I own no crypto and I think it's a ridiculous piece of hype, but I think all that reporting (and, on twitter, all that schadenfreude) about bitcoin (etc) going down is nonsense.

If you look at a 5 year chart of the BTC value, it's still super insane high and it's been going down hard once before (summer 2021). If I were a crypto fan I'd just tweet HODL like every previous time.

The thing about Bitcoin specifically, though, is that there are only really 2 possible outcomes:

1. The world decides it's "tulips" at some point, and the value goes to 0.

2. The world decides it will be a major part of the financial system, and it goes to 500k or 1 million.

Basically, anything in between is just a probability calculation of whether it will end up at one end or the other.

The problem with this, though, is that the way proof of work works means that it is impossible that it will ever go to a million. The amount of electricity needed to protect the network is directly tied to the price of BTC. This is not just some small, inconvenient detail. It is inherent to how proof of work functions. So if it takes the electrical output of, say, Argentina to run Bitcoin now, it will take the output of China to run it when it's up around a million, and that obviously is untenable.

Other cryptocurrencies have seen the writing on the wall and are moving to proof of stake (not without other issues). But the politics of Bitcoin mining, and the few large mining groups, makes it hard for me to see how this happens.

I could be wrong about this, but I don't know if the energy requirements have anything to do with the price (I.e. demand) for the coin, does it? I was under the impression that the problems that you have to solve get predictably more difficult, and they're more of a function of time than price.

But yes, with your point overall I agree, like in 10 years or something it doesn't seem workable without major changes. Wasn't that what lightening or side chains were supposed to do?

Any way, also, I don't own any crypto and I'm definitely not defending it. Feel free to correct me too if I'm mistaken, anyone.

You have it a bit backwards: the energy demand has to do with the price of the coin. You can look at mining calculators to see what the relationship is between kWh and coins today, and some have historical charts. This relationship is baked in to the "difficulty" of the mining function and the block reward - higher difficulty means more hashes per block which means more watts per coin. In turn, your power company charges you per kWh, and in an efficient market, you are going to expand operations until your marginal cost (the cost of power) is equal to marginal profit (profit from selling the coins you mine). Generally, bitcoin mining has been done in such a way that if you have access to power at 5-10c per kWh, you can mine profitably (not including the cost of a mining rig).

As the block reward goes down (and it is dropping), the rewards of mining also drop, so you have a reasonable argument that the power use is transitory until the block reward goes to 0. However, it looks like this may end up being made up with transaction fees because the transaction throughput of bitcoin is also really low.

Lightning and other solutions are supposed to fix the transaction throughput, but they have limitations.

I guess if the price of BTC goes up, then it makes it more "worth it" to throw more energy at mounting a double-spend attack, and therefore the energy needed to protect the network against such an attack also goes up?

> I guess if the price of BTC goes up, then it makes it more "worth it" to throw more energy at mounting a double-spend attack

Close, but not correct. As the price of BTC goes up, so does the expected reward for mining any given block, making it profitable to spend more electricity in pursuit of the rewards. This results in a net increase in electricity usage as everyone spends more in an attempt to capture the rising value of mining a block successfully.

In practice each miner is incentivized to spend an equal amount in electricity per block (at local rates) as the expected reward per block will net them. This results in a 51% attack being inordinately expensive, which was the point of the original design.

> Another consideration for each miner is to look for cheaper and more abundant energy sources

And thereby offsetting other inelastic demand for electricity, forcing them to count on non-renewables instead.

Bitcoin might be renewable if every single miner pinky swears to turn their rigs off the moment renewables stop over-producing, but come on, nobody believes that'll happen.

> Despite what the born-again eco-warriors have to say about consumption and the environment, Bitcoin can actually be an incentive for safe energy sources.

Interesting you've got to put an ad hominem in there about people who care about the environment. Probably not a good sign for the second half of this sentence, and it makes me wonder if you're representing other's positions in good faith.

Also, oops: https://e360.yale.edu/digest/bitcoin-miners-resurrect-fossil...

Sure, bitcoin miners will use cheap renewables if they're available. They'll also happily use whatever the hell is available too given the opportunity, since they need to use so much of the stuff. They're particularly notorious for driving up electricity rates locally as they turn previously abundant renewable hydro energy into a over-subscribed resource, requiring towns to import electricity from, yes, fossil fuel plants.

It's much simpler than that. If the price of BTC goes up, it's worth spending more on electricity to mine it.

If 1 coin costs $50,000, and you already own the rig, it's worth spending $49,999 on electricity to mine the next coin and you will make a profit. If you're rig can't do that, you're better off just turning it off.

Sure, but if the BTC prices rise enough then it is in every transaction recipient's benefit that the network is mining even if there aren't any new coins minted, to avoid a "51% attack" / double spend attack.

Ah ok, I just looked it up on Wikipedia and understand why I was confused and where the corrections are coming from as well.

> Every 2,016 blocks (approximately 14 days given roughly 10 minutes per block), nodes deterministically adjust the difficulty target based on the recent rate of block generation, with the aim of keeping the average time between new blocks at ten minutes.

So the changes are made at somewhat predictable paces, in this case roughly every 14 minutes, but the difficulty is adjusted based on demand. In other words, it's a little of both. Demand though will definitely affect the difficulty of the problems, but the demand is only updated every 2,016 blocks.

> but the difficulty is adjusted based on demand

Only indirectly. More precisely the difficulty is based on supply of hashing power. If more people hash, the blocks will be minted faster and the difficulty will be adjusted higher at the next re-adjustment. It doesn't really matter if those blocks are actually full or empty, and in fact the system would continue to work if most of the blocks were empty and the trading happened off the chain in exchanges.

I say indirectly because the amount of hashing power on the chain at any given moment is driven by the expected reward per block minted. Nobody wants to run thirsty machines if the cost of electricity exceeds the expected rewards for successfully minting a block. So the number of machines online and is directly proportional to the value of bitcoin, which is driven by consumer demand.

If the energy demand is less than the mining reward, you can profitably mine it.

Why would a bitcoin miner sell his mined BTC for less than the power costs?

To pay down rising borrowing costs?

how? I mined and got $10 in mining rewards. I owe $12 in electricity. what money do I have left over to pay down anything?

Isn't the difficulty tied to the hash rate?

The difficulty does readjust based on the hashrate; but the hashrate is driven by the cost/benefit analysis of hardware and electricity vs. block rewards, meaning as the asset price goes up, more miners are incentivized to join the network.

Why is this not a possibility:

3. It continues to be used very little/nothing in the legitimate financial system while being used for blackmail, drug trade, crypto trade etc. Price $1000.

> The amount of electricity needed to protect the network is directly tied to the price of BTC

This is not how proof of work functions. Hash rate and price are not directly related, they are somewhat correlated because when the price goes up it becomes more profitable to mine. Bitcoin doesn't need more hash rate for the price to go up - the price is the independent variable and the hash rate is the dependent variable.

Not directly related but not "somewhat" correlated either, it's deeply correlated exactly due to profitability, a point you actually mention but somehow don't consider a deep correlation.

Mining profitability is subject to conditions besides the price of a Bitcoin, for example: energy prices, block reward changes, regulation, hardware availability and pricing, etc.

It's really not as simple as hash rate = price. It's more so that they are correlated in direction of change.

Truth. Parent comment is deeply misinformed. BTC already has more than enough hash rate, and it is entirely independent of price.

