Earlier quoted context omitted.

I’m not exactly a proponent of crypto currencies, but this description seems like it holds true for any currency in the world, regardless of whether it’s crypto, fiat or natural. It’s not like you can carry dollars or a nugget of gold and expect any human being anywhere in the world to accept it as legal tender, and as long as that is true every type of payment is dependent on a “casino”, they just vary in size.

There are this things called "Exchanges" in every airport in the world. With the US dollar, Euro and some others, the world is your casino (following the comparison) and you can trade all of them. Same with gold and silver (although this are a bit harder to trade). Hell, try to pay a taxi in Djibouti, Sao Paolo or Islamabad with a BTC or USD and see which they'll accept and which will get you kicked out.

> try to pay a taxi in Djibouti, Sao Paolo or Islamabad with a BTC or USD and see which they'll accept and which will get you kicked out.

Even though the "merchant adoption" meme is the least interesting part of any asset, currency or potential payment method, the question is where does the goal post move when you can do that? Can you give us a preview of what your next goal post is?

Re: As an investor, why is crypto so hard to value?

#104

Post by mrep »

plaidfuji wrote: post #88

> The fundamental idea behind investing in a company is that one day they will grow and be so profitable that they will start to send cash back to investors. Is this really the fundamental idea behind equity investing at this point? My impression is that (a) dividends are becoming more rare and (b) the valuation of dividend-paying equities is not explained solely by dividend cash flow. Does anyone expect Tesla, Amazo…

Google is effectively paying dividends to the tune of 60 billion dollars a year through share buybacks [0]. Share buybacks reduce the number of outstanding shares increasing the P/E ratio which should increase the stock price. You can realize your dividend by selling a proportional amount of stock which might be bought by Google themselves.

[0]: https://ycharts.com/companies/GOOG/stock_buyback

Re: As an investor, why is crypto so hard to value?

#105

Post by throwaway6734 »

stillsut wrote: post #79

But what's easy to value is public pensions. Do the existing reserves and projected inflows match the liabilities? Of course not, they are underwater by trillions of dollars. How will fifty very different state governments and the federal government distribute these losses? Impossible to say, because different factions are already lining up different schemes with vastly different outcomes. In contrast, we already kno…

>So bitcoin competes with other currencies by being a system with transparent and predictable behavior

There's no reason to believe that the crypto ecosystem is 100% secure. Any security vulnerability could destroy the value of the entire market. Not to mention that the crypto ecosystem is unable to use force.

Re: As an investor, why is crypto so hard to value?

#106

Post by pureliquidhw »

legutierr wrote: post #103

How do you value oil or refined fuels? Same thing, no? At least with regards to Eth and Sol, they are commodities that presently have value because in the future people will need to purchase them to conduct the work that they want to perform.

Oil has utility. I can make plastics, fuel, or lubricants, and sell the refined product at a markup.

You can value oil by the value things that can be made with it against the cost to extract it.

Crypto does have an "extraction" cost, so that provides a baseline, but there's no downstream product to provide that value.

Crypto holders speculate that in the future they'll need crypto, but that isn't a given.

Re: As an investor, why is crypto so hard to value?

#107

Post by classified »

MilaM wrote: post #22

Crypto is like casino tokens. Worth a lot inside the casino. Very limited value outside.

And as with any other casino, the house is the only consistent and long-term winner. People bringing in the real money are just suckers, even if they score once in a blue moon. And since there is no actual value attached, every win requires an equal amount of loss elsewhere.

Re: As an investor, why is crypto so hard to value?

#108

Post by hotpotamus »

hnarn wrote: post #87
aurizon wrote: post #14

There is a quote, attributed to Mark Twain and others, which can be adapted to Crypto Currency. A mine is a hole in the ground. The discoverer of it is a natural liar. The hole in the ground and the liar combine and issue shares and trap fools.—Detroit Free Press. https://quoteinvestigator.com/2015/07/19/gold-mine/ And as applied to Crypto Currency:- A crypto currency is a hole in the air. The discoverer of it is a n…

Are you saying that there are no profitable mines in the world?

If you had a profitable mine, would you sell shares in it?

Re: As an investor, why is crypto so hard to value?

#109

Post by Gunax »

Crypto is a meme--in the traditional sense of an idea, not the internet joke.

What you're buying is the prediction that someone else will come along and buy it for more.

As it increases in value, it gets more exposure and more appealing, so the idea spreads.

Re: As an investor, why is crypto so hard to value?

#110

Post by im3w1l »

mrep wrote: post #104
plaidfuji wrote: post #88

> The fundamental idea behind investing in a company is that one day they will grow and be so profitable that they will start to send cash back to investors. Is this really the fundamental idea behind equity investing at this point? My impression is that (a) dividends are becoming more rare and (b) the valuation of dividend-paying equities is not explained solely by dividend cash flow. Does anyone expect Tesla, Amazo…

Google is effectively paying dividends to the tune of 60 billion dollars a year through share buybacks [0]. Share buybacks reduce the number of outstanding shares increasing the P/E ratio which should increase the stock price. You can realize your dividend by selling a proportional amount of stock which might be bought by Google themselves. [0]: https://ycharts.com/companies/GOOG/stock_buyback

So I figured with all the stocks they are handing out to employees, they would have have a net increase in outstanding shares. And this used to be the case. But in 2018 the number of shares peaked and now they are indeed decreasing.
Post reply on HN