Crypto Currency Thread (Vol.2)

[RichTT]

Condi said:

RichTT said:

Can you?

1yr return on weekly DCA - 83.52%
2yr return on weekly DCA - 143.17%
3yr return on weekly DCA - 112.78%
4yr return on weekly DCA - 165.23%
5yr return on weekly DCA - 269.27%
6yr return on weekly DCA - 423.82%

This doesn't make it a good store of value, you clearly don't understand what you're talking about. Store of value is about the volatility of the instrument, ie how likely is it to be worth today's value in 1/3/6/12 months time. Bitcoin is absolutely terrible for that because it is volatile. This isn't something made up, it's mathematical, it's measurable.

There's no such thing as 'store of value', because value does not reside in objects. Value is in the mind of the person, and is entirely subjective. Therefore considering anything as a store of value is a logical fallacy. What you can say is that there is a relative amount of certainty that your bitcoin will not be diluted by the extension of the issuance, so 1 bitcoin will always equal 1 bitcoin. Unlike fiat which is diluted consistently. Simply because it is auditable and verifiable at a protocol level and governed by the Nakamoto Consensus. In this sense, it is the most stable thing on Earth.

The 'store of value' for Bitcoin is in knowing that your ownership of a percentage of the total supply will never be diluted, and some people value that more than others.

What you can also say is that given the price history over the last 15 years, you can calculate the risk adjusted performance (in fiat denominated terms) using Sharpe ratio, power law modelling, and moving averages (for example) to make objective predictions of the increase in fiat value.

https://charts.bitbo.io/sharpe-ratio/

TwoOcean said:

Bitcoin's Contribution to Risk Adjusted Returns

Given the substantial increase in returns with very little added risk, it follows that a small position in bitcoin should positively impact the portfolio's Sharpe ratio. Figure 5 confirms this logic. The Traditional Portfolio produced Sharpe ratios well below 1.0 during the past 3-, 5-, and 10-year periods. Adding just a small position in bitcoin would have substantially increased the portfolio's Sharpe ratio. In fact, just a 3% investment in bitcoin would have increased the 10-year historical Sharpe ratio from 0.77 to 1.00.

https://www.twoocean.com/post/revisiting-the-case-for-bitcoin

Condi said:

Also, those figures above only look good because of Btc's current price, if in 6 months it has gone down by 20/30/40% (hardly unprecedented) then they'll look nowhere near so favourable. You cannot predict where it will be in 3 months or 6 months.

Unless someone has found a way to predict the future with 100% certainty, then the same is true for every single market and asset on the earth. Bitcoin is no different in this regard.

Edited by RichTT on Wednesday 8th May 09:12

[dimots]

Condi said:

This doesn't make it a good store of value, you clearly don't understand what you're talking about. Store of value is about the volatility of the instrument, ie how likely is it to be worth today's value in 1/3/6/12 months time. Bitcoin is absolutely terrible for that because it is volatile. This isn't something made up, it's mathematical, it's measurable.

Also, those figures above only look good because of Btc's current price, if in 6 months it has gone down by 20/30/40% (hardly unprecedented) then they'll look nowhere near so favourable. You cannot predict where it will be in 3 months or 6 months.

Bitcoin is provably a much better store of value than FIAT. I can prove it, I've been turning all my worthless ye olde pounds sterling into super modern techno bitcoin and now I'm absolutely loaded.

[Blown2CV]

BandOfBrothers said:

Blown2CV said:

decentralisation is only a benefit to a particular group of the population; mainly tinfoil hat people. The rest of the population either believe centralisation is a good thing, and the rest don't give a fk... certainly not enough to have to deal with the complexities and volatility of crypto.

I wonder if the Russians thought that 3 years ago too?

Not to mention that the vast majority of the Western governments have national debts levels that would have been considered crippling even only a decade ago. That all has to unwind somehow too.

you're missing the point. I am not saying the public are correct in their thinking and prioritisation, but i am saying this is how it is. We the 'enlightened' few can argue the toss about the economic, mathematical, cryptographic and philosophical details in places like this, but it doesn't matter one bit because if crypto is to become a true currency you need to get the masses bought into it. Maybe a massive catastrophic financial event will be what it takes to achieve this, but again it's just conjecture.

