Cryptocurrencies

[rkbabang]

1 hour ago, ValueArb said:

Commodities have consumers, their  demand curve meets the supply curve to dictate price. Even gold has industrial uses.

 

Crypto is just speculation.

 

 

Gold has been used as money for millennia despite it's industrial uses, not because of them.   Gold has been used as money because it has properties which make it useful as money.  It is malleable, easy to divide or combine, portable, transportable, long lasting and indestructible, easily identifiable, hard to counterfeit, easily verifiable, fungible, and somewhat rare (compared to most other things).

 

Had gold had no other uses at all, it would still have been used as money for those reasons.  Gold has a use, its use is that it has the properties which make it useful as money.

 

Bitcoin has other uses as well, which aren't currently widely understood (read "Softwar"), but even if it didn't have any non-monetary uses it would still be extremely valuable simply because it has all of the above qualities which make it useful as money and is far better than gold at most of them.  This notion that money needs to also be used for something else is just plain wrong.  Money needs to be useful as money and that is it.   If useful for other things were a requirement aluminum would be far and away better than gold, as would steel or oil.

 

Edited November 6, 2023 by rkbabang

[ValueArb]

44 minutes ago, rkbabang said:

 

 

Gold has been used as money for millennia despite it's industrial uses, not because of them.   Gold has been used as money because it has properties which make it useful as money.  It is malleable, easy to divide or combine, portable, transportable, long lasting and indestructible, easily identifiable, hard to counterfeit, easily verifiable, fungible, and somewhat rare (compared to most other things).

 

Had gold had no other uses at all, it would still have been used as money for those reasons.  Gold has a use, its use is that it has the properties which make it useful as money.

 

Bitcoin has other uses as well, which aren't currently widely understood (read "Softwar"), but even if it didn't have any non-monetary uses it would still be extremely valuable simply because it has all of the above qualities which make it useful as money and is far better than gold at most of them.  This notion that money needs to also be used for something else is just plain wrong.  Money needs to be useful as money and that is it.   If useful for other things were a requirement aluminum would be far and away better than gold, as would steel or oil.

 

I agree with much of what you say about gold and attributes that crypto share with it (other than no one ever got rug pulled owning gold).

 

But that just brings us back to the fact that crypto “money” lost 80% of its value in 12 months, while it took many decades for dollars to do same. The underlying forces that limit the volatility of the dollar are much more trustworthy than those underlying crypto.

 

Which gets us back to the central point, because of its lack of intrinsic value crypto is just a speculation. And no one is paying anything significant for those “other uses”.

[Castanza]

1 minute ago, ValueArb said:

The underlying forces that limit the volatility of the dollar are much more trustworthy than those underlying crypto.

 

LOL  holy shit now that is funny 

[rkbabang]

1 minute ago, ValueArb said:

I agree with much of what you say about gold and attributes that crypto share with it (other than no one ever got rug pulled owning gold).

 

But that just brings us back to the fact that crypto “money” lost 80% of its value in 12 months, while it took many decades for dollars to do same. The underlying forces that limit the volatility of the dollar are much more trustworthy than those underlying crypto.

 

Which gets us back to the central point, because of its lack of intrinsic value crypto is just a speculation. And no one is paying anything significant for those “other uses”.

 

 

I'll talk only about $BTC here, because I think most crypto are scams.   Bitcoin lost 80% of its value against the dollar in 12 months then gained 50% in the last year.  The dollar on the other hand isn't coming back.  It will just continue to degrade in value until it is completely worthless.   We know where it ends.   Bitcoin has the potential to replace the dollar as the world's money, but it hasn't happened yet.  It is still early and thus still volatile.  There are going to be large dramatic ups and downs yet to come as well before it stabilizes.  Money isn't something that you can invent today and see it take over the world tomorrow.  There is going to be a lot of back and forth in its climb to eventual dominance.

 

[ValueArb]

26 minutes ago, Castanza said:

 

LOL  holy shit now that is funny 

Are you denying the dollar is less volatile than crypto? Or do you think it’s only by accident?

