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

fundamentalinvestor.substack.com

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

#151

Post by trabant00 »

nathias wrote: post #65
trabant00 wrote: post #42

Earlier quoted context omitted.

Everything that doesn't serve a human basic need, of which there are many. Food is not worthless in itself, nor is shelter, security, human contact, etc. Extreme subjectivism never fed nobody nor kept them worm. It only made them think they are smart.

You don't understand what in itself means, it is a philosophical term used to distinguish between being in itself of something versus being of that for someone. For example there is no food in itself, food is always food for an animal in itself its just some matter. In the same way there is no value inherent in anything as it is in itself, but becomes valued by humans on the basis of speculation, use and rarity.

Exactly as I said, you think I do not understand a "smart" thing while you equate the worth food and crypto have for humans.

Solipsism 2.0

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

#152

Post by headmelted »

walkhour wrote: post #145
jacknews wrote: post #10

With the methods the author is using, I think they would also be unable to value gold and other non-producing assets. Crypto (despite claims that it's a currency) is a digital "asset". Like gold, but without any real-world use like jewellery, coatings, etc, and with a far shorter history of being a store of value. The problem with valuing it then is due to assessing risk. It could be trading at zero tomorrow, and the…

Crypto could crash tomorrow but the value won't be zero, similar to gold it has intrinsic value. Some people value it because they think it's cool, because they think they're fighting the government, because it would've been historically important, ...

That’s not what intrinsic means.

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

#154

Post by aurizon »

hotpotamus wrote: post #131
hnarn wrote: post #115

Earlier quoted context omitted.

I don't know what you're implying. Why do you think shares exist?

I believe shares exist to raise capital to exploit a natural resource in this case. But if I already have a profitable mine, I doubt I'd have much incentive to invite others to share ownership of that mine. However, if I have a hole in the ground that doesn't produce anything of value, then it's in my interest to sell shares of it since that might be my only income. Just a thought really - in spite of hearing many go…

Few mines start and go to full production without outside venture cash = you sell shares, lose part of the control, but use their money to ramp up production. It depends on what you want to do. Bootstrapping from a zero start needs after tax $$. As you start digging you start to sell metals and also pay your taxes, so the ramp up is slowed by the taxes. You can sell $10,000,000 in shares, so now have $10 million and the investor has some paper shares. No taxes are due yet, but you can build a $10 million mine and be in production and make $10 million annually for 60 years, It might cost $3 million for all costs = $7 million profit x 28% taxes ~~= $2 million in taxes and $5 million to divvy up with the shareholders, each and every year for 60 years = you choose. There are venture capitalists for mining IPO's as well as Wall Street IPO's. You pick what you know best.

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

#155

Post by legutierr »

pureliquidhw wrote: post #149
legutierr wrote: post #123

Earlier quoted context omitted.

> there's no downstream product to provide that value. Not true. Ethereum and Solana, for example, provide shared-data and shared-compute services. Eth and Sol are used to pay for these services (and are the only means to pay for these services). You may not value these services, but there are plenty of people who do, to the tune of anywhere from $10 to even hundreds of dollars per transaction, in the case of Ethereu…

That's basically replacing regular currency buying a service. The earlier comparison was to commodities and crypto's difficult to value nature. I won't argue you can't buy goods and services with crypto. You certainly can't produce plastic without oil, but there's nothing that can be made with crypto. It's not a commodity. That's why it's a speculative asset that's hard to value. Sentiment means more to crypto values…

I believe you are mistaken. Shared-data and shared-compute services of the type provided by blockchain networks such as Ethereum can only be paid for by the native token of that network. There is not a known way to provide these services without users paying for them using the native token. Thus, if those services have value, then the tokens that must be purchased to pay for them must also have value.

In this way, native crypto tokens like Eth are similar to petroleum, in that their value is commensurate with the value of the work that can be performed by consuming them.

Sure, competition between networks can have an impact on price, just like competition from electric vehicles can impact the price of oil. But competition does not itself destroy value, even if it has an impact on demand, and therefore on price.

The article itself talks about the difference between value and price. The price of crypto might be inflated by the hype surrounding it, but that does not mean that is has no underlying value, as you seem to assert.