[Blown2CV]

RichTT said:

There's no such thing as 'store of value', because value does not reside in objects. Value is in the mind of the person, and is entirely subjective.

so then what you are buying is confidence and trust. I refer you to my above point.

Something is a better store of value if it is less likely to suddenly cause the holders to lose confidence and sell up.... unlike say, crypto.

[RichTT]

Blown2CV said:

RichTT said:

There's no such thing as 'store of value', because value does not reside in objects. Value is in the mind of the person, and is entirely subjective.

so then what you are buying is confidence and trust. I refer you to my above point.

Something is a better store of value if it is less likely to suddenly cause the holders to lose confidence and sell up.... unlike say, crypto.

Market participants are not equal, but individual. Short term volatility and pricing is set on the margin by the traders. Whilst the correlation of bitcoin (and by proxy crypto) to risk on equities is fairly high, the fact that it is a 24 hour market allows those market participants to capitalise on volatility and uncertainty. This is short term price action. The difference is that whilst all the other cryptos trend to zero against bitcoin, bitcoin continues to make higher highs and higher lows on a long term basis. No other asset has returned from being 'dead' so many times, nor has an asset bubble ever crashed and gone on to make new ATH's, let alone 4-5 times.

Those who use a longer view and tend to set the price floor during dips and market corrections will use these opportunities to accumulate more. This is measurable and verifiable through on-chain analysis. It has been happening every single cycle. But every time this occurs the drawdowns reduce, the volatility reduces and the distribution of the asset becomes wider and more even. Yes, it's still highly concentrated, but even by now, the distribution is better than the wealth concentration of fiat monies between rich and poor.

[OoopsVoss]

RichTT said:

Market participants are not equal, but individual. Short term volatility and pricing is set on the margin by the traders. Whilst the correlation of bitcoin (and by proxy crypto) to risk on equities is fairly high, the fact that it is a 24 hour market allows those market participants to capitalise on volatility and uncertainty. This is short term price action. The difference is that whilst all the other cryptos trend to zero against bitcoin, bitcoin continues to make higher highs and higher lows on a long term basis. No other asset has returned from being 'dead' so many times, nor has an asset bubble ever crashed and gone on to make new ATH's, let alone 4-5 times.

Those who use a longer view and tend to set the price floor during dips and market corrections will use these opportunities to accumulate more. This is measurable and verifiable through on-chain analysis. It has been happening every single cycle. But every time this occurs the drawdowns reduce, the volatility reduces and the distribution of the asset becomes wider and more even. Yes, it's still highly concentrated, but even by now, the distribution is better than the wealth concentration of fiat monies between rich and poor.

From a trading perspective - fair points. But as an store of value in exchange for labour (that most people equate actual money) - is terrible store of value. Its an asset (a highly volatile one) - not a stable store of value. This is partly why stable coins exist. You absolutely wouldn't take AAPL (Apple Inc) shares in exchange for your labour - there long term price vol is too high (even the regulations for banking say this deeming then non-liquid whereas other equities are). Just because it can be very valuable does not not make it meaningful to most at the short end who exchange labour for money to live.

This is the blocker to adoption, the time lines being banded about have little relevance to man on the street. They are not saving or investing all the labour earning but spending it - constantly. Obfuscating about hash rates - means that the BTC advocates don't understand the herd of elephants in the room. Simple thought exercise.

Your daughter wants to go shopping to buy a pair of trainers, retailing at 100quid. You give her satoshi's to the value of 100quid at 9am when you drop her of at the bus station, but by 11:30 when she wants to buy them - daughter only has equivalent of 90quid in satoshi's -so she leaves empty handed wasting bus fare and time. Maybe on a good day she has 110quid worth of satoshi's - but you have no idea what way its going because its speculative.

Its basically rubbish for money at the short end - you cannot get around this. Its an investment that "may" have great long term pay-off, but only IF you can afford to take losses - that most people cannot when dealing with actual money.