[TwoCitiesCapital]

2 hours ago, ValueArb said:

Commodities have consumers, their  demand curve meets the supply curve to dictate price. Even gold has industrial uses.

 

Crypto is just speculation.

 

Plenty of people value a portable, fast, secure, censorship resistant form of wealth preservation. Plenty of people value immediate access to online payments without requiring traditional financial intermediaries. 

 

Who are you to tell them that those needs and wants are invalid, or rebrand them as speculation, simply because you don't value them? 

 

Edited November 6, 2023 by TwoCitiesCapital

[ValueArb]

26 minutes ago, rkbabang said:

 

 

I'll talk only about $BTC here, because I think most crypto are scams.   Bitcoin lost 80% of its value against the dollar in 12 months then gained 50% in the last year.  The dollar on the other hand isn't coming back.  It will just continue to degrade in value until it is completely worthless.   We know where it ends.   Bitcoin has the potential to replace the dollar as the world's money, but it hasn't happened yet.  It is still early and thus still volatile.  There are going to be large dramatic ups and downs yet to come as well before it stabilizes.  Money isn't something that you can invent today and see it take over the world tomorrow.  There is going to be a lot of back and forth in its climb to eventual dominance.

 

Again that volatility makes it a speculation not a currency. While the end game of the dollar is likely continued depreciation that’s not certain. We aren’t the Roman Empire yet.  There is still the potential that a fiscal crisis will lead to changes that address our profligate government spending.

[ValueArb]

1 minute ago, TwoCitiesCapital said:

 

Plenty of people value a portable, fast, secure, censorship resistant form of wealth preservation. Plenty of people value immediate access to online payments without requiring traditional financial intermediaries. 

 

Who are you to tell them that those needs and wants are invalid, or rebrand them as speculation, simply because you don't value them? 

 

I’m not “rebranding” anything. The historic definition of speculation is betting on price movements without the backing of an intrinsic value.

[Castanza]

2 minutes ago, ValueArb said:

Are you denying the dollar is less volatile than crypto? Or do you think it’s only by accident?

 

No, not denying that. Just laughing at the "trustworthy"  forces that underpin the dollars stability. Our government de-pegged us from the Gold standard, they constantly shift the goal posts on inflation and instead of pointing to purchasing power of the dollar they talk in nominal terms or "gas prices". They print and inflate in times of uncertainty, They spend like drunken sailors and tax us in just about any way they can. The US is about to begin using 50%+ of it's tax revenue just to service the interest payments on the debt. No empire in history has ever survived that. Things happen slowly then suddenly. The modern world moves much faster than the ancient world. I wouldn't be so sure saying the US is not like the Roman Empire. 

BTC requires no third party trust. It doesn't require a military to back your currency; and it doesn't fall pray to some idiot politician or government. I think anyone saying that BTC doesn't have intrinsic value simply hasn't put in the time or effort and looked around the globe at all the use cases (being used!). I think those same
people also have some recency bias where they think the US will remain a super power forever and the dollar will always be top dog because that's all they've known. 

[rkbabang]

1 hour ago, Castanza said:

BTC requires no third party trust. It doesn't require a military to back your currency; and it doesn't fall pray to some idiot politician or government. I think anyone saying that BTC doesn't have intrinsic value simply hasn't put in the time or effort and looked around the globe at all the use cases (being used!). I think those same

 

People tend to think value means industrial uses.  But being useful as money IS an intrinsic value.  Having better properties for that use than anything else ever discovered or invented gives it tremendous intrinsic value.   The market isn't efficient and this value hasn't yet been widely recognized yet, but that shouldn't bother a value investor.

Edited November 6, 2023 by rkbabang

[ValueArb]

32 minutes ago, rkbabang said:

 

People tend to thing value means industrial uses.  But being useful as money IS an intrinsic value.  Having better properties for that use than anything else ever discovered or invented gives it tremendous intrinsic value.   The market isn't efficient and this value hasn't yet been widely recognized yet, but that shouldn't bother a value investor.