That does not make sense.

The whole point of proof of work is that it is proof that someone has spent the value in electricity validating a block.

As the price of bitcoin rises, naturally more and more miners will beef up their rigs (that is, spend more money in infrastructure and electricity) to mine BTC, because the rewards and fees are worth more. Note if they didn't do this, anyone could easily have a "free money" arbitrage play, and basic economics says that discrepancy in prices (i.e. the value of a BTC on the market and the cost to mine one) must be arbitraged away.

Think of it this way, if hash rate is independent of price, why does it take the electricity output of Argentina to run the network? It certainly didn't take that much years ago. The reason being that as BTC becomes more valuable there is more reward and thus more competition for miners to mine. As that happens, the hash rate will rise as more power is added to the network.

I think it's functionally impossible for Bitcoin to hit literal zero. It could someday run on a network of ten hipster tech-history enthusiasts, worth micro-pennies like DOGE in the early days, but it still wouldn't hit zero.

I agree that Proof of Work has a severe scaling problem; which is why I expect Proof of Stake to outcompete PoW (a token with lower transaction costs being inherently more desirable as a store of value). AFAICT PoS scales linearly: as the market cap goes up, the opportunity cost of locking tokens, and the mining rewards, both go up proportionally. It'll be interesting to see if BTC maxi culture sees the writing on the wall, or sticks to their guns to the bitter end; even if they're right that it's a better security model (I'm doubtful), it wouldn't be the first time that "good enough" won the market.

I suppose the biggest reason that we'll never see PoW vanish completely, even if carbon-taxed or outlawed by most states, is the massive capital outlay in ASIC mining hardware, which literally has no other use. There'll always be a desire to recoup that investment, and an incentive to foster "true believers" to maintain demand.

I think the bigger issue is that Bitcoin has nothing backing it. It's value (and in turn, volatility) is driven by popular demand for the "asset", so even if there is some insane moonshot scenario where we do adopt it into the financial system, there's a very real chance that the price will collapse with little or no chance for recourse. That's the biggest issue, and it's one that's inherent to Bitcoin's nature as a decentralized currency. You'll hear diamond-hands Redditors complain about how Bitcoin "shouldn't be a fiat" and other such yarns of fiction, but the truth is that it doesn't have any desirable qualities that a centralized currency does. There is no bail-out, if Bitcoin fails then no sane person is going to let the global economy fail with it.

Simply put, there's just no path forwards where Bitcoin retains it's value long-term. Other crypto is harder to grok (often intentionally so), but I suspect they'll meet a similar fate once the media attention blows over.

It's backed by mathematics instead of a country. That doesn't make it better or worse, just different, and diversity is generally what people want in their portfolio.

It's not backed by mathematics any more than gold is backed by chemistry.

Uh, gold _is_ backed by chemistry. If gold were to change nearly any of its chemical properties, it would instantly lose its value. It is stable, generally non-reactive, non-toxic, lustrous, and of generally low abundance - all properties derived directly from its chemistry.

That is actually one of the strongest arguments, to my mind, for why some variant of a cryptocurrency will survive as a store of value. Gold kind of "organically" found its way into value almost precisely because it is backed by the physical laws of nature. Cryptocurrencies went up a level to be backed by the laws of mathematics.

Gold's value comes from being a Schelling point, not from any particular chemical properties - other than, like, not killing you or exploding.

Bitcoin is also a Schelling point.

Sure and cash is backed by a special linen-cotton blend of paper.

So, quite a lot then?

Making gold has always been the holy grail of chemistry. It's only valuable because chemistry says you can't make it easily.

Couldn't you say that about basically anything? That it will eventually be really big or go away?

Seems to me like bitcoin could keep seesawing on the fringes of relevance for a while. And people still buy tulips and beanie babies, albeit not anywhere near the prices at their height.

But that's because tulips and beanie babies have inherent value.

Tulips are pretty flowers.

Beanie babies are cute toys that you can play with.

Bitcoin is a purely virtual financial instrument. It has no purpose other than to be worth money.

It created an entire industry of ransomware!

> 2. The world decides it will be a major part of the financial system, and it goes to 500k or 1 million.

Where does this belief come from?

Dollars are also a major part of the financial system, at yet each dollar is only worth $1.

The supply of Dollars is not limited to 21 million.

You're missing a few pieces. The amount of electricity needed to protect the network is directly tied to the value of the block reward.

This depends on the value of bitcoin, true, but also the amount users are paying in fees and the reward era we are in (see https://en.bitcoin.it/wiki/Controlled_supply).

The way the system works is a block reward is paid every 10 minutes, currently 6.25 bitcoin worth about US$220k. This money then gets spend on mining costs, mostly electricity and mining hardware. The reward drops in half every 4 years so in 16 years it'll be 1/16 as much in bitcoin terms and if at that point bitcoin is around $500k the money spent on mining will be around the same as now.

> The amount of electricity needed to protect the network is directly tied to the price of BTC.

Why? I keep seeing this claim and it makes no sense to me.

If the price of bitcoin rose to $1 million, but the price to mine one and associated transaction fees stayed at, say, just $20k in electricity costs, don't you think lots of other miners would beef up their rigs to mine bitcoin now? After all, that's like $980k in free money!

Of course, they would beef up their rigs (spending commensurately more in electricity), and the required hash difficulty would go up to keep the mining speed at a block per 10 minutes.

Another way to think of it, is why do you think the electricity requirements of Bitcoin are now the output of Argentina? Years ago they were a teeny fraction of that. As Bitcoin became more valuable, the competition for mining increased, so the hash difficulty adjusted to ensure the new block rate matched the higher wattage miners were willing to put in to increase their hash rates.

That's a big assumption. Same assumption made in the study which provides the 0.5% world energy consumption figure that everyone is citing. No actual evidence that it is true is provided. The same study shows minimum consumption estimates which are much more reasonable.

I'm not assuming anything.

There is a guaranteed deep correlation between BTC price and amount of electricity needed to run the BTC network. That is the way proof of work is designed to function. I.e the whole way it protects against a 51% attack. There is simply no getting around this.

There is a relationship between mining difficulty and energy consumption. What I don't see is the correlation between price and mining difficulty. By this logic, mining activity should be way down right now.

I've read this explanation that i find explicit:

""" If 1 coin costs $50,000, and you already own the rig, it's worth spending $49,999 on electricity to mine the next coin and you will make a profit. If you're rig can't do that, you're better off just turning it off. """

Note that this is how it worked for bitcoin startup five years ago once the first specialized bitcoin rigs came into being. When the price of electricity where they operated became too high, some startup shut out or just changed their operations to create value around BTC(email/photograph ID/validation on the blockchain or other stuff like that)

I assume because the higher the price the greater the incentive for one entity to take over 51% of the network and start stealing transactions.

What makes you assume that only 0 and >500k USD are possible outcomes? Why not 5k or 50k? Why can it not sustain as a niche asset in your book?

> anything in between is just a probability calculation of whether it will end up at one end or the other.

There is some strong assumption you’re leaving out here.

