Merged Bitcoin - Part 3

Still no big change BTC/ETH balance. Seems like proof of work isn't really an issue for investors. That can change quickly though, as it's the most likely axis of possible regulation.
 
psionl0 said:
Feigning ignorance (in an attempt to show that the arguer is posting nonsense) is not a good strategy. You run the risk of showing that you really are stupid and that your own arguments are nonsense.

I am not about to give you an entire lesson on economics. Suffice to say that there is no such thing as a "zero sum game" because no trade exists in isolation. Demand for one commodity affects demand for other commodities and the net effect may be positive or negative. If you remember what bitcoin is useful for then you might know the reason that there is a demand for it in the first place.

I might add that the crypto market is minuscule in the financial market which is riddled with trades in derivatives and derivatives of derivative which dwarfs any trade in commodities and consumables. The only reason for the existence of this is to enrich wealthy speculators.
Click to expand...

But he did characterise your argument correctly. Trading in Bitcoin is a zero sum game. In fact, because of transaction fees and the enormous energy consumption, it is less than zero sum. If somebody makes money out of Bitcoin, it's because somebody else has lost the same amount of money.
 
jeremyp said:
But he did characterise your argument correctly. Trading in Bitcoin is a zero sum game. In fact, because of transaction fees and the enormous energy consumption, it is less than zero sum. If somebody makes money out of Bitcoin, it's because somebody else has lost the same amount of money.
Click to expand...

Isn't it the same with stock market ? And to large extent with commodities ?
 
psionl0 said:
Feigning ignorance (in an attempt to show that the arguer is posting nonsense) is not a good strategy.
Click to expand...
I am pointing out your ignorance, not feigning any of my own. Your arguments are just empty handwaving at this stage. You still can't show how trading in bitcoin is non-zero. That is, how it generates any wealth for the traders.

I am not about to give you an entire lesson on economics.
Click to expand...
Don't worry, nobody is asking...

Suffice to say that there is no such thing as a "zero sum game"
Click to expand...
Oh right, guess we can throw out that entire concept because you have stated that it does not exist. I'll be helpful and link the wiki, so you can update it with "there is no such thing" or some other sophisticated take down :

https://en.wikipedia.org/wiki/Zero-sum_game
 
Dr.Sid said:
Isn't it the same with stock market ? And to large extent with commodities ?
Click to expand...

How much petroleum do you think you have consumed in the last year through travel, energy consumption or use of products made available to you by using petroleum?

Compare that number to the amount of Bitcoin you have consumed in the last year. In either barrels or gallons.
 
Dr.Sid said:
Isn't it the same with stock market ? And to large extent with commodities ?
Click to expand...
Commodities futures trading is zero sum - for every long there is an equal short and vice versa. However the commodities market itself isn't, because people can produce more grain, more steel, copper or whatever.

The stock market isn't zero sum because the companies that being traded can grow in the real world, they can generate profits and pay out dividends to those invested in the stock. The entire world economy can grow and with it the stock markets...everyone can get a bit richer.

Bitcoin trading is just moving entries round on a public ledger. There is nothing analogous to company growth. No labour is input, no value added. Wealth is just redistributed, not generated. You can argue that the trading sets the right price for whatever it is you might want do with bitcoin and is therefore useful, but that doesn't mean it is positive sum.
 
FatherLukeduke said:
Commodities futures trading is zero sum - for every long there is an equal short and vice versa. However the commodities market itself isn't, because people can produce more grain, more steel, copper or whatever.

The stock market isn't zero sum because the companies that being traded can grow in the real world, they can generate profits and pay out dividends to those invested in the stock. The entire world economy can grow and with it the stock markets...everyone can get a bit richer.

Bitcoin trading is just moving entries round on a public ledger. There is nothing analogous to company growth. No labour is input, no value added. Wealth is just redistributed, not generated. You can argue that the trading sets the right price for whatever it is you might want do with bitcoin and is therefore useful, but that doesn't mean it is positive sum.
Click to expand...

