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Comment by benreesman | Hacker News Reader

Eh 20-ish years ago the shit happening on Island and Archipelago would blow most people’s minds. Undocumented, conditional, non-displayed order types. Routine wash trading. Shear-but-don’t skin multi-venue arbitrage. The ECNs were the Wild West. Smoke-filled dark pools.

Island and Arca are NASDAQ and NYSE now.

But Ben, US equities have intrinsic value unlike this BTC garbage! Well unless they pay no dividend, have dual-class share structure, and IPO without a profitable quarter. What’s a share of SNAP entitle you to exactly? Ah right, you think someone will buy it for more.

Crypto will have it’s 2001-style GC cycle, the useful stuff will stick around until Goldman owns it and the SEC makes a show of regulating it, the tulip garbage will wash out leaving behind a bunch of rich guys who are really annoying because they never built anything, and we’ll go back to arguing about programming languages.

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I truly appreciate your experience and cynicism here. People who haven't worked in financial markets have a hard time appreciating how deep the muck can get. Which makes them especially valuable suckers for the unregulated markets.

> People who haven't worked in financial markets have a hard time appreciating how deep the muck can get.

That's the main reason why I find the battle cry of "decentralization" so comically ironic. No government can control crypto, how awesome and empowering!

When the truth is that the vast amount of control that we've seen develop in the past century (and especially in the past two decades) were just to protect people from said muck.

[Edit] Or, as a practical comparison, think of the act of raising money from investors.

Centralized: Please file a detailed report with the relevant authority in which you list, among other things, all possible risks and challenges that you foresee and how this could harm investors.

Decentralized: LOL YOU APES, DIAMOND HANDS TO THE MOON!

You have a lot more faith in the IPO underwriting process than I do. They don’t call it a “pop” for nothing.

Not at all. I'm just saying that the other process is much, much worse than that.

thats like, your opinion bro. In all seriousness I am ok with crypto punishing gamblers, eventually people will learn to stay away from it, or be forced to stay away from it because they have nothing left to gamble. I don't see how this is more morally repugnant than casinos which are legally accessible in most of the US.

It's more morally repugnant because it's much less transparent. Casinos are exploitative misery factories and I'd be happy to see them vanish forever. But they're at least carefully regulated to exploit people at an agreed-upon level and with all the rules known beforehand.

Personally I am ok with both crypto and Casinos existing, just because some people are stupid doesn't mean i should have my freedoms restricted. Stupid Should Hurt.

As an aside crypto has the potential to change the world for the better if it ever becomes used as a real currency. I think the people that stand to lose in that situation love spreading FUD about crypto. However it is probably not bitcoin that is going to become that imho, but rather some POS coin.

Perhaps consider that this isn't about just you?

It's bad for society to let scam artists operate unfettered. It doesn't just harm the scammed. For one, you've given terrible people more money to run bigger scams. Two, it misdirects resources to negative-sum activity. Third and most broadly, it reduces trust in anything that looks vaguely similar, which increases transactional friction and reduces available investment capital, making society poorer as a whole.

And that's before we even get to your illusion that you are safe from being scammed because only stupid people get suckered and you're one of the smart ones. There are scams for everybody. The whole "crypto" space is proof of that.

If I play slot machines I know I lose money. But at least I know the return isn't absolutely horrible. Usually around 90%... Same applies to many casino games if played sensibly.

The lotteries and scratch tickets are the truly horrible crap. Return is absolutely abysmal with them...

Yeah and after all, the world's poker chip factories consume the same amount of energy as Argentina so it's an apt comparison.

This seems sarcastic but the amount of resources that has went into building all casinos, casino sites, and everything related to the industry dwarfs the amount of resources that have went into bitcoin by a lot.

If it seems otherwise it might be because you see articles on Bitcoin's energy consumption all the time, and not as much about casinos.

I look forward to seeing your math on that. But for a fair comparison you can't just look at "casinos to date" and "Bitcoin to date". After all, as Bitcoin proponents never tire of telling us, this is supposedly the early days.

Some of the most expensive casinos (just the building) to build are:

Venetian Macau – $2.4 billion, Wynn Las Vegas – $2.7 billion, Resorts World Sentosa – $4.53 billion, Marina Bay Sands – $5.36 billion, CityCenter Las Vegas – $9 billion.

That already likely costs more than the combined electricity used by Bitcoin so far, if it doesn't you can easily reach trillions by combining the costs of just Casino buildings. Money roughly translates into resources, so I can't see a way in which the gambling industry hasn't consumed much more than Bitcoin as of right now. Maybe in a century if Bitcoin keeps going really strong it can start to catch up.

0. https://casino.partycasino.com/en/blog/the-most-expensive-ca...

Comparing the cost to build a casino with the raw electricity cost of Bitcoin is not so much an apple-to-oranges comparison as apples-to-tire-rims.

But if your point is that Bitcoin is basically a big casino, I agree. And I think we should regulate it like one.

> you can easily reach trillions by combining the costs of just Casino buildings.

I have my doubts about this.

BTC energy cost was in the realm of 10 billion/year this year, and increasing quickly year over year. That's from around 150 TW hours, or around 5x Nevada's consumption.

The hash rate this year averaged around 140 million THash/sec. It appears that efficient equipment costs about 10k per 100THash/sec. So you're looking at another 14 billion in currently running hardware, conservatively, not to mention the price of the buildings those Asics need to be put in.

There's another big flaw here, which is that cost isn't just reflective of consumption but of demand. The same hotel building on the Vegas strip is a lot more expensive than if you built it in rural Idaho, and BTC has the advantage of being able to use the cheapest land and electricity.

In the case of buildings, that money went largely to engineers, workers, and materials. It’s not the best way of stimulating local economies (it’s fairly inefficient because of bribes and margins), but still much better than Bitcoin.

>punishing gamblers, eventually people will learn to stay away from it

Just like casinos?

Casinos are deemed acceptable and gamblers are (somewhat) protected instead. Instead of avoiding the bad situation, it makes it less bad. It’s just a different risk management strategy; prohibition would not be ideal either.

I think jayd16's point is that everybody knows that casinos are negative sum and have for a long time. But still, they continue to exist. So we can't assume, as ravar does, that in the long run the market will eliminate negative-sum things.

Right. My point was that we don't punish gamblers. instead we regulate the environment in which they gamble to limit the extent of the damage.

Otherwise, yeah. Negative things don't disappear just because they are negative.

> I don't see how this is more morally repugnant than casinos which are legally accessible in most of the US.

Gambling is heavily regulated in most of the US. It can be morally repugnant because retail investors are being swindled into making terrible "investments". Retail investors really shouldn't be exposed to that kind of manipulation and risk.

You can argue that they're stupid and deserve it, but some of these people have kids to feed and house, and when their house of cards comes falling down, innocent people will suffer.

It's a fundamental question wether people should be allowed to take on risks or not.

If you are leaning towards the "no they should not" side, then consider that doing a startup is also very risky. So maybe that should be illegal, too? Or at least, there should be government startup specialists that evaluate ideas and decide wether people should be allowed to create such startups?

Or should there be an elite of people who would be allowed to create startups, and the poor people (can't afford the risk) should be restricted to union jobs?

That is not a fundamental question. Everybody agrees that people should be generally allowed to take risks. However, we also constrain those risks in all sorts of ways so that we can run a reasonably safe and effective society. The eternal questions are which risks lead to generally positive-sum activity and which tend to be dangerously opaque, negative-sum, or with strong negative externalities. You can see this is almost any serious activity. Not just investment. Think of food, or transport, or construction.

"Everybody agrees that people should be generally allowed to take risks."

Not really, the nanny state is a thing.

Companies are free to direct list without underwriters and even issue new shares in the process.

I'm not sure what a "pop" (the idea that prices often go up on listing) has to do with anything. It generally means that the company underpriced its equity but by no means does this always happen.

Are you referring to a greenshoe? There's some misinformation there too, but it serves a purpose, too. [1]

[1] https://www.investopedia.com/articles/optioninvestor/08/gree...

