Prove Me Wrong: Cryptocurrencies are NOT good investments

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txhill
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by txhill »

watchnerd wrote: Wed May 05, 2021 11:08 pm
SlowMovingInvestor wrote: Wed May 05, 2021 10:59 pm If I were so minded I would try P2P or real estate lending myself, cutting out the middleman, but I'm not,
I've done P2P lending via Prosper for years.

The range of interest rates available is similar to BlockFi -- less for the AAA loans, even more for the high risk. And you at least have a consumer credit rating system as a bit of an information source.

Its a miniscule amount, but we consider those to be junk bonds.

We've also done direct lending via our PE portfolio, where the base yields about the same as publicly traded bonds from a pure credit POV, but we get another 1-3% as a liquidity premium.
I never was a fan of P2P lending because of the counterparty risk, and also doesn't it require locking up funds for a while? I hadn't looked into it in a long time. I imagine P2P lending will be even less attractive once DeFi really takes off.
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HomerJ
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by HomerJ »

txhill wrote: Wed May 05, 2021 11:02 pm
SlowMovingInvestor wrote: Wed May 05, 2021 10:59 pm No, I'm not. Banks are not making 8% on what I deposit with them, I know their loan rates for mortgage loans. If I were so minded I would try P2P or real estate lending myself, cutting out the middleman, but I'm not,

And I do have a BlockFi account which earns 8.6%. But that's NOT where I want my cash to be - an non FDIC account that is collateralized by volatile, risky assets . That BlockFi account is what I consider part of my high yield bond allocation, NOT my cash.

I transfer internationally with Transferwise. It's pretty fast, very cheap, excellent forex. Not instant, but I like the fact that they do verification. Domestic wires via my banks are free, and their limits are fairly high. If I wanted to transfer more than that, I'd probably get a higher limit set up.
So I should clarify that right now, DeFi is early--I don't trust it with more than a really small % of my funds (and I don't really keep much in cash anyway). But that is going to change over time. It'll either get insured because the government will just accept that this is the way things are going to be, or it'll get so reliable over time that concerns about its stability will fade away.
Or the risk will show up, and people will lose a lot of money, and no longer trust DeFi.

There is no free lunch. DeFi can only pay 8% because they are making loans at a much higher rate, and people who borrow at a higher rate are bad credit risks. (As far as I can tell, most of the people getting those high priced loans are using it to speculate in MORE crypto).

It really is dangerous.

It doesn't take that much experience and wisdom to spot this.

There is no risk-free 8%. There is no risk-free 8%.

It does seem you see that... Because like you say, you only trust it with a really small % of your funds...

So stop talking about how the 8% is such a good deal compared to banks. Because even you know it's not. Even you know there's risk there that doesn't exist with banks.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
txhill
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by txhill »

HomerJ wrote: Wed May 05, 2021 11:17 pm
txhill wrote: Wed May 05, 2021 11:02 pm
SlowMovingInvestor wrote: Wed May 05, 2021 10:59 pm No, I'm not. Banks are not making 8% on what I deposit with them, I know their loan rates for mortgage loans. If I were so minded I would try P2P or real estate lending myself, cutting out the middleman, but I'm not,

And I do have a BlockFi account which earns 8.6%. But that's NOT where I want my cash to be - an non FDIC account that is collateralized by volatile, risky assets . That BlockFi account is what I consider part of my high yield bond allocation, NOT my cash.

I transfer internationally with Transferwise. It's pretty fast, very cheap, excellent forex. Not instant, but I like the fact that they do verification. Domestic wires via my banks are free, and their limits are fairly high. If I wanted to transfer more than that, I'd probably get a higher limit set up.
So I should clarify that right now, DeFi is early--I don't trust it with more than a really small % of my funds (and I don't really keep much in cash anyway). But that is going to change over time. It'll either get insured because the government will just accept that this is the way things are going to be, or it'll get so reliable over time that concerns about its stability will fade away.
Or the risk will show up, and people will lose a lot of money, and no longer trust DeFi.

There is no free lunch. DeFi can only pay 8% because they are making loans at a much higher rate, and people who borrow at a higher rate are bad credit risks. (As far as I can tell, most of the people getting those high priced loans are using it to speculate in MORE crypto).

It really is dangerous.

It takes some experience and wisdom to spot this, and I know you just think we are all old fuddy-duddys, but this is absolutely true.

There is no risk-free 8%. There is no risk-free 8%.

It does seem you see that... Because like you say, you only trust it with a really small % of your funds...

So stop talking about how the 8% is such a good deal compared to banks. Because even you know it's not. Even you know there's risk there that doesn't exist with banks.
The 8% today represents current risk premium, yes, because DeFi hasn't been around all that long and folks aren't sure how to assess the risk fully yet. But I think in theory, the rate eventually will approach the risk free rate of return, and that's because DeFi is counterparty risk free. Zero counterparty default risk.

The risks associated with DeFi are programmatic. A bug in the code could destroy the protocol. But once a smart contract has been established for a long time and proven its reliability? Once you know that a smart contract is a bug-free sustaining liquidity protocol? Or if the government backs it up with FDIC insurance? Either way it's a game changer.
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watchnerd
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by watchnerd »

txhill wrote: Wed May 05, 2021 11:15 pm I never was a fan of P2P lending because of the counterparty risk, and also doesn't it require locking up funds for a while? I hadn't looked into it in a long time. I imagine P2P lending will be even less attractive once DeFi really takes off.
2-3 years, usually.
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claypigeon
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by claypigeon »

watchnerd wrote: Wed May 05, 2021 10:20 pm
claypigeon wrote: Wed May 05, 2021 10:08 pm
ballons wrote: Wed May 05, 2021 6:30 pm
claypigeon wrote: Wed May 05, 2021 5:20 pm...
Apologies if my post was unclear. You get paid as the middleman to delegate your crypto so others transactions can be validated. You also pay about 25 cents last I checked ( as it’s a flat 0.16 coin fee based on the crypto’s worth) which can be lowered and will once scaled, to transact yourself. ...
I don't want to pay 25 cents to a middleman. How do I get rid of crypto middlemen, including any premiums, to bring that to $0.00?
Develop a more efficient coin. Ultimately there’s some theoretical cost with any transaction. But much cheaper for the cost to be the actual transaction cost than the transaction cost plus a brick and mortar bank plus an ACH system plus salaries and employees and pensions and bailouts, etc. Somehow with 0.1% interest and making a profit elsewhere, banks still get away with these fees. My hope is at minimum defi forces brick and mortar banks to cut their ridiculous fees. Become more like vanguard/ fidelity/ Ameritrade and offer subsidized free trades making up the cost in other areas
I'm curious what fees you're actually paying to your bank?