[RichTT]

OoopsVoss said:

From a trading perspective - fair points. But as an store of value in exchange for labour (that most people equate actual money) - is terrible store of value. Its an asset (a highly volatile one) - not a stable store of value.

That's why I said there's no such thing as a store of value, let alone a stable one. That measure is simply an appraisal of how much 'moneyness' a thing has. I don't mean in the financial markets sense, I mean more in terms of economic theory. People in the UK believe that a house is a good investment because it tends to appreciate steadily in fiat value over a long time and the volatility is low. Is a house a store of value? You can argue for it. Yet it is highly illiquid, subject to outside market forces (interest rates etc) and can suffer complete destruction or confiscation. So it has a degree of moneyness that people value, can appraise, yet still actually be a very poor financial instrument for storing the fruits of your labor.

Bitcoin is incredibly liquid, traded 24/7, indestructible and moves at the speed of block propagation with final settlement. So it also has a degree of moneyness that people value, can appraise, and make a decision as to whether it is a good or poor financial instrument for them to be involved in.

For some it's a better money, for some, it's a better long term investment / store of value / risk adjusted portfolio allocation. None of these things are mutually exclusive. It's not perfect for everyone, and that's why it's often said it's for anyone, not everyone. Make your own subjective decision but accept that others make theirs.

OoopsVoss said:

This is partly why stable coins exist.

I agree. People in countries with volatile currencies want dollars and synthetic dollars are the easiest way for them to be able to do this. No doubt about it. But there are still plenty of places that it is easier or preferable to use bitcoin via lightning over non-smart phones (SMS) or in small circular economies. Mostly because there's no KYC or permission required to be involved in the use of them.

OoopsVoss said:

This is the blocker to adoption, the time lines being banded about have little relevance to man on the street. They are not saving or investing all the labour earning but spending it - constantly. Obfuscating about hash rates - means that the BTC advocates don't understand the herd of elephants in the room. Simple thought exercise.

I also agree, and this is a mindset thing. It comes down to societal stability (Lazlo's hierarchy of needs), the confidence to plan on a long term timescale and think further ahead than the next paycheck. It's a cultural shift that my grandparents generation would be shocked by. Borrowing today from your future self, if done unwisely, ends in financial ruin. Or at minimum, it ends up with those who did plan for the future, subsidising those who didn't. This applies equally to nation states who borrow too much from an unknowing future population.

OoopsVoss said:

Your daughter wants to go shopping

Fiat currencies are quite often more volatile than bitcoin, even the great british pound. (https://www.bloomberg.com/news/articles/2022-10-20/uk-pound-is-almost-as-unstable-as-bitcoin)

Current 30 day volatility index for bitcoin is 2.24%. Current 30 day volatility index for gold is 1.74%.

People often mis-state how volatile it is day to day, and under state how much the volatility is reducing over time, without actually looking at the numbers.



https://buybitcoinworldwide.com/volatility-index/

Edited by RichTT on Wednesday 8th May 11:34

[Blown2CV]

RichTT said:

Blown2CV said:

RichTT said:

There's no such thing as 'store of value', because value does not reside in objects. Value is in the mind of the person, and is entirely subjective.

so then what you are buying is confidence and trust. I refer you to my above point.

Something is a better store of value if it is less likely to suddenly cause the holders to lose confidence and sell up.... unlike say, crypto.

Market participants are not equal, but individual. Short term volatility and pricing is set on the margin by the traders. Whilst the correlation of bitcoin (and by proxy crypto) to risk on equities is fairly high, the fact that it is a 24 hour market allows those market participants to capitalise on volatility and uncertainty. This is short term price action. The difference is that whilst all the other cryptos trend to zero against bitcoin, bitcoin continues to make higher highs and higher lows on a long term basis. No other asset has returned from being 'dead' so many times, nor has an asset bubble ever crashed and gone on to make new ATH's, let alone 4-5 times.

