Cryptocurrencies

[Milu]

14 minutes ago, 73 Reds said:

Isn't BTC a "cryptocurrency"?  If its not a currency why is it called a currency?  Like anything that has a tangible use, gold has value.  It also has biblical and historical significance.  And for its entire existence there have been plenty of parties around the World who gladly accept gold in payment for goods and services.  But that's not really the issue here.  I don't begrudge anyone who has made a lot of money with BTC; that is what makes markets.  But at the same time I have little doubt about its ultimate outcome.  For my $ there is no need to invest in mind games when you can easily make money on assets with a legitimate IV.

I find most of these debates are just people at different stages in life with different investment philosophies and risk tolerances just talking past each other. One approach is to put 100% of your investable assets into stable stocks that you believe have legitimate IV, another approach is to put a high percentage of your inevitable assets into these stocks but also hold a portion in other assets like land, gold, real estate, bitcoin. Maybe you put another small portion into more speculative plays like venture capital, derivatives, palantir, Tesla. There is no right or wrong answer and what might seem safe to one person such as having 25% of portfolio in Berkshire and 25% in fairfax might look like crazy concentration risk to another person. Or somebody who has 2% or their portfolio in bitcoin and 3% in palantir might look stupid to the other person. There is never any real way to say what’s right and wrong, all you can do is look at some long term overall portfolio returns and even those can be based on a lot of luck. 

Edited February 6 by Milu

[KJP]

1 minute ago, 73 Reds said:

Isn't BTC a "cryptocurrency"?  If its not a currency why is it called a currency?  Like anything that has a tangible use, gold has value.  It also has biblical and historical significance.  And for its entire existence there have been plenty of parties around the World who gladly accept gold in payment for goods and services.  But that's not really the issue here.  I don't begrudge anyone who has made a lot of money with BTC; that is what makes markets.  But at the same time I have little doubt about its ultimate outcome.  For my $ there is no need to invest in mind games when you can easily make money on assets with a legitimate IV.

 

I see four arguments in your response:

 

1.  BTC should be analyzed as currency rather than a store of value because some people refer to it as a "cryptocurrency".  Is this actually at all persuasive even to you in the face of an argument that it is a store of value?  On its face a semantic straw man.

 

2.  As a physical object, gold has a "tangible use" whereas BTC doesn't and never could.  This is true.  Gold has certain  industrial uses and it has ornamental and aesthetic uses that have withstood the test of time.  But are you claiming those uses support the current gold price and that it's use as a store of value (central bank reserves, etc.) are irrelevant?  Or are you claiming that the store of value use is necessarily downstream of a pre-existing industrial/ornamental use, and that a different thing (tangible or intangible) could never become a store of value without first having tangible industrial and/or ornamental use?  If that's the argument, why do you believe that to be true?     

 

3.  Gold has a long history and many people in many parts of the world have accepted it in exchange for real goods and services.  While that statement is true, isn't it also true that the places you (as a US resident) actually shop at today for real goods and services do not accept gold?  So, if acceptance as a medium of exchange were the relevant test, why isn't gold worthless?

 

4. You cannot assess BTC or gold's intrinsic value, so you're not going to play that game.  This makes perfect sense to me and is the exact reason I do not and have never owned gold or BTC.  And this seems to be your real reason.  Everything else appears to be makeweight.  The only thing I do not understand is your absolute confidence in the "ultimate outcome," given that we know that gold is still around and commands a significant price per ounce despite having the same IV issues.  

[73 Reds]

1 minute ago, Milu said:

I find most of these debates are just people at different stages in life with different investment philosophies and risk tolerances just talking past each other. One approach is to put 100% of your investable assets into stable stocks that you believe have legitimate IV, another approach is to put a high percentage of your inevitable assets into these stocks but also hold a portion in other assets like land, gold, real estate, bitcoin. Maybe you put another small portion into more speculative plays like venture capital, derivatives, palantir, Tesla. There is no right or wrong answer and what might seem safe to one person such as having 25% of portfolio in Berkshire and 25% in fairfax might look like crazy concentration risk to another person. Or somebody who has 2% or their portfolio in bitcoin and 3% in palantir might look stupid to the other person. There is never any real way to say what’s right and wrong, all you can do is look at some long term overall portfolio returns and even those can be based on a lot of luck. 

Yes and no.  Everyone has their own definition of "speculation".  To me, BTC is the same as sports betting but sports betting is far more fun.

