Coinbase Is a $100B Crypto Cult(bloomberg.com)
bloomberg.com
Coinbase Is a $100B Crypto Cult
https://www.bloomberg.com/opinion/articles/2021-03-02/coinbase-ipo-coin-the-crypto-exchange-is-a-100-billion-cult
99 comments
Prices are still high so it's safe to say that people aren't tired. It's also hard to determine how much of what's going on is a bubble and how much is just the new normal. There's a lot of money floating around and it has to go somewhere - stocks, crypto, property etc.
If you aren't feeling great mentally, it might be good to not get emotionally involved in daytrading, speculation or anything related to crypto. Just park the money in a fund, don't touch it, don't check prices, and make sure that the rest of your life is okay.
If you aren't feeling great mentally, it might be good to not get emotionally involved in daytrading, speculation or anything related to crypto. Just park the money in a fund, don't touch it, don't check prices, and make sure that the rest of your life is okay.
I feel you. I started feeling "can we not have a crazy bull run now please" when it was clear 20k was broken for this cycle. I completely quit trading after the 2017 bubble, though. If I had placed bet on the promising small-caps (defi projects) I worked with through work over the past couple of years, I would have been wealthy now.
But I have no regrets, it has allowed me to detach mentally and emotionally from the price swings and I find my mental health worth more than the chance to get dirty rich (or lose it all). I see the prices of a lot of assets I hold during my daily work, but they're just numbers now.
I still have significant (to me) crypto holdings, but I take a longer-term perspective now and am fine with the fact that their market price may very well crash to 10% of now during the year.
But yeah, the goddamn media. Can we stop talking about price please? It's just so uninteresting.
But I have no regrets, it has allowed me to detach mentally and emotionally from the price swings and I find my mental health worth more than the chance to get dirty rich (or lose it all). I see the prices of a lot of assets I hold during my daily work, but they're just numbers now.
I still have significant (to me) crypto holdings, but I take a longer-term perspective now and am fine with the fact that their market price may very well crash to 10% of now during the year.
But yeah, the goddamn media. Can we stop talking about price please? It's just so uninteresting.
Yes, exactly this. Speculators will speculate, gamblers will gamble, and media consumers will consume media. Nothing I can do about any of that.
But I can regulate myself. Stop trading. Stop consuming media. Stop watching prices. All this short-term stuff is not meaningful.
Time is the true test. What ideas, companies and crypto projects will survive for decades, and which ones are ephemeral get-rich-quick vehicles?
I'd rather put my wealth in a handful of the former than pretend I can beat people smarter and faster than me by trading the latter.
My own psychology is the biggest obstacle to hanging on for multiple 10X's. I'll always sell winners too soon and hang on to losers too long. So for me, the best strategy is to "set it and forget it" and stop paying attention every day or even every week.
But I can regulate myself. Stop trading. Stop consuming media. Stop watching prices. All this short-term stuff is not meaningful.
Time is the true test. What ideas, companies and crypto projects will survive for decades, and which ones are ephemeral get-rich-quick vehicles?
I'd rather put my wealth in a handful of the former than pretend I can beat people smarter and faster than me by trading the latter.
My own psychology is the biggest obstacle to hanging on for multiple 10X's. I'll always sell winners too soon and hang on to losers too long. So for me, the best strategy is to "set it and forget it" and stop paying attention every day or even every week.
I always see situations like this as a personal problem. Perhaps by viewing it that way too, you can find a way to feel better. For example, you say "But it's just so tiresome to read about it all the time," so why don't you just stop reading about it?
The past year has been far and away the best year of my life, and that feeling continues today. I credit that to being mindful of how I live my life and making sure that I'm very careful to not live life in a way that becomes self-destructive.
The past year has been far and away the best year of my life, and that feeling continues today. I credit that to being mindful of how I live my life and making sure that I'm very careful to not live life in a way that becomes self-destructive.
I’ve seen some arguments that ETFs might be in a bubble aswell, due to increased retail investor demand.
I feel similarly. I have done well but it’s mentally draining and I’m compulsively checking balances. If I sold everything and moved into an ETF I’d pay a lot of short term cap gains but I still probably will.