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

#156

Post by [deleted] »

headmelted wrote: post #33
human wrote: post #18

Earlier quoted context omitted.

I don’t know if you’re serious. Your username does check out at least. I also believe crypto itself is worthless. Only the networks behind them and actually providing a service (transaction validation) have some value. The question is: can the networks survive a crypto crash. How do you pay miners with near zero value crypto? I can see a (sad) future where we will be left with central bank digital currencies only (CB…

Pretty sure the parent was being sarcastic (and provocative). In real terms it’s worth whatever the next buyer is willing to pay. It annoys me that people cite the run-up over the last decade as evidence of it’s brilliance when it’s nothing of the sort, but I’d just sound like a loon screaming into the wind. Personally I think it’s worthless. Honestly I suspect Satoshi Nakamoto (if they’re still alive) probably think…

[deleted]

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

#157

Post by pureliquidhw »

legutierr wrote: post #155
pureliquidhw wrote: post #149

Earlier quoted context omitted.

That's basically replacing regular currency buying a service. The earlier comparison was to commodities and crypto's difficult to value nature. I won't argue you can't buy goods and services with crypto. You certainly can't produce plastic without oil, but there's nothing that can be made with crypto. It's not a commodity. That's why it's a speculative asset that's hard to value. Sentiment means more to crypto values…

I believe you are mistaken. Shared-data and shared-compute services of the type provided by blockchain networks such as Ethereum can only be paid for by the native token of that network. There is not a known way to provide these services without users paying for them using the native token. Thus, if those services have value, then the tokens that must be purchased to pay for them must also have value. In this way, na…

Did some high level research. Looks like the data sharing is of the Blockchain itself which when decentralized saves storage for nodes, but is a limited use case. Torrents do decentralized storage too.

The shared compute I saw was Golem, which is pretty neat actually. Not sure how you join the network without either sharing compute or buying into ETH with a traditional currency, bringing us back to square 1.

But as a speculative asset crypto is great! Many a mansion and Corvette have been bought with crypto gains while I'm on the sidelines wondering what the hell is going on, every yesterday being a great time to buy and every today seeming like tomorrow's the day I'd be left holding the bag.

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

#158

Post by csmiller »

hiq wrote: post #140
my50cents wrote: post #66

Earlier quoted context omitted.

The simple answer is that if a stock is expected to never pay any dividends, it's intrinsic value is zero. Note that from shareholders' perspective, paying dividends is economically equivalent to share buyback, plus some tax considerations, so there are exceptions.

> The simple answer is that if a stock is expected to never pay any dividends, it's intrinsic value is zero. Which is obviously wrong, right? Any company that has liquid assets (and no debt) is at least worth the selling value of these assets, even if it doesn't pay dividends. So I'm not sure your model helps here.

I think in that case you would expect the company to return value to shareholders when liquidating it’s assets.

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

#159

Post by stillsut »

vmception wrote: post #129
stillsut wrote: post #124

Earlier quoted context omitted.

I'm interested in this O(nlogn) argument, can you elaborate on it, or point to a source that does?

Between vesting grants of tokens at discounted prices, salaries in tokens, and yield farming earnings, the quantity of your tokens increase over time and the any rally in prices amplifies your earnings by orders of magnitude. Linear is O(n) so better than linear is closer to O(nlogn) and less than exponential O(n^2). Vesting in the crypto space quite frequently is measured in months instead of years. Just industry st…

intriguing, thank you!

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

#160

Post by Youden »

walkhour wrote: post #144
tveita wrote: post #96

Financially, cryptocurrency is pretty much exactly like having stock in a long bankrupt company. You can trade it with other people, you can create contracts and derivatives involving it. What you can't do is ever get anything of value from holding the stock itself. This is easy to value, but some people are uncomfortable with the answer. With so much hype and magical thinking, it feels like there most be something m…

The fundamental problem of any such criticism of crypto is explaining then how crypto is different from gold besides "some people value gold also because of intrinsic value". Why is gold not exactly like having stock in a long bankrupt company? If gold is indeed like crypto, then when is this gradually built dogma finally going to be exposed? Holding gold would've been good investment advice almost in any civilizatio…

> is explaining then how crypto is different from gold besides "some people value gold also because of intrinsic value".

You say this as if having intrinsic value isn't enough?

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