Those who use a longer view and tend to set the price floor during dips and market corrections will use these opportunities to accumulate more. This is measurable and verifiable through on-chain analysis. It has been happening every single cycle. But every time this occurs the drawdowns reduce, the volatility reduces and the distribution of the asset becomes wider and more even. Yes, it's still highly concentrated, but even by now, the distribution is better than the wealth concentration of fiat monies between rich and poor.

but the store of value topic was about the building blocks required for crypto to become a useful currency... again you seem to have fallen into the trap of talking about it as an investment.

I realise volatility can make a good investment, but that isn't the argument.

[OoopsVoss]

RichTT said:

Fiat currencies are quite often more volatile than bitcoin, even the great british pound. (https://www.bloomberg.com/news/articles/2022-10-20/uk-pound-is-almost-as-unstable-as-bitcoin)

Current 30 day volatility index for bitcoin is 2.24%. Current 30 day volatility index for gold is 1.74%.

People often mis-state how volatile it is day to day, and under state how much the volatility is reducing over time, without actually looking at the numbers.



https://buybitcoinworldwide.com/volatility-index/

Edited by RichTT on Wednesday 8th May 11:34

I don't think you are wrong on volatility declining - but cable vol isn't eaten by the consumer - but the retailer. They don't reprice trainers constantly...

I can see why BTC has attributes people favour - but can't see mass market adoption when its work to live for many and FIAT does have implicit bail out guarantee even if people think its wrong. In anything other than total collapse - FIAT will get bailed out by central authority. BTC has the opposite - so it may be more resilient (if you think it in Nassim Taleb terms) - but you gotta be a real believer to have all your eggs in that basket (that's kinda the problem - for FIAT people are almost 100% bailed in - only a tiny minority have 100% BTC exposure).

For me, BTC is "like" money and has interesting investment potential - but's its not "money",. for reasons given and I can't see the widespread adoption given the hegemony of Western economics and circumventing the likes of OFAC etc.

[Scootersp]

RichTT said:

There's no such thing as 'store of value', because value does not reside in objects. Value is in the mind of the person, and is entirely subjective. Therefore considering anything as a store of value is a logical fallacy.

That's an interesting take because I'd say nearly all value does reside in objects/physical things?

Value in non physical things is a very recent addition to the human experience, and does rely on trust/belief/indoctrination and whether fiat or bitcoin or whatever, it is ultimately one day used to buy physical things? (Physical networks support bitcoin and swift/fiat tracking?)

Bitcoin or fiat billionaires feel comfortable because they can expect that during their remaining lives they can buy everything they ever need, that is not 100% assured, isn't that why diversification is encouraged? Buying everything they need for decades, they could afford to do today but is hugely impractical (for various reasons) unless you went full on homestead self sufficient like the ultimate prepper - like billionaire self sustaining island stories!?

[RichTT]

Blown2CV said:

but the store of value topic was about the building blocks required for crypto to become a useful currency... again you seem to have fallen into the trap of talking about it as an investment.

I realise volatility can make a good investment, but that isn't the argument.

It is a useful money to some, as it is less volatile and more inclusive than local fiat currencies. It is seen as an investment to others. Not mutually exclusive, but I'm talking about it from a relatively secure economic point of view.

Volatility over time is reducing. Whether that means that it takes 2-3 more cycles to become stable enough as a viable currency day to day for more people remains to be seen.

George Selgin wrote a paper back in 2013 that I think is highly interesting

"I argue that the attributes of synthetic commodity money are such as might supply the basis for a monetary regime that does not require oversight by any monetary authority, yet is capable of providing for all such changes in the money stock as may be needed to achieve a high degree of macroeconomic stability."

https://papers.ssrn.com/sol3/papers.cfm?abstract_i...

OoopsVoss said:

For me, BTC is "like" money and has interesting investment potential - but's its not "money",.

See paper linked above. Everything is varying degrees of moneyness. There is no absolutes, only shades of gray.

Scootersp said:

That's an interesting take because I'd say nearly all value does reside in objects/physical things?

Value in non physical things is a very recent addition to the human experience, and does rely on trust/belief/indoctrination and whether fiat or bitcoin or whatever, it is ultimately one day used to buy physical things? (Physical networks support bitcoin and swift/fiat tracking?)

