Stocks and Trading Thread - Channeling your inner Mono

[viper37]

Some of us need GPUs to do useful calculations. 

you mean Doom Eternal?

[The Minsky Moment]

Bitcoin has done very nicely as an asset class.  For the ostensible purpose it was intended - a currency for facilitating transactions or a substitute for government fiat currency - it has been a predictable disaster. In 2017, Bitcoin hit 300,000 daily transactions.  It's held roughly at that level through ups and down over 4 years.  300,000 daily transactions is nice if you are selling smartphones, so-so if selling cups of coffee, and laughingly inadequate for a proposed currency.  Its failure as money is directly related to its success as an asset: no one wants to use a form of money whose value fluctuates wildly day-to-day and which increases in value - i.e. causes price deflation - in double or triple digit percentages annually.

Bitcoin cannot and will never succeed as money - it was fatally flawed from inception - but that doesn't mean it can't succeed as an speculative investment asset. While it's true it lacks "intrinsic value," that is true of many successful investment assets like fine art or collectibles. Bitcoin does not have heritage connotations like some of these assets but it does have one of the attributes that make them successful - a strong and committed community of enthusiasts.  As long at that continues to hold true, the value will continue to go up as Bitcoin is designed to enhance its relative scarcity over time.  So there is some rational basis for optimism over a 5 or even 10 year time horizon.

Longer term, can Bitcoin retain enthusiasm and commitment in a similar manner as Old Dutch Masters or French Impressionists?  It's possible but I have my doubts.

[Admiral Yi]

A core of enthusiasts is not enough to increase the price of a collectible.  You need an expanding pool of suckers for that to happen.

[The Minsky Moment]

A core of enthusiasts is not enough to increase the price of a collectible.  You need an expanding pool of suckers for that to happen.

The art market suggests otherwise. Admittedly I don't have data to back it up - but I don't think the pool of buyers for contemporary art (e.g.) is constantly and rapidly expanding.  A single bitcoin now costs five figures so it has taken on qualities as a status symbol as well.

[Admiral Yi]

The art market suggests otherwise. Admittedly I don't have data to back it up - but I don't think the pool of buyers for contemporary art (e.g.) is constantly and rapidly expanding.  A single bitcoin now costs five figures so it has taken on qualities as a status symbol as well.

Disagree.  New multimillionaires and billionaires are being minted all the time.  They all want to buy status, and overpriced white squares does that to a degree.  An old master certainly does that.

[Josquius]

Art as an investment is crazy stuff.
Nestle I know has a vault full of the stuff. They put a piece or two on display around the hq but mostly just cache it in the hope it increases in value.

[The Minsky Moment]

The art market suggests otherwise. Admittedly I don't have data to back it up - but I don't think the pool of buyers for contemporary art (e.g.) is constantly and rapidly expanding.  A single bitcoin now costs five figures so it has taken on qualities as a status symbol as well.

Disagree.  New multimillionaires and billionaires are being minted all the time.  They all want to buy status, and overpriced white squares does that to a degree.  An old master certainly does that.

New billionaires are minted and old ones die off.  Most of them have no native interest in art and just follow whatever is currently "hot" in the market.  A submarket like Dutch Old Masters is of little interest to a typical billionaire - but there is a small community of enthusiasts that supports it.  That's all you need if supply is sufficiently constricted.

To be clear I am not saying bitcoin is sustainable in this way.  I am expressing a clear suspicion that it is not.  But a strong enough fad can carry for years before fading out.

[crazy canuck]

Bitcoin has done very nicely as an asset class.  For the ostensible purpose it was intended - a currency for facilitating transactions or a substitute for government fiat currency - it has been a predictable disaster. In 2017, Bitcoin hit 300,000 daily transactions.  It's held roughly at that level through ups and down over 4 years.  300,000 daily transactions is nice if you are selling smartphones, so-so if selling cups of coffee, and laughingly inadequate for a proposed currency.  Its failure as money is directly related to its success as an asset: no one wants to use a form of money whose value fluctuates wildly day-to-day and which increases in value - i.e. causes price deflation - in double or triple digit percentages annually.

Bitcoin cannot and will never succeed as money - it was fatally flawed from inception - but that doesn't mean it can't succeed as an speculative investment asset. While it's true it lacks "intrinsic value," that is true of many successful investment assets like fine art or collectibles. Bitcoin does not have heritage connotations like some of these assets but it does have one of the attributes that make them successful - a strong and committed community of enthusiasts.  As long at that continues to hold true, the value will continue to go up as Bitcoin is designed to enhance its relative scarcity over time.  So there is some rational basis for optimism over a 5 or even 10 year time horizon.

Longer term, can Bitcoin retain enthusiasm and commitment in a similar manner as Old Dutch Masters or French Impressionists?  It's possible but I have my doubts.

The problem is your starting point that Bitcoin had a purpose for which it was intended.  It was intended to be a proof of concept for how block chain tech could work.  That it why it is flawed for the ostensible purpose you have suggested.  It is kind of like a aberrant stamp.  It might have value because it is finite by design.  But it is never going to be a replacement currency.  Again because it is finite by design.  But it works pretty well as an alternative.