Part of the growth of the narrative is that new people are getting brought in and act like you and I did when we first got in. Meanwhile we are being quietly worried at this point.
Everybody is tired of it. Except for the central bank that is causing it. As soon as central banks stop printing money the whole crypto verse will die like a fad. But so will your passive investments like ETFs. That can't happen therefore the printing continues.
It’s laughable to think central banks will stop printing money one day.
EVERY single fiat currency in human history has either gone to zero, or has lost 99% of its value.
EVERY single fiat currency in human history has either gone to zero, or has lost 99% of its value.
They're designed to lose value at a measured rate. That's not really a criticism.
Devaluation is the deliberate downward adjustment of a currency, that's very different to depreciation.
Fiat currencies cannot be "designed" to lose value at a measured rate. Even bitcoin, which is actually designed with a measured addition of supply up to 21 million, cannot control its value.
Fiat currencies cannot be "designed" to lose value at a measured rate. Even bitcoin, which is actually designed with a measured addition of supply up to 21 million, cannot control its value.
How do you imagine devaluation works with modern free-floating currencies?
The president of the central bank doesn't just announce the new exchange rate, because exchange rates are set by markets.
To devalue a currency, the central bank sells a lot of it in the market.
Where do they get all that currency to sell? Either by selling government bonds in the market and using the proceeds to buy foreign currency, or by printing new units of the currency from thin air and selling that to buy bonds or foreign currency.
The president of the central bank doesn't just announce the new exchange rate, because exchange rates are set by markets.
To devalue a currency, the central bank sells a lot of it in the market.
Where do they get all that currency to sell? Either by selling government bonds in the market and using the proceeds to buy foreign currency, or by printing new units of the currency from thin air and selling that to buy bonds or foreign currency.
And your point is?
The point I was making is that devaluation is a term to describe a deliberate thing whereas a currency losing its value 99-100% over time is not.
The point I was making is that devaluation is a term to describe a deliberate thing whereas a currency losing its value 99-100% over time is not.
They're both deliberate, and they both use the same mechanisms to accomplish the devaluation/depreciation. The only real difference is that one is fast and one is slow.
Coinbase’s fees are ridiculously high. By this is a symptom of a lack of competition and immaturity of the cryptocurrency space.
The second issue is that cryptocurrency is akin to a religion. This is also true. Most people buy and hold Bitcoin on the belief it will go up but there isn’t much of a reason for it to go up except a lot of people continuing to buy in and hold. As Peter Shiff and others have made clear Bitcoin is a naturally occurring Ponzi scheme.
The second issue is that cryptocurrency is akin to a religion. This is also true. Most people buy and hold Bitcoin on the belief it will go up but there isn’t much of a reason for it to go up except a lot of people continuing to buy in and hold. As Peter Shiff and others have made clear Bitcoin is a naturally occurring Ponzi scheme.
Lack of competition? Outside of the US you get 5+ times lower fees with an exchange with 9x the volume and offerings (Binance). Even in the US you can use e.g. Kraken which has lower fees.
This author in particular didn't think it 'was worth the effort' to even use the actual market which offers 0.50% fees on Coinbase and went with the 1click solution that charges 1.49% for the convenience.
This author in particular didn't think it 'was worth the effort' to even use the actual market which offers 0.50% fees on Coinbase and went with the 1click solution that charges 1.49% for the convenience.
I also have an account on Kraken and for a layperson, it's really difficult to find out how much of what I have. For example. I can't get along with its UI.
Coinbase however makes things super trivial / easy. It's a convenience fee.
Coinbase however makes things super trivial / easy. It's a convenience fee.
You’re quoting a guy who has become a laughing stock. I liked Shiff back in 2008 when he was right about the housing bubble, but it’s become apparent now that all he is now is a shill for gold, which his living depends on. I feel bad for all the people who followed his advise on bitcoin
There's 2 built in reasons for bitcoins to go up in price, the amount you get for mining keeps halving, and bitcoins get destroyed a lot.
3rd reason is the difficulty goes up if more people mine.
3rd reason is the difficulty goes up if more people mine.
