It's interesting how the transfer of wealth to a Goldman Sachs executive via cryptocurrency invokes a feeling of mild jealousy and amusement, whereas the transfer of wealth to 'bankers', just like him, just doing their damn jobs and providing a service, invokes revilement in the eyes of the general public.
I do think the psychological (is that the word I'm looking for?) aspects of the frothy financial climate driving the cryptoboom is under-discussed. When the wider financial (not just crypto) bubble pops there's going to be a lot of resentment this time around.
I'm jealous of people and their crypto gains, having considered putting a tiny % of my portfolio in to crypto not long before the pandemic and deciding against it, but ultimately none of these cryptocurrencies are any more useful than they were in 2019, and in my gut I feel that these huge unjustified gains should, morally speaking, evaporate if these things prove to be worthless to us a society.
Crypto could easily be the largest pyramid scheme in history, I have zero interest in participating even if returns were guaranteed - that's not how I want to make money, I see no value being created in these "investments".
Recent developments on the stock market kind of killed the market idealism for me. I don't know what's a better alternative, but from where I'm standing the financial system is rewarding wasteful and immoral behaviour and it's degenerating really fast.
> Crypto could easily be the largest pyramid scheme in history, I have zero interest in participating even if returns were guaranteed - that's not how I want to make money, I see no value being created in these "investments".
Yes! Exactly!
I have a friend who's doing well from crypto. He bought an NFT for $800 and it's not worth $8,000. Where is the (social) value in that? Except for the social experimentation this is all providing, it's not solving a problem AT ALL!
This is how I feel in a nutshell: if I make $1m today, I want it to be because I solved a hard problem for a lot of people, not because of some meaningless, intangible wishy thinking currency.
Welll… If you made 1M today from crypto (and ofcourse you did "relatively" no evil in obtaining so) - wouldnt using that 1M later to actually solve a hard problem (or say a social cause) be just as worth it?
No because I'd have to spend time and effort on that thing. I'm not a utilitarian, I enjoy creating and solving problems which is why I chose SW dev. Crypto speculation is the opposite of that.
I wager once people have to start going back to work and all the free government money dries up, there will be a run on crypto to realize their gains en-masse, and this will trigger a massive wipe out for many latecomers.
Frankly, cryptocurrency being invented and created was a huge mistake for society at large. I hope the comeuppance isn't super destructive outside of cryptocurrency circles.
> I hope the comeuppance isn't super destructive outside of cryptocurrency circles.
This is one of my concerns too. I sock away a healthy % of my income in to traditional investments, and I aspire to one day own a home I can raise a family in.
The current asset bubble, which I personally believe is the wedge driving cryptocurrency apart from reality, is really hurting those of us with these rather mundane aspirations.
It depends... I think cryptocurrencies might be luring clueless people away from the stock market and into the crypto market, which is probably a good thing for the stock market even if it means lower returns in the short term.
Good in theory, but the stock market is booming and so is everything else. In the media this has recently been called the "everything bubble" and TINA (there is no alternative).
> Frankly, cryptocurrency being invented and created was a huge mistake for society at large. I hope the comeuppance isn't super destructive outside of cryptocurrency circles.
Satoshi Nakamoto did nothing wrong: hard to imagine, but Bitcoin started out as a crummy C++ GUI Windows application hosted on SourceForge and adopted almost exclusively by batshit insane people. It had no value: you could CPU mine it on any ordinary Windows PC. Many people refused to do even that because of how worthless BTC was at the time.
Enter the Libertarian/profiteer cohort, and the rest is history. Really think a bunch of you need to redirect your anger at the ICO game. Try to imagine Vitalik Buterin hard selling a clear gray market IPO on Reddit in combination with a high pressure countdown timer, and lots of fancy lawyers and Swiss foundations. That — the fact so many bitcoins were raised so easily for so little — is what unleashed the hellfire shillnado that has become synonymous with cryptocurrency in the modern era.