3. both 2, then 1

If you own cryptocurrency, and its all gone down, you're invested and can do two things. You can keep hold of your assets, or you can sell. If you sell, you can decide to share such or not, but since you are no longer invested, there's no incentive to share such (and if you're part of a pump and dump scheme, you don't want people to lose trust so your incentive is to say HODL while doing otherwise). So it makes sense we see a lot of HODL posts; these are people who are invested and don't want an implosion. There's also no way to verify whether the people who claim HODL actually do as they say. Thinking about it, seems awfully close to game theory like prisoner's dilemma.

Bitcoin is probably the first Ponzi scheme where everyone in it knows it is a Ponzi scheme. So I agree with your take here.

USA has natural resources, advanced technologies, and a standing armed forces that are stationed all over the world. These extract value and serve as utility.

Bitcoin is better at laundering money than many fiat currencies but otherwise it’s only wide scale utility is a speculative investment asset that only increases in value if more people create demand for its limited supply.

Yeah, the floor value of bitcoin is probably its value in crime.

Which I think is $0 . Monero has supplanted Bitcoin in the "crime" liquidity department.

I don't think it really qualifies as a Ponzi scheme, functionally it's not all that different from any other speculative asset. You're not giving your money to the 'blockchain' expecting it to give back X amount of dollars, you're trading your money for bitcoins and that's the end of it. Whether you want to keep your bitcoins forever, or attempt to find someone else to sell them to is up to you.

As an occasional bitcoin holder, I don't think it's a Ponzi scheme. Who's the Ponzi schemer? How come every time it collapses it comes back bigger in a year or two?

It's not a Ponzi scheme. It's a multi-level marketing or pyramid scheme. A percentage of every sale (transaction fees) of crypto goes to the other coin owners of the crypto. For every crypto coin it works slightly different. For Bitcoin, the original design was that everybody could be a miner and (potentially) receive transaction fees. Now it's in the hands of a few with the computing power.

70% of Bitcoin holders bought in last year. A continuous stream of greater fools is necessary for its price to even remain at the current level

Also, every ponzi scheme gives amazing returns, before it inevitably collapses. For example Madoff was able to give decent returns to his investors for 17 years! 'Number go up' is not a refutation of a ponzi scheme.

Yeah but with a Madoff/Ponzi scheme the thing collapses, Madoff goes to jail, it ends. Bitcoin seems more like other assets that don't make things, stuff like fiat money, gold, fine art and so on.

Yeah, it's the world's first decentralized Ponzi scheme. There's nobody to put in jail - its value just drops to 0.

It literally is just fiat currency. Bitcoin is a way to make fiat currency independent of government.

...but dependent on the price of electricity and computers.

Guess which governments have the most of both.

> A continuous stream of greater fools is necessary for its price to even remain at the current level.

I think HN is going to need a good explanation for this. The value is intrinsic, and can go up without any activity happening... I think there are other fools scouring about here in the comments.

> I think HN is going to need a good explanation for this. The value is intrinsic, and can go up without any activity happening...

I think you need to explain this. In what way does bitcoin have any intrinsic value?

And how can this value go up without activity? A currency with no activity is literally worthless.

You are the Ponzi schemer. It is a combination of Pump and Dump and Ponzi. That's why it "comes back bigger".

I think it comes back bigger each time because more people get involved. From a handful of tech geeks at the start to maybe 100m people this time around.

only 7Billion suckers on Earth. Pretty soon you'll need aliens to buy BTC to keep propping up the price...

Bitcoin isn't even close to reaching all 8* billion people, so this Ponzi scheme has the ability to go even higher.

Bitcoin and other cryptocurrencies have ~zero inherent value, due to their non-speculation use-cases like payment being very limited or still early development (smart contracts). Unless you count BTC in black market I guess.

USD has inherent value, it's the only currency where you can pay taxes in, and if you want to do business with government or government employees - who are ever only paid in USD - you must accept USD.

There is no such thing as inherent value. Value is subjected to the individual who makes decisions on the margin.

Maybe there isn’t inherent value in currencies, which crypto is not.

In assets there is can of course be inherent value (food, a sturdy house, land, etc.).

Its more complicated than that. If you already have some maybe having more of that specific thing is more a hassle than a benefit. Or maybe you don't value that thing at all.

What value has a premium steak to a vegan?

If your house is on 0.5 acre of land and you add another acre it might great but if you had 500 acres of land and added another one you wound't even notice.

Why people tend to value diamonds more than water which is essential to live? If you receive two copies of the same magazine you like to read does the second copy holds some value to you?

Inherent value is real. Market value of the thing is dependent on a million things but an axe has inherent value in the same way a feeble banknote hasn’t.

The steak has calories and nutrients, regardless of who holds it (until it goes bad). Those are inherently valuable to any human being.

Your secondary point is about the law of diminishing returns, it’s a non-sequitur.

Water is inherently valuable for obvious reasons. Diamonds have inherent value in their hardness although that has little to do with their market value, that isn’t based on inherent value.

The magazine isn't inherently valuable. The information in it could be if one can decipher it. But additional copies of information don't make new information, so one or a hundred magazines, it makes no difference in inherent value.

Bitcoin’s inherent value is

1. Immutability

2. Limited supply

3. Censorship-resistance

4. Independence of governments, nations, banks, institutions, corporations

5. Accessibility

You can also pay your taxes in crypto in many countries.

The dollar’s inherent value is very weak and not really tangible.

It’s 2022 and people still don’t get that.

> 4. Independence of governments, nations, banks, institutions, corporations

Here is a very direct question:

How does BTC or any other currency protect itself from a goverment?

Imagine that a very big government decides to mine BTCs, will not they control the BTC if they have enough miners? And when I say a government controls imagine: slowing down mining, making it illegal, or limiting it in general population, forcing people to declare thei cryptocurrencies, putting a cap on how much one person can hold personally and forcing you to keep them in an official wallet ...

So how can a crypto currency be independent from a government. The government makes laws and as a citizen you are forced to follow them. Crypto cannot escape this, no matter the technology as the control is not technological, is legal, political and social. It is a social contract that I agree a technology can make it harder to discover some nasty business a citizen is doing, but that does not mean it cannot be control.

Don't get me started on corporations. Imagine Google or AWS decides to use his computing power to mine BTCs or whatever crypto. They will in fact control de market.

Please hypothetically prove me wrong with arguments.

> and when I say a government controls imagine: slowing down mining, making it illegal, or limiting it in general population, forcing people to declare thei cryptocurrencies, putting a cap on how much one person can hold personally and forcing you to keep them in an official wallet

This all already happened multiple times, but miners are so distributed across the globe that this has nearly no impact.

It’s also pretty hard for a country to spin up this much mining power, because it simply takes a lot of time to manufacture ASICs.

It’s also very expensive. $34B at the very least and rather $100B. https://gobitcoin.io/tools/cost-51-attack/

No country has this much free cash available for shenanigans like this, not even the US.

That's not "value". Those are "attributes". A person may value those attributes or not, but they do not have inherent monetary value.

The currency of a nation has inherent monetary value because it is backed by the state; the details of what that means will vary from jurisdiction to jurisdiction, but except in states undergoing massive crises, you can still be sure that if you hold their currency, you have something of value and can transact business.

Bitcoin is backed by nothing but other people holding Bitcoin.

As for the attributes you list:

1. Immutability is a double-edged sword. There are legitimate situations where you want mutability.

2. Artificial scarcity of a digital thing is only beneficial if you are among those holding large amounts of it.

3 & 4 (basically the same). This is both a huge negative for many people, and only true until those institutions' policies, laws, regulations, etc catch up with Bitcoin and either fit it within their existing structures or ban it entirely.