[73 Reds]

2 minutes ago, KJP said:

 

I see four arguments in your response:

 

1.  BTC should be analyzed as currency rather than a store of value because some people refer to it as a "cryptocurrency".  Is this actually at all persuasive even to you in the face of an argument that it is a store of value?  On its face a semantic straw man.

 

2.  As a physical object, gold has a "tangible use" whereas BTC doesn't and never could.  This is true.  Gold has certain  industrial uses and it has ornamental and aesthetic uses that have withstood the test of time.  But are you claiming those uses support the current gold price and that it's use as a store of value (central bank reserves, etc.) are irrelevant?  Or are you claiming that the store of value use is necessarily downstream of a pre-existing industrial/ornamental use, and that a different thing (tangible or intangible) could never become a store of value without first having tangible industrial and/or ornamental use?  If that's the argument, why do you believe that to be true?     

 

3.  Gold has a long history and many people in many parts of the world have accepted it in exchange for real goods and services.  While that statement is true, isn't it also true that the places you (as a US resident) actually shop at today for real goods and services do not accept gold?  So, if acceptance as a medium of exchange were the relevant test, why isn't gold worthless?

 

4. You cannot assess BTC or gold's intrinsic value, so you're not going to play that game.  This makes perfect sense to me and is the exact reason I do not and have never owned gold or BTC.  And this seems to be your real reason.  Everything else appears to be makeweight.  The only thing I do not understand is your absolute confidence in the "ultimate outcome," given that we know that gold is still around and commands a significant price per ounce despite having the same IV issues.  

1.  I don't, and have never understood the term "store of value".  I invest in assets that increase rather than store value.   For the sake of investment, who would merely want to store value?  

 

2.  See #1 above.

 

3.  I've been to at least a dozen countries in the World where gold is widely accepted if offered.  I live and work in the US and would take gold if someone offered it to me as payment.  And oh by the way, it wasn't that long ago that we had a gold standard.

 

4.  All speculations end the same.  The only variable is the amount of time it takes.

[Milu]

6 minutes ago, 73 Reds said:

I don't, and have never understood the term "store of value".  I invest in assets that increase rather than store value.   For the sake of investment, who would merely want to store value?  

Sometimes people don’t want to invest 100% of their available capital 100% of the time. Looks at Berkshire for example, buffet has about $300b in tbills which have traditionally been the default store of value for him when he doesn’t find any investments that meet his strict return requirement. If and when the market has a big drawdown and some opportunities present themselves I would expect him to sell down some of his tbills and invest in stocks. Buffett’s tbills aren’t going to increase in value but his goal is to maintain purchasing power via the interest paid, so that when he is ready he can invest. Most people have some reserve asset that they use to store wealth in when they are not ready or not finding suitable investments. 

[TwoCitiesCapital]

4 hours ago, wachtwoord said:

Also lol at all the Schadenfreude posters in the topic . Indeed what always happens in this part of the cycle so it must still be alive. Human nature is hilariously ironic sometimes

 

Schadenfreude from posters who were skeptical at $40k, and $30k, and $20k, and mayhaps even before and think that falling to $60k somehow makes them right? 

 

Was like me pre-2019. Always calling it a bubble, always celebrating when it topped, until I realized that even at the bottom of an 80% recent drop, I had missed a 30x if I had just bought the "bubble" when I first heard about it.

 

Every top has been higher and every bottom has been higher for 15 straight years. That's not a collapsible bubble but a secular growth trend. 

 

1 hour ago, Buckeye said:

I was told many times on this thread that Bitcoin’s value was derived from the fact that it was backed by the most powerful computer in the entire world!!! It’s so valuable, I was told, you almost can’t even put a value on it

 

Me thinks that these “computers” that OpenAi, Google, Meta and Xai are building may be slightly more powerful, but what do I know.

 

Why don't you ask anyone of those services what they think about Bitcoin and it's value prop? 

 

1 hour ago, 73 Reds said:

But as many here have stated, BTC is backed by nothing and is exactly worth its backing - nothing.    And for that part of the World that lives under oppressed regimes?  Currencies are the least of their problems but there is always WU.

 

It's backed by the value it provides the buyer - like everything in existence that is for sale. And BTC provides exceptional value - more so to those in less stable regimes with less stable currencies because it still allows for capital formation that isn't confiscated at a whim or destroyed in a war or inflated into oblivion. 