Mining difficulty does not push the price up, it's the other way round.
Price drives up the profits of mining, and makes it viable to bring more capacity online. There is no mechanism by which difficulty drives the price.
Price drives up the profits of mining, and makes it viable to bring more capacity online. There is no mechanism by which difficulty drives the price.
>Mining difficulty does not push the price up, it's the other way round.
Mining difficulty has little effect on the price. Halvings which the poster was talking about, however, also does not push the price up but rather reduces the rate of inflation.
Mining difficulty has little effect on the price. Halvings which the poster was talking about, however, also does not push the price up but rather reduces the rate of inflation.
The actual cost of making a bitcoin is the cost of power, if the amount of power per bitcoin goes up, then the price will go up. The speculative price of bitcoins is ahead of the actual cost because it's very very likely to go up in the future as it becomes even more expensive to mine.
You have it precisely backwards.
If the price goes up then it becomes more profitable to mine, so it becomes viable to use more power.
There is no mechanism by which the cost of mining affects the price.
If the price goes up then it becomes more profitable to mine, so it becomes viable to use more power.
There is no mechanism by which the cost of mining affects the price.
If the cost of mining is higher than the price, then people won't mine, and the cost will go down.
They're the same thing in the end, as long as you don't account for people paying more to get bitcoins now because they know they'll be more expensive in the future.
So in the end the price of a bitcoin (not accounting for the future), will be exactly the cost of electricity to mine it.
Once you account for the future however you realise if you buy now you're getting them cheap, which pushes up the price, and thus causes it to be more profitable to mine, which pushes up the cost of mining, which causes it to be less profitable to mine.
The entire thing was designed by someone who took 1 economics class and thought inflation was a bad thing, so designed in multiple types of deflation, thus making it useless as a currency (who would ever sell a bitcoin?), and bring about the apocalypse faster
They're the same thing in the end, as long as you don't account for people paying more to get bitcoins now because they know they'll be more expensive in the future.
So in the end the price of a bitcoin (not accounting for the future), will be exactly the cost of electricity to mine it.
Once you account for the future however you realise if you buy now you're getting them cheap, which pushes up the price, and thus causes it to be more profitable to mine, which pushes up the cost of mining, which causes it to be less profitable to mine.
The entire thing was designed by someone who took 1 economics class and thought inflation was a bad thing, so designed in multiple types of deflation, thus making it useless as a currency (who would ever sell a bitcoin?), and bring about the apocalypse faster
>If the cost of mining is higher than the price, then people won't mine, and the cost will go down.
People will roughly decrease mining up to the new cost. That doesn't lower the cost further. If a mining pool explodes, decreasing the total power going into mining the price will not be affected.
The causality is fully from price>mining output, and there's no mechanism for the opposite since mining produces the same # of coins regardless of the amount of energy put in.
People will roughly decrease mining up to the new cost. That doesn't lower the cost further. If a mining pool explodes, decreasing the total power going into mining the price will not be affected.
The causality is fully from price>mining output, and there's no mechanism for the opposite since mining produces the same # of coins regardless of the amount of energy put in.
> If the cost of mining is higher than the price, then people won't mine, and the cost will go down.
Absolutely, the price of BTC drives the viability of mining, BUT the cost of mining doesn't have the reverse effect, it doesn't affect market price.
And yes, I agree, the whole thing is a clusterfuck :)
Absolutely, the price of BTC drives the viability of mining, BUT the cost of mining doesn't have the reverse effect, it doesn't affect market price.
And yes, I agree, the whole thing is a clusterfuck :)
You're looking at retail - their much bigger "wholesale" business has to compete on tighter margins. For example, when Tesla bought $1B via Coinbase, off market.
Competitors are showing up fast.
New opportunities are opening up in altcoins, staking and more.
Competitors are showing up fast.
New opportunities are opening up in altcoins, staking and more.
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but lack of competition is good for an investor :)
If Bitcoin showed one thing, it's that we can have a way to transact ownership of bytes from one address/wallet to another with a shared network without intermediaries and implicit trust of parties. IMHO it's a very big PoC and the number of people participating over the years makes it a success to me.