5. It's really not that accessible unless you're already fairly wealthy and digitally savvy.

All of those things are true (to varying degrees) of all of the thousands of crypto currencies. That's inherently the problem. As soon as another one comes along, the *value* of the earlier iterations gets reduced. There's no limit on the creation of new crypto currencies.

Bitcoin supply is not effectively limited until a satoshi is no longer adequate to express the price of a good. The 'supply' of Bitcoin doesn't only increase with mining, it effectively also rises with Bitcoin's price. Say I need to order one pizza per week. In late 2011, one BTC lasts me one week. At today's price, the same coin lasts me more than 50 years. There's no need to bid up the price of a whole coin in a (hypothetical) world where whole coins are scarce. You just buy less of it, because nothing is actually denominated in BTC - that would be unsustainable. Everything is still denominated in fiat.

Why did you list Bitcoin negatives instead of positives?:)

1. Immutability - clearly a negative feature, no way for humans to manage transactions and correct mistakes.

2. Limited supply - very bad for a "currency"

3. No censorship resistance in bitcoin, but ease of tax evasion due to exterritorial nature. IRS may find you easily but can't do anything. On the other hand oppressive regimes can both find you can prosecute you because in that case you are physically in the regime's country.

4. Dependence on a handful of anonymous guys in the non extradition offshore printing tokens to pump price with zero oversite. I pick governments. Also Bitcoins are not really independent from governments for the lawful citizens.

5. Zero accessibility after more than a decade in production.

You forget to mention the cost of Bitcoin and other cryptocurrencies. The cost of electricity, the environment. The cost of securing your assets. I can guarantee you, if a clever goon comes across you in the middle of the night in Amsterdam, and they know you got cryptocurrency assets with you, they'll get them off you (que XKCD ref. of what happens when you get coerced to give away your private key). And I bet they'll be able to smell the hipsters from miles away. Oh wait, these don't frolic around in those neighborhoods in Amsterdam. Cause stuff there goes via (small amounts of) cash, mainly.

Independence, you are very much dependent on the internet, miners, etc. Yes, you can use the tool to avoid detection of a nefarious state actor. But you'd be breaking the local law, willingly and knowingly. That's a risk. At one point, police are going to recognize these sweet 'lil Ledger and Trezor hardware wallets. Furthermore, if a large local economy would collapse, like say in my case EUR, it'd take Bitcoin with it. I admit, it makes sense to avoid currency in small economies in crook countries, but you're choosing for your own benefit instead of the state you live in.

Accessibility, since a lot of people use mobile smartphones, they cannot sync the blockchain to it. Many are dependent on third party like exchanges. Hardly independent of corporations.

Immutability, you can lose your private key and be done with it. If I lose my bank card, I can disable it and just get a new one. With NFTs, these depend on a third party resource. Which depends on USD or EUR or whatever in order to be paid. These also depend on authority of whoever made the blockchain or smart contract.

You didn't mention anonymity, because Bitcoin isn't. Yes, it takes effort, but it can be anonymized. The reason it supposedly doesn't happen is 1) if you are investigator and know a vulnerability to do so, you're best to keep it private for reuse 2) you apply parallel construction instead. But specialists who can do this exist. Its just that they're expensive, so they only go after big fish not Pablo who sends some Bitcoin from El Salvador to USA.

> You can also pay your taxes in crypto in many countries.

(It is called cryptocurrency, not crypto, but yes you can recognize cryptocurrency proponents by the way they call their asset.)

No, I cannot, as Bitcoin is not a currency. I have to pay my tax in EUR.

> It’s 2022 and people still don’t get that.

This kind of straw man is useless.

A Ponzi scheme is a specific type of scam where new investors are lure in with the promise of great returns and portions of their deposits are used by the scammer to pay off early investors who ask to realize some of their returns. The central scammer pockets the difference and eventually runs off with all of the deposits.

Crypto currencies if anything are a bit like distributed pump and dumps, but at that point you're just talking about asset speculation.

But it's not a Ponzi scheme. It's a currency with small adoption like that of a third world nation.

I'd say Ponzi-scheme is a justified classification, since returns are funded by new entrants or additional purchases, instead of the asset producing value itself like a company stock or a house.

Even something like gold with no value production - whose price is quite stable because of that by the way - has value because people want it for jewellery and industry.

You could say the same for overvalued stock like TSLA but I don't think anyone would call Tesla a Ponzi scheme. Most of it's value is speculation not actual profits or sales.

> Most of it's value is speculation not actual profits or sales.

“Most” is the key difference: a share of Tesla is fractional ownership in a real business which has proven capable of selling real products which people want. Some fraction of that is definitely speculative but far from all of it, and there's no reason to think that the value would decline to zero under any feasible economic situation.

A Bitcoin, in contrast, has no value other than what you can convince someone else to buy it for. Nobody needs it to conduct business, it's trivial to set up competing blockchains, and the deflationary model is designed to make you profitfrom everyone who starts buying later despite not having created any new value.

It's not a currency for anyone who is holding it long term, by definition.

Does that also apply to anyone who has money in the bank long term?

> USD has inherent value, it's the only currency where you can pay taxes in

I don't know, I pay my taxes in EUR, I live in EU. But I get your point. Moreover, USD is the most dominant coin in the world. Even outside USA, a lot of people depend on it.

By the same logic though, many internet drug dealers only accept BTC.

"Inherent" implies independent of any individual buyer demanding it. Even if the buyer is federal govt.

“ who are ever only paid in USD - you must accept USD”

Are you saying it’s inherent value comes from it being a protection racket.?

I'm curious about one thing as far as this statement goes... it's a little bit of a nonsequiter though. When/if the US starts to tax crypto and crypto gains, does that show that they have more of a legitimate value?

The USD is backed by the power to tax 330 million people. Bitcoin is not.

And, ultimately, the power to invade the other few billion people who can’t be taxed

Switzerland's currency is quite strong and considered a safe heaven. Do you think Switzerland has the capability or would invade another country to collected tax from a few billion people?

I am not an expert in how currencies work, but it's worth nothing that Switzerland, like most countries, keeps most of it's own reserves in USD (presumably treasury bills), and has around 1 trillion in USD in reserve. Which is not unrelated to the value of it's own currency and their ability to stabilize it. But I am not claiming to be able to explain the details myself.

https://www.ceicdata.com/en/switzerland/official-reserve-ass...

That number you're looking at is "total Swiss foreign currency reserves in units of USD" not "Swiss foreign currency reserves that are USD". Switzerland, for reasons that are fairly obvious, holds large Euro reserves. At the end of 2020 USD was only ~35% of that total amount.

Good correction, thanks! Still 35% of reserves is plenty!

I hadn't considered how many reserves have probably shifted to euros since the euro, that's actually a big deal for the US. Anyway...

By that logic then the more populous a country is the stronger their currency should be. We don’t see that. It’s a bit more complicated than that..

I mean, it's sort of like that though isn't it? Maybe not quite so literally, but, yes, you'd have to admit that the USD gets its strength from being able to take 330M Americans.

Not really. Look at China, look at India. By this logic we should all rely on the strength of their currency

So, in your eyes, value is proportional to the rate of change of value?

I plugged it into Wolfram Alpha and it showed some solutions. Some go up to infinity and some go down to zero. So the first guy was right after all!

