> illegal transactions, scams and gambling together make up less than 3% of volume
> To me, 3% is an acceptable level. It's a lower percentage than the black market in many countries even.
Yeah, but that's because the vast majority of volume comes from speculation and wash trading lmao.
What do you think the ratio of speculation and illegal activity to legitimate use cases is? I'd be willing to be it's greater than 10:1, maybe even 100:1
You don't have to bet, the data is in the paper I linked. 75% of bitcoin volume is speculation. Meanwhile in the traditional economy, 95% of global financial activity is speculation (see below).
What level of speculation would you say is high enough to justify throwing away the remaining productive uses of an asset class?
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In 2019, forex volume was $6.6T per day[1], or $1716T per year. In 2019, global GDP was $87.3T[2]. That's less than 5% economically meaningful activity.
The paper that you linked doesn't say that 75% of crypto activity is speculation, at least as far as I can tell. Are you referring to the line that says
>Starting from 2015, 75% of the real bitcoin volume has been linked to exchanges or exchange-like entities such as on-line wallets, OTC desks, and large institutional traders.
Because there is certainly plenty of speculation outside of those entities.
And for the traditional financial system, when you said "see below", are you referring to the ratio of forex volume to global GDP? Because those metrics are terrible proxies for "global financial activity" or "speculation"
I would recommend doing some reading on what GDP is, and how it's calculated. It's not the same thing as the total volume of transactions, or even in the same ballpark. The United States alone had more than $128T in just non-cash payments in 2021 (https://www.federalreserve.gov/paymentsystems/fr-payments-st...)
You should also understand that all forex activity is not speculation. I would think that global trade would fall under the bucket of "economically meaningful activity", no?
> Because there is certainly plenty of speculation outside of those entities.
Sure. And there's plenty of non-speculative activity outside of those entities as well. The paper explicitly looks at on-chain activity only.
> Because those metrics are terrible proxies for "global financial activity" or "speculation"
Maybe so. I put forward my sources, but there could be a better way of calculating it. My broader point was that speculation is the majority of activity, and I doubt that's any different whether you're talking about fiat, gold, oil, crypto, or any other widely used asset/asset class.
If you had to calculate that same statistic, what methodology would you use?
> You should also understand that all forex activity is not speculation. I would think that global trade would fall under the bucket of "economically meaningful activity", no?
In one sense it is meaningful, in another sense it's just a middleman market maker taking their cut, due to the inefficiency of humans having multiple currencies. Either way I don't see how the meaningfulness of trade changes once you introduce crypto.
Say I'm subscribed to a Australian musician's patreon. I send her USD, then a middleman sells that USD and gives her AUD. I also support a French musician. I send him BTC. He (or a middleman) sells that BTC for EUR. How can you say either of those situations is more or less economically meaningful?
> the data is in the paper I linked. 75% of bitcoin volume is speculation.
> Sure. And there's plenty of non-speculative activity outside of those entities as well. The paper explicitly looks at on-chain activity only.
You claimed that 75% of bitcoin volume was speculation. There is nothing in the paper to support this claim. I'm not arguing that there is 0 non-speculative activity, I'm saying that it is significantly less than 25%, and you're making up bogus statistics that aren't supported by your sources in the way that you say they are.
> Say I'm subscribed to a Australian musician's patreon. I send her USD, then a middleman sells that USD and gives her AUD. I also support a French musician. I send him BTC. He (or a middleman) sells that BTC for EUR. How can you say either of those situations is more or less economically meaningful?
Yes, these are both economically meaningful. This type of transaction is much more common in the fiat world than it is in the crypto world (where speculation and wash trading drive the majority of transactions).
Currency speculators make up a tiny portion of the real-world economy, while they make up the vast majority of the crypto economy.
> There is nothing in the paper to support this claim
The paper literally says, "75% of the real bitcoin volume has been linked to exchanges or exchange-like entities"
You may think the source isn't perfect, but at least I'm bringing some objective data to the conversation. If you disagree, please show me some data of your own instead of just repeating your preconceived bias (which I'm aware of already)
I repeat: If you had to calculate that same statistic, what methodology would you use?
> This type of transaction is much more common in the fiat world than it is in the crypto world
Source?
> where speculation and wash trading drive the majority of transactions
Source?
> Currency speculators make up a tiny portion of the real-world economy
Source?
> while they make up the vast majority of the crypto economy.