I'm still not sure I agree that Satoshi did nothing wrong, per se. But I really appreciate what you're saying, as this does afford some separation of the art (Bitcoin and Co.) from the artist (Satoshi).
Satoshi (whether it be he, she, or they) went into creating Bitcoin intended as a peer to peer cash that was easy to spend and outside of government control. Unfortunately, at least in the case of Bitcoin, it has turned into this slow, unwieldy "commodity" that is now rebranded as digital gold.
Diamonds are a scam and everyone knows it.
They are an over inflated good held by a monopoly of handful producers that tightly control the supply.
And nobody gives a fuck.
> I see no value being created in these "investments".
And stock market is any better? At the inception stock market was a tool to invest and prop up businesses for long term dividend gains. No its pure speculation tool that doesn't benefit anyone but the concentrated wealth, it is so removed from reality (but you already mentioned that).
At least I made money of crypto, before the blob of ultraweathly descends on it.
I don't invest in diamonds (I had to buy a few, but that was an investment of different kind), and I don't really invest in the stockmarket either for the reasons you mentioned.
I can make enough money to live comfortably through work, admitedly I would be a lot safer if I had more, I prefer investing in realestate that I can potentially monetise by renting and I can leave to my children. It's probably not the most efficient but I don't want to spend time and effort on investing in to stockmarket, crypto or w/e - I chose SW development because I like to build things that solve problems and be creative - at this point crypto/stocks feel like the exact opposite (initially I gave it the benefit of a doubt but at this point I'm almost certain it's a bubble built on spreading bullshit)
But isn't there value being created in actual legitimate blockchain projects like Filecoin and Storj (dropbox replacements)? For these slower growing coins, isn't the value coming from the utility of the product?
> But isn't there value being created in actual legitimate blockchain projects like Filecoin and Storj (dropbox replacements)? For these slower growing coins, isn't the value coming from the utility of the product?
No. Cryptocurrency valuation is 100% driven by narrative, categorically.
Your post in and of itself exemplifies the narrative pumping rhetoric which is at the core of all cryptocurrency valuation. There are absolutely no exceptions to this, and that is not an exaggeration in any way.
No - it's pricing the value of what the next guy will pay and spreading false narratives to build the bubble/capitalise on more people joining in. You're actively penalised if you don't play this game because you'll miss out on the temporary gains and shorting is dangerous and pointless with such irrational valuation methods.
I was thinking, that this is my limited world view. Thanks for sharing your. Albeit I earned money with crypto designing mining hardware (but not using it for myself).
No need to be jealous, since it's still the very early days for crypto in the grand scheme of things. It's far from having hit any of the real success metrics (much broader usage, significant % of wealth stored, transferred, etc).
They may prove to be a lot more useful than you imagine and one thing for sure is they are here to stay at this point.
The big difference compared to 2019 is that we had a Bitcoin halving in 2020, prices usually increase significantly after that since it becomes a lot more scarce, people think Bitcoin is too expensive for them, so they flip altcoins, we are in the middle of the altcoin season. And we've also stress tested a lot of the defi protocols that are now fundamental blocks in the crypto world (uniswap, maker, compound, aave, etc).
Everyone in crypto and sat on a 5x gain tells you its the "early days" because they can afford to lose 80% and still shrug it off. It's easy to be chipper right now.
Go back to between early 2018 and early 2020 though and look at r/bitcoin and you'll see a bunch of people running themselves in to early graves with anxiety, following every twitch in the market and hyping up every news story about crypto to try and justify to themselves why they bought in.
Bitcoin could go to $1M/coin, but it might do that over a 3 month period 10 years from now after a decade of going nowhere.
Over 10 years in and it's still "early days" for crypto? When do you think this entire thing is considered mature?
I'm very much a crypto skeptic, mostly because I see a lot more harm than good that comes out of the space (ransomware enablement, horrendous waste of energy on PoW coins, egoists that make up the majority of the community, etc)
I mean internet has changed very significantly in the last 30 years, or even in the last 5 years.