Value is a function of supply and demand. Taxation is guaranteed demand, so it does affect value.

I tend to think crypto currencies, much more than conventional financial assets, is sensitive to the public narrative/hype due to it being a pure speculation play. A lot of people bought in over the past two years due to the hype and I suspect if the media narrative turns a lot of folks will pull out.

I think many cryptocurrencies are on the edge of pump and dump schemes, amplified by social media.

A friend of mine made a decent amount just tracking the tweets of Elon Musk and other coin influencers a few years ago.

Every few months the financial press rediscovers crypto's insane volatility and pretends it's something new. A year ago, the Bitcoin price was $32K. By April it was $62K. It dropped to $31K in July. It got to $68K or so in November. Now it's $33K. Maybe this is the start of the next crypto winter but so far it's nothing unusual.

I would say that it's hard to credit the idea that Bitcoin is "the new gold" or any sort of safe haven asset. Just like the rest of crypto, it crashes when stocks crash, but harder. It's more like a high-flying tech stock.

Bitcoin has 3 mechanisms built in to make it almost always increase in value, halving of the rewards, finite total+lost bitcoins, and increasing complexity when more people are mining.

In the end all you're doing is buying electricity and converting it to bitcoin, anything above that cost is based on future costs when the rewards halve.

All this means you should never sell your bitcoins, which means it's a terrible currency

"to make it almost always increase in value"

To any investor this should be the biggest red flag that you are in a Ponzi/pump and dump scheme. "You can't lose!"

And rather than you are "buying electricity" I would say you are buying used electricity, which is useless.

It's a deflationary currency. The opposite of "USD always decreases in value because of inflation". Not a red flag at all. Even the idea that it's deflationary is debatable since exchanges now offer loans, a service which effectively creates new bitcoins out of nowhere.

Deflationary currencies cannot be deflationary forever. Think for 5 seconds: if that was true, then the person who sold the pizza for bitcoin will eventually have enough value to buy everything on the planet. So will the person whose CPU was mining to keep the pizza warm. Can there be two planets of value on the planet?

The value on the planet is not increasing as a result of bitcoin. Available bitcoins with which to buy valuable things are decreasing. There is a finite amount and people constantly lose bitcoins which takes them out of circulation.

People speak of the value of bitcoins increasing, as if it's some kind of universal law. If it was a universal law, you could just hold onto 1 BTC for long enough and then buy the entire planet. It's not.

It's not the value of BTC that's increasing. It's the value of USD and all other fiat currencies that are decreasing. Governments print trillions of them while fractional reserve banking and loans create even more. If you have a steadily decreasing supply of bitcoin and a steadily increasing supply of fiat, it's only reasonable to expect that more fiat will buy less bitcoin over time.

This is false. 10000 bitcoins used to buy $10 or a pizza. If USD's value was decreasing, 10000 bitcoins would buy $100 or a pizza. But no. Actually 10000 bitcoins buys $300,000,000 or 30,000,000 pizzas.

It's not false, it just means there must also be other factors influencing the price.

Not a law, but it's part of the design, because "omg inflation is bad, the government are taking your money!" theories from people who left before Economics 102

You're buying electricity, and using it to make the bitcoins.

The red flag is you're buying something that's useless. The cost of a bitcoin may be correct, but doesn't mean it's worth the cost.

Yeah if you’re just looking at the graph trend, you might only start panicking if BTC drops below the previous 2017 cycle’s peak of $19k.

Only for people who invested (I mean, speculated) before 2017. Those who started to speculate when BTC was 50k stepped right into the big pile of poo, and they have the choice to take their losses for current price, or to keep their assets ('HODL'). Either way, it remains speculation.

I jumped in right at 60k fully knowing it will either go to 500k or to zero. I will wait this out whatever happens.

Depending on how much you went into, aside from HODL, that's called YOLO. In general, people spread their assets. So for example, you could speculate some on the stock market, some in cryptocurrencies, etc. If you put all your savings in, and it goes to zero, I feel sorry for your children. Cause there goes their scholarship.

Childless and European here :). But I put like 3 months of salary there. Really nothing that could financially ruin me. I went YOLO on housing though... That shit is expensive.

> In general, people spread their assets. So for example, you could speculate some on the stock market, some in cryptocurrencies, etc.

I find this funny, my tech stocks portfolio has gone down 10% since the beginning of the year. I do monthly investing, so that's a loss compared to my average price over time.

In contrast, I bought ETH at around $20 USD, and it being at $2000 is still quite a good outcome for me.

You can't know what happens when the cryptocurrency ETH was at $20. You still don't know what happens. In contrast, with companies, we can take some things for granted, as they have to be open about it to e.g. SEC. With regards to the $20, I knew about Bitcoin when it was a couple of USD (during the Occupy Wallstreet movement, IIRC). I liked the idea, back then. But I didn't end up buying any because to me money is a tool, not a speculative asset. And, as tool, Bitcoin was not very useful then (it still isn't, IMO). Yes, I could've bought it back then. I almost did. But we don't know what the future holds, and for every person with my story there's only a few who did buy it in large enough quantities and exfiltrated their profits at a margin of 10000% like yours. The amount of people who lost money from Bitcoin speculation is also applicable, but you don't hear about the losers. As long as you HODL, all those who HODL win (at least on paper), but as soon as large amounts get exfiltrated, the supply goes up, and value goes down. So it is very important for those who hold the asset to share the HODL mindset (as cultish as it might be).

Well, looking at the graph trend, there's an argument that it should be trading at $15 when you take out speculative bubbles.

Who knows.

I'll tell you why I disagree taking the same 5 year chart-- the nature of the rapid rise means new money always going in.

That is to say, very large amounts of new money are being lost.

It's because completely unregulated pseudo-money with all proper infrastructure around it is amazingly attractive thing for all kinds of financial criminals, precisely because there is no regulation and no consequences. As long as it stay like that this industry will constantly grow long term. That doesn't make any less shady and bad for humans. It's like wildcat banks but now instead of a hundred clients they have hundred million clients.

HODL equals to BUY. Would you? I bought^ some of these recent days dips and sold on bounce, but now it’s just too scary. If you look at NASDAQ, it is much more appealing.

^ No, I’m not a desperate idiot, I’m just testing my feelings in trading in general on $1k, to stay calm and not act crazy in a real investment situation

No, it doesn't. HODL equals "hold". "Buy" means make an active decision to buy, hold means make a passive not to make a decision.

Money is fungible. There is no rational difference between "continue to hold X BTC that I already own" and "buy X BTC today when I currently own 0 BTC."

There is a logical difference between making a decision that some time is a right time to make a decision and making a decision that you don't have enough confidence in either decision.

Holding is not lack of confidence in a decision. Holding is exactly the same confidence as a buy. It’s always interest to see analysts recommendations go between sell, hold, and buy to me because like the one who initially posted, I believe a hold is the same as a buy. The effect on your return between a hold and a buy is the exact same for those dollars. It would be illogical to say you would hold a stock at a price but would not buy a stock at the same price. Every time you are not selling it should be based on the same factors as if you were buying. Indecision just results in an uninformed decision, it doesn’t make your past decision right.