I mean from a investor standpoint. Sure, company issuing shares will get money for them. But for investor, you can also only win what others lose. Same with commodities. Producers get money for commodities, sure. And holder of commodities can do something with them directly .. produce something .. or eat it. But for investors it's just zero sum game. You can only take money from other investors.
 
Samson said:
I will stick my neck out and say bitcoin will get to about 4k, and not move for years.
I hope someone else will forecast, it is kinda lonely on this thread.
Click to expand...


Please don't relent. I have been following your analysis since the beginning, and let's just say I am doing quite well for myself. Cha-Chang! Dolla dolla bill, y'all! No fomo, just mo and mo and mo and mo!
 
FatherLukeduke said:
Commodities futures trading is zero sum - for every long there is an equal short and vice versa. However the commodities market itself isn't, because people can produce more grain, more steel, copper or whatever.

The stock market isn't zero sum because the companies that being traded can grow in the real world, they can generate profits and pay out dividends to those invested in the stock. The entire world economy can grow and with it the stock markets...everyone can get a bit richer.

Bitcoin trading is just moving entries round on a public ledger. There is nothing analogous to company growth. No labour is input, no value added. Wealth is just redistributed, not generated. You can argue that the trading sets the right price for whatever it is you might want do with bitcoin and is therefore useful, but that doesn't mean it is positive sum.
Click to expand...

True, but the value of long/short positions may have different value to producers or consumers. Eg a farmer who sells a grain future gets a know set price for her grain when she harvests it. While she looses out on some profit if the price of grain goes up, it's still more important to remove the chance of taking a loss because grain prices drop. Similarly a consumer of a commodity can benefit from having a known, stable price they will be paying.

In such cases all three parties (producer, futures speculator and consumer) benefit even though in dollar terms it may have been a zero sum transaction. In the case of crypto the sellers are primarily speculators, the middlemen are speculators and the buyers are speculators. It's fundamental different than a commodity.
 
jeremyp said:
But he did characterise your argument correctly. Trading in Bitcoin is a zero sum game. In fact, because of transaction fees and the enormous energy consumption, it is less than zero sum. If somebody makes money out of Bitcoin, it's because somebody else has lost the same amount of money.
Click to expand...
You might think that this is a useful contribution but it is just ignorance.

Any material exchange could be said to be "zero sum". If item A is exchanged for item B then the items change hands but nothing is created nor destroyed. The reason it is not zero sum is because it affects what other trades are possible. Money spent on cryptos or art or used stamps etc is money that not available to be spent on oil or wheat etc so those commodities have a lower demand. The opposite scenario happens if cryptos are sold.

Of course, this is an oversimplified analysis.
 
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Dr. Keith said:
I tend to agree that it will find a plateau and hover there. I just don’t know
why $4k is any more plausible than $4. Or $40k, if you want to be optimistic.

For any other commodity this is less of a mystery, be it oil or frozen orange
juice concentrate.
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Exactly the problem I had with Bitcoin.

I know with orange juice the production, the consumption, the reserves.
I know how it will behave in different market conditions, boom time and
bust, even the effects of changing tastes.

Bitcoin, I know nothing about these important parameters at all. I cannot
make a prediction about price because I get a zero time horizon. What will
someone pay for it one second into the future? Anything.

I consider Bitcoin as an iCommodity to distinguish it from real commodities.
Similar to the Digital Horse Armor I get in a ten year old game few people
play anymore. (Kind of pixellated looking these days.)
 
FatherLukeduke said:
Commodities futures trading is zero sum - for every long there is an equal short and vice versa. However the commodities market itself isn't, because people can produce more grain, more steel, copper or whatever.

The stock market isn't zero sum because the companies that being traded can grow in the real world, they can generate profits and pay out dividends to those invested in the stock. The entire world economy can grow and with it the stock markets...everyone can get a bit richer.

Bitcoin trading is just moving entries round on a public ledger. There is nothing analogous to company growth. No labour is input, no value added. Wealth is just redistributed, not generated. You can argue that the trading sets the right price for whatever it is you might want do with bitcoin and is therefore useful, but that doesn't mean it is positive sum.
Click to expand...