> The paper literally says, "75% of the real bitcoin volume has been linked to exchanges or exchange-like entities"
Which is an entirely different metric than the % of bitcoin volume that's speculation. If I link a paper that says "1% of squirrels are albino", and I claim that it says that 1% of bitcoin trading is speculative, then I'm not "bringing objective data to the conversation"... I'm just lying
My original comment was
What do you think the ratio of speculation and illegal activity to legitimate use cases is? I'd be willing to be it's greater than 10:1, maybe even 100:1
You responded by lying and trying to shut down any actual data-driven discussion
> You don't have to bet, the data is in the paper I linked. 75% of bitcoin volume is speculation.
And then you have the audacity to ask for a source on the claim that "currency speculators make up a tiny portion of the real-world economy"? How many people do you know who are participants in the real world economy (should be literally everyone you've ever met), and how many of them are FX speculators?
Now compare that to crypto, where the entire marketing apparatus is built not upon its current value proposition but instead the idea that value will go up.
Why would I spend my time digging up data to quantify things are incredibly obvious from observation, when you're willing to lie and make up facts to support your narrative?
Of course not. If you disagree, at least try to present a coherent argument instead of just talking about squirrels. What entities do you think are missing from the list: exchanges or exchange-like entities such as on-line wallets, OTC desks, and large institutional traders
That might be overcounting even, since online wallets have nothing to do with speculation. So I'll correct myself: speculation is at most 75%, definitely a bit less.
> trying to shut down any actual data-driven discussion
I responded with exactly the data you asked for, just read it again :) If you need me to do the math for you:
> And then you have the audacity to ask for a source
Yes I do, since all data presented so far disagrees with your unsourced (though very strongly held) opinion.
Here's one example of how reality may be counterintuitive: High-frequency traders can make thousands of trades per second. How many people do you know who receive thousands of paychecks per second? From that alone it's plausible, obvious even, that forex speculation volume is substantially higher.
What's obvious to you isn't obvious to everyone else. That's why, in order to build a larger society, we need to set aside our biases and look at objective data in order to make informed decisions.
> Now compare that to crypto, where the entire marketing apparatus is built not upon its current value proposition but instead the idea that value will go up.
That doesn't sound too different from all modern investing. The stock market is also fueled by the illusion of the possibility infinite exponential growth. Bogleheads don't care about index funds' current value proposition. The grocery store won't accept your VTSAX as payment for a gallon of milk. You're just hoping that later you can sell your VTSAX to a greater fool.
Maybe the problem is you take everything the "marketing apparatus" says at face value? If one day you saw a TV advert for a pill that didn't work, would you also decide the entire medical industry is a scam?
> Why would I spend my time digging up data to quantify things are incredibly obvious from observation
Reality can be counterintuitive. It was once incredibly obvious that the earth was the center of the universe. Why should I spend my time digging up data when it's incredibly obvious from observation that the sun revolves around the earth?
HN is a place to engage with our curiosity, rise above anecdata, get out of our limited personal bubbles, and maybe even learn a thing or two along the way! Your immediate personal experience is not the objective reality for everyone on the planet. If you're just here to think with your emotions, ignore data, and rant about how much you hate change, you might feel more at home on Facebook or Twitter.
> when you're willing to lie and make up facts to support your narrative?
I'm sorry, I was under the impression that you at least had a basic understanding of cryptocurrencies and the drivers of transaction volume.
If you don't even understand that speculation can (and does) occur outside of on-exchange transactions, then I don't think this conversation is worth continuing.
I now understand that you probably weren't lying, you were just clueless about what you were talking about and actually thought that exchange volume is the only place where speculation occurs lmao.
In case it still isn't clear to you: on-exchange activity != total speculative activity. It isn't an upper threshold on total speculative activity. It has no concrete relationship with total speculative activity. Both on-exchange and off-exchange transactions can be speculative, or non-speculative. The metric you provided is not "exactly the data I asked for", it's a complete non-sequitur that betrays your ignorance on the underlying topic.
> That doesn't sound too different from all modern investing.
This is a valid comparison, you're on the right track here! Crypto ownership is very similar to modern investing, in that it's a speculative asset class, and not primarily being used for its function as a currency.
If you replaced the subject matter with something more mundane, this exchange would be hilarious. It almost reminds me of a Monty Python sketch.
1> Here's a paper that calculates the average lifespan of humans. The average lifespan is 75 years.
