Your characterization of all cryptocurrencies as a ponzi scheme purely based on the fact that people buy it because they believe others will buy it later at a higher price is weak because that is how all monetary assets like gold operates. We take it because we believe others will also take in the future.
I personally buy bitcoin not to sell for a higher price but rather, I believe strongly that a monetary system that's provably scarce, programmable, completely decentralized, permission-less, trustless, higly divisible, borderless and very easy to transfer has the potential to revolutionize how we store value.
This does not mean that everyone buys bitcoin because of this, some (perhaps majority) buy it because they believe it's going to go up but I see that as an initial incentive to get people into the industry.
At the end of the day, only time will tell if cryptocurrencies can actually live up to their promises of revolutionizing the financial system.
But is adding massively to global carbon levels needlessly...
Bitcoin is cryptocurrency 1.0, or proof of concept, and the concept is well and truly proven.
Developing others which operate more efficiently than the proof-of-concept or 1.0 version, or even than the existing banks and credit card exchanges is just engineering and iteration, and hardly a great leap of imagination or faith.
Any currency seeing moderate amounts of use and speculation is going to rapidly start sucking up power.
These narratives about power and emissions are narratives with an agenda. The agenda may be good in nature, but don't mistake them for accurate or precise.
Edit: also apart from making us question theses behaviors in other markets if that speculating behavior is bound to exist then at least it’s relatively harmless compared to doing that with real estate or commodities like food or water. Better that bank exec making that with dogecoin than other real stuff.
Well, think about operating a credit card company and taking fees whenever one of your cards is used. You could be very rich that way. Was any wealth created, or are you just siphoning off value that, in your absence, would have gone to someone else?
In that case, you created a lot of wealth and kept a part of it. The extra wealth arose from transactions that wouldn't have occurred without the service you provide.
Cryptocurrency isn't used much as a medium of exchange, but that was a design goal. Theoretically, it could be.
For at least the USA exchanges, the USG has made it clear major companies will never fail and is printing so much money that has to go somewhere.
Crypto currency is a zero sum game and i think this is what OP was implyining.
it's not really zero sum - this sort of speculation creates liquidity. This liquidity allows people who want to use the underlying asset in some other way to have a buyer (or seller) on the other end of the transaction.
How is value created during dividend payment?
This part is false. The price of a stock is not completely disconnected from actual value.
The money for the dividends has to come from somewhere. If you own AAPL, the dividends are funded Apple’s business activities. If you think that Apple’s business is a dead end, you would sell off your AAPL stock and move your money somewhere else.
Dividends are also only a small part of the picture.
I'm not sure I would describe high-flying tech stocks with no dividends, trading at 30-70 times earnings as much different. How many investors are really snapping up these stocks because they're sold on the 30+ year value proposition?
And if it's not the case for these pathetic cases, what does that say about the rest?
BTW I'm not arguing the dollar is worthless, especially not when compared to crypto, obviously the dollar has a lot more use than Bitcoin. But look at what rich people / money managers are doing with their dollars. If a Saudi prince is buying a painting by a student of Da Vinci for 450 billion dollars, what does that really say about the value of the dollar?
Things are not what they seem, I guess it's always been the case that quantities of money don't scale linearly in value but it seems particularly true today. And whatever is going on, it is foolish to dismiss cryptocurrency based on something that's not true for securities and not even for other currency.
the value of TSLA hasn't been created yet - the event is still in the future. The current price is based on the expectation (by many people) that their value creation in the future will occur.
As for GME - the short squeeze certainly did create value. It's like charging someone dying of thirst in the desert for water. But as soon as those people got _some_ water, you can no longer charge the same high price. Thus GME's rise and fall is rational.
As soon as you dive into the numbers, their answer will stop even mentioning the company Tesla, it will be about the American economy or the global economy in general.
I agree the short squeeze held value, it was great, but its value hasn't fallen yet, it's still over ten times its fundamental value, if such a thing even exists. If GME's new plans succeed, and it does exceptionally well and it really becomes a big player in the online games industry, maybe its stock would be worth $40 or even $80. If it doesn't, then all this capital is wasted and the stock is probably worth under $4. With those two very extreme scenarios and their appropriate valuations, what is its stock doing sitting at $150?
The answer is simple, just find a social gathering of GME investors, like r/superstonk, and read what they're saying about the stock. They're calling the squeeze to 450 a "baby squeeze", and that the big one is still coming. Even though as far as I know the squeeze to 450 was the largest squeeze in the history of the stock market.
I'm not saying these stocks are overvalued by the way. If you've got a firm grasp on the dynamics of those stocks, it might make sense to buy/hold at these prices. Just like it made sense to hold Dogecoin to that Goldman Sachs guy. Just don't pretend it's different somehow.