Futures trading isn't quite zero sum either, at least from a larger economic perspective, because it does play a legit role in price discovery. In fact, that's kind of the whole point of it. (In theory, at any rate. And in practice as well, unless of course it runs away with itself, as it sometimes/oftentimes tends to do.)


eta: I realize this doesn't have much to do with your larger argument, which I happen to be in agreement with. A nit, more like.
 
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Solitaire said:
Exactly the problem I had with Bitcoin.

I know with orange juice the production, the consumption, the reserves.
I know how it will behave in different market conditions, boom time and
bust, even the effects of changing tastes.

Bitcoin, I know nothing about these important parameters at all. I cannot
make a prediction about price because I get a zero time horizon. What will
someone pay for it one second into the future? Anything.

I consider Bitcoin as an iCommodity to distinguish it from real commodities.
Similar to the Digital Horse Armor I get in a ten year old game few people
play anymore. (Kind of pixellated looking these days.)
Click to expand...


Exactly. Assuming Bitcoin serves a purpose, how many Bitcoin are needed by the market to serve that purpose?

As you say, that question is easier to attack for actual commodities. We can disagree on whether oil will be at $70 or $130 per barrel a year from now, but no one is talking about $4,000 or $40,000 because we know the market and the production forecasts.

Maybe that armor will come back into style? Don’t lose hope.
 
porch said:
Please don't relent. I have been following your analysis since the beginning, and let's just say I am doing quite well for myself. Cha-Chang! Dolla dolla bill, y'all! No fomo, just mo and mo and mo and mo!
Click to expand...
Great to hear you are not a round tripper.
Most crypto traders are at the moment.
 
Charlie Munger is being deemed correct by a huge crash in crypto currently underway.
I am glad he is surviving to see the rats carry the poison to their final resting place.
Let us hope the unbanked find a corner far removed from the scams, the greed, and the morally bankrupt to move their pitiful earnings to the even more pitiful members of the human race.
 
Samson said:
I will stick my neck out and say bitcoin will get to about 4k, and not move for years.
I hope someone else will forecast, it is kinda lonely on this thread.
Click to expand...

By 2050, a single Bitcoin will sell for north of $12 million. :boxedin:
 
Dr.Sid said:
Isn't it the same with stock market ? And to large extent with commodities ?
Click to expand...

To an extent, yes but not exactly. With commodities some people are actually buying them to use and generate some value for themselves. If I',m a jeweller and you sell me some gold, you have all the money, but I have the gold and it is probably worth more to me than the money I paid for it.

Similarly the stock market. When you buy shares in a company, you are not just buying a piece of paper, you are buying a piece of a company. If that company does well, your piece of it becomes more valuable.
 
psionl0 said:
You might think that this is a useful contribution but it is just ignorance.

Any material exchange could be said to be "zero sum". If item A is exchanged for item B then the items change hands but nothing is created nor destroyed. The reason it is not zero sum is because it affects what other trades are possible. Money spent on cryptos or art or used stamps etc is money that not available to be spent on oil or wheat etc so those commodities have a lower demand. The opposite scenario happens if cryptos are sold.

Of course, this is an oversimplified analysis.
Click to expand...

You might think this is a useful contribution, but it's just not thinking carefully.

You've just said "when you buy Bitcoin you have less money available to buy other stuff but when you sell Bitcoin you have more money available for other stuff". This is true. On the other hand, if I buy Bitcoin, the money I buy it with doesn't vanish. The person I bought it from now has it and they have exactly* the extra amount available to buy oil or wheat that offsets the amount I no longer have to buy oil or wheat.

If you'd thought about your example for even a second, you'd have realised that.

*excepting any transaction fees.
 
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jeremyp said:
You might think this is a useful contribution, but it's just not thinking carefully.

You've just said "when you buy Bitcoin you have less money available to buy other stuff but when you sell Bitcoin you have more money available for other stuff". This is true. On the other hand, if I buy Bitcoin, the money I buy it with doesn't vanish. The person I bought it from now has it and they have exactly* the extra amount available to buy oil or wheat that offsets the amount I no longer have to buy oil or wheat.

If you'd thought about your example for even a second, you'd have realised that.