2> That's because the vast majority of humans eat junk food lmao. What do you think the lifespan of a human is? I'd be willing to be it's less than 10 years, maybe even 100 years
1> You don't have to bet, the data is in the paper. 75 years.
2> The paper only looks at the Americas, Eurasia, Africa, and mainland Australia. It doesn't even look at Tasmania. You're making up bogus statistics that aren't supported by your sources in the way that you say they are.
1> Maybe so. I put forward my sources, but there could be a better way of calculating it. If you had to calculate that same statistic, what methodology would you use?
2> One time I saw someone die from a heart attack when they were 45 years old, and 45 is way less than 75. Why would I spend my time digging up data to quantify things are incredibly obvious from observation, when you're willing to lie and make up facts to support your narrative?
1> Your personal observations are not universal objective reality. That's why data is important when running a society at scale. Why exactly do you believe the inclusion of data from Tasmania would significantly change the results? Do you have any sources for your wild claims?
2> I'm sorry, I was under the impression that you at least had a basic understanding of geography. If you don't even understand that humans live in Tasmania, then I don't think this conversation is worth continuing. When talking about the lifespan of humans on earth, the lifespan of humans in most countries on earth is a complete non-sequitur.
Anyway, if you don't understand why data is important when discussing policy, there's not much to be gained here. I hope you find truth if you're looking for it, and peace otherwise. Cheers.
What a ridiculous analogy. Add statistics to the pile of topics that you're overconfident yet completely naive about.
What you're describing is a scenario where you take a sample, and use its measure of central distribution to make inferences about SAME METRIC in the population. This is perfectly valid!
But the obvious flaw with your argument isn't "this paper says that 75% of X volume is speculation, but it's excluding some data", it's that the paper presents literally no claims or evidence about the % of volume that is speculation lmao.
You have been conflating 2 entirely unrelated metrics this whole time. I said this before, but I guess it needs repeating: the % of volume that happens on-exchange is not a proxy for the % of volume that is speculation. These are completely different things!
If you want an accurate analogy, this would be like if you said "this paper shows that the average human lifespan is 4 years", but what the paper actually said was that the Olympics are held every 4 years. It's a completely unrelated data point, irrelevant to the topic at hand, and you'd have to either be ignorant or intentionally deceitful to pretend that they are the same thing.
Just bush league stuff... and as I said earlier, if you can't grasp this concept then I don't know what you're doing on a crypto thread.
I actually do think that you have serious underlying confusion about the nature of what speculation even is, because you keep pretending like it's something which can be objectively measured by using on-chain data. Data is obviously a useful tool when it's available, but making up bullshit statistics to support your argument is malignant.
I should not have said speculation, the article makes it clear that 70% plus of unregulated exchange trades are wash trades.
Speculation (short selling etc) is a necessary part of a healthy financial system. Wash trades on the other hand are simply market manipulation.
GDP / production is what it's all about. The dollar is powerful in part because of US GDP. The financial sector exists to help put capital to work and extract more P (and to do so more efficiently). The financial sector cannot exist on it's own without meaningful production of value underneath it.
The crypto exchanges are different from forex in that forex facilitates people from other countries doing business with each other helping convert the value of one country's productive output into the value of the other countries productive output. Exchange rates rise and fall relative to GDP from the two countries.
I don't think comparing crypto exchange trading to forex makes sense, as that the crypto currencies don't have a meaningful connection to any nations GDP.
I think the point I'm trying to address here is that there is no P with cryptocurrencies. So the "crypto financial sector" seems more about price manipulation and gambling than it is helping facilitate trade between two economies.
Each of my links has examples of people exchanging goods and services in bitcoin for various reasons. Do you consider that productive economic activity (the "P")?
If you don't: why is it productive when I buy a car using dollars, but not productive when I buy a car using bitcoin?
If you do: why must a currency's worth be tied to one particular country's GDP? Why can't it instead be tied to the global production of everyone on earth, in any country, who has chosen to use that currency? I think it's actually a sign of strength when someone goes out of their way to adopt a global non-politcal currency, instead of succumbing to inertia and using the currency that was foisted on them by the geographical circumstances of their birth.
> To me, 3% is an acceptable level. It's a lower percentage than the black market in many countries even.
Yeah, but that's because the vast majority of volume comes from speculation and wash trading lmao.
What do you think the ratio of speculation and illegal activity to legitimate use cases is? I'd be willing to be it's greater than 10:1, maybe even 100:1