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Comment by socratesone | Hacker News Reader

I wonder if most blatant bs ICO projects are not just clever (pre-regulation) transfers of wealth from retail investors to management. Tron is the quintessential hype > value project, and now they are bolting on actual assets through buying stuff with their war chest. Even better for management, they don't have a fiduciary duty to token holders..

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That's what I thought too.

Really strange time to be alive. People give money away in a scam ( at least tron is in my opinion) and the owner go to buy nice stuff...

What scares me even more is how overvalued everything else must be around us. It really can't be that people give money away in such way and other valuations are still sane, there has to be some correlation.

I see companies closing in to 1 trillion USD, housing feeling decoupled from reality and the entire crypto market cap even now is ~300bln USD for what mostly is pure speculation. Odd.

things aren't overvalued if the money supply has been increasing, which it has

if more dollar units exist, and the same or less purchasable units exist, then purchasable units have a value in more dollar units

the people increasing the money supply had an idea about what other people would spend the additional money on, but economists never predict human behavior accurately. but it doesn't really matter, the primary recipients of the additional supply are their friends.

> things aren't overvalued if the money supply has been increasing, which it has

If housing prices disconnect and accelerate away from what incomes can support servicing a mortgage, housing is overvalued. If PE ratios start to become wildly unjustified, equities are overvalued. This is regardless of money supply.

In the former case you're assuming houses are for living in. That's a human perspective (and one I share) but the capitalist perspective is that houses are stored value and can be even more valuable if they're empty and well guarded. They become another sort of bitcoin, but backed by the reality of tangible property.

Depends on the jurisdiction, right? In several parts of Europe, they put RE ownership restrictions in place because they value housing as housing above value storage. In the US, not so much. Note the decline in foreign purchases of RE in Vancouver when they started taxing those transactions because people living in Vancouver were prioritized over Chinese dollars flooding the market.

1) That assumes that what drives housing prices is residential ownership.

2) What is a "justifiable" P/E multiple? What is the justification (other than past values) for _any_ P/E ratio? What were the drivers of either the numerator or denominator?

This is to say, that macro and micro economics try to model extremely complex systems. When trying to analyze "value" it's worth considering that your mental model might not be accounting for many/most of the relevant forces.

Ultimately a P/E ratio should be justified by discounted future expected returns, compared to the risk free rate. So ultimately, the P/E ratio is a market prediction of future earnings growth.

> If housing prices disconnect and accelerate away from what incomes can support servicing a mortgage, housing is overvalued. If PE ratios start to become wildly unjustified, equities are overvalued.

> This is regardless of money supply.

When vast amounts of money are added to the ecosystem - the economy in this case - the recipients all have the same choices of what to do with the money so that they don't lose it or have less of it. When the expectation is the even MORE money will be added to the ecosystem, then the market participants need to increase their own money faster than the rate that an individual money unit has less ability to purchase its share of the economy.

You have choices across the yield curve which dictate the velocity in which you increase your own supply of money. Some choices are below the expected rate of new money units, so you are expected to lose purchasing power. Other choices are expected to be above the rate of new money units, and this includes housing and stocks.

If there is an excess of money and the purchasable units are not increasing at the same speed, then they will increase in price.

Regarding "overvalued" in the terms of particular asset classes, yes, things can disconnect from this rate of change.

The way we are using that term is fundamentally different and counterproductive to go into a hole about. I am using it to make a simple point: the money will go somewhere.

Look at the whole casino market. From Las Vegas to video game gambling websites, there is a huge amount of money in there. Now imagine one global casino playable from anywhere in the world and you have the cryptocurrency market. There's no way it's going to stop. On top of that look at religions and how they were created and how they survive mostly from their huge amount of followers. Now imagine that cryptocurrency followers are pretty religious about their "crypto". You now realize it might not be a crazy idea to invest there.

This is, most religious preachers believe what they, preach; unlike most ICO owners, who are purely in it for the money.

Cryptocurrency used to be a fun place to be in, before people started doing these ICOs that only made sense when you look at it from a cash grab.

Something that is entertaining... Get a coin daemon that was created several years ago (could probably get away with months at this point,) that happens to be on an exchange. You can trivially execute a 51% attack, by yourself, with no real investment required.

Most religions started with a bunch of charlatans as well, the second layer is filled with believers. I've seen the same happening with cryptocurrencies

Crypto can still be fun to be in. If you pay attention to all the ICOs and the crashes and media hype, you're gonna get sad about it. But there are other places in this sphere you can find and still enjoy like the earlier days.

For example, for all the ICO bunk out there, there's also some awesome tech being developed. The lightning network for Bitcoin is really cool! I just paid 18 satoshis to a game the other day. That's less than a penny. There are people in that community building games and working on the tech and its constantly improving and that feels really good. It's pretty flakey, but you can watch it getting better over time.

There's Grin, an implementation of MimbleWimble which is under development. It has an origin story like Bitcoin - one day, somebody with a harry potter pseudonym signed on to the Bitcoin IRC and dropped a white paper and then left, never to be heard from again. Now it's under active development. There is no ICO planned, only an open genesis block, like the good old days. You can contribute, if you want! Or you could read the white paper to understand what makes it different and special.

Ethereum is working on scaling and sidechains. Those are not pump and dumps by private scammy companies, that's really cool new tech!

Whether you love or hate crypto depends greatly on which aspects of it you choose to pay attention to. It's easy for anyone to get disillusioned paying attention to ICOs all day. If you're actually into cool things and not just the "can i make a quick buck" aspect of it, go find those things. They're out there.

This is exactly why I think there will be a huge correction soon.

Mix this with an unstable administration running the largest economy in the world.

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