I think they may be referring to the "pop" some tech companies have gotten lately where they may have been purposely undervalued so when they IPO they get a nice 5-10% "boost" and good publicity when they open.

IPO "pop" is a bit of pejorative usually referring to the deliberate underpricing of an IPO so that the investment bankers' big clients can get a quick profit, the difference between the IPO price and the first available exchange price. In the context of this thread, an example of Wall Street sleaze.

perfect is the enemy of the good. it's not an infallible process, but some checking is better than zero

> the truth is that the vast amount of control that we've seen develop in the past century (and especially in the past two decades) were just to protect people from said muck.

Think of the children!

Do you really believe the vast amount of centralized control is to protect the poor stupid people? I think this is an incredibly naive and gullible take. The vast amount of controls in place are to solidify power amongst the powerful.

Two things can be true at the same time. Power systems do tend to work for the powerful. But that doesn't mean they can't also be valuable to everybody. Or even valuable to the average person much more than the powerful person.

Look, for example, at food regulation. Anybody who has worked in a restaurant can tell you a) how important food safety is, and b) how much health department regulations contribute to keeping them effective. That's good for almost everybody, but it's most valuable to those who buy food from low-end restaurants, where the incentive to cheat is strongest and where the clientele is low on political power.

It seems pretty hard to me to look at charts of inflation, income inequality, and quantitative easing and compare them to stock market values and not see how the system is allowing the rich and powerful to use inflation to suck money away from everyone not heavily in the market (especially the poor as inflation is a highly regressive tax) and into their own pockets through increases in valuation.

And then look at the barriers that regulation throws against the average person to keep them from the most lucrative investments (like required accreditation) and protecting the people stops feeling like a primary (or even tertiary) goal.

I don't doubt that initial push for regulation was at least in part to protect people from the sharks, but it sure doesn't seem like that's the driving motivation anymore.

> look at the barriers that regulation throws against the average person to keep them from the most lucrative investments (like required accreditation)

If anything, the accredited investor standard is proof that regulation doesn't favor the powerful. Taken as a whole, those aren't the most lucrative investments. They're the riskiest. The whole theory behind it is that if somebody is rich enough we won't try to protect them as much from scams; they're presumed to be sufficiently sophisticated and well resourced that it's their own problem.

I agree inflation is a problem, but you can't use that to prove much about the regulatory system, because a) inflation was low and stable for a long time, only increasing due to pandemic-driven disruptions, b) the wealthy are the ones yelling the loudest about pinching off inflation pronto, and c) the classic way to stop an inflationary surge is performative "austerity", which is much more disruptive to the poor than to the rich.

> Taken as a whole, those aren't the most lucrative investments. They're the riskiest.

I'm not an accredited investor but I did mountains of research on it years ago, and most of the time risk does correlate with reward. Also most of the most lucrative investments where people can get really rich are startup investments, which are off limits to most people who aren't already rich. There is definitely a ton of risk in startups, but also so much reward.

I think a better system for protecting people would be education/certification based. If the person truly understands the risk, they shouldn't be stopped by the government from investing IMHO.

I think the reason many of the richest people want inflation to stop is because it forces them into riskier investments in order to stay ahead of inflation. They care a great deal about maintaining wealth and high inflation erases a big class of "safer" investments from their list of options.

Risk correlates with reward, sure. On a very general basis. But there are a ton of specific exceptions to that.

There's plenty of reason to think that opportunities to "get really rich" offered to unsophisticated people without a lot of money will be a big exception.

Just think of it from a startup's point of view. Would you want to take a lot of small checks from people who don't know what they're doing and for whom it's a major portion of their assets? I wouldn't, because it's always a bad idea for people to gamble what they can't afford to lose. I'd feel bad taking their money for something I know has a small chance of success. And just as a practical matter it's low return on effort.

The people who are most eager to take money like that? Idiots, goofs, and fraudsters who cannot get money from serious investors who know better.

In any case, the accredited-investor system already has certification-based exceptions: https://www.investor.gov/introduction-investing/general-reso...

> It seems pretty hard to me to look at charts of inflation, income inequality, and quantitative easing and compare them to stock market values

You should have seen what the altanartive charts looked like.

> inflation is a highly regressive tax

Is it? I think a takeaway from Piketty's book was that inflation was one of the rare factors that slowed down or reversed wealth inequality. Intuitively it would make sense that people drowning in debt benefit from (moderate) inflation, especially if low wages get bumped in the process.

Yes that's a great point, as long as debt interest rates are fixed, inflation is good for people in debt. It's especially great for most home owners, but home ownership is largely a middle-class luxury.

But that said a lot of the really bad debt that poor people have is variable rate anyway (and usually outrageous) like credit cards, payday loans, etc.

Re wages: they tend to be sticky. Wages will get bumped up but it's almost always after the fact as a result of government reported inflation rates. So people have been feeling the inflation for a while by the time wages "catch up." And the government inflation rates are notoriously underestimates so in reality wages tend to stagnate and "drop" (they are the same number but buying power has dropped) until market pressures force them to rise.

It would definitely be interesting to hear about past examples where income inequality improved under inflation. In Weimar and Venezuela that doesn't seem to have happened. The poor there end up starving and using leaves for toilet paper. The really wealthy have access to international investing so they're protecting against inflation.

It might make your debt cheaper but if you can't afford food & housing at your current wage then it doesn't really matter.

> Yes that's a great point, as long as debt interest rates are fixed, inflation is good for people in debt.

Variable interest rates should be illegal anyway. How can you commit to paying next year a sum that you cannot know? It works somewhat as long as everything is stable, but is a significant fragilisation factor once things go awry. Which they are bound to do, eventually. The answer to that is not to create even more instability in the form of speculative cryptocurrencies; it’s to have better regulations.

> Re wages: they tend to be sticky. Wages will get bumped up but it's almost always after the fact as a result of government reported inflation rates.

Also, wages in real terms haven’t gone up for 40 to 50 years now. Inflation is a tax on savings, so it still penalises the wealthy, but it is not as helpful for the middle class as it once was.

> It would definitely be interesting to hear about past examples where income inequality improved under inflation.

Piketty’s book has a couple of them. The gist of it is that most high inflation events reduce inequality by burning money. People who don’t have any are not burnt. Of course it does not mean that it is pleasant for them, or that the wealthy end up starving. But it does reduce inequality.

A total war is a good example as well, because then the state is going to take the money where it is, i.e. in well stuffed bank accounts, and an existential threat is important enough to make it politically feasible.

And if you think really. The poor who live from hand-to-mouth, do they really care about inflation as long as wages keep going up with it. It is not like they even aim to save anything. So prices going up if also their wages do have really net zero effect for them.

When do wages ever keep up with inflation? Wages are equivalent to a lagging indicator.

With a steady inflation, the lag does not matter. The current problem is that wages are not following, although inflation had been fairly consistent for a couple of decades (until SARS-CoV 2). Historically, this seems to be an anomaly.

> ...the system is allowing the rich and powerful to use inflation to suck money away from everyone not heavily in the market (especially the poor as inflation is a highly regressive tax) and into their own pockets through increases in valuation.

It's not that simple. You're talking like poor people are debt-free and keep jealously-guarded meager savings in cash. However, chances are they have far more debt than assets and no savings whatsoever, so inflation doesn't hurt them (so long as their wages keep up) and may even help them.

I'm not sure if this actually applies to you, but your comment reads a bit like cherry-picking in the name of some ideological fixation (e.g. crypto/gold bug opposition to the idea of inflation. leading to attempts to paint inflation as the worst thing ever).

I think the gullible take is to imagine that the wealthy and powerful maximize their gains in an unstable system. They don't care about stupid people, but they care about the instability that comes with people getting taken in by scams or bad deals.

People who are currently at the top of a power structure have an interest in stability. One way of doing that is allowing people further down the power structure to profit in a limited way from the system. This both won't change anyone's relative position, and is a genuine improvement for all parties.