Our entire world runs on the concept of intangible digital money. 92% of all money worldwide is digital.

The Visa network has been around since 1958. You can argue that we dematerialised and abstracted our currencies almost 70 years ago with the advent of credit cards. The first internet banking site was launched in 1994 and mobile banking in 2002. People have been buying and 'owning' music or movies from online platforms for many years. Of course we now know that this is an illusion. The bank can alter and freeze your digital balance at any time, the music website owner can remove your ability to use your 'paid for' music at any point. But they can't do that with cash or physical records.

That, in part, was why Bitcoin was revolutionary, you could 'own' something digital without anyone else being able to manipulate or modify it without your permission.

Scootersp said:

Bitcoin or fiat billionaires feel comfortable because they can expect that during their remaining lives they can buy everything they ever need, that is not 100% assured, isn't that why diversification is encouraged? Buying everything they need for decades, they could afford to do today but is hugely impractical (for various reasons) unless you went full on homestead self sufficient like the ultimate prepper - like billionaire self sustaining island stories!?

Nothing is 100% assured. The base status of humanity is chaos and poverty, it is reasonable to assume that we are not immune to that in the west. You make a decision on all the information and plan accordingly. Bunkers, beans, ammo, gold/silver coins assume a complete collapse into anarchy. Billionaires can afford to plan for both a peaceful continuity of the status quo, or a complete paradigm shift.

[Scootersp]

RichTT said:

Scootersp said:

That's an interesting take because I'd say nearly all value does reside in objects/physical things?

Value in non physical things is a very recent addition to the human experience, and does rely on trust/belief/indoctrination and whether fiat or bitcoin or whatever, it is ultimately one day used to buy physical things? (Physical networks support bitcoin and swift/fiat tracking?)

Our entire world runs on the concept of intangible digital money. 92% of all money worldwide is digital.

'Runs on' and 'concept', agreed but that's not to me value. I question the digital value of fiat money as do you and I'm just not sure a different digital is the answer whereas you are on the basis of it being a fixed quantity and secure. Either way my argument is what matters and what you and I value are, leaving aside human emotions/connections, physical things whether free or very expensive in monetary terms.

Whilst bitcoin is limited it was created, is created scarcity a bit of an oxymoron?

[RichTT]

Scootersp said:

'Runs on' and 'concept', agreed but that's not to me value. I question the digital value of fiat money as do you and I'm just not sure a different digital is the answer whereas you are on the basis of it being a fixed quantity and secure. Either way my argument is what matters and what you and I value are, leaving aside human emotions/connections, physical things whether free or very expensive in monetary terms.

Whilst bitcoin is limited it was created, is created scarcity a bit of an oxymoron?

Let's look at it in simple terms, scarcity by itself is not what makes Bitcoin valuable or required for others to ascribe financial or other value to it.

It is simply a minimum requirement for a token to be considered a contender as worldwide dominant ubiquitously accepted money.

That the scarcity is fixed at a nominal amount is unimportant, regardless of how that number came to be. It is definable, verifiable, and the entire monetary supply audited every 10 minutes by every participant in the network.

[Ari]

Condi said:

I'm very slightly long, but have far more interest into why it moves and what it's actually for than any returns. It amuses and intrigues me people are willing to invest in an entirely unregulated, unpredictable, and frankly impossible to analyse market, especially when nobody can actually tell me what it's used for, simply because they assume some greater fool will pay more for it later on. At least at the casino you understand the odds, have pretty croupiers, free drinks and a laugh with the other people at the table.

And, as I say, crypto is a zero sum game. Well done for making money, but please don't assume that is due to anything other than luck and don't think that money has come from anywhere other than the pockets of other buyers.

The problem is that you're talking to people who believe that they're smarter investors than Warren Buffett. Just like those who decried Buffett for not jumping on the dot-com bubble back in the late nineties.

The question you ask (where is the value - how does it make a return?) has never been, and never will be answered, and for one simple reason. If you recall, I started a post specifically on this one key point in this forum. The crypto bros got it shut down.

