Newton’s Financial Misadventures in the South Sea Bubble [pdf]
dtc.umn.edu
dtc.umn.edu
One of my friends once asked me how the growth in cryptocurrency value i an unsustainable bubble when so many smart and math proficient people believe in it. This is a handy bit of Newton trivia to make the point that the intelligent investor is not necessarily the one with the best math proficiency but the one who understands and abuses market folly. When everyone goes right look if there's anything of value people might've missed to the left.
I think there are a lot of parallels between cryptocurrency/block chain tech now and the dot com bubble in the 90s. During the dot com bubbles fortunes were made and lost over nothing and there were many scams and vaporware business, but the underlying tech was sound and if you could identify the real businesses (e.g. Amazon, eBay) from the trash you could still make a lot of money in the long term even as the bubble popped and the market crashed. In a way, the bubble popping was good in a 'creative destruction' sort of way for clearing the brush (scammy and terrible companies) so the real ones could emerge and thrive. I think something similar will happen with cryptocurrency and blockchain tech.
It is why we will always have financial bubbles and scams.
What? That’s why you think highly of him? Not because of his contribution to Physics and Newtonian mechanics? That’s really strange.
I thought he was a nerd, who disliked socializing and kept to himself in his home doing & reading science. Also thought he was hardcore introvert.
Had I been like him the past few years, I would had achieved what I had set out to. Instead I pursued dames in my college & set out on romantic adventures.
Was of the opinion that all super successful scientists & engineers had the same MO, & I always thought of Newton to be like that.
He did of course have lots of long term relationships with men, including living with several. But claiming he wasn’t a virgin because of this would have been considered very odd at the time.
At the end of the day, it’s impossible to know what his love life was like from our point in history, but I’m skeptical he was some otherworldly aesthetic.
He certainly had passions outside of science, such as finance & religion.
You mean to imply he was possibly homosexual?
Hearing this for the first time in my life.
A lot of the hype in the media seems to be gone (or is now "doom and gloom"), so it will be interesting to see whether or not today's values can be sustained without a high rate of people continously buying in.
You can look at Railway Mania, the Oil boom of the mid 1800s, the Florida property boom, the airline boom of the early 20th century and the Dot Com boom of the late 90s for reference if you want and you can see that they become progressively quicker.
2. There is some value to Blockchain technology, so the value is not $0.
3. When comparing, given all of these assets had a starting value of effectively $0 at launch, you should probably look at them from an angel investment PoV. Peter Thiel got similar returns when investing in Facebook.
I'm not saying crypto is (entirely) comparable to Facebook in value (it might, it might not -- too early), but that's how I think the gains could make sense. It's valued like an internet startup, and then some.
4. The global market is still tiny? The entire crypto space is $550bn in market cap. Facebook is $552bn in market cap.
Valuations have probably gotten ahead of themselves and a lot of the smaller coins will die eventually, but it's still a blip in the grand scheme of things.
5. There is too much capital in the world. Too much cheap debt. Too much free money. This will fuel the mania. You could have put $2m in the stock market in 2008-2009, and if you used leverage in a smart way, could have ended up with $75-100m.
The value of current crypto-currencies might very well be zero, even if there is some value to blockchain technology.
> 4. The global market is still tiny? The entire crypto space is $550bn in market cap. Facebook is $552bn in market cap.
Comparing market caps like that is silly. I launch my own coin pg314-coin, 1 billion exist. I sell one to my friend for $1000. The market cap is now $1 trillion, twice that of Facebook...
> You could have put $2m in the stock market in 2008-2009, and if you used leverage in a smart way, could have ended up with $75-100m.
That is true of any period in time where the stock market went up. If you have a positive return to start with you can have an arbitrary multiplier with 'leverage used in a smart way'.
Sure. I'm just saying; you can't know. Bitcoin might be around in 5 years, Ethereum might be the platform everything gets built upon, or something better comes along, or it all dies never to be heard of again.
> Comparing market caps like that is silly. I launch my own coin pg314-coin, 1 billion exist. I sell one to my friend for $1000. The market cap is now $1 trillion, twice that of Facebook...
Approx. $10bn worth of Bitcoin was traded in the last 24 hours ($200bn market cap). Approx. $3.4bn Facebook shares were traded per day during the last 50 trading sessions ($550bn market cap).
Let's assume that even half of that Bitcoin trading is wash trading (which I don't think so). I think it's a pretty good way of looking at market caps. But you're right for the smaller coins -- those valuations are not in line with the money invested.
> That is true of any period in time where the stock market went up. If you have a positive return to start with you can have an arbitrary multiplier with 'leverage used in a smart way'.
Sure. But debt has been cheap in the last 10 to 20 years, and that has driven up asset prices significantly across the globe. People overpay for assets everywhere.
In times when everything has been going up, people are more willing to take risks. In times where everything is falling, people are less likely to take on speculative investments. That's just part of the cycle.
However, some people are buying Ethereum (not Bitcoin) because they think there is value in Blockchain technology.
I have a friend who did that, and he has done well. So it's definitely happening.
So going from say 20k to 12k or $10 is fine?