My other critique of "rules are about protecting the rich" is that the counter-factual of no rules does hurt the rich, but it hurts everyone else as well. It just doesn't seem true that striking down rules against manipulating markets is helpful to the non-rich, so it feels like cutting off your nose to spite your face.

When half of the people responsible for regulating markets are, instead, using insider knowledge to make a killing at day-trading, it's hard to trust the system.

So, the natural response is to build a new system that can be made to dance on strings by people you don't even know the identities of.

It doesn't exactly seem like progress, does it?

You are assuming the two systems are equivalent.

Ironically a lot of people that would have before criticized Wall Street now seem to be spending more effort criticizing cryptocurrencies ? (Even though they are the same kind of people that created and popularized cryptocurrencies to deal with Wall Street's issues in the first place ?)

I have no problem criticizing both.

Indeed, one good criticism of cryptocurrencies is that the are sucking up a lot of the attention and money that could go into actual reform.

For example, contrast Bitcoin usage in emerging markets with something like M-Pesa. They both started at the same time, but M-Pesa has been a huge boon to the unbanked, whereas Bitcoin is a rounding error in those markets.

Any good source to learn what M-Pesa is ?

Help me understand what you need beyond what you'd get from the top 10 Google hits. Because I see 4 or 5 sources there that seem good to me.

It's really great that people who don't have tens of millions of dollars to burn can't access L2 market data. It does a lot to promote fair and efficient markets.

Still remember going to a crypto meetup and met an older guy who worked at Arthur Andersen (auditor of Enron). Told me "you know what those Oak Doors stand for right? Your financial secrets never leave the firm."

Was blown away

> Well unless they pay no dividend, have dual-class share structure, and IPO without a profitable quarter. What’s a share of SNAP entitle you to exactly? Ah right, you think someone will buy it for more.

I think the idea would be like what happened to Apple: they eventually grew so much, became so successful, accumulated huge piles of cash bigger than they could possibly spend, that they had to start paying a dividend.

And there is a difference between a company with an inherently unprofitable business model, and a company that would be profitable if they didn't spend so much on growth. Admittedly, it is pretty hard to distinguish those sometimes, especially with the endless rounds of Series D, E, F, G, H, I, etc funding some startups are getting.

That is all speculative, but it's not unproductive beanie babie trading. It is pretty close, especially when the only rationalisation I can think of involves Apple paying dividends, which they didn't do for decades, and Facebook and Google still don't.

Even tulip selling is actually a real business, the tulip mania wasn't as bad as crypto from the "real value" perspective, I think.

Do you consider running a poker table a “real business”? Assuming there were no addicts present, what about a casino? Is that “real”?

Isn't a casino with no addicts just an arcade? I'm not sure what your point is, though. The addicts are pretty inextricable.

Perhaps let's just talk running a poker table. It's a platform where people can play a zero sum game against each other. To me, that's what cryptocurrency is. People want to play these games. That, to me, is real value.

Nitpick: the House rake makes poker not zero sum amongst players.

What's the house rake in cryptocurrency?

TXN fees for miners to secure the chain.

True. I thought of it as apt because the exchanges/miners, etc. take a fee.

>I think the idea would be like what happened to Apple: they eventually grew so much, became so successful, accumulated huge piles of cash bigger than they could possibly spend, that they had to start paying a dividend.

Not a great example, Apple paid out a quarterly dividend from 1987 to 1995. They paid out a dividend in those years because they were cashflow positive and that was just the thing you did because the idea of "hypergrowth" wasn't a thing.

Not to mention they were GAAP profitable pre IPO, same as Google, Facebook and Microsoft. Pull up the old S-1s if you don't believe me.

Don’t forget share buybacks, which have become more popular as of late. Dell being the prime example in the tech industry by leveraged buyout and making it private.

> they eventually grew so much, became so successful, accumulated huge piles of cash bigger than they could possibly spend, that they had to start paying a dividend.

What mechanism forces this?

Investors forcing the replacement of shareholder-unfriendly management. US companies tend to be better at returning cash to shareholders by buyback or dividend than many other locations (probably half the reason Asian shares are often cheap, they hold loads of useless money on the balance sheet)

Billionaire activist investors.

The board of directors.

> What’s a share of SNAP entitle you to exactly? Ah right, you think someone will buy it for more.

Ultimately you think someone will pay more for a future share of SNAP than of [OTHER THING] because you think SNAP's growth story is better, business model is promising, blah blah blah.

We may be trading on the derivatives of the fundamentals, or even the hope of future fundamentals, but even that's turning back some as it's been harder to get a big huge IPO purely on hope than it was in the recent history. Throw WeWork in against Snap there, even. Gambling but against numbers that will eventually be reconciled with performance with customers, not just other gamblers. Though personally I'm certainly hoping that some of that "eventually" starts to turn back into a backlash against dual-class stocks.

The equities market is still ultimately betting that at some point, the business results will keep the stock comparatively more attractive.

There's vague talk about "the backbone of future banking systems" or such for crypto as having similar fundamental value, but I haven't been convinced. Particularly, I'm not convinced today's big chains would be what the future would be built on - why pay the huge transaction costs and help the current crypto-rich get richer, instead of making purpose-built chains for your future applications?

> why pay the huge transaction costs and help the current crypto-rich get richer, instead of making purpose-built chains for your future applications?

the most convincing arguments i’ve heard for reusing an existing chain is 1) easier access to users, 2) easier to deploy and 3) if your application needs decentralization, a mature blockchain will be more secure (attacks like 51% attacks have higher cost) and reliable (in the uptime sense) than something you can deploy yourself.

> There's vague talk about "the backbone of future banking systems" or such for crypto as having similar fundamental value

another argument is that many cryptos are valuable because of “regulatory arbitrage”. bitcoin/monero/zcash are all easy ways to (partially) shelter your money from tax and legal regulations (hence why they are/were largely associated with drugs).

The regulatory arbitrage is a lie they tell themselves. Sure, drugs could be paid for by cryptos, but the ultimate utility of that money requires it to be transferred to fiat (aka, laundering). Unless all of your goods and services can be purchased using only crypto, the tax man and the gov't will always have this weak spot to target.

It's worse than that. Even if ALL your goods an services can be paid in crypto, the government can always demand that taxes be paid in fiat.

All I want to know is: will the annoying guy at my gym who put brags about putting all of his retirement into Bitcoin this summer provide me with some decent schadenfreude at some point?

If he put it in in June when it was 31k, he'd have increased it 30% now, double if he sold in November. Not too bad

And if he'd bought last March he'd be down 30%. Bitcoin didn't have a stellar 2021.

I wouldn't count "March" as summer

If I knew that I’d be trading it :)

But there’s a fairly active BTC derivatives market (depending on what passport you carry), so you could hedge against him getting/staying rich by getting a little creative with long-dated DOOM stuff.

Depends on how annoying he is I guess ;)

Looming rate hikes combined with ever increasing correlation of Bitcoin to equities suggests you may even get your day this year.

It's sad to see people genuinely wanting to watch others lose wealth so they can relish in it.

It's always jealousy. People see someone they view as "undeserving" doing better than themselves and react with hatred.

You're not wrong but there's plenty of contemptuous cryptobros who got wealthy via luck and won't admit it.

How exactly is it luck to recognize the value in crypto and buy a bunch? Because that's not exactly luck. That's recognizing value and managing risk successfully.

It's true that some people just FOMO into anything going up. But those types will end up losing all their "gains" in due time anyways.

> How exactly is it luck to recognize the value in crypto and buy a bunch? Because that's not exactly luck.

that's what luck is - they didn't recognize the value, but speculated on the potential value when it originally was valueless.

It could've crashed and burned, and it was luck that it didn't.

It's like seeing a lotto ticket, and claiming that you recognized the value of it (after the ticket has been shown to be a winning one).

> It's like seeing a lotto ticket

No, it’s nothing at all like that. The value of crypto was obvious very very early on. It was never going to crash and burn. Sure a black swan event could have wiped it out and still may. But based on what’s knowable, the value has been obvious since day 1 of bitcoin.