 

42 minutes ago, KJP said:

Respectfully, I don't think this is responsive to @Milu's point, which was that no place where you actually shop accepts gold either.  So, is gold worthless?  By bringing in the concept of "currency" I believe you are creating a straw man -- my understanding is that BTC bulls see it as a type of long term store of value, like gold, rather than a everyday medium of exchange like the USD.  

 

+1 

 

Basically the history of EVERY acceptable form of money is they started as stores of value. And once enough people are storing value in it, then there is a desire to spend that value and it becomes currency. 

 

USD was no different - it literally bootstrapped itself to a known store of value for the first ~100+ years or so of its existence before abandoning that and inflating to oblivion. 

 

2 hours ago, Spekulatius said:

Stable coins are indeed of much more practical value than crypto currencies like BTC for cross border payments. 

 

More practical, yes. But still subject to most of the downsides of any currency that is centrally controlled in that the currency is inflated, the bonds backing it could default, or the transaction itself can be stopped and your wallet blacklisted by government entities to prevent transfers and redemptions of value. 

 

Bitcoin is superior for permissionless spending - which may, or may not, become of immense value to people in their lifetime. 

 

38 minutes ago, Milu said:

Yea it’s an interesting trait alright. If somebody calls something ridiculously overvalued, bubble, worthless at $5k, $10k whatever, and that asset currently sits at $65k (after a 50% drawdown) you haven’t really been proved right. 

+1

[73 Reds]

Just now, Milu said:

Sometimes people don’t want to invest 100% of their available capital 100% of the time. Looks at Berkshire for example, buffet has about $300b in tbills which have traditionally been the default store of value for him when he doesn’t find any investments that meet his strict return requirement. If and when the market has a big drawdown and some opportunities present themselves I would expect him to sell down some of his tbills and invest in stocks. Buffett’s tbills aren’t going to increase in value but his goal is to maintain purchasing power via the interest paid, so that when he is ready he can invest. Most people have some reserve asset that they use to store wealth in when they are not ready or not finding suitable investments. 

Well, I get the impression the BTC bulls here aren't holding it waiting for a better opportunity.  And if they are, guess what is happening to their beloved store of value while other assets experience a drawdown?  OTOH, T-bills seem to holding their own.

[TwoCitiesCapital]

19 minutes ago, 73 Reds said:

 

4.  All speculations end the same.  The only variable is the amount of time it takes.

 

Can you name a single other speculation that existed for 15 years and survived multiple 70-80% drawdowns on its way to a $1.5 trillion market cap? 

 

The only thing I can think of that even comes close is Tesla. And I think they've managed it by turning hype into hard assets which keeps moving  the base valuation upwards even while selling more hype. Also a very volatile secular growth trend - just one that is financed with shareholder capital instead of profits/revenues. And even I don't believe Tesla is worth $0. 

Edited February 6 by TwoCitiesCapital

[73 Reds]

1 minute ago, TwoCitiesCapital said:

 

Can you name a single other speculation that existed for 15 years and survived multiple 70-80% drawdowns on its way to a $1.5 trillion market cap? 

Can you name another time in history when the World was as connected as it is today?  What doesn't take longer in time to play out?

[Gregmal]

Speculation is subjective. At one point, some shoddy mail in DVD business that generated huge losses was a speculation. Todays its one of the best businesses on the planet. Risk/reward is entirely about properly assessing probability of outcomes and weighting those probabilities within the framework of capital allocation. 

[73 Reds]

1 minute ago, Gregmal said:

Speculation is subjective. At one point, some shoddy mail in DVD business that generated huge losses was a speculation. Todays its one of the best businesses on the planet. Risk/reward is entirely about properly assessing probability of outcomes and weighting those probabilities within the framework of capital allocation. 

Yep.  But the key word in that shoddy mail in DVD business is "business".  All capital allocation involves calculated risk.   The objective of all businesses is to produce something.  Assets that don't produce anything are not businesses.  Its OK to invest in assets that don't produce anything if the asset is worth owning for other reasons.  Many people don't own expensive jewelry, artwork, antiques, etc... but most would like to if they could afford it.  People who don't own BTC have no interest in owning it for any reason.

[rogermunibond]

@TwoCitiesCapital gold

 

gold is backed by 5000+ years of belief

 

BTC is backed by 15+ years of belief

 

most speculative belief systems eventually get crushed.  BTC is more persistent that most, and its backers are pretty good at political lobbying to get financial institutions and governments to accept it.