Technically two other commenters here have a point, I think. It depends on your bankroll and investment strategies. But it's so personal that no one (especially random analysts who don't even know you exist) could really advise to HODL and make sense. That's a nitpick, though insightful one, to be fair. But in in-vacuum analysis it's either BUY or SELL. No one knows your portfolio to tell more, so everyone assumes that your money from a corresponding risk category just sits idle.

Incorrect. You should not put all of your money into a single investment, according to Kelly. BUY means "the amount of this you should have according to Kelly's criterion has increased", HODL means it is unchanged.

The problem is that, due to exponential growth, the majority of bitcoin holders entered in the last year. So, in a very meaningful way, the chart is always effectively only a year old in the collective's mind.

This is a great point. People might say bitcoin went up 5000% over x amount of time but what percentage of the people saw those returns and what percent of people got beat up over the spikes in 2021. Now that the market is essentially saturated, meaning everyone one who could buy bitcoin now has the ability to buy bitcoin… the growth left can’t necessarily come from new market entrants… and while there will always be stories of people hitting it rich, when 50% of people or more have only experienced a loss, a speculative asset can easily get negative sentiment, and permanently if enough people lose.

It's also worth noting that BTC is virtually even (down 1.6%) to where it was 6 months ago.

Most of the 'financial' reporting on crypto is nonsense, and imo, is just grasping at straws, or some kind of puff piece.

To some confident people, this is just a flash sale.

i almost get the sense that it is written by grifters trying to make the waves in both directions bigger for their own gain.

I own no crypto anymore. But it should be taken into account that it took a pandemic to get it back up and there was a multi-year decline before COVID.

That's all the point of crypto-currencies, they need to go up and down to enable speculation. Pump and make it go up. Dump and it goes down. Someone is cashing the difference.

A stable crypto-currency will not attract so much speculative investment.

A stable crypto-currency will not attract any investment. Crypto is useless for anything but money laundering and speculation.

I've gotten paid for code in XMR. It's great and absolutely useful. I wish everyone used it.

Monero (XMR) is indeed one of the few useful blockchains. Many darknet markets accept it, sometimes exclusively.

What did you do with the XMR?

I deposited most of it in a binance savings account. Left some in my mobile wallet. Unfortunately I had to cash it out in order to spend it. Wish I didn't have to but nothing else accepted it.

These things will not ever be real if we don't start using them as currencies. I came this close to proposing Monero transactions to a business partner after some banking problems but the market isn't looking good right now, too volatile.

Your "unfortunately" part is the whole point of what GGP was saying.

It's not useless though. It works just fine as a currency. It's just that nobody is using it. Like how Signal is more trustworthy than WhatsApp but nobody I know uses it so it doesn't matter.

Sadly currencies rely on network effects even more than instant messengers to be really useful. The fact that most people look at cryptocurrencies just like they were stocks and comparing against a buying/selling price in USD should be pretty clear. I know that people also invest in currencies and gain money on exchange fluctuations but it's more a "side effect" than the main purpose. With cryptocurrencies is the other way round instead.

All kinds of things rely on network effects, yet they managed to get started anyway. Reliance on network effects is not a reason to instantly dismiss something. Or else there would be no Hacker News.

Which is why I decided to accept XMR. I thought maybe that'd start something. The system is literally right there just waiting for us to use it.

I also remember seeing at least one artist accepting XMR for cryptocurrency-related art. Plenty of people were spending XMR on that person.

The idea of a "currency"[0] attracting investment is kinda crazy in its own right. Normally currencies don't attract investment; you can bet on the difference between them, but you usually "invest" (buy) large amounts of it specifically to do business with the country or economic entity that issued it. You buy Euros to do business in the EU, not to "invest" in the currency itself.

0 - Which crypto currencies actually function as currencies is a matter of debate.

Betting on the difference between is done by buying and selling them. I'm no defender of cryptocurrencies but speculation and trading have been a major feature modern forex markets since their inception.

Speculating on Forex is gambling, just like speculating on crypto.

Which is speculating on the relative difference in inflation rates, not actually investing in either currency per se.

Modern treasury operations for large cash holders absolutely “invest” in currencies. They do so in the form of what cash they hold outside of their immediate needs and in what cash “equivalents” they keep on their books.

What’s the difference between “investing” and investing?

Maybe that will help me to better understand cryptocurrencies “investors”.

Investing is when you buy something that creates enduring, repeated value over an indefinite period of time, which you can capture without selling the asset itself. Real estate, for example, creates value (a place to live) over a long time, which you can capture either by living there yourself or renting it to someone else - without selling the house.

Stock is ownership in a business which creates value over time (shoes, tweets, cars, etc) which is captured in a variety of ways, like selling through retail or ads or whatever - without selling the stock.

This is why currencies, gold and the like are not investments. They do not, in and of themselves, create value. They may be good to buy/hold anyway though!

Agree. I personally don’t consider cryptocurrencies as currencies and the comment has few points where I disagree:

- Consider them currencies

- Describing the fact of holding positions on currencies for operational purposes as an investment

- Thinking that cryptocurrencies accomplish the second point

The only difference in investing in currency than other asset classes is that the value of currencies is entirely relative to other currencies in ways other asset classes aren’t.

In practice that doesn’t make a difference because all the mechanics are the same as any other form of investment decision.

First of all I should be convinced that cryptocurrencies are currencies and secondly I don’t see how this asset can be used by treasury to hold any cash for operational purposes. Besides I am not sure that is investing per se.

I personally wouldn’t hold crypto as part of an forex portfolio mix for a corporate treasury largely because they are currently not really currency equivalents but there might be treasury groups that do & the mechanics of holding them isn’t much different than any other fx holding.

As far as whether treasury asset allocations are investing or not is largely in the eye of the beholder but companies very frequently prefer to hold “cash equivalents” beyond their immediate operational requirements. If a treasury buys us tbills that is both a traditional investment & a fx position (in that it’s a usd we are viewing preferentially over other currencies in our portfolio).

I’m no crypto fan but this is just incorrect. Stablecoins exist solely to be stable, look at tether.

You are right. How are they useful?

When you put money in the bank, it's backed by 1% real assets (go fractional reserve money!)

So let's say I don't want to put my money into something that is only 1% backed (See the Greek dept crisis). I could store cash under my mattress, but that also has some major risks.

With a stablecoin like UST, you 100% own it. Governments can't confiscate it. It's 100% backed by the asset behind it (not talking about Tether here ;)). I do agree that it comes with its own set of risks, but some people might prefer that risk over the ones above.

Or maybe I'm a foreigner and want to keep some of my personal value in dollars, but don't want to do that in cash or at some local bank.

It's basically another option at your disposal. And as the market cap of those stable coins prove, lots of people prefer that.

So this stable coin is "100% backed by the asset behind it", like a dollar, which is "backed by 1% real assets (go fractional reserve money!)". What did I miss?

1 dollar is backed by 1 dollar. 1 dollar in the bank is backed by 0.01 dollar.

And 1 stable coin is backed by 1 dollar in the bank. That means one stable coin is backed by 0.01 real dollar.

UST is not backed by dollars in any way, it's backed by assets that have a corresponding value in dollars.

So no, your statement is incorrect.

How can't a government confiscate the currency hold by stable coin provider? They are the government, they can do any tyrannical move they want.

Because the stable coin provider lives in web3, and so is distributed over the whole world.

So in case of UST, as long as the Terra network is up, your coins are there.