Most of the people I'm lumping into this did not and usually still do not understand why or how cryptocurrencies can solve problems.

This seems to be true of most people period. If there is a lump of people where a majority do understand crypto I haven't found it, possibly outside of tiny academic circles.

This. A lot of comments in here spewing hatred toward crypto seem to come from a psychological defense mechanism. People were wrong and decided not to move to crypto and are now doubling down on that position to feel better about their poor choices.

It doesn’t seem obvious that people who didn’t put money into cryptocurrencies were wrong. Even if you happened to through sheer luck buy low, sell high during one of the pops, that doesn’t mean everyone else was wrong any more than saying someone else was wrong for not playing roulette and selecting the right ending slot.

Your “buy low sell high” take is pretty short-sighted. For many, it’s a change in currency from fiat to digital. You on-ramp in but you don’t back out into fiat.

You're speaking about a subset of crypto traders that go right back to fiat.

I assumed making money was your metric, but if the metric is “change in currency from fiat to digital” I would argue that after nearly fifteen years of little adoption for mainstream, lack of ability to use cryptocurrency for anything but black market goods and super niche products, and what seems like an utter chaotic ecosystem dominated by con artists, cryptocurrencies are a pretty abject failure on that metric as well.

> lack of ability to use cryptocurrency

You can transact at any store that accepts credit cards with a crypto credit card.

There are countless uses for blockchains now from DeFi, gaming, social networks, NFTs, entertainment streaming, DAO’s and decentralized governance, and on and on the list goes.

I recommend you catch up to 2022 crypto if you don’t already know that.

This is such a bad faith argument - you are transacting at any store in the fiat currency that store accepts and not crypto. That a service exists to seamlessly deduct an amount of crypto equivalent to that fiat is no more novel than one providing the same service between two fiat currencies, gold or Nuka cola caps.

The other poster roundly dispatched your comment about using a “crypto credit card” so I’ll defer commentary on that.

On the others: the crux of my argument was adoption and usage, with the implication that cryptocurrency was better for the usecase than traditional methods. Of course you can shoehorn a blockchain or “the chain” into any usecase, just like I can use C to write a frontend service, but it doesn’t make sense because C isn’t the best or even a good tool for the job. I can buy bananas and put them on the blockchain, doesn’t mean there is any reason to do so aside from pumping up any cryptocurrency holdings I might have, perhaps BananaCoin or BananaICO or Gorilla NFTs, which I just invented right now.

In the end your pithy comments aren’t going to convince me to start shoehorning blockchain into my day to day transactions — as much as I might long for a decentralized currency — and my fact-based analyses aren’t going to convince someone who has a financial or psychological interest in bitcoins or cryptocurrency or NFTs to abandon them. I suggest we just agree to disagree.

I just want this environmental disaster to end.

If they'd just outlaw proof-of-work cryptocurrencies, I'd shut up and you can continue gambling your proof-of-stake digital chuck-e-cheese tokens to your heart's content.

But you're wasting more power than Argentina to do it. So yes, I hate this garbage and want it to fail.

I wonder how much energy YouTube or Facebook use compared to Bitcoin?

We could argue that Facebook and YouTube are only providing entertainment value. They don't do anything especially novel or provide critical infrastructure.

Rockets that deliver payloads into space are INCREDIBLY bad for the environment. But it provides critical services and infrastructure for now and the future.

Bitcoin provides a novel, decentralised, secure, electronic digital currency. It's being used for that purpose currently.

The FUD is unreal. We accept that certain use cases can persist and use tonnes of energy, but others we think is a crime against humanity.

Use of energy should not be a measure of shame on its own. What use case is it providing now and in the future for that energy usage?

The future will require a lot more energy for things we don't even know about yet. We need to ensure reliable renewable energy will provide for us now and in the future. We should not shut down new technologies just because it uses a lot of energy. When energy is cheap and clean and plentiful, we shouldn't worry about using it.

Nuclear Fusion reactor technology currently uses much more energy than it provides in output. But when that technology is viable it will help us to produce reliable and clean energy. Should we outlaw nuclear fusion because it uses shitloads of energy for no benefit (currently)?

Please educate yourself: PoW cryptocurrency is a red queen's race that is deliberately inefficient. I can't think of any other technology that continuously and deliberately wastes more and more energy. The only analogy I can even think of might be a nuclear arms' race: you have to keep building more and more missiles or there's a risk your enemy might get the jump on you.

Any engineer worthy of the title should be appalled by this inept and abusive design.

Trying to spot the biggest fool is quite entertaining

What if the biggest fool is you? That would be quite the karma.

Then I would be the biggest fool. But i'm not sure your hypothesis will withstand occams razor.

Wouldn’t Occam’s razor favor bitcoin over the usd in the long run?

Bitcoin monetary policy is dead simple and sound. USD not so much.

I can’t think of any advantage to usd unless you consider having physical money an advantage (eg paper bills and coins)

Come off it. Everyone loves to watch a loudmouth fail [1], regardless of what they are bragging about.

[1] Except maybe Buddhists and the elderly.

A watched pot never boils.

A counterpoint would be that what some call the intrinsic value is the expected future share price based on expected future revenues. There might or might not be future revenue for SNAP, but there is no revenue for a digital currency.

But I do think digital currency has intrinsic value, in that for now, it affords you anonymity to commit crimes in a way that ordinary currency does not. I’m not happy about it, but this is a form of value.

FTX claims they buyback FTT based on financial results. Their business model has more historical precedent than e.g. Uber’s (and is arguably less legally grey).

What difference am I missing?

> but there is no revenue for a digital currency

Isn't there? Ethereum kind of has revenue in that transaction fees for smart contract execution are burned (effectively a stock buyback)

It has around ~$19B in revenue extrapolated at the current rate (although it's issuing more than $20B a year for now, planning to reduce issuance some time later this year)

That's like MSFT issuing MicrosoftDollars to pay their dividents.

The MicrosoftDollars they issue to pay their employees seem to be getting them some talent!

Well, great then, they just need to apply the same strategy for their shareholders!

Crypto has this as a governance DAO with voting via the governance (sort of ownership) tokens. Lots of innovation happening.

People spend fiat to buy ETH for transaction fees. Value is value. If the value of the transaction were less than the fee, they wouldn't transact.

Its not uncommon to pay dividends in comapany stock.

How is digital currency, in general, anonymous? Bitcoin records all of your transactions, publicly, essentially forever.

If at any point in time there is a way to tie your identity to _any_ of the transactions made in your lifetime, then all of your other transactions get deanonymized retroactively. Maybe you made a mistake, maybe a bug is introduced into the Bitcoin software, maybe the government passes a new law, etc.

Cash doesn't have this issue. The bills I'm paying with when buying coffee at Starbucks, don't give you visibility into all of the purchases I've made with cash for the past 20 years.

The only exception would be crypto like Monero, but it's not the rule. Bitcoin is the flagship coin which somehow got people to think it's anonymous.

All it takes is for the government to require you to use the same wallet that's tied to your identity and then every citizen's transaction, past or future, is traceable to a degree that is just not possible with cash. That's a dangerous capability and we, the people, should make sure not to slowly end up in such a situation.

Look into privacy coins like Monero.

He mentions Monero.

Right. I mean, basically you're as safe as your public-key/username. If you can make your wallet in some kind of very off grid way, the same way you'd have to use Tor; cash laptop, McDonald's wifi, etc.

It doesn't matter how secretive you are when you create the wallet, that's not where the privacy issue lies. The problem comes from your use of the wallet. If you only use the wallet to pay for digital goods and only access those digital goods through multiple layers of protection, then you're probably fairly safe.

But that's not very realistic. If bitcoin were to become the primary way to pay for things, you're going to be buying physical goods with it. If you order something online then they have your shipping address to associate with your wallet. If you buy something at a physical store then they can see you and know what wallet paid them.