I don't actually have any -- no account fee, cash back rewards card, etc.
Not many as I mostly use digital cash but in the last year

Holding a minimum of $3000 in one account with 0.1% interest so I don’t pay a fee

Holding a minimum of $10000 in another account so I don’t pay a fee (emergency fund is here)

The inconvenience of going to the ATM at work or the one 3 miles from our house to withdraw cash without paying a fee

$35 for a wire fee

$25 for a stop transfer fee (got this waived) after my Venmo was hacked and they didn’t freeze my venmo and brick and mortar bank account after immediately calling in to cancel and the transaction rooms somehow still occurred a day later. I got my money back but add to that hour or two sorting this out

The bigger driver is just holding money and losing it to inflation so I have access to a free checking and ATM network. I’d love if I could put that money to work for me. We strictly follow a 6 month emergency fund and everything else in our stock allocation strategy (I mentioned awhile ago I don’t invest in crypto but only keep a few hundred dollars there for emergencies/power outages so we don’t need to rely on carrying cash though now it’s about a thousand dollars). But I’m stuck choosing between 0.6% at an inconvenient “high” yield savings account bank and losing 2% plus to inflation, or a convenient basically 0% savings bank account. I’d love to put that money to work at or beating inflation by staking a coin. The volatility scares us away but that’s a few thousands dollars we’re missing out on every year
Last edited by claypigeon on Wed May 05, 2021 11:31 pm, edited 1 time in total.
luckyducky99
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by luckyducky99 »

txhill wrote: Wed May 05, 2021 10:58 pm
watchnerd wrote: Wed May 05, 2021 10:56 pm
txhill wrote: Wed May 05, 2021 10:45 pm

You are all thinking about it wrong. You're paying quite a lot by keeping cash in a standard bank checking or savings account, and that's not even counting the effects of inflation. If you put your cash in a stablecoin that's pegged to the dollar and drop it into a DeFi liquidity protocol or put it in something like BlockFi, you'll earn 8%+ on it. And those stablecoins are instantly transferable and switchable back into USD. That is what you are paying the people who hold cash for you: 8%+ APY on your cash.
But that's mousenuts relative to our investment portfolio and how little cash we keep in checking, which usually hovers around $10k.

$80 a year, before taxes, $52 after taxes.

I'll pay $52 opportunity cost just to avoid the hassle of moving money around through extra steps. Plus my paychecks have to go to my checking account, and my bills get paid from there....it's just not worth the bother for $52.

I spend far more than that on other services every year that basically just save me time from having to do things myself....e.g. I don't cut my own hair.
Missing a zero :) That's $800 a year on just $10k. But yes it's not lifechanging money. But you're still paying the bank effectively $800 / year. When you give them money and expect nothing or just pennies in return, you're just giving them a free loan that they'll use to put your money to work. What about that is attractive? Not much other than FDIC insurance... and if DeFi becomes as well established or even insured as a savings account? Game over for banks.
FDIC protects individual depositors, but it also protects the whole system because when individuals know their deposits are insured the likelihood of there being a bank run and a contagious liquidity crisis virtually disappears.

Stablecoins are supposedly backed by cash and “equivalents” but looking around I couldn’t figure out what that means. Granted I didn’t look very hard. But I’m more skeptical than the average bear so I don’t trust them especially since they don’t seem transparent. If things start going sideways I wouldn’t be surprised if they had trouble meeting redemptions. Then there’s a stampede.

I’m actually more comfortable earning less interest on much more volatile crypto because I understand the counterparty risk better.
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HomerJ
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by HomerJ »

txhill wrote: Wed May 05, 2021 11:22 pmDeFi is counterparty risk free. Zero counterparty default risk.
This is incorrect. It would take one heck of a crash to burn through 2x collateral, but it is possible.

Read the fine print. You, the lender, can lose money, the DeFi exchanges will not make you whole if everything drops too fast. I've looked, and they have disclaimers.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

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Duplicate
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SlowMovingInvestor
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by SlowMovingInvestor »

txhill wrote: Wed May 05, 2021 11:02 pm So I should clarify that right now, DeFi is early--I don't trust it with more than a really small % of my funds (and I don't really keep much in cash anyway). But that is going to change over time. It'll either get insured because the government will just accept that this is the way things are going to be, or it'll get so reliable over time that concerns about its stability will fade away. Yes, with those will also come a drop in the APY i'm sure. But still, it takes all the work out from your end in terms of lending and earning interest on it, and in theory has ZERO default risk because of the way they structure the services as overcollateralized. It's a VERY fascinating development and something traditional banks are extremely worried about because they're going to have to adapt to stay in the game.
That ONLY works because they're loans backed by crypto collateral that can be liquidated. Margin loans (which is the best equivalent in the regular financial sector ) have much lower rates for borrowing and lending. At IB, it's around 1%. When you're going with loans without collateral or collateral that involves the proverbial repo man to repossess, then it's a very different matter -- risk and spreads will be higher. [And as we saw in the financial crisis, even collateralized loans, backed by heavily mathematical models can fail.]

P2P lending didn't kill traditional banks and even online only banks haven't made a huge dent. They're surprisingly resilient.
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txhill
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by txhill »

luckyducky99 wrote: Wed May 05, 2021 11:26 pm FDIC protects individual depositors, but it also protects the whole system because when individuals know their deposits are insured the likelihood of there being a bank run and a contagious liquidity crisis virtually disappears.

Stablecoins are supposedly backed by cash and “equivalents” but looking around I couldn’t figure out what that means. Granted I didn’t look very hard. But I’m more skeptical than the average bear so I don’t trust them especially since they don’t seem transparent. If things start going sideways I wouldn’t be surprised if they had trouble meeting redemptions. Then there’s a stampede.

I’m actually more comfortable earning less interest on much more volatile crypto because I understand the counterparty risk better.
HomerJ wrote: Wed May 05, 2021 11:27 pm
txhill wrote: Wed May 05, 2021 11:22 pmDeFi is counterparty risk free. Zero counterparty default risk.
This is incorrect. It would take one heck of a crash to burn through 2x collateral, but it is possible.

Read the fine print. You, the lender, can lose money, the DeFi exchanges will not make you whole if everything drops too fast. I've looked, and they have disclaimers.
I suppose both of you are describing extreme scenarios where there is a massive run on the protocol. I suppose that could happen and I don't know if the current smart contracts would handle that well or not. They handled a drop like in March 2020 just fine but a more extreme one I suppose is still untested. Maybe that explains the high APY you can get through DeFi now. But as the space develops I imagine that risk will drop, especially if they can use an actual US digital dollar and not just a stablecoin.