Also, it's an ecological disaster
Much energy usage would be an "ecological disaster" if you categorized it as unnecessary, which most things are. Do you REALLY need AC? Do you really need to watch dumb rendered internet videos?
AC has a real world use of cooling down a house; Bitcoin doesn't. That is a horrible comparison.
TikTok or Youtube videos might be more akin, but even then people are creating content which others are willing to consume. BTC is literally just a transfer of value, which could be done with much less power spent.
Yes it is known that Bitcoin doesnt cool a house. Thank you for pointing that out captain obvious. Its purpose is to stop central banks from destroying peoples lifelong labor they sacrificed their time and health for.
Ill leave it to you to invent the secure system that uses less power since nobody else seems to be able to figure it out. If you know of a way, please specify step by step in detail and how to roll that out effectively.
Ill leave it to you to invent the secure system that uses less power since nobody else seems to be able to figure it out. If you know of a way, please specify step by step in detail and how to roll that out effectively.
As I mentioned into the other comment- you are shoehorning decentralism into the topic. Not everyone has the belief that central banks are destroying peoples lives; or at least most will recognize the role it plays in keeping a relatively stable economy.
Can transfer of value be done with much less power spent (especially if decentralized)? If it there is a superior alternative, wouldn't you be referencing it by name?
Why does it need to be decentralized? That's you shoehorning crypto-anarchism into the equation. I am fine with a centralized currency, just as I am with a centralized group of people making critical decisions for the country (governments).
First, people do complain a lot about people running their AC at 72 in the summer. But more critically, there isn’t an alternative to AC that uses six orders of magnitude less energy.
There isnt an alternative to btc either. If you know of it please explain in detail how it works step by step. Eth2.0 aint it.
People say Bitcoin, but really they mean the success of cryptocurrency. There are more mechanisms than just proof of work.
If by more you mean one then I agree: proof of work and proof of stake. The other ones are too fringe.
But at least it's an interesting ecological disaster!
Maybe.
But Bloomberg is not to be trusted anymore ( The Phony Hack ), especially on subjects which may partially compete with its own core business.
But Bloomberg is not to be trusted anymore ( The Phony Hack ), especially on subjects which may partially compete with its own core business.
you dont think coinbase can be a cult and a mafia?
https://www.bloomberg.com/news/articles/2021-02-27/coinbase-...
https://www.bloomberg.com/news/articles/2021-02-27/coinbase-...
If you are dismissing crypto because you don't like bitcoin or proof of work (mining) then it may worth trying to look past that and reevaluate. Immutable ledgers, namely Ethereum, are transforming finance and that is just the low hanging fruit for this technology.
Could you elaborate on how Ethereum is transforming finance?
Here's a starting point for more information:
https://en.wikipedia.org/wiki/Decentralized_finance
https://en.wikipedia.org/wiki/Decentralized_finance
Right... I was thinking the other day, crypto ain't no solution for everything, so is no gold and fiat is just bad in long-term. The entiry economy is so broken, corrupt and one big scam and only the rich get richer and the poorer get poorer. I'm in crypto since 2015, so with gold and stocks. Made tons of money and yet I still think that the economy is one big scam. I don't trust money, I don't trust gold and neither do I trust crypto, and whilst we can say that these resources are very secure, they can be manipulated with very badly.
Crypto would possibly be great, not until the big players got in and now it no longer is money but rather investement thing. (Hold for 5 years get rich!) wtf? Right, I also hold bags, but it has just taken very different approach.
Crypto would possibly be great, not until the big players got in and now it no longer is money but rather investement thing. (Hold for 5 years get rich!) wtf? Right, I also hold bags, but it has just taken very different approach.
So basically coinbase needs competitors on transaction fee prices
It has a competitor, it's just sadly afraid of being in the US so it pulled out most of its offerings from there recently. Only Coinbase gets the preferential treatment.
Binance has 9x the volume of Coinbase, 5-10 times less fees, much more offerings and its 'stock' is at least an actual cryptocurrency rather than a US IPO.
>I was wrong, spending about $1,200 on those trades at a commission rate of 1.49%.