That's not value creation, that's zero sum.
There’s an old joke that starts with a guy taking a train through Scotland. He sees a black sheep out the window and says, “Ah, Scottish sheep are black. How interesting!”
The price of a stock is part market insanity and part value. The proportion varies.
Your investment decision directly impacted the prospects of that company over others.
In an ideal world, speculation in the stock market means that the best companies receive funding and the worst companies are unable to and therefore appropriately go out if business.
I do believe this bubble will pop eventually and the stock market will return to its appropriate primary function (which it still is doing ex-retail hype stocks) of allocating capital to the most productive companies.
Note also that I was responding to the statement that no wealth was created or destroyed by speculation in the stock market. My point is that this statement is false because it makes a real world difference whether it's GME versus MRNA that gets to raise money.
Do you think it has done this in the last 30 years? I am of the opinion that has it has at best done this exceedingly poorly. There are many reasons for this:
1. Speculating is the one we've already covered
2. HFT, which isn't that much different to speculating
3. The consolidation of market power in a few huge funds
4. The rise of index funds which don't attempt to judge companies on merit at all
It would/will take significant reforms to return the stock market to anything remotely resembling an ideal market.
HFT isn't relevant to this picture, their role is primarily market making and arbitrage and they have no net impact on pricing. Their sole role is to replace human market makers in a liquidity provision capacity, which reduces the cost to the active manager of doing business, at the expense of the extinct human market maker.
Hedge funds aren't that consolidated. There's lots of them. There's no such thing as market power (in terms of oligopoly or monopoly power) for the industry either. The bigger you are, the harder it is to operate on a marginal basis, since price impact becomes prohibitive. Hedge fund spin offs are a dime a dozen since all the IP is in individual's heads. The biggest ones are resigned to longer bets where the edge is smaller. Market power is a thing only for HFT firms, due to economies of scale and scope on the tech and fee side, but as mentioned above HFT aren't relevant to what we are discussing.
Index funds chase valuations set by active managers since they're typically investing in market cap weighted indices. Their existence doesn't change the value add or necessity of accurate security pricing, and they're not really relevant to that either.
you mean, those which generate the most ROI ?
In case of a sustained growth of a company (think Apple over the past 20 years) what the shareholders gain comes from the earnings of the company. Apple shareholders have gained trillions in the past years - no one has lost an equivalent amount.
That’s a very weak strawman.
Oh, and in other direction, bankruptcy.
Some stock price movements are also zero-sum. Active trading is zero-sum.
Stock holders own the underlying business and businesses do create wealth—all the inputs that are used in making a product are worth less that the product itself.
That's how _all_ wealth gets created. Even under communism (where the difference is that under communism, the capital is provided, and owned by the state, rather than privately owned).
Furthermore, if you need money in 4-5 countries (even inside the Eurozone), you'll find that several cryptocurrencies are really quite good for that purpose, and that banks are not. So I for one have found value in owning these (mostly temporarily, although I have some on hand now).
Might be fun to do it with Dogecoin I must say. I should give it a try.
Most cryptocurrencies are cartoon characters particularly tailored for gambling machines. I haven't seen a single use case other than enabling masses enter a massive pyramid scheme constantly manipulated in social media.
that the reason someone might pay you more in the future must be "legitimate" - that is the asset can be independently valued to be worth more in the future.
Investment in shares is not a scam (mostly), even if they _never_ pay a dividend, as long as they earn a profit. Investment in gold, however, can be likened to a scam, as the value of gold only grows to as speculation, and not wealth creation.
Hard to say whether cryptos behaves as gold, as some crypto does have uses beyond being sold to someone else for a higher price.
Well, gold has numerous uses in the real world. https://geology.com/minerals/gold/uses-of-gold.shtml
Holding almost literally anything nonperishable is better than dollars. We can argue what it is, but if anyone has any optimism at all about the future of Dogecoin then there is a price point where it makes a lot of sense to buy Dogecoin rather than dollars.
This really feels like a kind of "screw you, I've gotten mine" form of capitalism.
Yet tell that to those who lost their shirts on Mt. Gox, Binance, any of the black swan events within the past few years, etc.
It's really a technology-packed MLM.
Then you very obviously never actually learned about the topic.
To the people downvoting this:
* smart contracts
* decentralized exchanges
* decentralized finance (lending, investing, etc)
* instant borderless value transfer
All of it trustless, permissionless, uncensorable, resilient, not controlled by a centralized entity, mathematically provable.
But keep telling yourself it has no value because you failed to invest.
The tech does indeed have valuable applications, but that doesn't take away the fact that we're in a mania.