And lets say you maintain one wallet for the secret all-digital stuff and another wallet for everything else (or however many wallets makes sense for you), it's better that way, but all you have to do is slip up once with the secret wallet to be screwed. Everything you did with that secret wallet can now be associated with you even if the transaction happened 20 years ago.

The relationship between Bitcoin and Monero is symbiotic. Bitcoin brings legitimacy and (for crypto) security. Hedge funds, corporations, and other big money can hold bitcoin. Yet it's easy enough to convert between BTC and XMR, so they are effectively fungible.

> Yet it's easy enough to convert between BTC and XMR, so they are effectively fungible.

That's not what we mean in finance when we say fungible.

https://www.investopedia.com/terms/f/fungibility.asp

> A counterpoint would be that what some call the intrinsic value is the expected future share price based on expected future revenues.

Sure, but plenty of tech companies have never paid dividends and never will. FB's shareholders would have legal claim to a portion of: a) a buyout (but nobody could afford to take FB private), b) a liquidation (so, you're buying in in case FB goes bankrupt), or c) future dividends (but FB's boy-king privileged stockholder doesn't want to pay dividends)...

Which I think was Ben's point.

Right, because cash has never afforded anonymity... always good enough for the government agencies. This is an entirely boring and tired trope. How about the simple ability to transfer value across international borders, free of extraneous % fees imposed by unnecessary middlemen? That alone is enough of a use case to justify adoption. Banks have reaped rewards unearned for long enough. Those capable and responsible enough to manage their affairs can do so

Uhm... there is something called law in most of the world which kind of regulate how and why you can or cannot send money across international borders, I will never understand that "crypto let us do it better than banks".

You can send 10BTC to me, you're from Azerbaijan and I'm from France, all cool and nice until I want to cash out on that 10BTC... do you think I can receive 380k EUR on my bank without some government agency knocking on my door and accusing me of money laundering, asking me where this money comes from, asking me to pay taxes on it?

If you are forbidden by law from sending money from A to B you cannot send it, either because you cannot send from A, you cannot receive in B, a mix of the two or whatever. You can send me crypto but since I cannot buy food with crypto I need to cash out sooner or later so that's end game.

If you can send money from A to B it's way cheaper and more secure to send it using our current banking system. And BTW you pay a fee to turn money into crypto, in many cases you pay a fee to send crypto and lastly you pay another fee to turn that crypto back into money, sending crypto is not free.

> If you are forbidden by law from sending money from A to B you cannot send it

the crypto-dream (which, i admit is a nice outcome) is that no entity _could_ make such a transaction forbidden under a new regime of crypto finance.

And it is true that today, some gov'ts can have an outsized effect over people that would not be under their juristiction - such as people in iran being sanctioned by the US.

Unfortunately, crypto is hardly being used this way, nor will it be in the near to medium term future.

Maybe you'd like to read my post again? Criminality is a trope. Many people that you don't interface with, because they are low stature and status, transfer monies internationally. Pakistanis, Indians, Filipinos in the UAE, South Americans in the US. These people all send money in small amounts. Paying a percentage to a bank on an electronic transfer is idiotic. Why does a bank earn more money for the same service relative to the amount transferred? Why would YOU agree to such a ridiculous term of service? Crypto is increasingly transactable, making conversion irrelevant. Not to mention all the ways we already achieve this be it through PayPal or venmo or Linepay, in-game currencies, reward points.... on and on. It seems you just have a negative view of the technology or a vested interest in the established world of finance. If you are unable to see ANY value in the technology it is because you lack imagination or chose to ignore it

> It seems you just have a negative view of the technology or a vested interest in the established world of finance

I have neither.

BTW half of my family lives in South America and I'm in Italy, we have no problem in sending money back and forth and it is cheaper to use a bank than exchanging via crypto.

Also I cannot ask my 85 years old grandma to join Coinbase or Kraken or whatever, but she has a bank account and it works pretty neatly (and yet again, it's waaaaay cheaper than Coinbase fees for example)

That "Filipinos in the UAE" is bullshit. Their problem is not about crypto vs banks, their primary problem is the UAE.

That's just tax evasion and/or smuggling.

> Banks have reaped rewards unearned for long enough.

They are getting paid for a service, ridiculously low fees generally. Do you know how much does it costs you an international bank transfer? Between 0 and 0.6% if you're unlucky.

> That alone is enough of a use case to justify adoption.

No, it's not, it's the usual niche use case problem no one I know ever cared for. When was the last time you heard "I want to send money to my aunt in India but those goddamn banks are so expensive!!!!"

> it affords you anonymity

What? Bitcoin is radically transparent. The vast majority of crimes are committed with standard currencies like $USD. If 'crime' is the only value you see, you're extremely ignorant.

What is the bull case for $USD? What properties does it have that make it superior to currencies like $BTC in your opinion?

One thing fiat currencies have that is underrated: a legal system to handle special cases. Recently, an apparently Bitcoin-rich man named Mircea Propescu died without sharing his private key(s). Now that fortune is gone with no recourse for next of kin. Maybe this is OK and everyone is happy to lose the safety net. But what about fraud? Do you want to have to take up arms to get your money back from someone who stole from you?

For a starters, its not Bitcoin fault that someone did not have last will, or did not include the keys or their crypto in the last will.

Second, when some large heist in the past happened on the chain, the largest exchanges announced they won't exchange proceeds from these addresses. It may still not be impossible to withdraw into fiat, but certainly it was harder. Eventually, there will be more regulation from US and other countries' bodies, some of it will benefit crypto holders, some inconvenience them some more.

One example could be of a Government Body that oversees crypto fraud. If you had some coin stolen and you are able to prove they were yours and are unable to communicate with the party who took your coins, these assets can go into some form of public "coins on red notice list", where government puts them there, and exchanges can see the addresses and know not to accept or exchange these assets. If someone tries to, exchange can show them a notice information, instead of completing transaction. Another list government can maintain is "public call notice" (I'm just making these names up) similar to how public hearings are made. In this scenario, government can call up on an owner of some specific questionable coins to explain transactions behind. If no owner comes up in 30 days, these coins could be again put on "red notice" list.

The bottom line is, since exchanges are regulated by governments, the governments will surely regulate even more. Ultimately because everything is transparent on a block chain, certain coins can become "dirty" just like money becomes tainted, and exchange or even possession of these coins can be made unlawful.

> For a starters, its not Bitcoin fault that someone did not have last will, or did not include the keys or their crypto in the last will.

It’s not Ford’s fault that someone didn’t drive safely, and yet they’re required to build cars with safety features. Bitcoin’s design ensures that these mistakes happen regularly, and most users end up paying a “I can’t believe it’s not a bank” exchange to hold their Bitcoin for them due to the many irrecoverable risks if you do it yourself.

> For a starters, its not Bitcoin fault that someone did not have last will, or did not include the keys or their crypto in the last will.

Since we can assume that some people will die without making arrangements to pass on their keys, then isn't it guaranteed that a non-inflationary cryptocurrency like BTC would eventually consist solely of lost, unreachable coins?

No, but the reason would be simpler, the network dying because of low movement.

I think what you're describing is a centralized body that can use due process to resolve disputes. 4 legs good 2 legs better?

Since we cannot have an ever growing amount of BTC, you mean that in time more and more coins will be tainted? Assuming that frauds and heists and all that are constant but BTC generation is less than linear an ever growing percentage of coins will be tainted.

Another thing: if someone steals money from me and I can prove it, and law can find him, and trial him, etc. I want the possibility to have my money back not some “coins on red notice”.

Sounds like you're just talking the banking system and cash. Anonymity + regulation. They already regulate credit and banks have systems for fraud.

What again does Bitcoin solve for over this?

> What is the bull case for $USD? What properties does it have that make it superior to currencies like $BTC in your opinion?

That I can spend USD in just about any shop or for any transaction, legal or not. While crypto "currencies"? I'd say: not so much.

This is a short term advantage that is quickly evaporating.

There are crypto credit cards now that allow you to achieve the same effect.