 

but that's the key, without greater belief, BTC will die

Edited February 6 by rogermunibond

[Gregmal]

2 minutes ago, 73 Reds said:

But the key word in that shoddy mail in DVD business is "business"

Eh if something doesnt make money, I dont consider it a business, but a hobby. I've see a lot of people whom run "businesses" that have no path to viability for other reasons. So you see, everything down to the verbiage articulated is subjective. Now of course someone who doesn't know any better can start and operate a "business" with the full intent on making a profit when in reality there is no path...what is that? Whereas others can fully buy into the investment story of Bitcoin on the simple understanding that it's digital gold/currency. Does the ignorance in both cases absolve? Fuck if I know. End of the day, money in, money out. Your P/L tells the truth. 

[73 Reds]

6 minutes ago, Gregmal said:

Eh if something doesnt make money, I dont consider it a business, but a hobby. I've see a lot of people whom run "businesses" that have no path to viability for other reasons. So you see, everything down to the verbiage articulated is subjective. Now of course someone who doesn't know any better can start and operate a "business" with the full intent on making a profit when in reality there is no path...what is that? Whereas others can fully buy into the investment story of Bitcoin on the simple understanding that it's digital gold/currency. Does the ignorance in both cases absolve? Fuck if I know. End of the day, money in, money out. Your P/L tells the truth. 

Sure, its the objective or intent to make money that makes a business and makes it worthy of investment.  The BTC bulls are just so sensitive when people apply logic to their thesis.  To those of us who have no interest in owning it, we also have no interest in whether the price goes up or down or how long it takes for the inevitable.  But it is fun to discuss and as always, the psychology is really fascinating.  

Edited February 6 by 73 Reds
missed word

[Luke]

Folks - if you look at modern economics and the role of currencies in economies then there is no way for Bitcoin to ever be used by states to run our economies because it is deflationary in a successful economy. The issuer of the currency always has to be an intelligent government that intervenes in the market and controls variables like inflation and wage growth and stimulates when necessary and cools down when necessary. 

 

We have been told for decades now by neoliberal economists to engage in a model that serves private enterprise and capital but lowers overall growth for the overall economy.

 

Bitcoin is a nice technological invention but can not be priced and will never be broadly used. It might have some purpose in third world countries or to hide payment tracks so it will obviously never go to zero now that many mostly fishy services like piracy etc get paid in crypto and Bitcoin but it will also never reach the scale some wish it does. 

 

As an investor its unbuyable and if you do buy it because you speculate on it going up further then you are no longer investing but gambling and thats fine to do or not. 

[Luke]

1 minute ago, 73 Reds said:

Sure, its the objective or intent that makes a business and makes it worthy of investment.  The BTC bulls are just so sensitive when people apply logic to their thesis.  To those of us who have no interest in owning it, we also have no interest in whether the price goes up or down or how long it takes for the inevitable.  But it is fun to discuss and as always, the psychology is really fascinating.  

It mostly attracts people that do not understand enough about economics and buy into some of the promises people make like saylor that bitcoin will reach 1m USD per bitcoin. People are desperate and need money and they have seen stocks do 50000% so why shouldnt this new bitcoin thing which is up thousands of percentages already

[Luke]

31 minutes ago, TwoCitiesCapital said:

Can you name a single other speculation that existed for 15 years and survived multiple 70-80% drawdowns on its way to a $1.5 trillion market cap? 

 

The only thing I can think of that even comes close is Tesla. And I think they've managed it by turning hype into hard assets which keeps moving  the base valuation upwards even while selling more hype. Also a very volatile secular growth trend - just one that is financed with shareholder capital instead of profits/revenues. And even I don't believe Tesla is worth $0. 

You are ignoring something. Bitcoin only ever got big with the Tech Hype and Covid. 

 

 

You had a small hype spike in 2017 but it only got big when gambling and WSB got big. If you look in the past behind 2017 its an irrelevant asset mostly that got some traction because of its usage on the dark net for drugs etc. 

 

Its not a brilliant new asset or something. It was a payment tool for illegal shit and then got hyped by tech dudes and gamblers furthering this sad bubble. 

[TwoCitiesCapital]

54 minutes ago, 73 Reds said:

Can you name another time in history when the World was as connected as it is today?  What doesn't take longer in time to play out?

 

Longer? My man, everything happens faster in the world today. Banks literally collapse overnight due to digital transfers. Nothing happens more slowly.

 

24 minutes ago, Luke said:

You are ignoring something. Bitcoin only ever got big with the Tech Hype and Covid. 

 

 

You had a small hype spike in 2017 but it only got big when gambling and WSB got big. If you look in the past behind 2017 its an irrelevant asset mostly that got some traction because of its usage on the dark net for drugs etc. 