*excepting any transaction fees.
Click to expand...
More commodities on the market means diluted demand. If you had spent more than 1 second studying economics you would have realized that.
 
Chanakya said:
Futures trading isn't quite zero sum either, at least from a larger economic perspective, because it does play a legit role in price discovery.
Click to expand...
I've maintained that it sets the efficient price for a commodity and it therefore useful. Zero sum games don't have to be pointless. Doesn't mean the futures trading itself isn't zero sum however, as it is.

To quote economist Paul Samuelson:

“For every trader betting on higher prices, another is betting on lower prices. These trades are matched. In the stock market, all investors (buyers and sellers) can profit in a rising market, and all can lose in a falling market. In futures markets, one trader’s gain is another’s loss.”
Click to expand...

Or analyst Denis Gartman

“In the world of futures speculation, for every long there is an equal and opposite short. That is, unlike the world of equity trading where there needn’t be equal numbers of longs versus shorts, in the world of futures dealing there is. Money is neither made, nor lost, in futures; it is simply moved from one pocket to the next as margins are swapped at the close of trading each day. Thus, every time there is a buyer betting that prices shall rise in the future, there is an equal seller taking the very opposite bet, betting that prices will fall.”
Click to expand...
 
FatherLukeduke said:
I've maintained that it sets the efficient price for a commodity and it therefore useful. Zero sum games don't have to be pointless. Doesn't mean the futures trading itself isn't zero sum however, as it is.

To quote economist Paul Samuelson:



Or analyst Denis Gartman
Click to expand...


Hm. I'd consider a zero-sum game off of a wider perspective, a broader economic basis, than that narrow reading. On the other hand, your cite seems sound, and I can hardly argue with Paul Samuelson without first marshaling sound, academically substantiated, arguments, that I don't have at this time.

But we can't have it both ways, can we? (I say "we", not "you", because I happen to be in agreement with your larger argument, but off of a wider interpretation of zero-sums.) Seen in these narrow, transactional terms, that is divorced from a broader economic underpinning/purpose , I don't see BTC is any different than stocks, or commodities; which is psionIO's argument basically. If a bull market is a win-win for everyone, when it comes to commodities or stock, at any rate while the going is good, well then the exact same thing can be said of BTC as well. To me, what sets BTC apart from commodities and stock, is the wider economic utility of the latter, so that even speculation in the latter can be seen as serving a valid, even vital, economic function. A wider economic function that BTC does NOT provide; although it was designed to do that, and although it is conceivable that eventually it might end up doing that, who knows, but so far it doesn't, except to a niche, a sometimes criminal niche.

But, I was saying, if we agree to see zero sum in simply these transactional terms, and leave out the economic "purpose", then BTC is no more zero sum than are stocks and commodities.
 
FatherLukeduke said:
I've maintained that it sets the efficient price for a commodity and it therefore useful. Zero sum games don't have to be pointless. Doesn't mean the futures trading itself isn't zero sum however, as it is.

To quote economist Paul Samuelson:



Or analyst Denis Gartman
Click to expand...

Not everyone is a trader though, and "zero sum" could be referring to utility. (essentially value to the buyer or seller).

For example a farmer may sell a futures contract on his grain in order to lock in a known price that will guarantee profitability at the end of the year. A flour mill may buy futures contracts on that same grain in order so they can set the price for their flour over the next year.

In both cases there is a net gain in utility and both parties get something more valuable to them. For the farmer knowing he will be profitable is more valuable then extracting every last penny of profit it prices are higher than expected. For the flour mill being able to tell their customers how much their flour will cost is more valuable than extracting every last penny of profit should grain prices be lower than expected.

At least that's how it is for actual commodities, for crypto essentially everyone is a trader so there are no cases where both sides get something more valuable to them personally.
 
lomiller said:
Not everyone is a trader though, and "zero sum" could be referring to utility. (essentially value to the buyer or seller).

For example a farmer may sell a futures contract on his grain in order to lock in a known price that will guarantee profitability at the end of the year. A flour mill may buy futures contracts on that same grain in order so they can set the price for their flour over the next year.