Regarding stablecoins, I prefer USDC and GUSD because they are audited. USDT seems a little less transparent in how it works so I try to avoid using it for now.
SlowMovingInvestor
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by SlowMovingInvestor »

txhill wrote: Wed May 05, 2021 11:22 pm
The risks associated with DeFi are programmatic. A bug in the code could destroy the protocol. But once a smart contract has been established for a long time and proven its reliability? Once you know that a smart contract is a bug-free sustaining liquidity protocol? Or if the government backs it up with FDIC insurance? Either way it's a game changer.
Code that has been running for years and is open source can very well have bugs. I spent long nights rolling out fixes for Heartbleed (just the most prominent of several open source bugs I've had to deal with) a few years back.

I don't see the government providing FDIC insurance -- indeed it shouldn't, any more than it should insure P2P loans or market maker operations for that matter (which is essentially what liquidity pools are).
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Hustlinghustling »

HomerJ wrote: Wed May 05, 2021 11:17 pm
There is no free lunch. DeFi can only pay 8% because they are making loans at a much higher rate, and people who borrow at a higher rate are bad credit risks. (As far as I can tell, most of the people getting those high priced loans are using it to speculate in MORE crypto).
Interest rates are not all about credit worthiness here. Many are borrowing to shortsell crypto in spot market (i.e institutional market makers hedging their futures positions). much like how the rate to borrow a stock goes up for stocks with substntial short interest. the higher the demand to go short, the more one needs to pay to borrow it.

similarly, on the supply side, the more people are willing to lend their positions (perhaps after greater trust in the platform is established), the more the price of the borrow will fall.

point being, shortselling of crypto is a big factor to understand on the demand side for the borrow.the overcollateralized structure is identical for how institutions facilitating stock loans for shortselling set it up.
Last edited by Hustlinghustling on Wed May 05, 2021 11:52 pm, edited 1 time in total.
SlowMovingInvestor
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by SlowMovingInvestor »

txhill wrote: Wed May 05, 2021 11:15 pm
I never was a fan of P2P lending because of the counterparty risk, and also doesn't it require locking up funds for a while? I hadn't looked into it in a long time. I imagine P2P lending will be even less attractive once DeFi really takes off.
That's the thing -- there's always going to be counterparty risk unless you assume that all loans are going to be collateralized with assets that can be immediately priced and liquidated. DeFi is essentially P2P lending with that type of collateral.

[ As far as locking goes, any platform will do that to match loan duration]
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luckyducky99
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by luckyducky99 »

txhill wrote: Wed May 05, 2021 11:33 pm
luckyducky99 wrote: Wed May 05, 2021 11:26 pm FDIC protects individual depositors, but it also protects the whole system because when individuals know their deposits are insured the likelihood of there being a bank run and a contagious liquidity crisis virtually disappears.

Stablecoins are supposedly backed by cash and “equivalents” but looking around I couldn’t figure out what that means. Granted I didn’t look very hard. But I’m more skeptical than the average bear so I don’t trust them especially since they don’t seem transparent. If things start going sideways I wouldn’t be surprised if they had trouble meeting redemptions. Then there’s a stampede.

I’m actually more comfortable earning less interest on much more volatile crypto because I understand the counterparty risk better.
HomerJ wrote: Wed May 05, 2021 11:27 pm
txhill wrote: Wed May 05, 2021 11:22 pmDeFi is counterparty risk free. Zero counterparty default risk.
This is incorrect. It would take one heck of a crash to burn through 2x collateral, but it is possible.

Read the fine print. You, the lender, can lose money, the DeFi exchanges will not make you whole if everything drops too fast. I've looked, and they have disclaimers.
I suppose both of you are describing extreme scenarios where there is a massive run on the protocol. I suppose that could happen and I don't know if the current smart contracts would handle that well or not. They handled a drop like in March 2020 just fine but a more extreme one I suppose is still untested. Maybe that explains the high APY you can get through DeFi now. But as the space develops I imagine that risk will drop, especially if they can use an actual US digital dollar and not just a stablecoin.

Regarding stablecoins, I prefer USDC and GUSD because they are audited. USDT seems a little less transparent in how it works so I try to avoid using it for now.
I’m less worried about the protocol than what’s actually backing each USDC. If it’s not actually $1 in a bank somewhere, then there’s real liquidity risk. If there actually is $1 somewhere for every coin, then I don’t understand who’s paying 8% to borrow them when borrowing dollars is much cheaper.

I admit to not understanding the market for stablecoins though.
Last edited by luckyducky99 on Wed May 05, 2021 11:49 pm, edited 1 time in total.
SlowMovingInvestor
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by SlowMovingInvestor »

Hustlinghustling wrote: Wed May 05, 2021 11:43 pm
HomerJ wrote: Wed May 05, 2021 11:17 pm
There is no free lunch. DeFi can only pay 8% because they are making loans at a much higher rate, and people who borrow at a higher rate are bad credit risks. (As far as I can tell, most of the people getting those high priced loans are using it to speculate in MORE crypto).
Interest rates are not all about credit worthiness here. Many are borrowing to shortsell crypto in spot market (i.e institutional market makers hedging their futures positions). much like how the rate to borrow a stock goes up for stocks with substntial short interest. the higher the demand to go short, the more one needs to pay to borrow it.
The 8% rate, and much of this particular thread was about stablecoins as the equivalent to a bank account. I don't think that scenario applies for stablecoins.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Hustlinghustling »

SlowMovingInvestor wrote: Wed May 05, 2021 11:49 pm
Hustlinghustling wrote: Wed May 05, 2021 11:43 pm
HomerJ wrote: Wed May 05, 2021 11:17 pm
There is no free lunch. DeFi can only pay 8% because they are making loans at a much higher rate, and people who borrow at a higher rate are bad credit risks. (As far as I can tell, most of the people getting those high priced loans are using it to speculate in MORE crypto).
Interest rates are not all about credit worthiness here. Many are borrowing to shortsell crypto in spot market (i.e institutional market makers hedging their futures positions). much like how the rate to borrow a stock goes up for stocks with substntial short interest. the higher the demand to go short, the more one needs to pay to borrow it.
The 8% rate, and much of this particular thread was about stablecoins as the equivalent to a bank account. I don't think that scenario applies for stablecoins.
I don't disagree there will be some who are borrowing for the traditional use case. Or leveraging to more crypto perhaps as it is still their easiest non-KYC way to do so.