Personally, I will say it's mature enough when Bitcoin is the world reserve currency (crazy, I know!) and defi fulfills majority if not all of my financial transactions/operations, etc.
I look at ransomware as a positive, finally a forcing function for companies to take security seriously. Energy, it's pushing us towards greener energy sources and there are less energy intensive alternatives being developed.
It definitely isn't, unless you count anything that uses power as pushing towards green energy which makes no sense.
The only way to incentivize different forms of energy production is by making them more profitable, which has nothing to do with what that power is used for.
> I mean internet has changed very significantly in the last 30 years, or even in the last 5 years.
Has it?
I think the biggest inflection point in the last 15 years has been the prevalence of smart phones and mobile connectivity, otherwise most of what we do on the Internet today was already happening in the 90s, it's just more prevalent now.
>>I look at ransomware as a positive, finally a forcing function for companies to take security seriously. Energy, it's pushing us towards greener energy sources and there are less energy intensive alternatives being developed.
I keep hearing this "green energy" being pushed harder by proponents of cryptocurrency and I find this rather disingenuous. We are already pushing towards this goal, crypto or not, but unlike a world blissfully free of this long con, green energy will not be appropriately allocated to areas of greater need, like infrastructure, housing, schools, hospitals, etc.
Plus, a true capitalist that wants the maximum value will go for the cheapest and easiest source of electricity. Coal fired and gas via fracking will still be easier to pursue for increased bang for buck. I think you assume the cryptocurrency community has the best interests of everyone else and the planet at heart.
Let's not forget that cryptocurrency miners and stakeholders are not shy from leeching off other countries that may offer subsidized electricity, sometimes even causing blackouts for those that need the electricity the most. Seems very parasitic.
Don‘t base your opinion on DOGE. There are plenty of cryptocureencies with actual use cases that provide value.
It's entertaining to see how crypto pushers all hate dogecoin because it's a 'joke', yet the only real difference between it and countless other coins (say, bitcoin) is in its name. The dirty secret is that they are all bad jokes.
All of those are interesting properties, but they are all unproven at scale and it's unclear whether they are "better" for humans than the things they claim to replace.
- Smart contracts can only effectively secure digital assets and entitlements that can be transferred electronically. Ultimately anything physical requires legal and physical entities to enforce. As an example: it's fine to put property contracts on a blockchain, but proving who owns what property is rarely a real world problem. We have land registries for this, and it's in everyone's interest to keep copies of sales contracts and sign them under witness. You still need bailiffs and lawyers to get squatters or bad tenants out of your property.
- I don't think 'centralized' exchanges are really a problem. There are hundreds of stock exchanges throughout the globe, tens of thousands of brokers and huge off-book markets. We live in a highly decentralized system already. There's an argument that Average Joe can't access these markets, but this is changing with traditional solutions already (see: Robinhood etc).
- decentralized finance (lending, investing, etc). Again, this doesn't work for lending secured against hard assets like property (i.e. mortgages). You need courts to deal with grievances over ownership, and this is where the costs lie. Solving the paperwork problem is not interesting.
- instant borderless value transfer. Well, Transferwise and many more obscure, specialized companies offer this already, and waiting a 24 hours for a big, global transfer in the worst case isn't really a big deal.
The bottom line is the needs of most people are already well served by traditional blockchainless services, and where they're not it's not obvious that they can't be.
They aren't all working to survive but the ones who are are. Anyone who wants to escape the rat race would take the GS exec job if they were offered it as it speeds up the timeline for them.
I am deadly serious. There has been a successful multi-decade gaslighting initiative to make people think middle class and working class are different when in fact they are both just working to make the investment class rich. Time is your most valuable asset and unless you own it 100% then you are working class.
You're absolutely right in implicitly arguing that social class isn't exactly determined by the amount of money you have.
You're also correct that traditionally the proletariat (the working class) were those who sold their labour. By a very strict definition, anyone who earns a wage is working class and that would include CEOs (as you are doing explicitly). That definition is deficient and doesn't relate to reality.