In both cases there is a net gain in utility and both parties get something more valuable to them. For the farmer knowing he will be profitable is more valuable then extracting every last penny of profit it prices are higher than expected. For the flour mill being able to tell their customers how much their flour will cost is more valuable than extracting every last penny of profit should grain prices be lower than expected.

At least that's how it is for actual commodities, for crypto essentially everyone is a trader so there are no cases where both sides get something more valuable to them personally.
Click to expand...


Even with currency specifically, hedging --- using options --- serves a solid economic function. That of locking in a price in offshore deals. And also price discovery, so that even the speculator is part of a wider economic "purpose", and contributes to a larger " sum". But an economic sum, not a strictly financial one, not a transactional sum.

That's where BTC loses out to commodities and stocks. Locking in a BTC price means nothing if you're not buying or selling in BTC. And price discovery for BTC is pointless, if isn't used as currency. Used, not just designated; which it isn't, not really; one day, maybe, who knows, but not today, not really, not unless you operate a very fringe deal. Otherwise, in trading terms, a bull run's a bull run, and the underlying asset is irrelevant. Speculation is always zero-sum, in trading terms; and if you see a bull run as a win-win, even then, a rising tide lifts everyone up, in a BTC ocean no less than a Euro ocean, or an ocean of stocks, or some commodity.

FLD introduced a great argument against BTC, but hobbled it by insisting on seeing zero sum in trading, transactional terms, rather than wider economic terms. I don't say he's wrong, because clearly his cite holds up; plus his argument itself has merit, except not in the narrow transactional terms he's trying to frame it in. Can't have it both ways.
 
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psionl0 said:
Why? A commodity is a commodity.

Bitcoin may not be in the same category as oil or gold but it is certainly
not in the same category as game tokens.
Click to expand...


Commodity, a raw material or agriculture product, that can be bought
or sold, consumed in the production of goods and services.
​


Copper, check. Coffee, check. Oil, check. Corn, check. Bitcoin, Hm.

No. It just doesn't fit. You can't turn a Bitcoin into anything else.
You can only trade it for other things. What other options do I have?


Financial Instrument, a legal agreement between two parties engaged
in the exchange of an asset with monetary value whose contract the
parties may create, modify, or trade.
​


Bonds, check. Stocks, check. Derivatives, check, Options, check. Bitcoin, hm.

Well, you write contracts about Bitcoin, but itself doesn't constitute a contract.


P. S. For a while I didn't know what to call Bitcoin. But while driving past large
ugly metal statues the city put in public park, I though, melting those things
down would provide more value. And then I got it. I know what Bitcoin is.

Beany Babies, check. Furbies, check. Pokeymon Cards, check. Bitcoin, why not?

Bitcoin, like abstract art, doesn't have a known value. I cannot predict usage,
and likewise price, depending upon make conditions good, bad, or otherwise.
Price definitely depend upon the eye of the beholder just like art.

I think this solves the problem.
 
Solitaire said:

Commodity, a raw material or agriculture product, that can be bought
or sold, consumed in the production of goods and services.
​
Click to expand...
The Oxford dictionary doesn't have the line "consumed in the production of goods and services". It also provides an alternative definition: "a useful or valuable thing".

Or you could refer to Wikipedia: "In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them."

You are not going to prove that bitcoin is "useless" by cherry picking dictionaries.
 
psionl0 said:
The Oxford dictionary doesn't have the line "consumed in the production of goods and services". It also provides an alternative definition: "a useful or valuable thing".

Or you could refer to Wikipedia: "In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them."

You are not going to prove that bitcoin is "useless" by cherry picking dictionaries.
Click to expand...

Is a dollar a commodity?
 
The hash rate is at record highs so bitcoin is increasingly secure.

If anyone can unpack this please do.
 
Looks like yet another crypto currency exchange is biting the dust.

https://www.bbc.co.uk/news/business-63564364

FTX is having to be bailed out by its rival Binance after its token lost 80% of its value.

Equity analyst Dan Ives:
This is a black swan event that adds more fears in the crypto space. This cold winter for crypto now takes on more fear
Click to expand...