But pointing out there's a big equity-like lending component to this market that is different from how one normally looks at traditional money, lending and credit and involving bigger institutional drivers behind it.
Last edited by Hustlinghustling on Wed May 05, 2021 11:57 pm, edited 1 time in total.
luckyducky99
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by luckyducky99 »

SlowMovingInvestor wrote: Wed May 05, 2021 11:44 pm
txhill wrote: Wed May 05, 2021 11:15 pm
I never was a fan of P2P lending because of the counterparty risk, and also doesn't it require locking up funds for a while? I hadn't looked into it in a long time. I imagine P2P lending will be even less attractive once DeFi really takes off.
That's the thing -- there's always going to be counterparty risk unless you assume that all loans are going to be collateralized with assets that can be immediately priced and liquidated. DeFi is essentially P2P lending with that type of collateral.

[ As far as locking goes, any platform will do that to match loan duration]
The bolded bit is my concern around stablecoins. If people are posting them as collateral to borrow other crypto, and other crypto dives off a cliff, I question how readily they can be liquidated. And if they even start to have problems they could unravel fast as everyone rushes to claim their dollars.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by cogito »

luckyducky99 wrote: Wed May 05, 2021 11:48 pm

I’m less worried about the protocol than what’s actually backing each USDC. If it’s not actually $1 in a bank somewhere, then there’s real liquidity risk. If there actually is $1 somewhere for every coin, then I don’t understand who’s paying 8% to borrow them when borrowing dollars is much cheaper.

I admit to not understanding the market for stablecoins though.
USDC and GUSD are gonna be fine. USDT probably not. The market is mostly outside of our small world here in the USA.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by SlowMovingInvestor »

luckyducky99 wrote: Wed May 05, 2021 11:57 pm The bolded bit is my concern around stablecoins. If people are posting them as collateral to borrow other crypto, and other crypto dives off a cliff, I question how readily they can be liquidated. And if they even start to have problems they could unravel fast as everyone rushes to claim their dollars.
It's more likely to be the other way around, i.e. people post other crypto as collateral to borrow stablecoins. And for stablecoins backed by audited reserves, stablecoins should be convertible to $ even during a crash.

But if you're concerned about loss, that doesn't help you -- if you deposit USDC and they're lent out, they aren't in your (or the FI"s) possession, they've gone to someone else. So you will suffer a loss even if the USDC is convertible back to USD 1: 1.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by SlowMovingInvestor »

Hustlinghustling wrote: Wed May 05, 2021 11:56 pm
I don't disagree there will be some who are borrowing for the traditional use case. Or leveraging to more crypto perhaps as it is still their easiest non-KYC way to do so.

But pointing out there's a big equity-like lending component to this market that is different from how one normally looks at traditional money, lending and credit and involving bigger institutional drivers behind it.
It seems the futures and spot price of BTC has converged recently. And I'm not sure other tokens have large futures markets except possibly Ether. So I'm not convinced this is a major source of borrowing.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Prahasaurus »

av111 wrote: Wed May 05, 2021 11:14 pm
Keenobserver wrote: Wed May 05, 2021 11:05 pm
av111 wrote: Wed May 05, 2021 3:31 pm
Keenobserver wrote: Wed May 05, 2021 3:18 pm
watchnerd wrote: Wed May 05, 2021 1:31 pm

How much longer do you think those returns will happen in the future?
Can you give me such a timeline for any investment with certainty?
It is not possible to give a timeline for speculative items. Look at DOGE. No revenue, no profit, no use. Perfect beanie baby and still goes up or down for no reason.

It is more possible to predict how a real investment will behave when it engages with the environment to hire people, make something, sell it and generate profits
So stocks are not speculative? We dont get stock bubbles? I thought it was simple; a stock is worth what whatever someone is willing to pay for it in the open market. Same holds true for crypto, even DODGE despite its lack of apparant utility. A bubble yes, but lets not pretend stocks are not speculative and dont have bubbles. Anyone investing in cryptosphere will acknowledge its a high risk high reward game simiar to penny stocks or pharma stocks. Why the hate?
Stocks represent regular businesses. They have a basis, book value, track record of revenue and profits and possibility of impact on these metrics from macro and micro environment. Crypto is nothing like that so it is hard to see anything but speculation
This is just not true. It's demonstrably false. It amazes me people still believe this with such confidence! I have given many, many examples, but either you don't understand them or never bothered to read them. I've shown how I receive monthly payments on my crypto investments, money that comes from users paying for services within crypto, e.g. Ren moving assets across different chains and taking a small % of the transaction amount, or Uniswap generating revenue from all trading transactions. Fun fact: Uniswap actually generates similar daily fee volumes as Bitcoin! One app running on Ethereum does as much daily revenue as the entire Bitcoin network: https://cryptofees.info

People see Bitcoin and Dogecoin and think crypto. Then totally miss out on what is really happening. That is why I was able to buy Uniswap at 3.44, knowing it was going to see a similar market cap to Coinbase. Or AAVE at any price (since I still think AAVE is 100x undervalued based on its 5 year potential). My post from December 2020:

viewtopic.php?p=5670510#p5670510
If you want to compare Coinbase to a crypto project, you should compare it to Uniswap. Although my guess is you’ve never used Uniswap, and probably never even heard of Uniswap. Uniswap does half the total daily volume as Coinbase. But they do it with less than 10 people!!! Because the project is decentralized. And Uniswap’s total market cap is around 1 billion USD (UNI token), which is 1/30 of the expected Coinbase IPO price. Also, if you ask me what trading volumes will be in 2 years, I would bet a lot of money that Uniswap will be much higher than Coinbase. Similar trading volumes today, one company has thousands of employees and the other decentralized protocol (not a company) is doing similar volumes with less than 10 people!!! Crazy, huh?
UNI was trading at under 4 USD at that time, less than 6 months ago. A crypto project with users, revenue, explosive growth, etc. Now it's over 40 USD. It was a simple case of comparing multiples, Coinbase expected market cap after IPO versus Uniswap, and realizing UNI was massively undervalued.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Hustlinghustling »

SlowMovingInvestor wrote: Thu May 06, 2021 12:27 am
Hustlinghustling wrote: Wed May 05, 2021 11:56 pm
I don't disagree there will be some who are borrowing for the traditional use case. Or leveraging to more crypto perhaps as it is still their easiest non-KYC way to do so.

