Cryptocurrencies

[rkbabang]

Who said anything about buying a coffee?  Also- gold is traded as a doomsday anti-financial system hedge yet it is still custodied w banks/vaults.

 

From the article: "To achieve that vision, ICE is partnering with heavyweights from the worlds of technology, consulting, and retail: Microsoft, Boston Consulting Group, and Starbucks."

 

Starbucks implies coffee.  But I agree with you.  The world's gold is worth $trillions and (almost) nobody is buying their morning coffee with it.

 

 

[SnarkyPuppy]

Who said anything about buying a coffee?  Also- gold is traded as a doomsday anti-financial system hedge yet it is still custodied w banks/vaults.

 

From the article: "To achieve that vision, ICE is partnering with heavyweights from the worlds of technology, consulting, and retail: Microsoft, Boston Consulting Group, and Starbucks."

 

Starbucks implies coffee.  But I agree with you.  The world's gold is worth $trillions and (almost) nobody is buying their morning coffee with it.

 

Right.  I don't have a strong view on BTC as a payment rail - although second layer solutions seem more promising than consensus would dictate.  Store of value thesis is slowly catching on and becoming less of a career-risk investment - once custody and prime brokerage services allow larger funds to purchase uncorrelated alpha (BTC) and the intrinsic value becomes more accepted (catalyst: time), I'd be surprised if we aren't well over $112bn in value. 

 

Store of value thesis will play out.  The big risk is which consensus mechanism wins out?

[rkbabang]

The rise of crypto in higher education

 

". 42 percent of the world’s top 50 universities now offer at least one course on crypto or blockchain

. Students from a range of majors are interested in crypto and blockchain courses — and universities are adding courses across a variety of departments

. Original Coinbase research includes a Qriously survey of 675 U.S. students, a comprehensive review of courses at 50 international universities, and interviews with professors and students

 

When David Yermack, the finance department chair at New York University Stern School of Business, first offered his course on blockchain and financial services in 2014, 35 students signed up, eight fewer than the school’s typical elective.

 

By spring 2018, the number of enrolled students climbed to 230, forcing Stern to move the class to its largest auditorium. This academic year, Yermack will teach the blockchain course both semesters to meet interest from students."

[Liberty]

 

Fun fact from the NY atty gen’l. Coinbase has a prop desk that actively trades against  its clients. 20% of all trades executed on the Coinbase platform were made by their prop desk. Just burn crypto down and start over. I’m serious.

 

https://virtualmarkets.ag.ny.gov/

[benhacker]

Fun fact from the NY atty gen’l. Coinbase has a prop desk that actively trades against  its clients. 20% of all trades executed on the Coinbase platform were made by their prop desk. Just burn crypto down and start over. I’m serious.

 

No defender of Crypto... but this criticism is odd.

 

Dealer markets (including Forex, and Bonds) essentially operate this way as well.

 

Given the average Crypto customers... wouldn't you want to take the other side (on average)? ;-)

 

Does look like Crypto is coming for a reckoning though.  The mating of Wall Street and Silicon Valley will need to be burnt down to a stump and start over.  The corruption is endemic in many places.

[Liberty]

Are the crypto bulls here still pounding the tables or did they change their minds?

[rkbabang]

Are the crypto bulls here still pounding the tables or did they change their minds?

 

I don't know about pounding the tables, but I'm still dollar cost averaging in.  If there is a more significant drop (BTC < $1K)  I will put larger amounts in.

 

[matts]

I find it interesting that even though this is supposed to be a value-focused board, the interest in idea threads drops sharply when the price drops, which is a bit counterintuitive. Bitcoin is just an extreme case of this.

[clutch]

I find it interesting that even though this is supposed to be a value-focused board, the interest in idea threads drops sharply when the price drops, which is a bit counterintuitive. Bitcoin is just an extreme case of this.

 

Value investors are still humans.

[SnarkyPuppy]

It's clear that there is tremendous intangible value in an asset that a) cannot be debased and b) that than can be transferred in a judgment resistant manner (ie transfer of value between party A and party B cannot be blocked). 

 

It is simply a better version of gold and I would be surprised if this is not recognized over a long period of time. 

 

The real risk is whether the censorship resistant non debasable asset will prove to be bitcoin or another cryptocurrency.  It's also unclear whether there are better incentive mechanisms for distributed ledgers.  Those are the true risks and are somewhat hedgeable. 

 

As a corally, from an investment standpoint, it's simply a highly asymmetric trade given the global demand for non sovereign stores of value.  There is no traditional margin of safety providing a floor - but price vs value is still a relevant framework. 

 

I've been slowly adding - the speed of which more due to the fact that I already have a large position. 

 

IMO most other utility coins are useless with some exceptions - but outside of my circle of competence.

 

On a shorter term horizon (since some in this thread are concluding on result due to price - despite criticizing those who made decisions off of price 11 months ago) - it would be weird to be bearish ahead of the commencement of physical clearing of the assets by ICE.  Who knows what happens in 1-3 years though.

[SharperDingaan]

As at 10am (EST), the spot price of an oz of gold is  USD 1,222. A Bitcoin sells for USD 4,701.