Traditionally, the bourgeoisie were the class or classes who employed the workers. The capitalists own the capital and capital goods (means of production) that are used in industry. The petit bourgeoisie are those who own small businesses, such as shopkeepers or lawyers. They were middle class because they were neither working class nor part of the nobility.
Today many companies are publicly held. By this, I mean that stakes in the company are sold publicly. Many companies are also part-owned by the public in the sense of state ownership. This kind of relationship would falsely suppose that members of the working class are members of the bourgeoisie. You agree that ownership doesn't exactly determine class since your criterion is the selling of time or labour.
Those today who have power over the factors of production are very often employed when previously they employed themselves. You call these people working class. I find that very bizarre.
I believe that a managing director of an investment bank is a person who represents capital absolutely. Their job is to head an organisation whose aim is to manage capital and to generate or bring in capital in the process. To identify this person with a factory worker is confused.
"The man" doesn't have to be rich (but he is), his position is one of power.
Money is power, so the man is those on the top floors of institutes dealing with large amounts of money and having gala evenings with politicians and CEOs.
That's who the working class person making minimum wage that was just made redundant actually works for.
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Saying that the investor bank executive is working class because he needs to pay his rent is bollocks.
Working class is anyone who needs to work to survive. The rest (middle class, salary etc) is all a distraction. Pitting poors against poors to leverage power. Either you have enough to live off of your investments 100% or you are working class.
So the millionaire that's spending $5,000 a week in rent and $50,000 a week to maintain his lifestyle—as it might be required by his job and expected by his peers—is working class?
Sorry, it's your definition that is wrong. "Working class" doesn't mean "category of people that work."
"When used non-academically in the United States, [...] it often refers to a section of society dependent on physical labour, especially when compensated with an hourly wage. For example, the working class is loosely defined as those without college degrees. Working-class occupations are then categorized into four groups: unskilled labourers, artisans, outworkers, and factory workers."
Honestly, it seems to me like this may be a case of having some insider knowledge or knowing ahead of time that the coordinated pump and dump was going to occur. Any rational person would have looked at DOGE over the past however many years and seen it for the true joke it was. It barely made any meaningful movement on pricing until very recently.
I can understand if someone may have mined it for fun and forgot about it, or some Robinhood user messed about with DOGE, but this feels a bit more unusual to me. Perhaps working at Goldman Sachs afforded him some additional advantage on insight?
I'm not sure I could sleep easy at night knowing I fleeced the rubes, but then again, I'm not this gentleman.
Any rational person sees the market is irrational.
Putting $10 on dodge back in January, or on spiffcoin today, is no different to putting $10 on a horse at the 3.15, except the excitement probably lasts longer.
The bookie wins on aggregate, but you are buying the hope and excitement and that has value.
I profited too without extra information: I bought 20$ worth of dogecoin some time ago. When I saw last week that it had risen, I had to search for my old backups, convert the wallet format, and transfer the coins.. Pure luck
The same happened to me. I bought a bit of doge years ago with no intention of my buy being a trade or investment to make profit. I originally was just trying to figure out how this all worked. I totally forgot about it until recently.
However, I'm assuming this guy put down a significantly greater amount of cash down than either of us did. He couldn't have made millions by a small amount bought. I assume he had some insights by analyzing the technicals of the price movement. Based on his background, that assumption seems reasonable. Otherwise, he was willing to buy very early on and risk say $10k on a cryptocurrency that doesn't really have any valuable fundamentals... besides that it's a meme and it's funny that you can make fake money out of meme. People bet more than that on horses in races with no rational basis or he has lots of disposable income, so it is possible he made the trade on a whim.
Yes. Wait for the idiots to put their cash into it, and extract that. The rest should wait for more idiots. Too bad for the ones who get in last. So good for him.
I do feel jaded by all of this, but I can only hope that people who lose their shirts on all of this actually learn not to try this mess ever again. Greed really can be our biggest downfall.