But pointing out there's a big equity-like lending component to this market that is different from how one normally looks at traditional money, lending and credit and involving bigger institutional drivers behind it.
It seems the futures and spot price of BTC has converged recently. And I'm not sure other tokens have large futures markets except possibly Ether. So I'm not convinced this is a major source of borrowing.
You don't need a futures markets to drive short interest on the spot market though. futures hedging is but one use case of crypto borrowing. you can also just go short outright, especially in the absence of a future's market to give you that channel

For me, Occam's Razor applies when everyone is baffled at "why would anyone borrow crypto at [insert ridiculous rate], and overcollateralize on top of that, when you can just borrow at the bank for [insert much lower rate]" ... when 1) borrowing in that specific crypto is the only way to go short on such a volatile, highly traded asset (regardless of futures trading) and 2) also when borrowing is essential to support the futures markets.

re: BTC futures and spot convergence. That would be consistent with lower interest rates offered on BTC which should come with more supply of borrow being made available (people becoming more comfortable using lending platforms and the risks involved?) and also less demand to go short.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Prahasaurus »

txhill wrote: Wed May 05, 2021 11:22 pm
HomerJ wrote: Wed May 05, 2021 11:17 pm
txhill wrote: Wed May 05, 2021 11:02 pm
SlowMovingInvestor wrote: Wed May 05, 2021 10:59 pm No, I'm not. Banks are not making 8% on what I deposit with them, I know their loan rates for mortgage loans. If I were so minded I would try P2P or real estate lending myself, cutting out the middleman, but I'm not,

And I do have a BlockFi account which earns 8.6%. But that's NOT where I want my cash to be - an non FDIC account that is collateralized by volatile, risky assets . That BlockFi account is what I consider part of my high yield bond allocation, NOT my cash.

I transfer internationally with Transferwise. It's pretty fast, very cheap, excellent forex. Not instant, but I like the fact that they do verification. Domestic wires via my banks are free, and their limits are fairly high. If I wanted to transfer more than that, I'd probably get a higher limit set up.
So I should clarify that right now, DeFi is early--I don't trust it with more than a really small % of my funds (and I don't really keep much in cash anyway). But that is going to change over time. It'll either get insured because the government will just accept that this is the way things are going to be, or it'll get so reliable over time that concerns about its stability will fade away.
Or the risk will show up, and people will lose a lot of money, and no longer trust DeFi.

There is no free lunch. DeFi can only pay 8% because they are making loans at a much higher rate, and people who borrow at a higher rate are bad credit risks. (As far as I can tell, most of the people getting those high priced loans are using it to speculate in MORE crypto).

It really is dangerous.

It takes some experience and wisdom to spot this, and I know you just think we are all old fuddy-duddys, but this is absolutely true.

There is no risk-free 8%. There is no risk-free 8%.

It does seem you see that... Because like you say, you only trust it with a really small % of your funds...

So stop talking about how the 8% is such a good deal compared to banks. Because even you know it's not. Even you know there's risk there that doesn't exist with banks.
The 8% today represents current risk premium, yes, because DeFi hasn't been around all that long and folks aren't sure how to assess the risk fully yet. But I think in theory, the rate eventually will approach the risk free rate of return, and that's because DeFi is counterparty risk free. Zero counterparty default risk.

The risks associated with DeFi are programmatic. A bug in the code could destroy the protocol. But once a smart contract has been established for a long time and proven its reliability? Once you know that a smart contract is a bug-free sustaining liquidity protocol? Or if the government backs it up with FDIC insurance? Either way it's a game changer.
I disagree. The 8% (right now USDC is earning 5.66%, by the way, as these are variable rates) is based on supply and demand. Nothing more. You can argue that supply is limited because of perceived risk which you correctly identified, and hence that lower supply is what drives the interest rate up. OK, I'll accept that, but it's very hard to measure. And I could counter that demand is similarly limited because of the perceived risk within other projects and investments.

Bottom line is that Aave is revolutionary. Don't let that get lost in this discussion! A fully decentralized platform with a handful of core developers (paid by the DAO, not a central entity) is offering basic banking services to anyone in the world! And the vast majority of the money generated is given back to users. Right now Aave has over 16 billion dollars locked in their protocol, and they are just over a year old. And good news, you can own the AAVE governance token yourself and be part of the project. Aave's market cap is under 6 billion USD. Wells Fargo, a horrible bank, is worth 190 billion USD. As a customer of both, I will bet you Aave's market cap will surpass Wells one day in the near future.

Would you rather earn 8% on your deposits, or pay for another mega yacht for Jamie Daimon? You choose, but I'm taking the 8%. If supply increases and/or demand falls and my average rate drops to 3-4% on USD deposits, I can live with that, too. If this all seems too risky for you, great, don't put your money there. That's the beauty of crypto, nobody is forcing you to do anything. Just more options.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Prahasaurus »

cogito wrote: Thu May 06, 2021 12:01 am
luckyducky99 wrote: Wed May 05, 2021 11:48 pm

I’m less worried about the protocol than what’s actually backing each USDC. If it’s not actually $1 in a bank somewhere, then there’s real liquidity risk. If there actually is $1 somewhere for every coin, then I don’t understand who’s paying 8% to borrow them when borrowing dollars is much cheaper.

I admit to not understanding the market for stablecoins though.
USDC and GUSD are gonna be fine. USDT probably not. The market is mostly outside of our small world here in the USA.
I think USDT will be fine. It's very popular in Asia, and it's quite easy to use USDT when moving money across chains. I know that was the primary FUD here for some months, but it seems to have totally died down of late... :D

I was airdropped some tokens from a project on Binance. I didn't really want to get involved in the project, so I simply converted to USDT and moved off Binance (USDT made it easier to transfer off Binance). Because it was a relatively small amount (under 2k USD), I sent it to Matic (Ethereum L2) and put the money on Aave. I wanted to test Aave's solution on Matic, experience firsthand the low fees, etc. I was impressed. But I digress...

I think USDT will be a huge winner long term in this space, thanks to their massive liquidity and dominance of Asian markets. That is where most of the action is now. The US is almost certainly going to drop the ball on crypto. Other countries (especially China) will view it as an opportunity and embrace it (with stops and starts along the way, obviously).

As to USDT's risk, you can actually see some of that in real time at Aave, comparing lend/borrow rates across USD stablecoins:

USDC: 5.66% (interest on deposits)
USDT: 8.59% (interest on deposits)

So you are paid more to hold tether dollars, which makes sense. But again, it's hard to extract out how much of this is from the risk, and not supply/demand availability (and of course it's all linked).
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by YRT70 »

Prahasaurus wrote: Thu May 06, 2021 12:38 am Or AAVE at any price (since I still think AAVE is 100x undervalued based on its 5 year potential). My post from December 2020:
If I was to put in some play money in crypto today, what would you recommend? ETH, AAVE or UNI?

