You shouldn't invest in the crypto currency?
rohitgupta.bearblog.dev
rohitgupta.bearblog.dev
This may be less of a concern in stabler, larger coins like btc and eth. I'm still not sure I get why staying longer yields any sort of edge, though. If my expected return over some small period is 0, adding a bunch of those small periods together does not yield a positive expected return.
One way of looking at it is to say that traditional currencies are constantly devaluing as their supply increases. A counter argument there might be that the supply of cryptocurrencies is increasing generally. This could be tested if BTC or ETH are ever unseated by another blockchain.
The psychological conditions could change if every new cryptocurrency was viewed as a potential heir to the throne. "Digital gold" could be debunked in the eyes of the masses.
There are many asymmetries between retail investors in crypto, and hedge fund investors. It is difficult to predict which hedge fund will win, but it is predictable that individual investors will lose on average over time (although some individuals will win).
> So, it is the same as gambling where if you are winning, someone has to lose.
Not true.
If you think of cryptocurrency as gambling, yes.
If you think of cryptocurrency as a kind of money, no.
For example: I buy $100 worth of Bitcoin, and I spend those on a VPN and some drugs. The seller of the Bitcoin feel they won because they can use $100 on something else they like, and I feel I won because I'm anonymous and on drugs!
It is your own responsibility to not treat cryptocurrencies like gambling.
Use it to buy something. Who knows what's gonna happen long-term with any one altcoin / project.
> In the cryptocurrency world, no one really has a positive mathematical edge in cryptocurrency i.e. no one has such information which makes them better than other crypto investors. So, it is impossible to make a profit in long term.
Not true.
A must-read: https://medium.com/@danrobinson/ethereum-is-a-dark-forest-ec...
There are lots of people with a mathematical edge. You're probably not one of them.
A friend of mine who sucks at math was fascinated by day-trading because it seemed so easy. It's not a fair game, it's not for everyone, and it is popularised because it's so much more profitable if more suckers want to join.
What's a sucker? Someone who sucks at math who wants to get rich quick and effortlessly through financial speculation.
This is really great point which i missed. Thanks :)
... well, this individual appears not to know the definition of stable, but do go on.
> Cryptocurrency returns are a zero-sum game i.e. if 1 person gets a $10 profit, another person has to lose $10.
First, equities are positive-sum games, which makes them, on the whole, in the fullness of time, a strictly better investment. It is not true that someone has to lose for someone else to win in the equity markets. Shareholder returns are derived from the business itself.
Second, proof-of-work currencies are negative sum, since the miners have to expend unfathomable quantities of electricity and generate mountains e-waste. This costs money. This money is obtained by selling the block reward, which puts negative price pressure on the cryptos. So not only are the only source of returns other gamblers, there's also a hole in the bucket. In gambling parlance, that's the rake in a game of poker.
Assuming the network doesn't produce external value to the people transacting on it (for example, lower transaction fees than alternatives, lower cost to enforce contracts, lower spread trading equities or currencies etc).
They don't, definitely nowhere near the amount currently invested.
"this system is currently costing more than it is producing"
vs
"this system, by definition, is negative sum"
The first is a comment on the current state of the thing, the second is an immutable statement about the thing's nature, which in this case is false.
The hypothetical value generated accrues to those who hold equity in the miners or network operators (stakers in a PoS system) - not the tokens themselves. If Starbucks pre-sold coffee as tokens, the fact that Starbucks is selling more or less coffee means nothing for the value of the token.
Let's say I use the network to send $5k to a relative in another country and this transaction costs me $1. If I otherwise would have paid $5, then $4 of value is created external to the network itself.
Currently there are inflationary block rewards so the net may still be ETH creation (depends on the day). That will change after the merge when inflationary rewards are removed though.
You could have just said currencies are negative sum. Your argument doesn't pertain exclusively to crypto. It cost electricity and resources to print and wire transfer dollars and yen, for instance.
On the other hand crypto is marketed as an investment that you are to hold for long periods of time. Crypto is sold as something that goes up over time, and should be compared to other things that are marketed that way.
Some people use currencies or their derivatives as investments, particularly forex traders.
Some may use crypto essentially as a currency. The 'marketing' isn't unified and depends on who you listen to. For instance, the bitcoin whitepaper itself doesn't promise real returns on 'investment.'
>On the other hand crypto is marketed as an investment that you are to hold for long periods of time
I'm with you that this is probably not a good viewpoint to take, but I don't think that's the only viewpoint out there on how to use crypto.
Your goal is to walk away with more units of your currency than you had to start, not that each of those units will be worth more.
>It's not an investment, it's a pair trade.
So borrowing USD and selling it to buy BTC means you're not investing in BTC?
But there's also someone constantly filling the bucket with pretend water (Tether) faster than the real water falls through the hole.
A better analogy between crypto in traditional markets is some sort of wild-west futures market and options market. Index futures are provably zero-sum. Options are negative-sum for buyers, if I'm not mistaken.
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