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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?

#161

Post by Lazare »

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…

Very similar arguments can be made about gold. And have been! And the fact they have been wrong until now is not necessarily a good predictor of the future.

In any case, there is one key thing which differentiates gold from crypto - there's only one kind of gold, and there's only a very small number of metals with similar properties to gold - perhaps 8 in total, all of which have been valuable since mankind figured out how to extract and work them, and none of which are exact substitutes for gold. Gold and gold-like metals are scarce!

Crypto is not scarce. Any one coin can be, but even if we, as a society, decided that, say, shiba inu themed crypto coins are our core store of value, there are multiple shiba inu themed coins already extant, and it is trivial to make infinite more. Even if we pick a single coin like Bitcoin (and why would we?), there are currently something like 45 currently active forks, all claiming to be the one true best Bitcoin.

Gold is valuable because it is unique and differentiable. (That is, if you want something like gold, you need to buy some gold, because nothing else is quite like it.) Litecoin is valuable because...?

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

#162

Post by Lazare »

CPLX wrote: post #69
Lazare wrote: post #52

Earlier quoted context omitted.

I must congratulate on your excellent demonstration of Poe's Law. Nonetheless, to the extent that you are being serious and not sarcastic, I largely agree with you.

If one assumes the content is sarcastic, it’s trying to point out that hey all these incredible big and successful entities support it so it can’t be worthless. Problem is that if you’ve been alive awhile you’ve seen situations over and over and over again where things that important institutions valued very highly did in fact turn out to be worthless.

Just so.

(And it's a bit ironic to see crypto enthusiasts place so much weight on the opinion of the largest players in the traditional financial system!)

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

#163

Post by bb88 »

jakupovic wrote: post #73
UweSchmidt wrote: post #71

Earlier quoted context omitted.

This defeats the core idea of having something immutable, that no one can mess with. If you can agree to roll out a new version, why not do it with regular software?

No it does not. Immutable for use doesn't mean it cannot change for example if the title of your house is on the blockchain when you sell it a new immutable transaction referencing your original immutable transaction would be created. Same as rolling out a new version of log4j

So you're saying we need software lawyers to figure out if rolling a new transaction is safe or not?

Weirdly, that seems worse than having just lawyers.

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

#164

Post by bb88 »

cinntaile wrote: post #48
bb88 wrote: post #31

Earlier quoted context omitted.

Things can have high utility without any actual value. Toothpicks, eating utensils, screwdrivers, etc. The problem comes when people mistake one for another. IOW, buying a bunch of screwdrivers isn't a great retirement strategy.

If you buy quality screwdrivers you'll be able to resell them for a good price.

If you bought quality USA made screwdrivers in 1980, you must have been surely been disappointed when China started making quality tools for cheaper in the 1990's.

Most people would have stopped caring about quality, and instead started caring about cheap utility. "It's good enough."

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

#166

Post by human »

UweSchmidt wrote: post #35
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…

The "Networks behind them" are also worthless, if you mean blockchain. Consider the oracle problem, the fact that running Hello World requires mining a block, that software contains errors and cannot be patched on the blockchain, the curious absence of real world applications of blockchain after all those years, and the inevitable precedence of the Law in the real world that makes any "the code is the law" ideas moot…

I used the term “networks” and not blockchain purposefully. I wanted to mean that having thousands of decentralized nodes with such computing power is astounding. The blockchain technology is cool but I also believe it won’t be a revolution on par with the Internet let’s say. If there is one legacy I hope we have once all cryptos have gone to zero is a reliable, trustless and decentralized network to run important stuff.

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

#167

Post by nathias »

trabant00 wrote: post #151
nathias wrote: post #65

Earlier quoted context omitted.

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

You keep using words you don't seem to understand, I'm sure you mean to draw an analogy, but do it, draw it, stop just implying - thats the worst for any kind of dialogue.

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

#168

Post by bb88 »

headmelted wrote: post #152
walkhour wrote: post #145

Earlier quoted context omitted.

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.

Correct. Because cryptocurrencies are created out of thin air, they can also disappear into thin air.

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

#169

Post by NicoJuicy »

stillsut wrote: post #125
NicoJuicy wrote: post #113

Earlier quoted context omitted.

But Bitcoin isn't transparent either, because none of the companies infuencing Bitcoin are.

On January 1, 2028 how much bitcoin is there? You can predict the supply to within +/- 0.00001%, regardless of the companies who influence bitcoin. On January 1, 2028 how much M2 money supply is there? 10% more? 10% less? 100% more? 1,000% more? It completely depends on who is influencing it.

How much money will tether print to buy Bitcoin tomorrow?

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

#170

Post by mraudiobook_com »

Lazare wrote: post #161
walkhour wrote: post #144

Earlier quoted context omitted.

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…

Very similar arguments can be made about gold. And have been! And the fact they have been wrong until now is not necessarily a good predictor of the future. In any case, there is one key thing which differentiates gold from crypto - there's only one kind of gold, and there's only a very small number of metals with similar properties to gold - perhaps 8 in total, all of which have been valuable since mankind figured o…

Crypto is not scarce,

That is simply an incorrect statement.

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