(and yes I do my own due diligence too)
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Prahasaurus »

YRT70 wrote: Thu May 06, 2021 3:24 am
Prahasaurus wrote: Thu May 06, 2021 12:38 am Or AAVE at any price (since I still think AAVE is 100x undervalued based on its 5 year potential). My post from December 2020:
If I was to put in some play money in crypto today, what would you recommend? ETH, AAVE or UNI?

(and yes I do my own due diligence too)
Trick question, because the correct answer is all of them...

I'll assume you are a long term investor by crypto standards (min 3 years):

80% ETH
15% AAVE
5% UNI

If your risk profile allows it, take your AAVE and stake in their safety module. You will earn 7% APY, paid in AAVE tokens. Beware of the risks. Also, you need to have more than the equivalent of 5k USD in AAVE tokens (after allocating your 15%) to make it worthwhile.

If you have more than 5k USD in UNI (after allocating your 5%), take your UNI and stake at Bancor in their single sided pools. You will earn more UNI and also Bancor tokens (with 5k USD in UNI probably generating around 400 USD per year in Bancor tokens. I am rather optimistic on Bancor long term, why not take their "free" tokens instead of leaving everything in your wallet.

Stake all of your ETH in nodes (validators). There are options. You can do this at Coinbase (max 40 ETH). You can use Lido Finance. You can wait a bit and use the Rocket Pool option (you don't need a min of 32 ETH for any of these options, only if you choose to run your own node at home). Advantage of staking is you will earn 6-8% paid in ETH. Key being "paid in ETH..."

Lock it all up in these protocols, check in occasionally, but more or less forget about it. Would not be surprised to see a 100k USD price per ETH in 3 years. Maybe sooner if the move to ETH 2.0 goes as well as I expect. This is definitely not priced in, with ETH moving from Proof of Work to Proof of Stake. This will dramatically change the tokenomics of Ethereum (completely eliminate sell pressure from miners since they no longer exist, people locking ETH in nodes to earn interest will significantly reduce total supply, continued demand for gas (ETH) as DeFi grows, etc.).

Not investment advice. :-)
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by YRT70 »

Prahasaurus wrote: Thu May 06, 2021 3:53 am Not investment advice. :-)
Thanks man. Appreciate it.
Prahasaurus wrote: Thu May 06, 2021 3:53 am
Stake all of your ETH in nodes (validators). There are options. You can do this at Coinbase (max 40 ETH).
Is Kraken also good for that?
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Prahasaurus »

YRT70 wrote: Thu May 06, 2021 4:24 am
Prahasaurus wrote: Thu May 06, 2021 3:53 am Not investment advice. :-)
Thanks man. Appreciate it.
Prahasaurus wrote: Thu May 06, 2021 3:53 am
Stake all of your ETH in nodes (validators). There are options. You can do this at Coinbase (max 40 ETH).
Is Kraken also good for that?
No personal experience with Kraken, although it's probably a good option. I am staking some of my ETH at Coinbase, so far so good.

If the total amount you plan to invest is relatively small (e.g. 10k), just buy ETH. No need to complicate things.

Good luck.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by txhill »

Prahasaurus wrote: Thu May 06, 2021 3:53 am
YRT70 wrote: Thu May 06, 2021 3:24 am
Prahasaurus wrote: Thu May 06, 2021 12:38 am Or AAVE at any price (since I still think AAVE is 100x undervalued based on its 5 year potential). My post from December 2020:
If I was to put in some play money in crypto today, what would you recommend? ETH, AAVE or UNI?

(and yes I do my own due diligence too)
Trick question, because the correct answer is all of them...

I'll assume you are a long term investor by crypto standards (min 3 years):

80% ETH
15% AAVE
5% UNI

If your risk profile allows it, take your AAVE and stake in their safety module. You will earn 7% APY, paid in AAVE tokens. Beware of the risks. Also, you need to have more than the equivalent of 5k USD in AAVE tokens (after allocating your 15%) to make it worthwhile.

If you have more than 5k USD in UNI (after allocating your 5%), take your UNI and stake at Bancor in their single sided pools. You will earn more UNI and also Bancor tokens (with 5k USD in UNI probably generating around 400 USD per year in Bancor tokens. I am rather optimistic on Bancor long term, why not take their "free" tokens instead of leaving everything in your wallet.

Stake all of your ETH in nodes (validators). There are options. You can do this at Coinbase (max 40 ETH). You can use Lido Finance. You can wait a bit and use the Rocket Pool option (you don't need a min of 32 ETH for any of these options, only if you choose to run your own node at home). Advantage of staking is you will earn 6-8% paid in ETH. Key being "paid in ETH..."

Lock it all up in these protocols, check in occasionally, but more or less forget about it. Would not be surprised to see a 100k USD price per ETH in 3 years. Maybe sooner if the move to ETH 2.0 goes as well as I expect. This is definitely not priced in, with ETH moving from Proof of Work to Proof of Stake. This will dramatically change the tokenomics of Ethereum (completely eliminate sell pressure from miners since they no longer exist, people locking ETH in nodes to earn interest will significantly reduce total supply, continued demand for gas (ETH) as DeFi grows, etc.).

Not investment advice. :-)
This is a helpful summary. I've been watching AAVE, UNI, and COMP for a while but hadn't really done the deep dive to understand how to stake them. I'll take a closer look I suppose, $5k is pretty cheap to try something new out. I find it hard to do anything but buy ETH these days though. I'm even tempted to sell some of my S&P 500 index funds to buy more ETH even though I promised myself ages ago never to sell index funds unless I had to...
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by watchnerd »

Prahasaurus wrote: Thu May 06, 2021 3:53 am Would not be surprised to see a 100k USD price per ETH in 3 years. Maybe sooner if the move to ETH 2.0 goes as well as I expect. This is definitely not priced in, with ETH moving from Proof of Work to Proof of Stake. This will dramatically change the tokenomics of Ethereum (completely eliminate sell pressure from miners since they no longer exist, people locking ETH in nodes to earn interest will significantly reduce total supply, continued demand for gas (ETH) as DeFi grows, etc.).

Not investment advice. :-)
I like Eth. I hold it.

But to go to 100K in 3 years is 30x growth, and would put its market cap at about $12T.

That's 12x more than Bitcoin and about 20-30% more than gold.

And about 30% of the total US stock market.

That's pretty aggressive and ambitious, don't you think?