In 10 years another bunch of 20-30 year olds will join some new attractive 'get rich quick' scheme before they lose anything they got in the following crash if pyramid. Recycle and repaeat.
To truly "cash out", I think you would need to trade into stablecoins or various other coins with low transfer fees (tether, neo, ada) then transfer to a multitude of crypto exchanges who have high enough limits to start converting to fiat. Those with KYC would then report earnings to the IRS. There are some without KYC (KuCoin) which you might be able to hide some earnings. 3rd option is get it into bitcoin, fly offshore and start cashing out from Bitcoin ATMs or offshore banks.
If you wonder why authorities tolerate current climate of Ponzi schemes, it's probably because of the expectations this crypto tech will become stable and reliable enough to begin transition to crypto-based currencies with emission controlled by central banks. Some countries already started research and development.
No wealth was created or destroyed in the making of these millions, the millions simply changed hands. Think about that before purchasing a cryptocurrency. You're basically handing your money to an earlier "investor" in the hopes that a future "investor" will hand a greater amount to you. This is all there is to it.
We need to understand is that, while many cryptocurrencies are completely worthless, some cryptocurrencies have solid reasons to exist.
Your characterization of all cryptocurrencies as a ponzi scheme purely based on the fact that people buy it because they believe others will buy it later at a higher price is weak because that is how all monetary assets like gold operates. We take it because we believe others will also take in the future.
I personally buy bitcoin not to sell for a higher price but rather, I believe strongly that a monetary system that's provably scarce, programmable, completely decentralized, permission-less, trustless, higly divisible, borderless and very easy to transfer has the potential to revolutionize how we store value.
This does not mean that everyone buys bitcoin because of this, some (perhaps majority) buy it because they believe it's going to go up but I see that as an initial incentive to get people into the industry.
At the end of the day, only time will tell if cryptocurrencies can actually live up to their promises of revolutionizing the financial system.
"I believe strongly that a monetary system that's provably scarce, programmable, completely decentralized, permission-less, trustless, higly divisible, borderless and very easy to transfer has the potential to revolutionize how we store value."
But is adding massively to global carbon levels needlessly...
That is an implementation detail of bitcoin, not a fundamental aspect of cryptocurrency.
Bitcoin is cryptocurrency 1.0, or proof of concept, and the concept is well and truly proven.
Developing others which operate more efficiently than the proof-of-concept or 1.0 version, or even than the existing banks and credit card exchanges is just engineering and iteration, and hardly a great leap of imagination or faith.
That's not correct. There's proof of work (what you're talking about), proof of stake (much more efficient, different purpose), and proof of history (more time centric).
These narratives about power and emissions are narratives with an agenda. The agenda may be good in nature, but don't mistake them for accurate or precise.
The only concept that is well and truly proven is that of an expensive and barely usable payment system with a colossal environmental cost. Everything else is vaporware, as of today.
This can also be applied to the stock market as it is used today, the majority of people don’t care about dividends or voting rights, only the price, with company earnings serving the sole purpose of predicting the future price at the expected time of selling to another person. Crypto is just the end game of that behavior where it’s not hidden.
Edit: also apart from making us question theses behaviors in other markets if that speculating behavior is bound to exist then at least it’s relatively harmless compared to doing that with real estate or commodities like food or water. Better that bank exec making that with dogecoin than other real stuff.
Companies are in general productive goods. An investor may not care about decades of dividends ahead, but they are there. They are paid (in the long term) from value created, not just a FIFO bubble.
But the stock market is a secondary market, you exchange second hand titles, you are not an investor, so my point is that if people are just here to speculate on the value it’s not very different and the underlying doesn’t really matter.
If you own stock you are an investor who is invested in a business, in exactly the same way that someone who owns a restaurant or some business is invested in that business. There is no difference between owning a stock and owning a business.
Well, think about operating a credit card company and taking fees whenever one of your cards is used. You could be very rich that way. Was any wealth created, or are you just siphoning off value that, in your absence, would have gone to someone else?