Assuming this advantage disappears, are there any other bull cases for $USD?

I don't want a currency with a bull case. That means it discourages spending it in favor of holding it. I want a currency with an extremely slow bear case.

Also my value of USD hasn't dropped 30% in the last month.

It is a good thing to be encouraged to saving instead of spending.

No one needs incentive to spend. You will spend if you have plenty to spend. Having a currency which gains in value will take you there.

> You will spend if you have plenty to spend. Having a currency which gains in value will take you there.

That’s some pretty fanta-dreamy-economics. How can it possibly be true for everybody? Money from heaven?

There is no modern economic argument to favor saving over spending. What you're saying runs counter to pretty much all economic theory from any ideological camp you could think of.

Economic theory has run this world into the ground in just a single human lifetime. A system that maximizes consumption is insane.

Do you mean that if we had some renaissance banks during the 19xx until 2022, gold coins instead of our modern currencies, no stock exchanges, no financial whatever and maybe all retro economical entities you can think of… would we be in a different position?

You cannot blame the theory, you cannot blame the system… we have a saying in Italy: opportunity makes the thief. Blame the people, not abstract entities.

I'm not seeing how a deflationary currency even addresses this argument.

I wasn't try to. I'm saying "modern economic theory" isn't really a position of strength to reason from. It's not like economists have done a good job at anything. Endless unsustainable growth, a disaster of a financial system, every natural incentive is completely upside down and inequality keeps rising.

Is a deflationary system better or a solution? I don't know.

To my knowledge, no large society in the past two centuries, regardless of economic systems, has been a particularly good steward of natural resources. You're going to have to do better than that.

Deflationary currencies have been an abject disaster in all fronts, and there is nothing particularly contentious about them from even the most contrarian of positions.

Just because an argument is not popular does not indicate it is false.

> Having a currency which gains in value will take you there. Until it doesn't.

As a matter of fact crypto "currencies" are a rotten medium for saving due to their volatility.

Sure, they may go up in value. But then that's pure speculation, certainly not saving.

You can’t avoid being a speculator. Any currency or asset you hold is your speculative position. You may believe that one position is more speculative than another. But fiat currencies can go into hyperinflation and become worthless, for example.

BTC didn’t drop in value did it?

1 BTC is worth 1 BTC.

The fed manipulating the USD and affecting the trading pair of USD/BTC is probably what you’re referring to.

BTC value dropped against all fiat currencies after mining rigs shutting down in Kazakistan and a little bit after the Kosovo news, so yeah BTC value dropped.

In a longer span: BTC is down 33% against EUR in the last 3 months.

> 1 BTC is worth 1 BTC.

That’s tautological, so devoid of any information.

> 1 BTC is worth 1 BTC.

tautologically true, but irrelevant. That's like saying gold costs 1 ounce per ounce, and that price has never changed in the history of its existence.

Current economic pricing happens with USD for most activities, and thus you need to be pricing BTC under USD.

Until the day people would easily accept BTC directly (and hold it instead of converting it into USD), you cannot price BTC in BTC.

I, and everyone else, has to pay taxes in USD. That will never replaced.

Maybe that you can buy bread with USD, or a house, or a car, or pay rent, or insurance, or gas, a coke on a vending machine, or stocks, or... well there are a lot of things you can do with USD that you cannot do with BTC right now.

This advantage for $USD is already beginning to vanish. Assuming it does, are there any other reasons to be bullish $USD?

First of all I’m not seeing this advantage “beginning to vanish”.

Even assuming it completely disappears we still need to solve:

- energy inefficiency of BTC

- extremely low number of transactions per unit of time

- a currency lacking the possibility of reversing transfers is not compatible with most legal systems

- full traceability of my wallet transactions open to the public

- volatility

And those are the first I can think of while paying little attention because I’m watching a movie…

Okay but the question was: what’s the bull case for $USD?

We started from your question “What properties does it have that make it superior to currencies like $BTC in your opinion?”.

Then you changed subject about being bullish when replying. So you must either decide: are we talking about currencies or about speculative assets?

There are no reasons to be bullish about currencies, that’s not their purpose.

> There are no reasons to be bullish about currencies, that’s not their purpose.

Whether you hold currencies, stocks, cryptos - these are all positions with various possible outcomes. A currency can become worthless through hyperinflation, for example. So yes, you absolutely should be sizing up your currency position and deciding whether it is to your advantage to hold it.

You can say a currency bull case is that it’s stable representation of value. That thesis could play out or completely break down depending on how the government in control of the currency behaves themselves.

Stocks and currencies don’t behave the same, currencies in the long term are bearish.

Anyway if you think about bulls and bears you are not thinking of currencies, you better put your money into more volatile markets. A bullish currency is against our modern conception of how economical models work, so I wouldn’t place my money on it.

I’m not saying you shouldn’t place your money on BTC or other crypto, it’s kind of a good time right now since we are full bear and a bull period is probably starting soon. I mean, by watching historical trends and aknowledging the contingencies that pushed down values in those last months, maybe we’ll have to wait some time but it should bull during 2022.

All in all, crypto market is still not a currency market but an asset market. Just for one simple reason: crypto (currencies?) are still not currencies. When crypto will turn into currencies you’ll start seeing a inexorable slow bearish course for all of them, it’s economics baby ;)

Not to mention the centralization of much of the coinage of BTC/Ethereum in the cryptocurrency exchanges. The killer feature of BTC is the ability of the entire population to achieve consensus about who owns what and have ultimate faith in the whole process. Owning BTC through an exchange is antithetical to the whole concept of BTC.

It's questions like yours that never get answered when others are trying to sell me on cryptocurrencies. These are basic questions that must have answers before BTC would ever be able to operate as a currency at all, let alone the currency.

> This advantage for $USD is already beginning to vanish.

this is an incorrect premise from which to draw any conclusions tho. Hypothetically, if this was true, then it would also imply the world economy and order to be changing, such that your way of life is going to be turned upside down.

For example, world war 3.

Crypto is one of the great revolutions of the past several hundred years in terms of disrupting the world order and rearranging power on a global level. Few understand this yet.

"What is the bull case for $USD?"

Is Bitcoin a currency or an "investment"? (Here's a hint: you don't want a "bull case" for a currency.)

> you don't want a "bull case" for a currency.

Yes you do. Because currencies are a position to store value just like every other “investment”. Currencies can go bad and become literally worthless via hyperinflation, for example. And some currencies will hold their buying power better than others. To not consider whether your currency has a strong bull case… or whatever you want to call it… is basically blindly trusting it. That’s closer to faith and hope that logic.

Money has no properties or value. Both usd and bitcoin have an intrinsic value of zero. Unless you like staring at bills depicting national heroes, ofc.

The reason you want money is that you know people around you want it and you can use it to acquire goods.

Now, what makes USD a superior currency:

- you don't need internet to use it

- you don't need third party centralized unregulated services to use it (unless you want to run a full node)

- you can exchange it with ease, in multiple formats. Give your daughter 0.0000000000045 bitcoins for lunch.

- no fees for using it.

- practically scales to infinity vs few hundreds transactions per minute.

- doesn't require energy to run. The energy required by each transaction covers the needs (heating and transport included) of a family of 5 for days

- very stable, I know how much things will cost a minute, hour or days from now, so my daughter eats even if whales are short squeezing markets by lunch time.

- used mostly to buy services and goods vs never used to buy anything but other currencies.

- inflationary, creates pressure to spend and invest rather than hoarding. Deflative currencies don't make sense to spend. Why would I buy X today at n bitcoins, if the deflative nature of bitcoin will make it more scarce and will make X cheaper. Why spend bitcoin today, if in few months there will be new highs and I can buy even more and so on.

- de facto currency of international trade. Some countries like Russia try to do international trade in euro. What can have higher consensus?

- 250 years of history

- regulated through democratic means and under clear laws for the benefit of most; vs unregulated, mostly owned by few early anarco capitalists (i know people with thousands and thousands of bitcoin) and offshore scams. Basically very few people own most of bitcoins there are out there, very few people control most of the network.