 

Its not a brilliant new asset or something. It was a payment tool for illegal shit and then got hyped by tech dudes and gamblers furthering this sad bubble. 

 

It's lows in 2022 were lower than the "small spike in 2017/2018" - so not sure how that supports that it was 1) a small spike and 2) that Bitcoin only got big after COVID. Like all asset classes, it's been goosed by the trillions of stimulus that were printed and will never disappear. It's doing exactly what it's designed to do - sipping up the excess liquidity and storing value. Currently in excess of inflation, but eventually will be close to matching it. 

 

45 minutes ago, rogermunibond said:

@TwoCitiesCapital gold

 

gold is backed by 5000+ years of belief

 

BTC is backed by 15+ years of belief

 

There was a time gold was only backed by ~15 years of belief....and probably had fewer adopters at that time than Bitcoin has today given how slowly information traveled. 

 

45 minutes ago, rogermunibond said:

most speculative belief systems eventually get crushed.  BTC is more persistent that most, and its backers are pretty good at political lobbying to get financial institutions and governments to accept it.

 

but that's the key, without greater belief, BTC will die

 

This is true if every asset. No belief - $0.

 

I agree with you most speculative systems get crushed - that's why it's so telling BTC has lasted for 15 years and is STILL worth $1 trillion....it is defying what should be happening if it were simply a speculative system and that should have you questioning your thesis and asking what it is you're missing 

[73 Reds]

10 minutes ago, TwoCitiesCapital said:

 

Longer? My man, everything happens faster in the world today. Banks literally collapse overnight due to digital transfers. Nothing happens more slowly.

 

 

It's lows in 2022 were lower than the "small spike in 2017/2018" - so not sure how that supports that it was 1) a small spike and 2) that Bitcoin only got big after COVID. Like all asset classes, it's been goosed by the trillions of stimulus that were printed and will never disappear. It's doing exactly what it's designed to do - sipping up the excess liquidity and storing value. Currently in excess of inflation, but eventually will be close to matching it. 

 

 

There was a time gold was only backed by ~15 years of belief....and probably had fewer adopters at that time than Bitcoin has today given how slowly information traveled. 

 

 

This is true if every asset. No belief - $0.

 

I agree with you most speculative systems get crushed - that's why it's so telling BTC has lasted for 15 years and is STILL worth $1 trillion....it is defying what should be happening if it were simply a speculative system and that should have you questioning your thesis and asking what it is you're missing 

More connected world = larger market and longer time for cycle to play out.  

[Milu]

A good tell of how close we are to a bottom in a bitcoin downturn is the number of gloating posts show up in close succession so perhaps we're on the way up from here.

 

And time to trim is when the 'have fun staying poor' posts show up on the other end.

 

My conviction in the asset remains unshaken.

[rogermunibond]

@TwoCitiesCapital a productive asset doesn't need belief.  if I can farm land and generate $100K of income from it then it doesn't matter that others think it is zero.

[gfp]

at this point I'm just doing trades to f*ck with you guys

 

[SharperDingaan]

Everyone has different reasons for holding BTC, and they change daily; everything from betting slip speculation, through to store of value. The various associated level 2 solutions from CB digital currency and 'stable-coin' through to 'lightning networks' ... add utility. They are just different tools for different purposes for use anywhere in the world. 

 

You can be of either a 'analog' or a 'digital' mindset; they both work, but the mindsets are tribal ..... there is only one right way, it is this way, and you know nothing! Of course you can also be both ... and those experienced in the mechanics of 'crypto' will be 

 

There will always be a Statler and Waldorf ... but nothing prevents  an enterprising lad from selling tickets to the show 

 https://muppet.fandom.com/wiki/Statler_and_Waldorf

 

SD

Edited February 7 by SharperDingaan

[TwoCitiesCapital]

39 minutes ago, rogermunibond said:

@TwoCitiesCapital a productive asset doesn't need belief.  if I can farm land and generate $100K of income from it then it doesn't matter that others think it is zero.

 

 

It's only worth what a buyer will pay. And it only generates $100k if buyers have belief in the value of the produce.

 

Produce has no cash flows, and therefore is worthless/valueless based on the arguments coming out of this group - just like Bitcoin, right? 

 

 

[TwoCitiesCapital]

49 minutes ago, 73 Reds said:

More connected world = larger market and longer time for cycle to play out.  

 

That is absolutely not borne out by the reality we witness every day