I admire your tenacity, and I do like to pop in for a wry smile at this thread from time to time (the person above who compared crypto to housing, that was a laugh out loud moment ).

But you're talking to The Believers. They just want to keep the faith, they have no truck with your difficult questions and awkward facts getting in the way of their path to The Land Of Milk & Honey, and its sunlit uplands.

Keep fighting the good (if futile) fight!

[RichTT]

Ari said:

Condi said:

And, as I say, crypto is a zero sum game. Well done for making money, but please don't assume that is due to anything other than luck and don't think that money has come from anywhere other than the pockets of other buyers.

The question you ask (where is the value - how does it make a return?) has never been, and never will be answered, and for one simple reason.

People have answered many times Ari, you just ignore the answers because you don't like them or believe them, and that's fine, you are entitled to an opinion.

Bitcoin is a zero sum game in the same sense that everything else is that has become financialised. $1 of inflow to any asset class does not equal $1 out for every market participant. Just as $1 in doesn't equal a $1 increase in market cap, or that $1 out doesn't equal a $1 drop in market cap. Never has, never will. You just refuse to accept that everything else acts this way and that somehow Bitcoin is acting irrationally and is somehow not reacting to the exact same dynamics of every other asset class.

Where is the value? In the physical network of people and ASIC's. How does it make a return? People take their economic value and they put it into the network. The price action is a function of supply and demand based on the current available supply for sale. That available supply fluctuates.

You can have the exact same argument with any other commodity on earth that has physical and futures markets.

Perhaps you should read the George Selgin paper I linked above. Because if a Professor Emeritus of economics understands the value proposition of Bitcoin, and you don't, then I'm going to err on the side of the Prof.

[BandOfBrothers]

RichTT said:

...

Where is the value? In the physical network of people and ASIC's. How does it make a return? People take their economic value and they put it into the network.

...

Not sure you've entirely nailed that.

The value in BTC is not the people (nothing has value without people) or the ASICs (you could double the amount of asics without impacting price).

The value is in its nature (which is supported by people and ASICs): it is unique in that it is decentralised, finite, liquid, divisible, indestructible (without destroying everything else of value in the world) and fungible.



NB: It doesn't inherently give a return like a bond or equity share, just as gold doesn't.

In fact gold is a very good comparison to Bitcoin as they share many similarities. People are accustomed to seeing gold jewellery and thinking that's where the value of gold is, in its beauty, but they fail to understand that gold jewellery came about because of the inherent value of gold as a demonstration of wealth, and not the other way around.

Edited by BandOfBrothers on Thursday 9th May 12:27

[funinhounslow]

I think it's fair to say that in the 15 years or so since it's been around Bitcoin hasn't really demonstrated utility for the "man on the street" - if it had we'd all be using it, surely?

But in that time Bitcoin must have soaked up vast amounts of resources - energy to mine bitcoin, and capital to purchase it.

We don't really have a lot to show for it do we? My impression is that most people with Bitcoin are HODLers or perhaps using it to pay off bribes...

It seems like a terrible waste - the opportunity cost must be phenomenal...

[g4ry13]

How long did it take before the idea of computers was conceived and actually being useful items for the "man on the street" to put under their desk / on their lap?

[funinhounslow]

40 - 50 years at a rough guess?

But when they were huge and expensive they were still being used for something

Lyon’s Tea Houses used them to manage stock in the 1950s and NASA used them to put a bloke on the moon…

[BandOfBrothers]

funinhounslow said:

I think it's fair to say that in the 15 years or so since it's been around Bitcoin hasn't really demonstrated utility for the "man on the street" - if it had we'd all be using it, surely?

But in that time Bitcoin must have soaked up vast amounts of resources - energy to mine bitcoin, and capital to purchase it.

We don't really have a lot to show for it do we? My impression is that most people with Bitcoin are HODLers or perhaps using it to pay off bribes...

It seems like a terrible waste - the opportunity cost must be phenomenal...

Have you heard of gold mining?