Where is that $12T of cash inflow over 3 years going to come from?
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by socialfl »

I don't understand the hype in a lot of these cryptocurrencies like "doge" the joke coin... I've got some $ in bitcoin and ETH is where I put 80% of what I've put in.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Prahasaurus »

watchnerd wrote: Thu May 06, 2021 9:26 am
Prahasaurus wrote: Thu May 06, 2021 3:53 am Would not be surprised to see a 100k USD price per ETH in 3 years. Maybe sooner if the move to ETH 2.0 goes as well as I expect. This is definitely not priced in, with ETH moving from Proof of Work to Proof of Stake. This will dramatically change the tokenomics of Ethereum (completely eliminate sell pressure from miners since they no longer exist, people locking ETH in nodes to earn interest will significantly reduce total supply, continued demand for gas (ETH) as DeFi grows, etc.).

Not investment advice. :-)
I like Eth. I hold it.

But to go to 100K in 3 years is 30x growth, and would put its market cap at about $12T.

That's 12x more than Bitcoin and about 20-30% more than gold.

And about 30% of the total US stock market.

That's pretty aggressive and ambitious, don't you think?

Where is that $12T of cash inflow over 3 years going to come from?
1 - Forget Bitcoin. It's irrelevant. Bitcoin is a meme coin with a limited addressable market. Although our macro environment and some other factors will likely drive BTC to massive heights in 2021/22, perhaps around 150k USD or so. I think, however, that Bitcoin is reaching its addressable market limit.

2 - Investor class is still sleeping on Ethereum. They are confused by Bitcoin, and still think Ethereum is a "Bitcoin like" asset. Just look at the comments here, and Bogleheads are financially savvy investors. Few understand the implications of EIP1559 and the massive change in tokenomics that will come with the move from mining to staking. Now Ethereum miners need to sell a decent % of their ETH daily to finance operations (like Bitcoin miners). This selling pressure will be completely eliminated. More or less in parallel (!), Ethereum holders will rush to lock up their ETH in nodes to help secure the network and earn interest. That will take a lot of ETH off the market. This has already started, but will accelerate. So sell pressure massively reduced, supply reduced.... This is not priced in. Think GME and the recent short squeeze, you will see something very similar later this year as this plays out, people wake up to Ethereum, realize ETH is being taken off the market, no more miners to dump on the market to finance operations...

3 - Few institutional investors have embraced Ethereum, only Bitcoin. This is about to change. There is a decent chance an Ethereum ETF will be approved before a Bitcoin ETF. Just that is going to cause ETH to explode in price, especially if it happens before a BTC ETF (which I also believe will be later this year). Institutional investors are slowly starting to "get" Ethereum, and they will understand it better as it's more consistent with how they invest in other assets (unlike Bitcoin). They will "get" apps like Uniswap and Aave, and they will start to understand those apps are running on Ethereum, and need ETH to function. People are waking up to what DeFi could become. NFT's are starting to gain real traction, but most people don't understand that is all Ethereum, too... I think the latter half of 2021 will be the break out period for DeFi and Ethereum.

4 - Once people start to understand Ethereum better, many will ask why we need Bitcoin. Especially after the move to Proof of Stake, eliminating the environmental concerns of Bitcoin. Without a doubt I think that will be Bitcoin's Achilles heel.

Here is a good summary of what I believe will happen over the next 6-12 months (not written by me, but I endorse): https://drive.google.com/file/d/1Z1cc7Z ... cN06P/view

He has a 79-page report here with a lot more detail: https://drive.google.com/file/d/1bECqgi ... -vA99/view

He thinks a short term 16 trillion market cap is possible, with the network settling in later with a 3.5 - 5.5 trillion market cap. So let's say 10x from here.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by watchnerd »

Prahasaurus wrote: Thu May 06, 2021 11:47 am

He thinks a short term 16 trillion market cap is possible, with the network settling in later with a 3.5 - 5.5 trillion market cap. So let's say 10x from here.
And who is @squishchaos?

Any rando can post something in a Google doc.

It might even be worth the effort if one is trying stimulate demand for Eth.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by HomerJ »

Prahasaurus wrote: Thu May 06, 2021 11:47 am1 - Forget Bitcoin. It's irrelevant. Bitcoin is a meme coin with a limited addressable market. Although our macro environment and some other factors will likely drive BTC to massive heights in 2021/22, perhaps around 150k USD or so. I think, however, that Bitcoin is reaching its addressable market limit.
Just two weeks ago, you wrote $500k or $1 million per bitcoin.
Here is a good summary of what I believe will happen over the next 6-12 months (not written by me, but I endorse):
A year ago you also wrote that one should invest in bitcoin because you believed "massive societal breakdown was likely to happen over the next 6-12 months."

Although with COVID, I could see why you felt that way back in April 2020.

But it's hard to tell the future, isn't it?
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Prahasaurus »

HomerJ wrote: Thu May 06, 2021 12:00 pm
Prahasaurus wrote: Thu May 06, 2021 11:47 am1 - Forget Bitcoin. It's irrelevant. Bitcoin is a meme coin with a limited addressable market. Although our macro environment and some other factors will likely drive BTC to massive heights in 2021/22, perhaps around 150k USD or so. I think, however, that Bitcoin is reaching its addressable market limit.
Just two weeks ago, you wrote $500k or $1 million per bitcoin.
Here is a good summary of what I believe will happen over the next 6-12 months (not written by me, but I endorse):
A year ago you also wrote that one should invest in bitcoin because you believed "massive societal breakdown was likely to happen over the next 6-12 months."

Although with COVID, I could see why you felt that way back in April 2020.

But it's hard to tell the future, isn't it?
I think Bitcoin will go higher, perhaps much higher. I still hold BTC. As DOGE has shown, it's hard to predict price once the feeding frenzy starts. But my personal thinking on Bitcoin has definitely changed of late. Even recently. I am not as bullish as before for a variety of reasons. But again, who knows? I was never bullish on DOGE and here we are. With meme coins it's hard to predict.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Gadget »

I wonder how much these crypto market runups like Doge are based on psychological price points. They can either buy 100 Doge, or .014 ETH, or .000083 BTC. I'd wager most people outside of bogleheads don't understand market cap and supply. And that the price per stock or coin isn't what matters if you ignore market cap.

BTC should do a stock split like Tesla. Same market cap, but better psychological price points for entry. Or they could just start trying to force exchanges to label BTC price by default in satoshis or something. Just look at all the satoshis you can buy. They're even cheaper than Doge. What a bargain. /s
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by YRT70 »

Gadget wrote: Thu May 06, 2021 12:19 pm I wonder how much these crypto market runups like Doge are based on psychological price points. They can either buy 100 Doge, or .014 ETH, or .000083 BTC. I'd wager most people outside of bogleheads don't understand market cap and supply. And that the price per stock or coin isn't what matters if you ignore market cap.