If a buyer believes that Bitcoin is a substitute for gold, is it really rationale to pay today - 3.85x (4701/1222) the price of an oz of gold for it?. If most folks would think 'no', wouldn't you expect the price to fall further? https://www.kitco.com/gold-price-today-usa/ https://coinmarketcap.com/currencies/bitcoin/

 

If cryptocurrency as an asset class, were to rise in value, what would it require?

We would suggest that until the regulatory space catches-up, and implements pro-active policy, it doesn't look good.

 

Then look at what higher education is teaching in those cryptoclasses.

Most of it is to 4th year and MBA students, very basic, and culminates around the ICO. Todays students may well become a significant chunk of future demand, but they are unlikely to have any significant impact for a good while yet.

 

Hence, one has to ask if an investment today, is perhaps too early for this party?

The answer should depend on the purpose of that investment.

 

SD

 

 

 

[Liberty]

As at 10am (EST), the spot price of an oz of gold is  USD 1,222. A Bitcoin sells for USD 4,701.

If a buyer believes that Bitcoin is a substitute for gold, is it really rationale to pay today - 3.85x (4701/1222) the price of an oz of gold for it?. If most folks would think 'no', wouldn't you expect the price to fall further? https://www.kitco.com/gold-price-today-usa/ https://coinmarketcap.com/currencies/bitcoin/

 

:o

 

But are you sure you're comparing an ounce of gold with an ounce of bitcoin?

[Sportgamma]

Ignorance alert: Just a novice thinking out loud:

 

I wonder to what extent the economics of mining affects the price of Bitcoin.

 

Take for example the mining operations of FRMO. They want to create some sort of variable fixed income instruments based on mining (and they have already to some extent). They could offer a closed-end fund that would facilitate a mining operation. The fund converts rewards to USD to pay for costs and distribute proceeds to unitholders.

 

Miners, in general, receive their rewards outside of the secondary market and need to convert, at least, some of their holdings to cover costs. As such, you should have a relatively consistent base of sellers in the market. Non-miners, in theory, should not have the same pressure to buy (except if the size of the non-miner pool is consistently growing).

 

A major cost component for miners comes in the form of graphics cards. Earlier this year there was a shortage of cards and the prices shot up. As apparent from the latest NVIDIA conference call, there now is excess inventory in the market and prices have gone down considerably.

 

It is also interesting to note that the Bitcoin mining difficulty rate has dropped as the network hash power had decreased. Could it be that supply/demand forces in mining are affecting the market price of Bitcoin? 

[Liberty]

It's clear that there is tremendous intangible value in an asset that a) cannot be debased and b) that than can be transferred in a judgment resistant manner (ie transfer of value between party A and party B cannot be blocked). 

 

It is simply a better version of gold and I would be surprised if this is not recognized over a long period of time. 

 

One big difference that I see between cryptocurrencies and gold is that you can't make new versions of gold to increase the total supply of "gold-like" things, while you can always (and they do) create new cryptocyrrencies to increase the total supply of "bitcoin-like and ethereum-like" things in circulation even if the supply within once currency is limited.

[rkbabang]

As at 10am (EST), the spot price of an oz of gold is  USD 1,222. A Bitcoin sells for USD 4,701.

If a buyer believes that Bitcoin is a substitute for gold, is it really rationale to pay today - 3.85x (4701/1222) the price of an oz of gold for it?. If most folks would think 'no', wouldn't you expect the price to fall further? https://www.kitco.com/gold-price-today-usa/ https://coinmarketcap.com/currencies/bitcoin/

 

:o

 

But are you sure you're comparing an ounce of gold with an ounce of bitcoin?

 

There are more than 21M oz of gold in the world.  In fact there is 190,040 tonnes of gold that has been mined which is (if my calculation is correct) 6,703,470,960 oz of gold.  So there is 320.21 times more oz of gold than there is bitcoins.  So for BTC to be equal in price to gold at $1222/oz it would be $390,074.62 per BTC.

 

EDIT: Actually that calculation is wrong, because I converted from metric tons to oz instead of troy oz. So there is 6,109,919,028 troy oz of gold, which means there are 290.95X more troy oz of gold than Bitcoins and the equivalent price to gold at $1222 would be BTC at $355,540.90

 

 

[Liberty]

There are more than 21M oz of gold in the world.  In fact there is 190,040 tonnes of gold that has been mined which is (if my calculation is correct) 6,703,470,960 oz of gold.  So there is 320.21 times more oz of gold than there is bitcoins.  So for BTC to be equal in price to gold at $1222/oz it would be $390,074.62 per BTC.

 

But why would it be?

[rkbabang]

There are more than 21M oz of gold in the world.  In fact there is 190,040 tonnes of gold that has been mined which is (if my calculation is correct) 6,703,470,960 oz of gold.  So there is 320.21 times more oz of gold than there is bitcoins.  So for BTC to be equal in price to gold at $1222/oz it would be $390,074.62 per BTC.

 

But why would it be?

 

I have no idea, ask SharperDingaan, he is the one who used this weird equivalence to argue that BTC was overpriced.

