Crypto businesses are very lucrative so don’t be too busy asking why when you should be asking how
The law of large numbers, in this case—the speculative experiment of seeking returns from assets that do not produce value, will iron this out. History does not repeat, but it rhymes often enough for those who know the tune to sing along.
For starters, you should probably start over on whatever you think you know about the tulips. Primarily its relation to tulip derivatives and the spot market of tulips, and the government's role in the dutch derivatives market at that time. And secondly, the length of that asset price distortion, compared to the crypto markets.
Of all the endless knowledge that humanity produces, you have to ask yourself whether or not there’s meaning in pursuing topics endlessly.
They’re flowers. This isn’t a discussion about some ECON 500-level course topic.
There’s an academic argument to be had about whether or not the accounts of the event are credible, but that’s not what we’re talking about here.
It is.
> There’s an academic argument to be had about whether or not the accounts of the event are credible, but that’s not what we’re talking about here.
It is.
You brought it up. You threw in conjecture. And every rebuttal is more complex than you decided to be willing to pursue. That doesn't become false by saying we aren't talking about something that we absolutely are, and all of your hyperbole keeps reinforcing your willing self-proclaimed but obvious ignorance.
Your side of the argument is ad hominem. I’m ignorant. OK, great, what’s your point? I should rethink tulips. Why?
You don’t actually make an argument yourself; sure I spouted off some things I think are generally bad because my statements imply you’re not going to find long-term returns from that type of “investing,” but are you not also spouting off some points of your own?
Truce, one last "ad hominem" and I'll move on
> Of all the endless knowledge that humanity produces, you have to ask yourself whether or not there’s meaning in pursuing topics endlessly.
This is a verbose way of saying ignorance.
Okay moving on.
My real argument is that Tulip mania is actually the worst poster child of speculative bubbles, as the spot market was largely unaffected and for a brief period of time the futures market became very divorced. It also ended with a local bubonic plague, which means the speculators died, so we don't really know if there was merit to the future delivery or not. Also public policy played a role in the futures contracts, and for that I would have to brush off more literature to expound upon. But the idea in popular culture is quite wrong.
I personally did not comment on beanie babies and ignored it. My first inclination on that speculative bubble is that it was silly, but I didn't comment on it because I don't know if there were supply and demand conditions to support it, and such imbalances can occur in any asset class whether there is utility or not.
Regarding crypto in the light of other speculative asset price bubbles, even ignoring the utility that it does have for a broader and broader set of people, the staying power alone has defeated the bubbles you mentioned. But to counter the lowest hanging rebuttal of "but it can remain irrational longer than you can remain solvent" you have to then counter in how the utility does address a wider and wider market. Its not just a payments, it is far beyond payments right now, and all of these crypto assets inherit the payments capability.
So I researched the Beanie Babies bubble and it also does not seem irrational. Ty Warner encountered a temporary supply chain problem and announced that was permanent, and this was not priced in as in, nobody expected that. Beanie Babies did have high sales before this, and people wanted ones they couldn't get.
The Beanie Babies bubble burst when Ty Warner flooded the market with too many variants at once. He didn't know it at the time and was also more interested in his own revenue.
It is not irrational if the traders factored in the possibility of the market being flooded. Does that include the infamous tale of a divorced couple splitting their Beanie Babies investments on a family courtroom floor? I don't think that matters. This is a hallmark of all markets, a spot commodity that there is more of.
Beanie Babies traded at their retail value after Christmas 1999. It is possible to have sustained above market value, such as with diamonds. Maintain the scarcity properly at the expense of near term revenues.
In relation to crypto, the market doesn't become diluted just because there is "more cryptos", the digital commodities that have known immutable supply and market share occasionally have supply shocks and are expected to have them at greater amplitude.
At this point, I can only draw the line of irrational exuberance at equities and credit market bubbles. And even then, only sometimes. So that gives us South China Sea bubble, and the 90s Tech bubble in the Nasdaq.
I don't see a way to turn bitcoin back into electricity. One could exchange bitcoin to fiat currency and then buy new electricity(created from a different source) but that's not really using stored electricity.
Do you have any examples of a bubble which
- lasted more than 5 years - recovered from previous drops in value of more than 50 %?
What kind of evidence would convince you that bitcoin were different from these past bubbles?
Before 3 years ago, it wouldn't have looked like "any other penny asset" it would have had a similar chart as now because its prior booms and busts 3 years prior to that all had similar degrees of amplitude. Just zoom in on a chart and pretend that it is summer 2017 with no future price history available, just like all the traders at the time had.
Regarding "penny asset" again, in price 3 years ago and 6 years ago Bitcoin would have been hundreds of dollars, which is not like penny assets, and even if comparing "penny stocks" to a digital commodity the marketcap of bitcoin 3 even 6 years ago would be greater than 99.9% of anything in the penny stock markets (bulletin boards, pink sheets), of which - of course - commodities and commodities derivative do not trade on.
You speak in hyperbole for emphasis and that's generally fine, but that only works if you know what you are talking about and it is pretty clear you just conflate concepts over and over again.
Its fine if you personally don't want to or don't have the risk profile to be in this market, yes you are missing a lot of alpha from sitting on the sidelines. No, you don't have any insight to support you sitting on the sidelines. But again, it is a completely valid choice to do so.
It’s supposed to be a currency. And yet it’s not. It doesn’t exhibit any of the traits of a currency I’d want to spend at least. Maybe you’re OK with that, so have fun. It’s fundamental existence doesn’t work for me.
ah that argument, I read that recently, those are skeumorphs, here is a quote
> When it comes to this asset class, there are still people that argue against the concept of Bitcoin, mostly in reaction to one of its sales pitches without ever noticing what this really is. For example, people are likely to debate about the “coin” or “currency” nomenclature of “bitcoin” and “cryptocurrency” respectively. Ultimately, what we have is an asset with a fixed known supply, which has some attributes of all other asset classes, some improvements, is continually updated to have more attributes and improvements, in a world with massive inflation. This is the macro story of bitcoin, the big picture.
You might begin to notice that I use the term "digital asset" and "crypto" in its new asset-based context very reliably. It can be transferred peer to peer and I frequently do that, I don't use the term currency and I typically don't single bitcoin out specifically as I'm not usually talking about bitcoin specifically.
Except there’s a fixed supply. There isn’t a fixed supply of value in the world.
The amendment ratification process has a long lead time, even when it is not politicized. The current Taproot and Schnoor amendments actually improve the "electronic cash" feature set, and has signaling consensus already but they must signal for I think 6-12 months before the nodes start updating their software. Hopefully wallets and exchanges use this time to implement the technology as default for the users (but they won't, human nature)
The real gift of bitcoin is that it jump-started a wave of innovation by birthing "cryptocurrency". Once people saw that money would flow into bitcoin, people started new projects to try out all the other now-obvious ideas for cryptocurrencies. People want to build important things.
If you're thinking of bitcoin in the mindset of beanie babies or building a better credit card, then you may have missed the bigger thing that's happening. It's becoming obvious, to me at least, that cryptocurrency is trending in a direction where it will profoundly disrupt any industry that uses the internet, beginning with finance.
Also, I've been following this thread, and you should probably re-read all of vmception's comments. IMO he's right about some important stuff that your replies suggest you may be missing.
Plus the Lindy effect. If it's lasted 10 yrs, it's likely to last another 10.