Other Cryptos don't have the same drawbacks as Bitcoin and are better designed.  They have moved beyond the proof of concept phase.  But what the future holds for any of those alternatives is nothing but a guess.  The one thing something like, say, Ether has going for it, is a researcher can add their calculations to what is being solved by the miners to have access to the worlds most powerful supercomputer.  It is also not finite and is secure, at least for now.  So it has some advantages over dealing with the very unsecure ways we currently transfer electronic funds using the banks with varying degrees of security.

[Tamas]

IMHO best case scenario for crypto, the technology will be employed to record actual money, although I am sceptical.

Other than that these will be speculative "assets" and neat way for paying for illegal stuff and perhaps money laundering.

As it's been said about Bitcoin a while ago, it's a great solution to a problem that hasn't been invented yet.

[crazy canuck]

IMHO best case scenario for crypto, the technology will be employed to record actual money, although I am sceptical.

Other than that these will be speculative "assets" and neat way for paying for illegal stuff and perhaps money laundering.

As it's been said about Bitcoin a while ago, it's a great solution to a problem that hasn't been invented yet.

My knowledge of the tech is obviously limited, but iirc the security of a block chain is that it cannot be altered externally and so I am not sure how it could record anything external to what is generated on its leger without making it something different from a block chain and destroy its security.

And again the problem is the analysis that focuses on Bitcoin.  It was not invented to be a solution to anything.  It was simply a proof of concept.  So saying it does not solve a problem doesn't tell us much. What came in later iterations do solve problems - Ether provides researchers with access to computing power they cannot get anywhere else, as just one example.

[Tamas]

IMHO best case scenario for crypto, the technology will be employed to record actual money, although I am sceptical.

Other than that these will be speculative "assets" and neat way for paying for illegal stuff and perhaps money laundering.

As it's been said about Bitcoin a while ago, it's a great solution to a problem that hasn't been invented yet.

My knowledge of the tech is obviously limited, but iirc the security of a block chain is that it cannot be altered externally and so I am not sure how it could record anything external to what is generated on its leger without making it something different from a block chain and destroy its security.

And again the problem is the analysis that focuses on Bitcoin.  It was not invented to be a solution to anything.  It was simply a proof of concept.  So saying it does not solve a problem doesn't tell us much. What came in later iterations do solve problems - Ether provides researchers with access to computing power they cannot get anywhere else, as just one example.

Yeah fine but if you are not paying for something you don't want  authorities to know you are paying for it, what's the point of using blockchain as currency?

I guess, if it was under government control, a blockchain-based currency could be very useful in tracing transaction histories, wouldn't it? But the "private revolution of currency" angle touted by many blockchain proponents I think at best naive at worst sinister.

[crazy canuck]

Yeah fine but if you are not paying for something you don't want  authorities to know you are paying for it, what's the point of using blockchain as currency?

Already explained above, in a word, security. 

I guess, if it was under government control, a blockchain-based currency could be very useful in tracing transaction histories, wouldn't it? But the "private revolution of currency" angle touted by many blockchain proponents I think at best naive at worst sinister.

Yes, I think this is a significant point that most miss.  The purpose of a blockchain is to be secure and unalterable.  If governments regulate the identifiers of the accounts through which the transactions flow voila - Traceable transactions.  I think it will always remain a form of private currency though.  I am not sure how an algorithm generated product can ever replace the fiat of a state currency.  By definition those are two very different concepts. 

There are a lot of actors, beyond the stereotypical drug lords, that would not want this to happen.  Think about how much easier it would be for taxing authorities to audit.  And how much more difficult it would be to abuse off shore tax havens.  Come to think of it, if the Biden proposal for internal minimum tax polices goes anywhere, a viable blockchain currency would support that considerably.

[The Minsky Moment]

The problem is your starting point that Bitcoin had a purpose for which it was intended.  It was intended to be a proof of concept for how block chain tech could work. 

Right - it says something about the intensity of the enthusiasm for the concept that bitcoin has been taken so far from its original presentation.

Other Cryptos don't have the same drawbacks as Bitcoin and are better designed.  They have moved beyond the proof of concept phase.  But what the future holds for any of those alternatives is nothing but a guess.  The one thing something like, say, Ether has going for it, is a researcher can add their calculations to what is being solved by the miners to have access to the worlds most powerful supercomputer.  It is also not finite and is secure, at least for now.  So it has some advantages over dealing with the very unsecure ways we currently transfer electronic funds using the banks with varying degrees of security.

Well, Ether is the only other one I have even a vauge understanding about.  And that understanding is that the design was supposed to emphasize its flexibility for use in different kinds of transactions.  That's a sound approach in theory but in practice Ether is having the same "problem" as Bitcoin - it has been too successful as a speculative asset category, which really hampers its development as a transactional utility.

[crazy canuck]

Speculation aside, Ether is a very different creature from Bitcoin.  I think it is valid to ask the question Tamas asked - ie what problem does this tech solve.   But where the analysis goes wrong imo, is to then answer that question using the Bitcoin example and then compound the error by assuming the whole lot of them have the same shortfalls.  I think it is likely that some wiz kid is out there improving what Ether has to offer using the blockchain tech.  There are lots of things that can be done with it.  I think that focusing on only Bitcoin is a bit like writing off air flight since the Wright brothers didn't travel very far with their proof of concept. 

[Jacob]

Already explained above, in a word, security. 

IMO bitcoin lacks security. It has none of the protections against fraud or accidental loss that real currencies have. Can't speak to any of the other crypto currencies.