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

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

#181

Post by MCneill27 »

WastingMyTime89 wrote: post #174
vmception wrote: post #102

Earlier quoted context omitted.

> 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?

I mean that’s the definition of currency not really moving the goal post: store of value, unit of account and mean of exchange. At this point, I am not sure bitcoin even ticks one. It’s an asset with a volatile price. It is not a currency.

Bitcoin !== Cryptocurrency

But yes, I agree with you about BTC.

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

#182

Post by MCneill27 »

nathias wrote: post #28
postcynical wrote: post #13

Crypto is worthless. All the VCs pouring money into crypto/web3 (a16h, sequoia) are worthless. All the companies pivoting to web3 are worthless (square). All the companies building up web3 teams are worthless (stripe, mastercard). All the fastest growing startups (coinbase, ftx, opensea) are worthless. All the devs who get started in crypto/web3 and won't go back, are worthless.

Everything is worthless in itself. We give value to things subjectively and mediate this valuation through intersubjective consensus mechanisms. I'm glad that now we are in a position where a personal decision and valuation really counts, this is why I'm only taking web3 related jobs from now on.

This is a horrible misreading of Kantian TI. The idea of "value" is what's worthless in itself, not objects or entities. Yes, everything is worthless in itself, but that says more about "worth" than it does about "everything", and it isn't mutually exclusive with there being things in the world that are required for human life. Value at the bottom end takes its shape from these things, and in the top end, like complex financial derivatives, is far removed from human necessities.

You're missing that we can get really close to things-in-themselves. It's like you got an erection as soon as you read that we were fundamentally separate from things-in-themselves, and just ran with it.

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

#183

Post by nathias »

MCneill27 wrote: post #182
nathias wrote: post #28

Earlier quoted context omitted.

Everything is worthless in itself. We give value to things subjectively and mediate this valuation through intersubjective consensus mechanisms. I'm glad that now we are in a position where a personal decision and valuation really counts, this is why I'm only taking web3 related jobs from now on.

This is a horrible misreading of Kantian TI. The idea of "value" is what's worthless in itself, not objects or entities. Yes, everything is worthless in itself, but that says more about "worth" than it does about "everything", and it isn't mutually exclusive with there being things in the world that are required for human life. Value at the bottom end takes its shape from these things, and in the top end, like comple…

It can't be a 'horrible misreading of Kantian TI' because it isn't a reading of Kantian TI, in itself as distinguished from for itself and for others is a standard concept in philosophy since Kant and part of common sense language.

My point is just that value isn't some simple natural thing that you could consider as a positive fact, like you are trying to do. Value doesn't 'take its 'shape' (whatever that would mean) from necessities of human life', and has no immediate special relation to necessities.

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

#184

Post by hiq »

csmiller wrote: post #158
hiq wrote: post #140

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. 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.

Exactly, so it doesn't have a value of 0 for these shareholders.

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

#185

Post by redwood »

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…

Gold has also stood the test of time in a way unique to our human culture

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

#186

Post by Lazare »

spiralx wrote: post #179
WastingMyTime89 wrote: post #172

Earlier quoted context omitted.

Gold is not really scarce and as seen its price plummets multiple times throughout history as large quantities were unexpectedly discovered. If even a minority of the people currently hoarding gold decided to sell, the price would crash. Gold is a strange asset. It is valuable because it is seen as a strong way to store value and it is a strong way to store value because people collectively believe it to be so. In th…

I remember being surprised when I read that half of all of the gold we have has been mined since 1961, which really does show that basing your currency on it would have massive problems.

See also the inflationary spike of the Renaissance era, sometimes called the Spanish Price Revolution: https://voxeu.org/article/does-inflow-precious-metals-new-wo...

Prices rose sixfold over 150 years, which represents a ~1% inflation rate which seems low by modern standards, but the thing about inflation is that expectations matter far more than the absolute rate, and European society had ~0% inflation assumptions baked into it, so the effects were significant and sweeping. The graph of price levels in England in that article is just wild.

It's now generally accepted that that the main driver of this was the Spanish treasure fleets from the New World, which significantly increased the money supply in Europe.

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

#187

Post by helloworld11 »

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…

What a completely nonsensical comparison. There are plenty of valid criticisms of crypto speculation and the underlying assets, but this is just hateful posturing painted up as sophisticated opinion.

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

#188

Post by roenxi »

headmelted wrote: post #178
roenxi wrote: post #171

Earlier quoted context omitted.

'Need' doesn't really come in to it, Bitcoin doesn't need that much power. But from a raw value perspective, Bitcoin has something that the other cryptos do not have - a massive network of computing power. That means bitcoins and other crypto currencies can't be simply swapped for each other. Bitcoin is different, for now.