Again, crypto doesn’t get to redefine long defined financial terms. Intrinsic value means it generates internal cash flows and/or is likely to in the future. Without intrinsic value it fails the test of being an investment, and passes the test of being a speculation.

And something isn’t very useful for money if it can lose half its value in a few months. As for other uses, the most popular other use for crypto is for producing rug-pulls. 

 

I’m never entirely dismissing crypto, I just spent 6 hours evaluating a crypto project on Friday to see if was different and could create actual value for holders. Turned out it wasn’t and can’t. But I will still evaluate new ideas as they come across my desk.
 

I do believe BTC is inherently deflationary and offers the potential to retain value better than the dollar in the long run. But I can’t value it, it has no yield and does not pay dividends, I have no idea of what price it’s undervalued and what price it’s overvalued. So I sit out and invest in safer things.

[rkbabang]

9 minutes ago, ValueArb said:

Again, crypto doesn’t get to redefine long defined financial terms. Intrinsic value means it generates internal cash flows and/or is likely to in the future. Without intrinsic value it fails the test of being an investment, and passes the test of being a speculation.

And something isn’t very useful for money if it can lose half its value in a few months. As for other uses, the most popular other use for crypto is for producing rug-pulls. 

 

I’m never entirely dismissing crypto, I just spent 6 hours evaluating a crypto project on Friday to see if was different and could create actual value for holders. Turned out it wasn’t and can’t. But I will still evaluate new ideas as they come across my desk.
 

I do believe BTC is inherently deflationary and offers the potential to retain value better than the dollar in the long run. But I can’t value it, it has no yield and does not pay dividends, I have no idea of what price it’s undervalued and what price it’s overvalued. So I sit out and invest in safer things.

 

" Intrinsic value means it generates internal cash flows"   for a corporation yes, for a commodity or money this doesn't make any sense.  Gold sitting in your safe isn't "generating internal cash flows".   You are mixing up multiple concepts and applying it to the wrong category.   There is no company behind bitcoin.

 

"And something isn’t very useful for money if it can lose half its value in a few months."  I think we've covered this already.  Bitcoin won't be stable until it is used by a very large percentage of the global population.  This will be a while yet.

 

"the most popular other use for crypto is for producing rug-pulls. 

I’m never entirely dismissing crypto, I just spent 6 hours evaluating a crypto project on Friday to see if was different and could create actual value for holders. Turned out it wasn’t and can’t. But I will still evaluate new ideas as they come across my desk."

 

I'm not surprised.  99% of crypto "projects" are frauds and scams.  Crypto "projects" are just people trying to start businesses while selling unregistered securities to fund them and that is the legitimate ones, the scams are people selling unregistered securities to artificially create demand for them with the intent of rug pulling and running away with the cash.

 

 "I do believe BTC is inherently deflationary and offers the potential to retain value better than the dollar in the long run. But I can’t value it, it has no yield and does not pay dividends, I have no idea of what price it’s undervalued and what price it’s overvalued. So I sit out and invest in safer things."

 

Fair enough.  BTC is impossible to really value accurately right now.  I am confident of the general direction, but I wouldn't place a bet on the exact $ amount BTC will trade in a year or even in 5 years.  BTC will be far more valuable in 5-15+ years than it is now, but I can't put an exact price on it either.  I intend to hold long term and am going on the premise that it is better to be roughly right than exactly wrong.

 

[ValueArb]

2 hours ago, rkbabang said:

 

" Intrinsic value means it generates internal cash flows"   for a corporation yes, for a commodity or money this doesn't make any sense.  Gold sitting in your safe isn't "generating internal cash flows".   You are mixing up multiple concepts and applying it to the wrong category.   There is no company behind bitcoin.