In that case, you created a lot of wealth and kept a part of it. The extra wealth arose from transactions that wouldn't have occurred without the service you provide.
Cryptocurrency isn't used much as a medium of exchange, but that was a design goal. Theoretically, it could be.
The stock market has other mechanism of value creation, one of them that the company distributes dividends which is money outside the stock market. Companies also use it to fund themselves to grow. It is not a zero sum game.
Crypto currency is a zero sum game and i think this is what OP was implyining.
I'd be totally with you until 2 years ago. Now I'm not so certain. Can you truly look at TSLA and say that there's value creation behind that valuation? Or GME? And frankly, the dollar?
And if it's not the case for these pathetic cases, what does that say about the rest?
BTW I'm not arguing the dollar is worthless, especially not when compared to crypto, obviously the dollar has a lot more use than Bitcoin. But look at what rich people / money managers are doing with their dollars. If a Saudi prince is buying a painting by a student of Da Vinci for 450 billion dollars, what does that really say about the value of the dollar?
Things are not what they seem, I guess it's always been the case that quantities of money don't scale linearly in value but it seems particularly true today. And whatever is going on, it is foolish to dismiss cryptocurrency based on something that's not true for securities and not even for other currency.
> Can you truly look at TSLA and say that there's value creation behind that valuation?
the value of TSLA hasn't been created yet - the event is still in the future. The current price is based on the expectation (by many people) that their value creation in the future will occur.
As for GME - the short squeeze certainly did create value. It's like charging someone dying of thirst in the desert for water. But as soon as those people got _some_ water, you can no longer charge the same high price. Thus GME's rise and fall is rational.
That expectation is not based in any reality, not by anyone working at Tesla, and not by anyone with any sort of realistic view of what the company will do in the future. The value of the stock simply does not have any relation to the company itself. It's easy to verify this by asking anyone holding TSLA what amount of profit Tesla will make at the point that its current valuation is justified. It doesn't even really matter how far in the future that point is, it would for an investor basing their investments on fundamentals, but that's not what's going on.
As soon as you dive into the numbers, their answer will stop even mentioning the company Tesla, it will be about the American economy or the global economy in general.
I agree the short squeeze held value, it was great, but its value hasn't fallen yet, it's still over ten times its fundamental value, if such a thing even exists. If GME's new plans succeed, and it does exceptionally well and it really becomes a big player in the online games industry, maybe its stock would be worth $40 or even $80. If it doesn't, then all this capital is wasted and the stock is probably worth under $4. With those two very extreme scenarios and their appropriate valuations, what is its stock doing sitting at $150?
The answer is simple, just find a social gathering of GME investors, like r/superstonk, and read what they're saying about the stock. They're calling the squeeze to 450 a "baby squeeze", and that the big one is still coming. Even though as far as I know the squeeze to 450 was the largest squeeze in the history of the stock market.
I'm not saying these stocks are overvalued by the way. If you've got a firm grasp on the dynamics of those stocks, it might make sense to buy/hold at these prices. Just like it made sense to hold Dogecoin to that Goldman Sachs guy. Just don't pretend it's different somehow.
> And if it's not the case for these pathetic cases, what does that say about the rest?
There’s an old joke that starts with a guy taking a train through Scotland. He sees a black sheep out the window and says, “Ah, Scottish sheep are black. How interesting!”
The price of a stock is part market insanity and part value. The proportion varies.
I was under the impression that dividends were essentially forced value selloffs, given that stock prices drop the exact amount of the dividend the moment it is paid.
Value is created by the company making profits. How it uses those profits, whether by paying out dividends, buying back stock, or investing in the business, is mostly irrelevant to the value creation part.
So, given that dividends are priced in to the value estimation by investors - which we have established is completely disconnected from actual value - and priced out once paid... it turns out that for exchanges, value is not very relevant?
> … which we have established is completely disconnected from actual value …
This part is false. The price of a stock is not completely disconnected from actual value.