 

[Gregmal]

There are more than 21M oz of gold in the world.  In fact there is 190,040 tonnes of gold that has been mined which is (if my calculation is correct) 6,703,470,960 oz of gold.  So there is 320.21 times more oz of gold than there is bitcoins.  So for BTC to be equal in price to gold at $1222/oz it would be $390,074.62 per BTC.

 

But why would it be?

 

IIRC that was also the argument the Winklevoss dudes used and also arrived at roughly a $350K BTC price.

I have no idea, ask SharperDingaan, he is the one who used this weird equivalence to argue that BTC was overpriced.

[rkbabang]

IIRC that was also the argument the Winklevoss dudes used and also arrived at roughly a $350K BTC price.

 

If you think that the market cap of BTC will one day equal the current market cap of gold the price will be north of $350K using today's gold prices as a comparison.  But comparing the price of 1 BTC with the price of 1 oz of gold is a strange equivalence.  It is like comparing the price of whole apples to oz of orange juice.

 

[no_free_lunch]

IIRC that was also the argument the Winklevoss dudes used and also arrived at roughly a $350K BTC price.

 

If you think that the market cap of BTC will one day equal the current market cap of gold the price will be north of $350K using today's gold prices as a comparison.  But comparing the price of 1 BTC with the price of 1 oz of gold is a strange equivalence.  It is like comparing the price of whole apples to oz of orange juice.

 

 

To me, comparing market cap to market cap makes sense.  Obviously you would never expect them to exactly match but similar to stocks, it is a comp.  They are both stores of value.  Obviously they are not the same, gold does have real world utility while bitcoin, in my mind, has negative utility as transaction have to pay for all the mining used to secure it.  Gold also has stood the test of time, bitcoin still has some proving in that regard.  However, bitcoin does have the use case that all you really need to remember is a key.  So theoretically you can just flee your country if need be and later on retrieve your bitcoin using your memory, say what you will but that does offer some additional safeguards.  Anyways, weight it all out and apply an appropriate discount to the $350k and go from there.

[rkbabang]

IIRC that was also the argument the Winklevoss dudes used and also arrived at roughly a $350K BTC price.

 

If you think that the market cap of BTC will one day equal the current market cap of gold the price will be north of $350K using today's gold prices as a comparison.  But comparing the price of 1 BTC with the price of 1 oz of gold is a strange equivalence.  It is like comparing the price of whole apples to oz of orange juice.

 

 

To me, comparing market cap to market cap makes sense.  Obviously you would never expect them to exactly match but similar to stocks, it is a comp.  They are both stores of value.  Obviously they are not the same, gold does have real world utility while bitcoin, in my mind, has negative utility as transaction have to pay for all the mining used to secure it.  Gold also has stood the test of time, bitcoin still has some proving in that regard.  However, bitcoin does have the use case that all you really need to remember is a key.  So theoretically you can just flee your country if need be and later on retrieve your bitcoin using your memory, say what you will but that does offer some additional safeguards.  Anyways, weight it all out and apply an appropriate discount to the $350k and go from there.

 

It is absolutely better than trying to hide your wealth in your underwear.  https://whdh.com/news/officials-thousands-in-undeclared-cash-found-sewn-into-womans-underwear-at-logan-airport/

[rb]

It is absolutely better than trying to hide your wealth in your underwear.  https://whdh.com/news/officials-thousands-in-undeclared-cash-found-sewn-into-womans-underwear-at-logan-airport/

The declaration of monetary instruments over $10,000 is a ridiculous policy. In this and other cases, the behaviour of the US Federal and other sub-governments is despicable!

[SharperDingaan]

If you think Bitcoin is the digital equivalent of gold, you are comparing 1 'unit' of Bitcoin to 1 'unit' of gold.

 

Rkbabang has the right valuation approach. 21M total token/total available gold in troy oz (6,703,960)

The limitations are that not all 21M token are accessable (lost the wallet private keys), and most gold does not 'trade' in the market

1 Bitcoin (gold equivalent) = 3.132 troy oz (6,703,960/21,000,000) = 3.132 x 1,222 gold price = USD 6,647

1 Biticoin (market price) = USD 4,701

 

More realistic estimates of 'tradeable' gold, would be (1) aggregate quantity on offer in open derivative positions, and (2) aggregate quantity of bullion in various vaults. If 50% of the 6.703,960 troy oz typically does not trade, the Bitcoin (gold equivalent) is maybe USD 3,323.

 

SD

 

 

[Guest Schwab711]

If gold is roughly the same price that it was when BTC got popular and BTC is worth gold then we just doubled supply of 'gold' (measured in $) without effecting price. All while measured inflation is roughly 0-2% during the same period.

[SharperDingaan]

If gold is roughly the same price that it was when BTC got popular and BTC is worth gold then we just doubled supply of 'gold' (measured in $) without effecting price. All while measured inflation is roughly 0-2% during the same period.

 

Good point.

 

The implication is that this is essentially an estimate as to the aggregate global QE (resulting from the crises?) that has yet to bleed out into the main-street economy (CPI inflation measure).

 

SD