 

 

No I'm not mixing up anything. Neither gold or any other commodity has any intrinsic value because it's future cash flows are just based on a price that's unpredictable.  Commodities are always speculations, even if you think you understand a commodities supply/demand curves better than the market and can predict its future, its still speculating. Whether money has an intrinsic value is an interesting philosophic question.

 

Obviously one dollar is worth one dollar now and for eternity, but the buying power of that dollar will certainly decline over its future. But measured in dollars, the intrinsic value of dollars is perfectly consistent, so I say it has an intrinsic value and owning it isn't a speculation on anything (other than inflation and maybe exchange rates). If I believe that, what this means is that contrary to what I just said previously on this thread, there is some crypto with an intrinsic value. Can you guess it?

 

Spoiler

Obviously it's fiat collateralized stable coins. Since they are backed by a specific currency they have a clear intrinsic value in that currency. Obviously the intelligent investor would examine them for risk and maybe discount their IV for risk that assets didn't match what is claimed. But if you could have strong confidence that Tether was worth at least 95 cents you'd happily buy it all day at 90 cents if given the opportunity. 

 

The problem I have with stable coins is "whats the point"? I can get same benefit + interest from a money market account. The idea I was looking at involved marrying a transaction tax with a fiat backed crypto currency that rewarded long term holders by increasing the NAV over time with proceeds from the transaction tax and interest earned from fiat holdings. But I felt it ended up with same problem, a slowly increasing NAV over time for a crypto coin you are locked into for long periods before you can earn a small return from isn't anywhere near as good as a money market account. 

 

 

[rkbabang]

24 minutes ago, ValueArb said:

 

No I'm not mixing up anything. Neither gold or any other commodity has any intrinsic value because it's future cash flows are just based on a price that's unpredictable.  Commodities are always speculations, even if you think you understand a commodities supply/demand curves better than the market and can predict its future, its still speculating. Whether money has an intrinsic value is an interesting philosophic question.

 

Obviously one dollar is worth one dollar now and for eternity, but the buying power of that dollar will certainly decline over its future. But measured in dollars, the intrinsic value of dollars is perfectly consistent, so I say it has an intrinsic value and owning it isn't a speculation on anything (other than inflation and maybe exchange rates). If I believe that, what this means is that contrary to what I just said previously on this thread, there is some crypto with an intrinsic value. Can you guess it?

 

  Reveal hidden contents

Obviously it's fiat collateralized stable coins. Since they are backed by a specific currency they have a clear intrinsic value in that currency. Obviously the intelligent investor would examine them for risk and maybe discount their IV for risk that assets didn't match what is claimed. But if you could have strong confidence that Tether was worth at least 95 cents you'd happily buy it all day at 90 cents if given the opportunity. 

 

The problem I have with stable coins is "whats the point"? I can get same benefit + interest from a money market account. The idea I was looking at involved marrying a transaction tax with a fiat backed crypto currency that rewarded long term holders by increasing the NAV over time with proceeds from the transaction tax and interest earned from fiat holdings. But I felt it ended up with same problem, a slowly increasing NAV over time for a crypto coin you are locked into for long periods before you can earn a small return from isn't anywhere near as good as a money market account. 

 

 

Yes!  1 BTC = 1 BTC and that will never change.

[ValueArb]

5 minutes ago, rkbabang said:

Yes!  1 BTC = 1 BTC and that will never change.

 

And when it becomes a viable currency that will give some form of intrinsic value. 

[TwoCitiesCapital]

4 hours ago, rkbabang said:

 

People tend to think value means industrial uses.  But being useful as money IS an intrinsic value.  Having better properties for that use than anything else ever discovered or invented gives it tremendous intrinsic value.   The market isn't efficient and this value hasn't yet been widely recognized yet, but that shouldn't bother a value investor.

 

This whole conversation is pointless. I made the comment that it was like any other commodity in terms of it's pricing being set via supply/demand a yesterday. He was dismissive of that suggesting that other commodities have industrial uses and BTC doesn't. 