Given the number of black swans in the crypto world, I'm beginning to think they might all be black.
 
jeremyp said:
Looks like yet another crypto currency exchange is biting the dust.

https://www.bbc.co.uk/news/business-63564364

FTX is having to be bailed out by its rival Binance after its token lost 80% of its value.

Equity analyst Dan Ives:


Given the number of black swans in the crypto world, I'm beginning to think they might all be black.
Click to expand...
Warren Buffett said he would prefer farms to bitcoin.
He might be right.
 
Crypto is plus or minus a trillion.
I get that it empowers anyone with internet but no "status"
Which of 20k cryptos is needed.?
 
Big Short Michael Burry Says Don't Touch Crypto by Luck Olinga

Michael Burry, the legendary investor who bet on the subprime mortgage
meltdown that sparked the 2008 financial crisis, has advice for them and
other investors interested in crypto: don't touch it if you don't want to burn
your fingers because there is too much leverage.

"The problem with #crypto, as in most things, is the leverage," the financier
said on Twitter on Nov. 9. "If you don't know how much leverage is in crypto,
you don't know anything about crypto, no matter how much else you think
you know."

The problem with crypto is that you can use the same coin as collateral
to borrow multiple times against it. There is no transparency in the market
to determine whether the same coin has already been used as collateral.

Unlike an every day example of a house which cannot be used to obtain
multiple mortgages as there are records allowing a bank to confirm whether
a house already has a mortgage against it.
Click to expand...


No transparency. Eek!

I looked for a news article detailing leverage and I didn't find anything.
I don't know how this ties into other assets. Could this be a black swan?
 
Solitaire said:
No transparency. Eek!

I looked for a news article detailing leverage and I didn't find anything.I don't know how this ties into other assets. Could this be a black swan?
Click to expand...
That would suggest that the article is more about scare mongering than about known facts.
 
jeremyp said:
Looks like yet another crypto currency exchange is biting the dust.

https://www.bbc.co.uk/news/business-63564364

FTX is having to be bailed out by its rival Binance after its token lost 80% of its value.

Equity analyst Dan Ives:


Given the number of black swans in the crypto world, I'm beginning to think they might all be black.
Click to expand...


Woof. Just saw this bit of news, elsewhere. Came back here to see if there's any interesting insights posted on this.

Saw this thing referred to as perhaps the biggest destruction of wealth ever, in terms of how much was lost in how little time. Most of it this guy Bankman-Fried's apparently, poor guy.

One mustn't generalize from single instances to the entire class of assets, of course, but this seems very similar to gambling. When the going's good, boom, you go from hundreds or maybe low thousands to the tens of thousands. Then you put together all kinds of strategies, some of which seem to work to an extent. And then, boom again, something like this happens, and you realize it was all just ...tissue thin illusion, all along.

Again, I don't mean this as an anti-crypto post. It's wrong to generalize from a few specific instances to a whole asset class. But basis what I'm seeing, the lesson I draw is that investing in crypto is like gambling, and while there's no harm in an occasional flutter, and in occasionally trying your luck, but it's wise to not sit on your chips. If you've managed to get a pile of chips, then the smart thing to do is to cash out. Like they say, the only consistently good strategy when gambling is cash management.

-----

My "strategy" is purely academic. I don't invest in crypto. Have thought of doing it more than once, but never got down to actually putting down any money. Just as well, I suppose. Then again, maybe not. Much like gambling, or playing the lottery --- it can be a mug's game, sure; but then if you have a realistic idea of the odds, and have the discipline to not overindulge and also to exit without waiting too long, then there's --- arguably! --- something to be said in favor of that sort of thing I suppose, gambling I mean to say.

We have some pro-bitcoin types posting here, some of them pretty much knowledgeable about all of this. psionIO, for instance, although he doesn't seem to have posted in a while. If anyone has any good argument why what happens to the FTXs of the world doesn't speak to the prospects of BTC, for instance, then that should make for interesting reading --- provided they do think that, that is. Like I said, the discussion on here sometimes throws up interesting bits of layman-friendly insights, presented in easily digestible bites.
 
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