What would it take for a government to take down the Terra network? I guess more than what it takes to take down the BitTorrent network. And last time I checked, I can still download any movie on there.

So a government being able to confiscate a wallet on a blockchain, seems very unlikely if you protect it well.

You can send them to people and/or exchange them for stuff. Which is exactly what you'd want to do with a currency.

But why would you do that? When you can do exactly that with a traditional currency but much safer, much cheaper, much faster and much more conveniently.

Sending traditional currencies has more roadblocks, in any form, whether you're talking physical or digital traditional currency.

The CBDC idea might bring the best of both worlds.

How else will you get paid for your ransomware?

Tether has a $69 billion dollar market cap

USD Coin has $42 billion, Binance USD has $12 billion, Terra USD $9 billion, Dai $8 billion, ...

you were saying?

There's more to it than multiplying the current price by the number of coins in existence: you need to consider the questions of liquidity and what an attempt to sell a non-trivial amount would do to those exchange rates as people start questioning whether they want to put more hard currency in. Cryptocurrencies are the weakest form of fiat currency and that means that there's a very real chance you simply cannot find enough buyers at the price you want to pay.

This can technically happen with other currencies, of course, but they're so much larger and more stable that it's orders of magnitude less likely. You need a world-shaking catastrophe not to find someone willing to take USD because so many contracts are written in USD, and there's plenty of need to pay taxes or interact with government contracts and employees.

Stables just need a fixed income vehicle similar to bonds. Luna and UST is this and is taking off.

That isn't the point. They're supposed to be stable to be usable as currency. Using them as an investment class is a very off-label use that has emerged.

This sentiment is exactly why it hasn’t worked yet. Yes bitcoin is a currency hence the “coin” in its name but a lot of crypto is not. This is a failure in education in the community and also a failure by the US government to correctly classify the different types of crypto, and essentially label every blockchain as securities when only a few even approach being securities. In their desire to collect tax, they have completely mistaken one thing for another. In the same way the US hasn’t figured out that “tech” isn’t one sector of the economy but actually has 100s of new industries each of which are extremely unique. Facebook and YouTube are not two competitors just because they both are software with ads, they each exist in their own industry and monopolize their industry. You wouldn’t consider TV broadcasting and radio the same industry even though they are both forms of media. Crypto is the same, there is just so much unique software that is being miscategorized.

I don't see how any of that is relevant. Bitcoin has failed as a currency because owners are hoarding instead of spending. But the fundamental elements of all crypto, namely anonymous transactions over decentralized Blockchain, is the only element that is giving regulators heartburn.

> But the fundamental elements of all crypto, namely anonymous transactions over decentralized Blockchain, is the only element that is giving regulators heartburn.

No, it's not. See wave after wave of stories about people thinking that crypto was anonymous only to be arrested for drug crimes and tax evasion.

I think the thing that's giving the regulators heartburn is the fear that this is looking like a massive bubble.

It matters because if it is just a currency then you shouldn’t be taxed on its appreciation. Right now if you say sold $100 in product and now have $100 worth of bitcoin, but then the price of bitcoin doubles and you have $200 in USD of bitcoin, then you have to pay taxes on the $100 appreciation if it is a security. The way it gets taxed will make it a currency or not.

It might not be what the inventor imagined, but this is hardly an unexpected outcome. BTC in particular was doomed to either be a forgotten novelty, or the wild speculation instrument we see today. It doesn't really have a good mix of features for a usable currency, and its appeal as a currency is largely limited to those ideologically pre-disposed to value anti-inflation over other limitations.

The limited throughput of the blockchain was always going to be a particularly bad problem.

Wait until you learn about MakerDAO

So now the critical deficiencies of Crypto as a currency, become it's selling points? I guess for the con-men and shysters that makes a sensible point of view. Fleece the sheep!

I suspect that the crypto markets absorb excess investment money that the stock market cannot, because its saturated. Essentially, there are no other high potential yield investments to speculate on. So when the stock market goes down by a small amount, crypto will swing down by a larger amount, as investors pivot from crypto to the (now) underpriced stocks.

But this is a just-so story, and would be hard to validate, given that there are going to be a lot of confounding factors.

With options there is no saturation of a market, since you don’t actually need to purchase/sell a stock in order to profit from it. Supply is effectively unlimited (I’m not following the gme debacle, but this is what registering shares was also about - trading in shares that don’t exist)

Okay? And 1.5 trillion was wiped off of the US equity market.

Over the last month: VTSAX is down 9%, AMZN (hardest-hit Big 5) is down 16%, BTC is down 34%.

Netflix is down 35%, not sure why Google would be seen as the hardest-hit FAANG.

The dirty secret of "FAANG" is that Netflix is not a FAANG company anymore despite literally being the N of the acronym.

The idea behind FAANG was to create a catchy acronym for "high-growth, big-cap tech stock". At the time, maybe it made sense to stick Netflix in the acronym - but their business model was also radically different than it is now. It also wasn't really sustainable: Facebook, Apple, Amazon, and Google all own their "moats[0]", Netflix is just a middle-man that licenses content.

The FAANG business model is all about creating your own sovereign territory on the Internet through capex and licensing. You spend a lot of money building out the best tech platform possible, and then license that out to as many people as possible so you can take 30%[1] off of the top of every transaction ever. This also implies being "cynically inclusive": trying to onboard anyone and everyone, regardless of their absolute economic value as a customer or the company's ability to support them. 30% of pennies adds up across billions of individual publishers.

Netflix does not do this, never have, and never will. They only license premium video content, which means they're exclusively working with people who actually have negotiating leverage. Furthermore, the people selling that content are better-capitalized than Netflix and can afford to just DIY/self-host their own streaming service. Thus, their business model is less like YouTube, and more like Comcast. The amount of profit Netflix can make off of premium content is far lower than FAANG companies make off of the "30% of pennies" model. That's also why they moved into content production - owning the shows is more valuable than owning the screens they are showed on.

Counting Netflix as a FAANG makes absolutely no sense and we should just pretend the N stands for, oh... I dunno. Does Alphabet own an "N" company yet? Is there any other platform owner out there that has an "n" somewhere in their name?

[0] A tech company euphemism for a monopoly. Amazon likes to call it a "flywheel". Other companies use the phrase "stickiness".

[1] A lot has been made of "the 30%", especially in the context of Epic v. Apple. In my opinion, the problem is not the fact that the cut is 30%, or even that it exists at all; it's just a convenient shorthand for market power gained from owning the platform.

> Counting Netflix as a FAANG makes absolutely no sense and we should just pretend the N stands for, oh... I dunno.

I always mentally treat the 'N' as standing for Microsoft. The letter isn't right, but FAAMG isn't as easy to pronounce as FAANG...

NadellaSoft

My bad, didn't check Netflix. It's not "really" part of FANG in my head, I suppose. Edited my comment to say "Big 5" instead.

He made a GAAF, no need to read anything into it.

Big Tech stocks have changed since FANG/FAANG was coined, the term doesn't necessarily relate to what was big and heading for explosive growth back then. "FAANG" is a noun that doesn't necessarily mean "Facebook Amazon Apple Netflix Google" any more

> He made a GAAF, no need to read anything into it.

But did not say they were wrong and Netflix was actually the same as Bitcoin.

They edited it to another group to prove their point.

Which to be honest confirms the original implication, they are picking and choosing for politics.