 

Now, he's right back to acknowledging it's like other commodities, but continues to dismiss it because there's no cash flows so any price above $0 is "speculation" which we know is a cardinal sin among value investors  still hasn't addressed your, or my, points that there is plenty of valuable use cases as a payments and wealth storage/transportation mechanism. 

 

The goal post keeps moving, there's nothing intellectually interesting about the lazy dismissal of BTC, and there hasn't been any arguments made that don't fall apart when applied to any other commodity that have non-zero prices. 

Edited November 7, 2023 by TwoCitiesCapital

[TwoCitiesCapital]

33 minutes ago, ValueArb said:

 

And when it becomes a viable currency that will give some form of intrinsic value. 

 

Yes. 100% of the intrinsic value will accrue to it in that 1 second that some nameless face calls it a currency - and not a penny before! 

[ValueArb]

7 minutes ago, TwoCitiesCapital said:

 

This whole conversation is pointless. I made the comment that it was like any other commodity in terms of it's pricing being set via supply/demand a yesterday. He was dismissive of that suggesting that other commodities have industrial uses and BTC doesn't. 

 

Now, he's right back to acknowledging it's like other commodities, but continues to dismiss it because there's no cash flows so any price above $0 is "speculation" which we know is a cardinal sin among value investors  still hasn't addressed your, or my, points that there is plenty of valuable use cases as a payments and wealth storage/transportation mechanism. 

 

The goal post keeps moving, there's nothing intellectually interesting about the lazy dismissal of BTC, and there hasn't been any arguments made that don't fall apart when applied to any other commodity that have non-zero prices. 

 

Again commodities are speculations and so is crypto. Its a standard definition. And yes, any commodity with industrial uses is different than crypto because crypto has none. We can use gold or wheat as mediums of exchange just as easily as BTC, it doesn't give them any intrinsic value. No goalposts have been moved.

 

And you keep talking about "valuable use cases" in generalities. Be specific and name them.

[ValueArb]

9 minutes ago, TwoCitiesCapital said:

 

Yes. 100% of the intrinsic value will accrue to it in that 1 second that some nameless face calls it a currency - and not a penny before! 

 

And who said someone calling it a "currency" actually makes it a viable currency? Again, fluctuating 80% a year in price doesn't make anything a viable currency.

[RichardGibbons]

1 hour ago, ValueArb said:

 

Again commodities are speculations and so is crypto. Its a standard definition. And yes, any commodity with industrial uses is different than crypto because crypto has none. We can use gold or wheat as mediums of exchange just as easily as BTC, it doesn't give them any intrinsic value.

 

And by induction, anything created by commodities is also a commodity and therefore speculative.  And any business that relies on selling something speculative is also speculative because it could disappear in an instant if the speculative value of its output falls to zero.

 

Therefore everything in the human universe is speculative and nothing in existence has intrinsic value.  Including bitcoin. And the USD dollar.

 

There, ValueArb. To help you out, I've proven exactly what you've been stretching toward. The key, I think, is to start with the premise that commodities that people use and are willing to expend both resources and human effort to acquire don't have intrinsic value.

[rkbabang]

1 hour ago, RichardGibbons said:

 

And by induction, anything created by commodities is also a commodity and therefore speculative.  And any business that relies on selling something speculative is also speculative because it could disappear in an instant if the speculative value of its output falls to zero.

 

Therefore everything in the human universe is speculative and nothing in existence has intrinsic value.  Including bitcoin. And the USD dollar.

 

There, ValueArb. To help you out, I've proven exactly what you've been stretching toward. The key, I think, is to start with the premise that commodities that people use and are willing to expend both resources and human effort to acquire don't have intrinsic value.

 

The funny part is that is kind of what I believe. Nothing in life is guaranteed and all value is subjective.  There really is nothing that has “intrinsic value” because all value is subjective. You may think you have a company with intrinsic value, but people could stop loving any product or service and those cash flows would vanish.

[RichardGibbons]

1 hour ago, rkbabang said:

The funny part is that is kind of what I believe. Nothing in life is guaranteed and all value is subjective.  There really is nothing that has “intrinsic value” because all value is subjective. You may think you have a company with intrinsic value, but people could stop loving any product or service and those cash flows would vanish.