The money for the dividends has to come from somewhere. If you own AAPL, the dividends are funded Apple’s business activities. If you think that Apple’s business is a dead end, you would sell off your AAPL stock and move your money somewhere else.
Dividends are also only a small part of the picture.
To flip it around, the stock had a higher price to begin with because it is expected to pay dividends. I don’t think anyone is saying that the dividends themselves are what creates value.
Seems like any currency conversion or speculation of any kind is a zero sum game then. But ostensibly if it's spent like any currency it's not zero sum
> Seems like any currency conversion or speculation of any kind is a zero sum game then
it's not really zero sum - this sort of speculation creates liquidity. This liquidity allows people who want to use the underlying asset in some other way to have a buyer (or seller) on the other end of the transaction.
> The stock market has other mechanism of value creation, one of them that the company distributes dividends which is money outside the stock market.
I'm not sure I would describe high-flying tech stocks with no dividends, trading at 30-70 times earnings as much different. How many investors are really snapping up these stocks because they're sold on the 30+ year value proposition?
In case of a sustained growth of a company (think Apple over the past 20 years) what the shareholders gain comes from the earnings of the company. Apple shareholders have gained trillions in the past years - no one has lost an equivalent amount.
Yes, sustained growth of Apple over the past 20 years makes buying Apple stock an investment. Shareholder gains come either from dividends or stock buybacks (which is kinda the same), but not every uptick in the stock price is because of value creation.
Some stock price movements are also zero-sum. Active trading is zero-sum.
I’m not sure what your point is. Are you talking about a small fraction of stocks that pay dividends? Because otherwise the stock market is completely based on this: money changing hands.
Buybacks are also a mechanism of connecting stock price to company performance, but arguably that is also tenuous and rare, except for the last few years when several companies have done buybacks.
There's a distinction there. In the stock market, your decision to buy leads to a price increase which improves the ability of that specific company to raise money.
Your investment decision directly impacted the prospects of that company over others.
In an ideal world, speculation in the stock market means that the best companies receive funding and the worst companies are unable to and therefore appropriately go out if business.
Yes, but in the real world people are makong jsut as much if not more money on comaoniea that they think other people will later invest it, rather than companies that they think are good companies. That makes it little better than crypto.
There's a bubble now in speculative stocks, and it's not good because it means billions in funding are going towards failing companies. That's why I said "in an ideal world".
I do believe this bubble will pop eventually and the stock market will return to its appropriate primary function (which it still is doing ex-retail hype stocks) of allocating capital to the most productive companies.
Note also that I was responding to the statement that no wealth was created or destroyed by speculation in the stock market. My point is that this statement is false because it makes a real world difference whether it's GME versus MRNA that gets to raise money.
> the stock market will return to its appropriate primary function (which it still is doing ex-retail hype stocks) of allocating capital to the most productive companies.
Do you think it has done this in the last 30 years? I am of the opinion that has it has at best done this exceedingly poorly. There are many reasons for this:
1. Speculating is the one we've already covered
2. HFT, which isn't that much different to speculating
3. The consolidation of market power in a few huge funds
4. The rise of index funds which don't attempt to judge companies on merit at all
It would/will take significant reforms to return the stock market to anything remotely resembling an ideal market.
It has done this rather well historically. A failing, badly managed company is most of the time going to be worth less than a highly successful one or one that's growing and gaining traction. That's why when a company beats quarterly earnings, the stock price goes up. It's also why Enron's price crashed when their fraud was revealed. That means capital is typically and on average flowing in a productive direction versus the alternative, which is good for the economy for obvious reasons.
HFT isn't relevant to this picture, their role is primarily market making and arbitrage and they have no net impact on pricing. Their sole role is to replace human market makers in a liquidity provision capacity, which reduces the cost to the active manager of doing business, at the expense of the extinct human market maker.