OP point is clear to me, everyone can trash talk Bitcoin from twitter rote, but no one is actually thinking. How does it relate to the US equity market? The top comments are currently very uninspiring.

Certainly is clear, big tech stocks are falling, not as much as crypto, and that probably has something to do with big tech stocks have fundamental value.

Well sure, the N literally stands for netflix. But semantically, it's often used as "the big tech companies". At least that what it means in my head. And that's Apple, Microsoft, (gap), Google, Amazon, (gap), Telsa, Facebook, at least by market cap. Netflix isn't anywhere close.

Rates are going up, so stocks are being cashed out to be invested in better yielding bonds

What rate are you getting on bonds today?

What did you get last month?

Personally I sold all my crypto after reading Grantham's thing on Friday. https://news.ycombinator.com/item?id=30036797

Fed rate policy

Yup - there are other factors that affect what investors think of tech stocks and crypto, but they are also on the riskier end of the spectrum, so when the general market sentiment swings, they swing too, and to a greater degree.

Yeah but then look over the past year.

The S&P 500 is down about 9% off its high from a month or two ago. BTC just crossed under half of it's peak.

It's true that's not captured in the headline, but this is a newsworthy crypto crash. It's not the first or the worst, but it's worth covering.

It's very standard for bitcoin and won't be going away for a while as the asset is still realizing its value across all global liquidity. It's scary and why the SEC dragging their feet on a spot ETF approval i.e. an investment vehicle that a non-crypto fanboy can use (yours truly) is criminal.

Yes, it’s truly criminal that the SEC hasn’t approved more ways for speculation in cryptocurrency. It’s not as if an Average Joe can just go out and buy cryptocurrency or something. Can you imagine what the market volatility would be if cryptocurrency proponents were allowed to convince naïve people to invest their money, too?

a SEC approved spot ETF is needed for institutional access, not retail. Several countries have already approved such vehicles, and nobody imploded.

Retail is already all the way in. Institutions have mandates that restrict them to trading venues, types of instruments, jurisdictions (some can only invest domestically, and so cannot use foreign ETFs), and so on and so on.

There is a reason why MSTR was able to raise mountains of debt to buy Bitcoin.

It's all institutional money.

also, DeFi leverage is not censorable by the SEC

Not really sure I follow you. You can log into Coinbase, a publicly traded company, create an account with your FDIC-insured bank account and buy crypto in ~5 minutes.

GBTC exists and seems to be tracking BTC's price successfully.

The main reason behind that is tether and its price manipulation.

It depends on the base rates. BTC has a 66% volatility while S&P 500 doesn't. One should expect such crashes with BTC.

US equity doesn't pretend to be a low risk investment vehicle resistant to inflation worries.

Except it does

How?

It's common financial advice if you invest in the US equity market index you will get a 7% return a year

Over long periods, on average, historically - no one is saying you will always get that in any given year.

Same with crypto. We have 10 years of data so far.

It historically has grown reliably overall at the market level, but individual equities are not that at all. BTC specifically was supposed to be that, and it isn't.

There is no cryptocurrency in the top 10 pretending to be low-risk. There are probably way more financial advisors claiming that US equity is low-risk than there are people claiming the same for any cryptocurrency.

Neither does crypto. Out of all things that's about the least "low risk" I've seen yet.

Store of value.

US money printer.

Inflation hedge.

Do you think we forget what the crypto-bros said just a few months ago?

Bitcoin isn't pretending to be any of those (which is essentially what the claim is). Do you see any of that on bitcoin.org, anywhere in Bitcoin Core, or in the Bitcoin Whitepaper? Or in any of the top cryptoassets by market cap?

Don't conflate people talking about something with the thing itself.

> Don't conflate people talking about something with the thing itself.

Bitcoin doesn't have a HN account. Listening to people talk about it is the only way to get information about it.

Bitcoin proponents have been semi-continuously yammering about all of those for over a decade. If anyone seriously disagreed, there'd be a disclaimer on bitcoin.org.

None of those necessarily imply low risk / volatility, and on the long term chart crypto has satisfied all 3

You can't be a store of value if your value drops randomly.

You especially can't be an inflation hedge if you drop while inflation goes up.

Although obviously not as dramatic as crypto, gold has had huge drops and multi year bear markets, but it's still considered an inflation hedge. The housing market has had huge dips too.

Neither is as volatile as crypto, but my point is no asset has a guarantee that its value won't "drop randomly", simply not possible. Inflation was positive during the real estate crash of '08 and during multiple gold bear markets. If your time horizon is long enough, a volatile asset can still be a good inflation hedge.

2008 was a period of deflation. Of course inflation hedges would drop, when inflation was negative.

Oil, housing, car prices all dropped at that time. Prices dropped so low that companies like General Motors went bankrupt.

-------

We face an opposite problem today. Prices are going up. Old established companies love this, they can sell their stuff at higher prices. Aka, inflation. Turns out crypto was terrible at hedging this scenario.

You're right I stand corrected on '08, but if look at the 6m chart on a real estate index now it also seems like a bad inflation hedge. On the flip side, if you looked at crypto or real estate in November they seemed like amazing inflation hedges.

Most assets have tanked in the last couple months, so it's sort of misleading to single out crypto.

did you just said that crypto pretends to be a low risk investment?

The US equity market is behaving predictably. Assets were overvalued per their fundamentals and Fed actions are being taken to cool them off. A correction was widely predicted as is the eventual recovery. Crypto is meant to be immune to these effects yet it had an even more dramatic reaction than traditional equities. And while it's recovery seems likely there's still no fundamentals on which you can hang your hat and say what will drive it. It could keep dropping, it could stay flat, it could hit $100k and there's nothing you can point to as evidence it will do any of those.

Is Bitcoin a currency or an equity? I forget.

It's a commodity

'commodity' okay. Show me one legitimate use case for btc without converting it into a real currency

I looked at my 401k and it wasn't pretty.

I won't touch leverage with a 10 foot pole. With that being said, 9% is a lot depending on how much you have in the account.

It's annoying, but it doesn't matter too much unless you're retiring soon.

I suspect it will drop another 20% though, back to mid 2020 levels. Fed will start to intervene if it goes beyond that, too many votes. Its like house prices in the UK, the government won't allow them to drop.

I am paying my daughter's college tuition from a 529 plan, so this affects me even though I am not retiring soon.

Tough love: if you are currently making needed payments out of an account invested primarily in volatile assets, you have invested it incorrectly. More likely you left the 529 money in stocks because it's a tax shelter, not because you were actually setting that money aside for tuition.

It's the same point above: this is what markets do. Investment strategies are risk management strategies. You can't just dump money into whatever is going up right now and then complain when it goes down.

> Tough love: if you are currently making needed payments out of an account invested primarily in volatile assets, you have invested it incorrectly. More likely you left the 529 money in stocks because it's a tax shelter, not because you were actually setting that money aside for tuition.

Not exactly, so I'm not down 9% in my 529. I set target dates and my financial institution has shifted them to more stable assets based on that. I just checked and it's only 19% stocks.

As an aside, using a 529 for a tax shelter wouldn't work very well because of the penalties incurred if it is not used for education. 100% of the funds I have saved here are for tuition purposes -- I started doing this years before we had children.

> I won't touch leverage with a 10 foot pole.

But with a long enough pole and a firm-enough place to stand, you could move the world! <ducks>

Archimedes investment strategies?