Anyway, the author could've had 0.50% fees even on Coinbase (still 5x higher than the lowest Binance fees) by switching to Pro which is free. The author for some reason thinks "it wasn't worth the effort". Well, if you don't want to spend the 10 minutes to use the market rather than the 1click solution, I dont see how its the exchange's fault.
Binance has 9x the volume of Coinbase, 5-10 times less fees, much more offerings and its 'stock' is at least an actual cryptocurrency rather than a US IPO.
>I was wrong, spending about $1,200 on those trades at a commission rate of 1.49%.
Anyway, the author could've had 0.50% fees even on Coinbase (still 5x higher than the lowest Binance fees) by switching to Pro which is free. The author for some reason thinks "it wasn't worth the effort". Well, if you don't want to spend the 10 minutes to use the market rather than the 1click solution, I dont see how its the exchange's fault.
Yea I really don't understand this. Coinbase makes it extremely easy to setup Pro and transfer/share funds from your non-Pro accounts.
>It has a competitor, it's just sadly afraid of being in the US
Protectionism at its finest.
Protectionism at its finest.
It has. One of them is called Coinbase Pro.
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This article is all over the place. It takes an obviously negative stance right from the start by complaining that Coinbase has frequent outages and poor customer support (that hasn’t been my experience as a long time happy Coinbase customer), then it switches completely to the author complaining about how they didn’t research the fees, and got surprised by high fees that earnestly reflect the cost of operating the business. This is somehow better than the way brokerages fund zero fee retail investing transactions, but also somehow vaguely dishonest and predatory at the same time?
It’s a very weak, meandering article with no significant point. I usually expect better from Bloomberg on financial topics, but I guess it’s just the usual trendy anti-cryptocurrency drivel.
It’s a very weak, meandering article with no significant point. I usually expect better from Bloomberg on financial topics, but I guess it’s just the usual trendy anti-cryptocurrency drivel.
> Bitcoin is an investment cult, but at some point you have to leave the cult, making you an apostate.
Bitcoin is more than a cult, for what it's worth. Bitcoin has value for rich Chinese to circumvent yuan capital export restrictions (https://www.scmp.com/economy/china-economy/article/3098981/c...), for Iran to sort-of bypass international sanctions (https://observers.france24.com/en/middle-east/20210203-in-ir...) and for North Korea to fund their nuke program (https://www.nasdaq.com/articles/un-says-north-korea-funded-n...).
In addition to that, it is a perfect tool for Western people to buy drugs, weapons and other contraband (Silk Road and its countless successors), for sending large sums of money across borders, and soon-ish to buy Tesla cars.
Basically, there are many people and governments with massive stakes in keeping Bitcoin operable and its dollar value somewhat high-ish.
Bitcoin is more than a cult, for what it's worth. Bitcoin has value for rich Chinese to circumvent yuan capital export restrictions (https://www.scmp.com/economy/china-economy/article/3098981/c...), for Iran to sort-of bypass international sanctions (https://observers.france24.com/en/middle-east/20210203-in-ir...) and for North Korea to fund their nuke program (https://www.nasdaq.com/articles/un-says-north-korea-funded-n...).
In addition to that, it is a perfect tool for Western people to buy drugs, weapons and other contraband (Silk Road and its countless successors), for sending large sums of money across borders, and soon-ish to buy Tesla cars.
Basically, there are many people and governments with massive stakes in keeping Bitcoin operable and its dollar value somewhat high-ish.
>In addition to that, it is a perfect tool for Western people to buy drugs, weapons and other contraband (Silk Road and its countless successors), for sending large sums of money across borders, and soon-ish to buy Tesla cars.
Cryptocurrencies are. Bitcoin is outclassed by e.g. Monero in that niche and sadly, the constant international busts of DNMs have made buying drugs online an ordeal with markets having very short lifespans currently.
Cryptocurrencies are. Bitcoin is outclassed by e.g. Monero in that niche and sadly, the constant international busts of DNMs have made buying drugs online an ordeal with markets having very short lifespans currently.