Hedge funds aren't that consolidated. There's lots of them. There's no such thing as market power (in terms of oligopoly or monopoly power) for the industry either. The bigger you are, the harder it is to operate on a marginal basis, since price impact becomes prohibitive. Hedge fund spin offs are a dime a dozen since all the IP is in individual's heads. The biggest ones are resigned to longer bets where the edge is smaller. Market power is a thing only for HFT firms, due to economies of scale and scope on the tech and fee side, but as mentioned above HFT aren't relevant to what we are discussing.
Index funds chase valuations set by active managers since they're typically investing in market cap weighted indices. Their existence doesn't change the value add or necessity of accurate security pricing, and they're not really relevant to that either.
Stock holders own the underlying business and businesses do create wealth—all the inputs that are used in making a product are worth less that the product itself.
by using labour, and capital (plant and equipment usually) to generate something that didn't exist before, that other people would pay more for than the cost of inputs.
That's how _all_ wealth gets created. Even under communism (where the difference is that under communism, the capital is provided, and owned by the state, rather than privately owned).
No wealth was created or destroyed in the making of pretty much every luxury good, currency, stock, loan, ... That is not what defines a ponzi scheme.
Furthermore, if you need money in 4-5 countries (even inside the Eurozone), you'll find that several cryptocurrencies are really quite good for that purpose, and that banks are not. So I for one have found value in owning these (mostly temporarily, although I have some on hand now).
Might be fun to do it with Dogecoin I must say. I should give it a try.
Any scam could be defended this way. What does differentiate a scam from a legit investment ?
Most cryptocurrencies are cartoon characters particularly tailored for gambling machines. I haven't seen a single use case other than enabling masses enter a massive pyramid scheme constantly manipulated in social media.
> What does differentiate a scam from a legit investment ?
that the reason someone might pay you more in the future must be "legitimate" - that is the asset can be independently valued to be worth more in the future.
Investment in shares is not a scam (mostly), even if they _never_ pay a dividend, as long as they earn a profit. Investment in gold, however, can be likened to a scam, as the value of gold only grows to as speculation, and not wealth creation.
Hard to say whether cryptos behaves as gold, as some crypto does have uses beyond being sold to someone else for a higher price.
Sure, but the thing being traded for these are US Dollars which are, by explicit design, worse than pretty much any other asset over the long term. Not only do they go down in value, but they go down in value in a difficult to predict pattern and more rapidly in crisises.
Holding almost literally anything nonperishable is better than dollars. We can argue what it is, but if anyone has any optimism at all about the future of Dogecoin then there is a price point where it makes a lot of sense to buy Dogecoin rather than dollars.
Well, you know. This is economics. What people intended doesn't matter; price is forward looking and present-based. It doesn't look like a joke right now.
You know this thing called gold. All you are doing is being an early investor in "gold" in the hopes that a future "investor" will hand a greater amount to you for the "gold". This is all there is to it.
I do liken cryptocurrency as a sort of voluntary "redistribution of the wealth" but from the peanut gallery to early adopters and the already objectively "rich".
This really feels like a kind of "screw you, I've gotten mine" form of capitalism.
Perhaps... but cryptocurrency makes this far more blatant and obvious. It really is sold as some kind of pipe-dream and a miracle financial instrument.
Yet tell that to those who lost their shirts on Mt. Gox, Binance, any of the black swan events within the past few years, etc.
Let's be real here, only a negligible amount of buyers today purchase cryptocurrencies because they believe in the tech - for the majority, it boils down to making a quick buck.
The tech does indeed have valuable applications, but that doesn't take away the fact that we're in a mania.
I do think the psychological (is that the word I'm looking for?) aspects of the frothy financial climate driving the cryptoboom is under-discussed. When the wider financial (not just crypto) bubble pops there's going to be a lot of resentment this time around.
I'm jealous of people and their crypto gains, having considered putting a tiny % of my portfolio in to crypto not long before the pandemic and deciding against it, but ultimately none of these cryptocurrencies are any more useful than they were in 2019, and in my gut I feel that these huge unjustified gains should, morally speaking, evaporate if these things prove to be worthless to us a society.