> For every dollar you make on crypto, somone loses a dollar.
If that's not true of the stock market, why would that be true of crypto?
If that's not true of the stock market, why would that be true of crypto?
There is no company behind crypto currencies that holders get ownership of. There is no product or service to drive profits. There are no dividends, voting power, or anything that gives inherent value to the coins. It's all pure speculation. Just money getting shifted around among the holders - with exchanges taking a cut off the top of each transaction.
In this case though, FTX had their own token FTT that gave people that owned it voting rights in FTX and "staking rewards" aka dividends. It's not worth anything today due to the fraud that SBF perpetrated, but that sure smells a awful lot like a stock to me.
That's a bit of a straw man, as no one claimed they are. "Gambling" is often not a nondeterministic game of chance, either. For example, when I go to a casino and play poker, I'm still gambling, even though there's plenty of determinism and strategy to go along with the elements of chance.
Day traders are gamblers.
Cryptocurrencies will _never_ pay dividends, because they are based purely on speculation. These things are absolutely not the same. Cryptocurrencies only provide gambling.
(Or I did until the SEC said they weren't allowed to do that anymore because they didn't give me enough disclaimer that they might lose my money.)
You're locking up your crypto for this for some period of time, which means you lose liquidity to get gains. During that period of time the coin can crash and you're out of that money.
For stocks, you don't need to lose liquidity to get dividends. For companies generating profit, they don't necessarily need to be parasitic to generate those profits. It's possible to generate profits while also providing value for users.
Take for instance Venmo and the ability to get funds from your wallet into your bank instantly. Venmo is taking risk by doing so, the banks are taking risk to do so. They charge you a fee for this risk. You want your money faster, and they want their risk covered. They're going to eat some amount of fraud by providing this service, but the cost of providing it should cover the fraud cost and offer a small profit. It's mutually beneficial and optional (regular bank transfers are slower, but free).
Lots of SaaS products are similar. They offer a product businesses need, at a lower cost than the businesses would have to pay to build/run it themselves.
Those are profitable things that are just services, like crypto, but businesses also build things that have physical value, like houses, undersea communication cables, etc.
If people stop trading crypto, all value is immediately gone.
really? how can that be true?
In general, the only times a company gets money when you buy shares are if you participate in an IPO, or if an already-public company decides to offer more shares for sale in order to raise some money, and you buy some of those shares. (There are exceptions, but retail investors like you and me usually don't get invited to participate in those deals, though.) The vast majority of shares that trade hands on the markets every day are not owned by the company whose name is next to the ticker symbol.
Companies IPO and sell shares. The company gets paid by people who want to own shares. The company IPOs and sells 1000 shares at $50 each, gaining them $50k which they can then use to buy a new whatever. Then, in a market like NYSE, other people can buy and sell stock. If I think the stock is undervalued I offer to buy 1 from someone at $55. that person gives me 1 stock, I give them $55, netting them $5. The company is not involved in this transaction and does not get anything from that specific transaction.
Now that the price is at $55, the company could decide to sell additional stock, now at $55 instead of $50, but that's a separate event from the transaction that happened previously. So the company does benefit from the stock price being high, but not directly off each transaction.
I've omitted all the details, but I think that's enough to get the gist of it.
HN/VC is NOT the traditional way for companies to raise money.
Buying outside a IPO is called the secondary market. If nobody could buy a share in the secondary market, the stock is almost worthless. Just like your private company with one round of funding and shares. If you can't sell them, they aren't worth much.
You buying the stock raised the price of the stock. Google uses the stock as compensation. The higher the price, the easier they can hire, and the less cash they need to offer to employees while still being attractive.
Network effect, security, are some of the reasons.
And sometimes some people just need the cash, and are willing to sell at a discount.
Because the inherent value includes things we know about such as the assets the company has, but it also includes the speculative future earnings which we can't be sure about.
Yes, and in doing so you've managed to blissfully ignore all the speculation and outright gambling that goes on in the stock market.
I'm not a crypto defender; I think it's mostly useless and a waste of people's time and money. But let's not paint a big rosy picture of the rest of our financial system. That's just not where the truth lies.
Take Apple or Coca Cola for example: They have well established lines of products and lines of business. You know people will keep buying iPhones and MacBooks and AirPods and whatever else Apple makes. You know people will keep buying Coca Cola drinks forever and ever.
The popular blockchains do not create any intrinsic value (Looking at Bitcoin and Ethereum). They are heavy and cumbersome and can't handle planetary scale. Some blockchain solutions promise secure, fee-less transfers (for example IOTA and NANO). In my opinion, those blockchains at least partially implement the true promise of Crypto that, if successful, would be able to replace the existing financial system which is extremely wasteful.
Just think about how much money it costs to implement FIAT: You have to print it, which is very expensive (both notes and coins). You then have to move it around using heavy armored vehicles. You have to secure it in extremely expensive vaults. You then need to keep securing it across the entire vertical: Every business that takes cash has to deal with theft, securing the cash, fake notes, etc. Even credit cards are very expensive to maintain. Cards have to be printed & mailed out all the time. It's all plastic, and it all ends up in landfills. The inks are toxic, as are the metals in the chips. The equipment required to process cards is expensive, breaks and needs to be replaced, is annoying, slow, ridden with fraud and theft and chargebacks and a host of other issues.
I implemented EMV and 3D-Secure for card processing, a few years ago. I also implemented cash processing equipment. It ALL sucks. You have no idea how Crypto is a breath of fresh air compared to those crappy standards and mechanisms that take an insane amount of time and money and bureaucracy to implement and maintain.
A really good blockchain that does secure, fee-less transactions in less than a second and can handle planetary scale, now that is the holy grail! You don't need equipment, you already have a phone. The merchants get their money instantly, and they are done, that's it. They have their money. Done. They need to pay their vendors? They pay them, done! They could even instantly pay their vendors at the moment of sale. Can you imagine how revolutionary that is? how this completely changes the game for commerce?
The entire crypto world has been held back by greedy assholes, tens of thousands of scammers (how many ICOs and rug pulls have screwed countless users?!), governments, government bodies and banks, and unregulated companies that behave irresponsibly with customer funds (for example FTX and BlockFi). Leadership that lacks vision and initiative (Any 1st world country that accepts crypto and leads with it, would make its citizens rich, by definition, on a planetary scale).
-Money laundering becomes impossible to prevent when no entity has control over identity verification of the users.
-All transactions are public, so normal users who won't be trying to lie about their identity lose all financial privacy.
-Undoing transactions due to fraud or simple error becomes extremely cumbersome and ultimately requires re-centralization of authority that crypto supposedly was created to avoid.
But their stock price is (mostly) independent of that. It is indeed true that at least with short-term trading, your gain is someone's loss, and vice versa. There is a difference between cryptocurrency and companies, but there is little difference between trading in cryptocurrency, and trading in traditional company stocks.
What's your opinion of Solana?