Also, bitcoin is highly traceable by law enforcement, e.g. chainalysis
Sounds like there might soon be many governments with stakes in making Bitcoin inoperable. If it's funding Iran, North Korea nukes, and drugs, then why shouldn't the US ban it? If that happens, why wouldn't the price go into the trash, given that no institution on the right side of the law will want to touch it?
Too many US individuals have stakes in Bitcoin. Any government action that tanks its value will be universally seen as negative, no matter political alignment. Political suicide.
They might have said that in the 1930s before the government imposed restrictions on selling gold. A tiny minority of people owns bitcoin. If it gets seen as linked to bad guys then it will not be hard to ban, any more than it would be unpopular to ban e.g. complex derivatives that are seen as making markets unstable.
China has no such concerns, and them banning it would be more than enough to tank BTC overnight.
People will still want to get in on the limited Bitcoin supply.
I use cash dollars to buy drugs. There is a massive push to keep dollars operable. Dollars must be a cult.
Be careful. Dollars are a gateway currency. Next thing you know, you might be sending large sums of money across borders or buying a Tesla car. Won’t somebody please think of the children?
I use them to buy CBD.
This is desperate pearl clutching.
Crypto is getting super interesting, and bitcoin isn't going anywhere. This video from a professional YouTuber helped me feel a little more in the loop:
https://youtu.be/YHt1Cd1m8VQ
Not mentioned in the video, I've recently observed people noticing that Bitcoin Cash has decent transaction fees. (I don't remember where - maybe on twitter or in a forum)
https://youtu.be/YHt1Cd1m8VQ
Not mentioned in the video, I've recently observed people noticing that Bitcoin Cash has decent transaction fees. (I don't remember where - maybe on twitter or in a forum)
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The money the Fed printed has to go somewhere.
And they are likely to keep printing it. And interest rates are stupid low. If you are already in the stock market there is not really anywhere else to go with your money if you want big growth. To me it makes sense to have at least some of your investments in crpyo. Especially if you are young.
I'm interested in this take, as I'm hearing it a lot lately and it seems quite plausible. Is there evidence that the price increase of bitcoin is causally related, in any reliable way, to inflationary activity at The Fed?
If so, why isn't this the headline of the past month?
If so, why isn't this the headline of the past month?
It's a theory for why many non-CPI assets are inflating in price and it has been discussed ad nauseum since March.
One group (including the Fed) points at CPI and PCE and says there is no inflation, in fact they want some inflation but can't get it.
The other group says there is inflation but it is 'asset inflation' causing things like real estate, healthcare, education, trading cards, classic cars, crypto, etc to sky rocket.
And then you have gold bugs and contrarians like Mike Burry talking about Weimar 2.0 hyperinflation coming.
You have to go to St Louis FRED data and decide for yourself. Look at M1 and M2 supply, velocity etc. Commodities have been on a tear for 6 months after a 12 year bear run. That could just be supply shock for a quickly recovering economy. And now we have an incoming 1.9T stimulus, with a lot of it going directly to consumers instead of sitting on bank balance sheets like QE. Who knows?
One group (including the Fed) points at CPI and PCE and says there is no inflation, in fact they want some inflation but can't get it.
The other group says there is inflation but it is 'asset inflation' causing things like real estate, healthcare, education, trading cards, classic cars, crypto, etc to sky rocket.
And then you have gold bugs and contrarians like Mike Burry talking about Weimar 2.0 hyperinflation coming.
You have to go to St Louis FRED data and decide for yourself. Look at M1 and M2 supply, velocity etc. Commodities have been on a tear for 6 months after a 12 year bear run. That could just be supply shock for a quickly recovering economy. And now we have an incoming 1.9T stimulus, with a lot of it going directly to consumers instead of sitting on bank balance sheets like QE. Who knows?
I'm convinced this is part of what's driving corporates allocating parts of their treasury in BTC, as brought into mainstream consciousness by Microstrategy/Saylor and Tesla/Musk. They have certainly brought this into the consciousness of CEOs, CFOs and board as "something you can do".
Debt is cheap, there is a growing concern on the ability of the USD (and others for that matter) to retain its long-term value and BTC can be used as collateral for fiat loans to gain liquidity while still being exposed to BTC.