I've heard this argument, but there's no utility value whatsoever to that power, or the energy consumed to run the hashes (in that the energy and hashing power is spent on the mining task and therefore unavailable for other uses). The argument is essentially that the computing and hashing power has intrinsic value for other use cases it could be reapplied to if not doing this. It could, but that value would accrue to…

> but there's no utility value whatsoever to that power

If you think about it, what you actually mean is that you don't recognise the utility, not that there isn't utility there. If we do a classic comparison with gold, pretty much nobody gets any utility out of the gold, and yet a tonne of gold still has very high intrinsic value because it has just enough utility to some rare people.

> It could, but that value would accrue to the person selling the energy and/or the hardware, not whoever held the token at that time.

That isn't how anything else works. Little of the value of the economy accrues to the people who mine coal or oil, but they provide most of the raw grunt to make all of everything work.

The economy doesn't have to directly link creation of value to who gets rewarded.

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

#189

Post by Quindecillion »

giancarlostoro wrote: post #78
Quindecillion wrote: post #50

Most "cryptos" are just affinity scams riding on the coattails of the true innovation of Bitcoin. They offer nothing significantly new or important over Bitcoin. Most people in the space understand this and why. Institutional investors starting to come in understand this. State governments are starting to understand this. The energy sector is starting to understand this. Yes crypto is a bubble, and it will pop. When…

Tbh Bitcoin does nothing interesting compared to say Ethereum. I think Ethereum is a far more interesting ecosystem when you consider the only cryptocurrency CoinBase runs is built on top of Ethereum. Bitcoin is the most boring coin and its only valued so much based on speculation and brand recognition.

You don't understand Bitcoin, or Ethereum for that matter.

Ethereum is a product produced by a company. They have an enormous about of control over it. They've changed the token issuance multiple times over its lifetime. Vitalik being a figurehead is also a problem. There's a lot of risk of what happens to the project when Vitalik leaves or dies.

Bitcoin suffers from none of those problems. The issuance has been fixed for 13 years. Any attempts to change important parameters of the consensus rules have failed. The figurehead of the project left years ago when Bitcoin was still small and hasn't been heard from since.

Ethereum and all other alts are products sold by companies.

Bitcoin is simply an open protocol, owned by no one, and yet accessible to anyone. There is no CEO, marketing department, legal team or anything like that. It's just open-source software that people choose to run.

It's similar to email, but instead of sending messages, you can send absolutely scarce "tokens".

It's a subtle difference, but it is vitally important.

> Bitcoin is the most boring coin

Good. Would you really want a new form of money to be "dynamic" and constantly changing? Bitcoin being predictable is a feature. Certainty of issuance so you can't be arbitrarily diluted at the whims of a select few.

> its only valued so much based on speculation and brand recognition

There's a lot more value to Bitcoin than that.

* It's significantly decentralised so it can't be shut down in any practical way

* It can't be easily confisicated if secured correctly. This is important for people living in authoritarian regimes where bank accounts can be easily shut down

* It's permissionless. Anyone can use it, and no one can stop someone from using it

* It's accessible. You just need an internet connection to use the Bitcoin network. Think about what this means for countries with a large portion of unbanked people or currencies that are unstable... yet they have internet and mobile phones

* The Bitcoin network is an always available consumer of energy. This is a game changer for the energy sector because they can recoup lost revenue from excess power

* It's also a non-competitive consumer of stranded energy i.e. energy that can't be transmitted to where people are

You mention brand recognition almost as a bad thing, but network effects are important and powerful... particularly for open networks like Bitcoin.

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

#190

Post by Quindecillion »

bestouff wrote: post #56
Quindecillion wrote: post #50

Most "cryptos" are just affinity scams riding on the coattails of the true innovation of Bitcoin. They offer nothing significantly new or important over Bitcoin. Most people in the space understand this and why. Institutional investors starting to come in understand this. State governments are starting to understand this. The energy sector is starting to understand this. Yes crypto is a bubble, and it will pop. When…

You seem to have some ...

Of course.

This is the funny thing about Bitcoin. Once you've researched it sufficiently you are compelled to buy some because you understand the fundamentals of its value proposition.

But then critics will point out that you own Bitcoin so you're now clearly biased because you have skin in the game.

I guess you could call it the Bitcoin paradox, or the Catch-22 of Bitcoin?

Once you understand it you buy it, but now no one will listen to you about it because you're "compromised".

There's nothing I can do about that other than to suggest you look into it further if you're curious.

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