I think the list can get infinitely longer but it gets boring.

Cash is used for more crime than crypto. London city pretty much is the epicenter of money laundering and financial crime.

Is it though?

Cash may be more in absolute value terms, but in per dollar terms, is cash used more for crimes than regular transactions than crypto?

Yes. There was a report about it recently. Don't have the link at hand.

> there is no revenue for a digital currency.

These debates get rehashed ad nauseum, but of course the same could be said of the USD, GBP, etc.. Currencies are exchanged to meet debt, contract, or tax obligations denominated in a particular currency. Trade is the common mode by which a currency has to be exchanged. For instance, if an American company buys British goods denominated in GBP, it will either exchange USD for GBP to close the transaction or borrow GBP that it must similarly pay back in GBP. The net result in either case is that it buys GBP and sells USD. If the UK government levies a duty/tax on the transaction, that too generates a demand for GBP requiring an exchange.

Now it is of course somewhat unclear whether a significant economy exists in crypto that generates debts/taxes denominated in crypto that would create a steady/cyclical demand for crypto. It requires either that some productive center of the economy is demanding payment in crypto, or that governments are demanding tax payments in crypto, or both. If either is simply willing to accept multiple possible currencies, then demand flows through the most favorable path. Perhaps a modicum of anonymity is part of this calculus, but costs, difficulty, and risks also probably play a role.

My point is that the economic analysis of your claims is more complicated. Buying currency serves a classical finance purpose that is unrelated to your analysis of equities. I think the climate and regulatory consequences of crypto are very serious, but I generally agree with those who say the credit/payments industry is predominantly parasitic. But those who say that no mechanism should exist to control the money supply based on economic conditions are just charlatans and simpletons and should be ignored.

> But Ben, US equities have intrinsic value unlike this BTC garbage! Well unless they pay no dividend, have dual-class share structure, and IPO without a profitable quarter.

Should the company's assets be liquidated, shareholders are entitled to that value after creditors.

If BTC tanks, there is little value to extract from liquidation.

How much of a bath would you take on one share's portion of the assets? Oh, and how many of those assets are tangible?

It's still something, it has a price and value. Crypto assets have only a price.

With crypto these days alpha is still very easy since it's a small backwater. Microstructure is all complete bullshit (and has been as long as these markets existed), and leverage is basically unlimited. A huge sell order is more likely to indicate buying than selling, for example. At least liquidation cascades don't literally hit 0 like they have in the past, which is an improvement.

There are also all sorts of unpublished arrangements like colocating servers for privileged partners; you will _never_ trade into an order they don't want you to when you have 5ms latency and they have microseconds.

On the one hand, people have never really understood just how dirty it is. On the other, most of that is now just the long flat line on the chart...

Haha, Alameda or Wintermute? :)

When I got into crypto back in 2013 I resolved myself to long-term holds with self-custody(before HODL was even a meme) precisely because I had seen how bad things got in pink sheet trading a few years prior and had the losses to prove it - I already had no faith in regulated markets, therefore I knew it was only going to be more blatant in crypto.

But if I held over the long term and carefully looked for the macro picture, I would sidestep manipulation, because it's ultimately the product of people sitting in front of a whiteboard trying to make their play happen within the span of the next business quarter, whereas my bet is on crypto as an asset class.

The plan has worked reasonably well; it's had huge ups and equally huge downs, so I have not quite "won" yet, but I have definitely not lost.

> US equities have intrinsic value

Really? My impression is that many US equities in 2022 are more like Reddit up/downvote scores than a reflection of intrinsic value.

Which isn't a bad thing in my opinion, by the way.

I mean if they pay a dividend (and you believe it will continue) you can do math that treats it like a bond coupon and do a present-day valuation.

If they have attached voting rights you can get together with other investors and vote yourself a bigger dividend (though same goes for Uniswap v2), or a share buyback.

But yeah, mostly it’s a Keynsian Beauty Contest.

I think of it like this. If you suddenly owned 100% of Bitcoin, then you wouldn’t actually have anything valuable - nobody would buy it off you. If you suddenly owned 100% of Tesla then you’d be able to extract a lot of value.

I’ll start the bidding at 1 USD to own all BTC. Anyone want to go higher?

hmm. it might be a bit more subtle than that - if you were to own all 21 million bitcoin (i.e, nothing can be mined or otherwise created), it’d pose an existential crisis for the currency. miners would have no reason to mine, transactions on the small scale couldn’t happen, etc.

at the very least i expect other coins would pop up with a different genesis block. or maybe some form of hard fork (again, i might add).

owning them all might be problematic. 99% might not be.

that said, i don’t think it can be done for >100 years yet..

Well, no, it's actually pretty simple, you could sell half of it to jumpstart the ecosystem, and you still own half of it.

i'm talking about hoarding the entirety, specifically.

sure, 2 USD, bring it on

Sorry, but that's provably false, just look at all the Bitcoin knockoffs that forked off the main chain and the amount of money people put into them.

If someone managed to somehow own 100% of Bitcoin, it would make it worth much less, but it would not make it without value.

If I suddenly own 100% of Tesla the stock would crash. I'll extract some value but it would be a pittance.

You seem to ignore the fact that you would then have access to 100% of the revenue that Tesla makes by selling cars and other things.

(This in turn sort of guarantees a price floor for stocks in public companies: the price of a stock shouldn't really go below the net asset value of the company.)

I really doubt Tesla would survive very long in that state. Stock will crash, public opinion will sour, employees will quit etc. very quickly.

Why would public opinion matter if your company wasn't public?

IMO it's a beautiful thing if your company can be aligned 100% with customers and not some random idiots that want participation in your company issues without even owning a Tesla let alone an EV. No earnings reports, no SEC wasting your time.

Only reason companies (unfortunately) need to go public is the need for upfront capital or early-stage capital that wants an exit.

The second part is very significant. Many people want to diversify their risk, and public companies allow that. Rather own 10% each of 10 companies than 100% of one risk-wise.

Note that taking 100% of a company has been one of Warren Buffet's activities for decades.

If you own literally all of the stock in Tesla... how could the stock crash? There's no stock being traded for its value to change.

Of note, there are examples in the past of companies going private without falling apart--Dell is the most notable example I can think of off the top of my head.

>If you own literally all of the stock in Tesla... how could the stock crash? There's no stock being traded for its value to change.

The price will plummet in the sense that nobody would bid to buy it for anywhere as much as they would before the event.

If nobody is bidding, there's no asks to cause the price to go down. More likely, someone buying all of the stock either a) intends to take it private, at which point there is no more stock anymore or b) intends to fold it into another company, at which point there is no more stock anymore. (Of course, the valuation would likely go down anyways, because people usually pay a premium to buy all of the stock.)

Real estate, employee talent, brand value, business knowledge, .. You could do a whole lot with that.

"If I suddenly own 100% of Tesla the stock would crash."

This is a nonsensical statement. If you own 100% of Tesla then it has no stock price.

You would also have control of its physical and intellectual assets as well as receiving its current and future revenue streams.

Yes, yes, in theory it has no stock price. In practice if I do want to sell - privately or not - I wouldn't get anywhere as much as the price was beforehand.

> I wouldn't get anywhere as much as the price was beforehand.

that's not a conclusion, but an assumption you make.

The price of a stock can only be found by transacting, and if this isn't taking place, you cannot draw any conclusions about the price of a stock. You can only guess it - via some method like cashflow analysis, or some other model.

It's pretty obvious we are indeed guessing given that this is a hypothetical. My guess is that if suddenly I own 100% of Tesla, the company will be worth a lot less after that. It is clearly not based on actual transactions or offers to need to specify that it was a guess.

That is true, but only because a) the market for entire companies is fairly small, and b) Tesla, overall, is vastly overvalued.

If you look at other companies like Dell, or the various acquisitions of Berkshire Hathaway, you would find plenty of examples of people deciding the market price of companies was less than the value, doing exactly what you are arguing can't happen, and making money from it.