In case anyone missed it: https://www.microstrategy.com/en/resources/events/world-2021...
Debt is cheap, there is a growing concern on the ability of the USD (and others for that matter) to retain its long-term value and BTC can be used as collateral for fiat loans to gain liquidity while still being exposed to BTC.
In case anyone missed it: https://www.microstrategy.com/en/resources/events/world-2021...
Basic economics, btc is denominated in $, if the dollar becomes worth less (increased supply), you will need more $ per coin. But that doesnt explain the 10, 20x of bitcoin by itself.
The biggest problem with the way we list the last price of assets is that the price listed is only the price of one unit. In reality, if all bitcoins were sold, the money recouped would be considerably less than last price * num coins. Perhaps this is already a solved problem via some metrics that I'm not familiar with.
Because we only use last price to evaluate assets, small changes in demand and last price can have considerable effects on overall valuations, even though (I think) the total value of the asset is not much different.
A simple example of the idea is this: I have 100 ecoins and I want to sell them. They are the only ecoins in the world. I sell the first for 100; the next, I have fewer buyers, so I settle for 99... etc all the way to 1 for the last. The initial valuation, based on last price, would have been 100*100 = 10,000. The actual cash recouped was 5,050. Obviously volume has an impact, and in reality prices are generally more stable and the whole process is much more complicated but you get the idea. But if bitcoin / gme / tesla have taught us anything, it's that price can remain irrationally high indefinitely because of the way wealth and money can be moved around and there's no urgency to use it (due to lack of taxation).
Artificial inflation/manipulation of assets seems like a great argument for wealth taxation. It would discourage tying up liquidity in bad assets and encourage better investment.
Because we only use last price to evaluate assets, small changes in demand and last price can have considerable effects on overall valuations, even though (I think) the total value of the asset is not much different.
A simple example of the idea is this: I have 100 ecoins and I want to sell them. They are the only ecoins in the world. I sell the first for 100; the next, I have fewer buyers, so I settle for 99... etc all the way to 1 for the last. The initial valuation, based on last price, would have been 100*100 = 10,000. The actual cash recouped was 5,050. Obviously volume has an impact, and in reality prices are generally more stable and the whole process is much more complicated but you get the idea. But if bitcoin / gme / tesla have taught us anything, it's that price can remain irrationally high indefinitely because of the way wealth and money can be moved around and there's no urgency to use it (due to lack of taxation).
Artificial inflation/manipulation of assets seems like a great argument for wealth taxation. It would discourage tying up liquidity in bad assets and encourage better investment.
If this argument made sense then we’d see other currencies exploding too. The 10x growth is the thing to be explained, not modest growth due to devaluing the dollar.
Have a Google on this. Its broadly accepted that stimulus measures are driving the inflation we've seen in risk asset prices over the last 12 months.
This extends to retail as well. E.g there was even some research on RobinHood which showed a sharp uptick in trading the day after the stimulus checks landed.
This extends to retail as well. E.g there was even some research on RobinHood which showed a sharp uptick in trading the day after the stimulus checks landed.
i believe the comment was an reference to coinbase $100B valuation, most of the money printed ends up in the stock market, because institutions can't do anything else with it which pumps up the prices. Global economy is tanking, stock market is up.
Stock market is forward looking. It priced in vaccines last spring. Now it is pricing in a complete economic rebound and return to normal this year. Look at commodities, yield curve steepening, flight to airlines, cruise lines, etc and away from WFH tech that got overbought post-Covid.
Well I guess it's forward looking ... until it isn't.
Right. It's forward looking, based on data available and projections. Doesn't mean it's always correct.
I keep thinking that, too.
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I understand that in the past year it has enabled people to easily make a lot of money. I personally made a lot of money (relatively speaking that is, as I'm a student) in the past year. But it's just so tiresome to read about it all the time.
Asset X goes up, asset Y comes back down. Rinse and repeat. It wears me out.
My emotional state of mind is not great at the moment, because of lockdown & loneliness, but I think this long lasting asset bubble would've made me tired regardless of my state of mind.
Maybe I'll just do ETFs, maybe I'll just quit for the year.
Any people here who feel the same?