 

Yeah, I feel as if it's a bit like the "brain in a vat" scenario. It's plausible that you are just a brain in a vat, with electrical inputs supplied to brain to make you think that you actually have a body and exist in this world. There's no reason to be completely confident that you aren't just a brain in a vat being fed stimuli.

 

But, on a practical level, you're likely to have better outcomes (i.e. a happier brain) if you use the heuristic that you aren't just a brain in a vat, but rather act as if you were a brain in a body roaming about on a giant spinning sphere.

 

Similarly, I think you're likely to have better results investing if you have some concept of "intrinsic value", even if you know that the word "intrinsic" doesn't actually exist with the 100% confidence that seems to be implicit in the word "intrinsic".

[Castanza]

16 hours ago, rkbabang said:

"And something isn’t very useful for money if it can lose half its value in a few months."  I think we've covered this already.  Bitcoin won't be stable until it is used by a very large percentage of the global population.  This will be a while yet.

 

@ValueArb Pegging BTC to the dollar is a near-term view used by traders. Long-term the price is irrelevant. I think this is where a lot of people get mixed up. Paying 30k for a BNTC vs 19k does not change it's intrinsic value. It changes how much you've paid for the tool. If I buy a DeWalt table saw in September for $699 and my Dad buys one for himself on Black Friday for $399 is there a difference in usefulness between the two saws? No.

 

You can make generally the same argument with Gold. Price is only relevant to how much you are able to purchase at that point in time. But if Gold ends up being used as the hedge it's claimed to be (dollar collapse) the price you paid is only relevant against the amount you were able to secure at that point in time. If the dollar goes to zero does Gold still have monetary value? History would suggest that it does. But that doesn't change the fact that Gold had many different prices against fiat currencies over thousands of years in different civilizations. 

 

Volatility is and is not relevant. Depends on your time-line and framework of "why" you're buying BTC. 

 

USD-BTC is simply a premium you're paying with what fiat you currently own. Nay-sayers think it's relevant because most things in the world are pegged against the dollar currently. This WILL NOT (it's a certainty) always be the case. 

[SharperDingaan]

The reality is that 'Intrinsic Value' has multiple meanings. To the trader it is simply what the vehicle can be bought at today, versus what it could be flogged for tomorrow. That value is entirely in the traders head; at any given time everybody will have a different value, and the value will move with the trader's moods. Your thinking it's worth something, is little more than your feeling happy and the other guy feeling depressed. 

 

Any objective value, is simply the PV of some forecast; with the timing and magnitude of future benefits and discount rates in constant flux. Near term gain/loss is little more than the PV of actual vs forecast, from today through to the next significant financial announcement (earnings release, purchase/sale, drill plan/result, etc.). 'Objective', being the same approach that everyone else would use (CFA way, peer review, academic papers, etc). Failure to play the game, a firing offence.

 

All readily exploitable; provided you are comfortable going against the herd. Comes down to whether you've treated 'investment' the same as any other business (you're there to make money), or whether you've treated it as 'entertainment'. Losses as the cost of the ticket to see/experience the show.   

 

SD

 

  

Edited November 7, 2023 by SharperDingaan

[ValueArb]

13 hours ago, RichardGibbons said:

 

And by induction, anything created by commodities is also a commodity and therefore speculative.  And any business that relies on selling something speculative is also speculative because it could disappear in an instant if the speculative value of its output falls to zero.

 

Therefore everything in the human universe is speculative and nothing in existence has intrinsic value.  Including bitcoin. And the USD dollar.

 

There, ValueArb. To help you out, I've proven exactly what you've been stretching toward. The key, I think, is to start with the premise that commodities that people use and are willing to expend both resources and human effort to acquire don't have intrinsic value.

 

As the universe disappears into nothingness billions of years from now there will still be someone somewhere drinking a Coca-Cola.