That's not how it works.

If you own the entirety of TSLA then you've essentially taken the company private.

Then you can turn around and sell to private equity firms with, say, current market cap as asking price.

Firms used to give out dividends, that would make it easier to claim it had intrinsic value (future cash flows discounted). Now it appears the only intrinsic value is how much another firm would pay to acquire the company and do X with it.

There are plenty of companies that give dividends. I own about a hundred different stocks and 99% of them are dividend bearing to the tune of about $200K per year.

Dividends are worthless.

Stocks go down every time they give out dividends so you never really make anything. And you will never beat inflation with dividends.

Dividend investing is stuff of 1980's folklore. These days it's all about modelling and executing on hype. We're entering an era where hype is intrinsic value. I'm not advocating for a world like that, but it's the world we live in now whether we like it or not.

No… Your claims are typical of how people talk during peak bubbles. It's very similar to how people talked about buying any tech IPO stock in 1999, even when the companies had hopeless business models. The way I expect they'll get disproved is simply when the market cycle turns. Right now there's a powerful illusion that asset prices have become unmoored from expected returns, but at some point macroeconomic conditions change and the demand to liquidate the assets becomes significantly higher than the demand to keep buying them at their previous prices. Like if S&P P/E multiples begin a steady slide from 30 to 15 due to less liquidity in the economy, everyone's stock portfolio will feel like a bloodbath. In such an environment, demand for all these crazy coins also dries up and prices plummet (so much for being a "store of value"), since there are no cashflows that reward the purchasers and set a floor on the price; it's entirely - as you say - a function of the current “hype” i.e. buy-side demand level.

Share buybacks also create value and have been on the rise.

> But Ben, US equities have intrinsic value unlike this BTC garbage! Well unless they pay no dividend, have dual-class share structure, and IPO without a profitable quarter. What’s a share of SNAP entitle you to exactly? Ah right, you think someone will buy it for more.

Folks always levied these criticisms about Apple. So long as the company is growing and can do better re-investing the capital in itself, it should do so. Companies intentionally avoid creating profits to avoid paying taxes, electing instead to re-invest that capital tax-free. The idea of going public without a "profitable quarter" is meaningless if they could just be profitable at will.

Apple has paid over $1B in dividends to Warren Buffet alone since he took his stake, and returned just around $100B to investors last year between $85B in buybacks and $15B in dividends.

Buying shares you are paying for a combination of the present intrinsic value and your estimation of its future assets and cash flows. That doesn't mean your appraisal of these future outcomes are correct, and that's the risk.

But equities are fractional ownership stake in businesses whose value increases through non-investor participants. You know, customers? That's the difference between a positive-sum game and a zero-sum game like futures and options, or a negative-sum game like crypto assets. With especially proof of work crypto assets, value is constantly being removed by external participants, rather than added.

Yes traditional assets are mired in garbage behavior, but that doesn't mean that crypto is better - far from it. Decentralization makes it borderline impossible to control the behavior of bad actors while providing essentially zero material value to anyone beyond a few edge cases. And as usual, folks mention there will be some crypto folks who create value left behind after some wash-out. 14 years later, zero value created. It is true that not all equities are good investments (of course), in the fullness of time, zero crypto token investments as we see today will ever be good investments.

> the useful stuff will stick around

There's none though. The markets and especially crypto lunatics themselves clearly show nobody cares about decentralization.

> US equities have intrinsic value unlike this BTC garbage!

One major difference is the US Gov & public (e.g. pension funds) have much more leverage for holding US equities liable vs holding crypto liable in a Financial-Crisis-type leverage implosion. While I agree with the suggested notion of "common stocks have no real intrinsic value," when it boils down to opportunity cost, the retail shareholder has probably one to two orders of magnitude less downside in common stocks versus crypto. Unless the U.S. ends up bailing out crypto ... (in exchange for catching tax evasion?)

What is the reference to Island and Archipelago? I'm not familiar and my DDG skills aren't helping.

https://www.investopedia.com/terms/a/archipelago.asp (also talks about Island)

Might you or someone else explain what these things and how they are used/exploited?

> Undocumented, conditional, non-displayed order types. Routine wash trading. Shear-but-don’t skin multi-venue arbitrage.

Broadly speaking lots of very conventional order types are "conditional" (limit orders are technically conditional), but various exchanges have at various times allowed the condition to effectively become "execute this order if I make money on it", which is a wealth transfer from those who can't place that order to those who can. "Displayed" or "displayed size" basically means that other market participants can see roughly "someone is offering to buy X amount at Y price, if I move quickly I can take them up on that". "Hidden" or "non-displayed" means that an order might execute in front of another but other participants can't see that before they act. "Non-displayed" isn't necessarily a bad thing either, but it creates scope for sophisticated participants to further set up advantages for themselves.

The "undocumented" part is the real killer: that's basically the idea that there's a secret API for playing with cheat codes that the exchange only makes accessible to certain actors. That's straight fucked up (and tends towards illegal as markets become more mature).

"Wash Trading" is roughly the idea that (typically) via intermediaries of one kind or another that an actor effectively trades with themselves. An actor might want to do this for several reasons, but a big one (maybe the main one) is to create the appearance of market activity where there isn't any legitimate commerce going on.

"Arbitrage" I think is technically defined as something like: "a transaction or transactions guaranteed to be profitable", but in practice the term gets applied more loosely than that. In the sense I meant: if gold is 100 quibbles in Foobarnia and 50 quibbles in Boofarnia, someone will buy a ton of gold in Boofarnia and ship it to Foobarnia and pocket the 50 quibbles, raising the price in the cheap place and lowering it in the expensive place and fairly quickly this gets you to 75 quibbles in both places (or whatever, there are transaction costs). There's an old quip: "you can shear a sheep many times, but you can skin him only once". If an arbitrageur has unique access to one or both markets, they can play the long game and just bleed profit out without actually providing the social utility of equalizing prices.

People do all this shit and more in practically every electronic market on Earth. It's quite a bit more regulated and monitored in mature markets like US equities and quite a bit more flagrant in e.g. crypto DeFi exchanges but how much net "rich connected people taking non-rich, non-connected people's money" goes on in one vs. the other is quite the controversy, as you can tell from the other comments in this thread.

Thanks for the wonderfully detailed response and perspective. I appreciate it. Cheers.

This has to be one of the best comments I’ve read on HN.

This comment is gold

Haha, we might all die on this tired exploited rock from heat death before that

So, I take it you missed out on Bitcoin?

So there's a question fairly deep in the thread asking me to define what I meant by the terms in the first paragraph. I'm reposting my answer up here to both clarify what I meant if it's not clear, and to invite those more knowledgable than myself to correct any ways in which I'm misusing the terminology or otherwise saying something untrue:

So electronic financial markets (whether ARCA/NYSE or Binance) have a number of ways that they can advantage certain participants at the expense of others. One of many is to make certain types of orders difficult or impossible for certain actors. Broadly speaking lots of very conventional order types are "conditional" (limit orders are technically conditional), but various exchanges have at various times allowed the condition to effectively become "execute this order if I make money on it", which is a wealth transfer from those who can't place that order to those who can. "Displayed" or "displayed size" basically means that other market participants can see roughly "someone is offering to buy X amount at Y price, if I move quickly I can take them up on that". "Hidden" or "non-displayed" means that an order might execute in front of another but other participants can't see that before they act. "Non-displayed" isn't necessarily a bad thing either, but it creates scope for sophisticated participants to further set up advantages for themselves.

Tulip garbage? Tulip Mania lasted like 6 months, Bitcoin has been running for over 13 years. Don’t get me wrong tho, I do agree anything not being Bitcoin is garbage.

Oh I’m not opining on this or that coin being tulips. A lot of it is by volume.

I think the reference is about the phenomenon not the actual comparison between BTC and tulip.

Tulip trading existed for many years before Tulip mania, and it was a profitable business that continues even today. Only the mania part was crazy

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