BTC should do a stock split like Tesla. Same market cap, but better psychological price points for entry. Or they could just start trying to force exchanges to label BTC price by default in satoshis or something. Just look at all the satoshis you can buy. They're even cheaper than Doge. What a bargain. /s
I can confirm this is a factor. One of my friends who has little experience investing really likes that he can buy whole Doge coins for 50 cents. He's not a fan of buying small pieces of BTC or ETH.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by EnjoyIt »

Prahasaurus wrote: Thu May 06, 2021 12:07 pm
HomerJ wrote: Thu May 06, 2021 12:00 pm
Prahasaurus wrote: Thu May 06, 2021 11:47 am1 - Forget Bitcoin. It's irrelevant. Bitcoin is a meme coin with a limited addressable market. Although our macro environment and some other factors will likely drive BTC to massive heights in 2021/22, perhaps around 150k USD or so. I think, however, that Bitcoin is reaching its addressable market limit.
Just two weeks ago, you wrote $500k or $1 million per bitcoin.
Here is a good summary of what I believe will happen over the next 6-12 months (not written by me, but I endorse):
A year ago you also wrote that one should invest in bitcoin because you believed "massive societal breakdown was likely to happen over the next 6-12 months."

Although with COVID, I could see why you felt that way back in April 2020.

But it's hard to tell the future, isn't it?
I think Bitcoin will go higher, perhaps much higher. I still hold BTC. As DOGE has shown, it's hard to predict price once the feeding frenzy starts. But my personal thinking on Bitcoin has definitely changed of late. Even recently. I am not as bullish as before for a variety of reasons. But again, who knows? I was never bullish on DOGE and here we are. With meme coins it's hard to predict.
I think you are realizing how unpredictable and volatile this whole space is. Very tough to make accurate predictions.

I think just as likely as your predictions, the bubble bursts in the next few months and will take a few years to recover if there is a real future in DeFi.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by watchnerd »

YRT70 wrote: Thu May 06, 2021 12:27 pm
Gadget wrote: Thu May 06, 2021 12:19 pm I wonder how much these crypto market runups like Doge are based on psychological price points. They can either buy 100 Doge, or .014 ETH, or .000083 BTC. I'd wager most people outside of bogleheads don't understand market cap and supply. And that the price per stock or coin isn't what matters if you ignore market cap.

BTC should do a stock split like Tesla. Same market cap, but better psychological price points for entry. Or they could just start trying to force exchanges to label BTC price by default in satoshis or something. Just look at all the satoshis you can buy. They're even cheaper than Doge. What a bargain. /s
I can confirm this is a factor. One of my friends who has little experience investing really likes that he can buy whole Doge coins for 50 cents. He's not a fan of buying small pieces of BTC or ETH.

That's really interesting.

Does he feel like it's more friendly for the 'little guy' because the price per coin is low?
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YRT70
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by YRT70 »

watchnerd wrote: Thu May 06, 2021 1:16 pm
YRT70 wrote: Thu May 06, 2021 12:27 pm
Gadget wrote: Thu May 06, 2021 12:19 pm I wonder how much these crypto market runups like Doge are based on psychological price points. They can either buy 100 Doge, or .014 ETH, or .000083 BTC. I'd wager most people outside of bogleheads don't understand market cap and supply. And that the price per stock or coin isn't what matters if you ignore market cap.

BTC should do a stock split like Tesla. Same market cap, but better psychological price points for entry. Or they could just start trying to force exchanges to label BTC price by default in satoshis or something. Just look at all the satoshis you can buy. They're even cheaper than Doge. What a bargain. /s
I can confirm this is a factor. One of my friends who has little experience investing really likes that he can buy whole Doge coins for 50 cents. He's not a fan of buying small pieces of BTC or ETH.

That's really interesting.

Does he feel like it's more friendly for the 'little guy' because the price per coin is low?
I think it's purely a mental thing for himself, he prefers to own whole coins instead of tiny pieces. Like Gadget said, if they'd split up BTC in Satoshis I think it would make it more popular.
decapod10
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by decapod10 »

watchnerd wrote: Thu May 06, 2021 1:16 pm
YRT70 wrote: Thu May 06, 2021 12:27 pm
Gadget wrote: Thu May 06, 2021 12:19 pm I wonder how much these crypto market runups like Doge are based on psychological price points. They can either buy 100 Doge, or .014 ETH, or .000083 BTC. I'd wager most people outside of bogleheads don't understand market cap and supply. And that the price per stock or coin isn't what matters if you ignore market cap.

BTC should do a stock split like Tesla. Same market cap, but better psychological price points for entry. Or they could just start trying to force exchanges to label BTC price by default in satoshis or something. Just look at all the satoshis you can buy. They're even cheaper than Doge. What a bargain. /s
I can confirm this is a factor. One of my friends who has little experience investing really likes that he can buy whole Doge coins for 50 cents. He's not a fan of buying small pieces of BTC or ETH.

That's really interesting.

Does he feel like it's more friendly for the 'little guy' because the price per coin is low?
This is usually the thinking:

Bitcoin is already $50,000, so how much higher can it go? But Dogecoin is only 50 cents per coin, imagine if it goes up to $50,000 per coin! Even if it only gets to 1/2 of Bitcoin, that's $25,000 per coin! I'll still make millions!
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by surfstar »

watchnerd wrote: Thu May 06, 2021 1:16 pm
YRT70 wrote: Thu May 06, 2021 12:27 pm
Gadget wrote: Thu May 06, 2021 12:19 pm I wonder how much these crypto market runups like Doge are based on psychological price points. They can either buy 100 Doge, or .014 ETH, or .000083 BTC. I'd wager most people outside of bogleheads don't understand market cap and supply. And that the price per stock or coin isn't what matters if you ignore market cap.

BTC should do a stock split like Tesla. Same market cap, but better psychological price points for entry. Or they could just start trying to force exchanges to label BTC price by default in satoshis or something. Just look at all the satoshis you can buy. They're even cheaper than Doge. What a bargain. /s
I can confirm this is a factor. One of my friends who has little experience investing really likes that he can buy whole Doge coins for 50 cents. He's not a fan of buying small pieces of BTC or ETH.

That's really interesting.

Does he feel like it's more friendly for the 'little guy' because the price per coin is low?
I'd wager its the same reason that penny stocks used to (maybe still do?) appeal to some investors. Doesn't make them a good investment, though, and it seems likely that many people are about to find out. Crypto bubble 2021... get in/out before it pops! :D or sit on the sidelines and watch, like many of us :confused
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by txhill »

I thought on it more, and I think the main appeal of Dogecoin is that it's really funny and actually makes investing fun, and not in the way that Robinhood does (dopamine rushes from gamifying it). It's a more substantial funniness that comes from the feeling of community--everyone sharing silly videos and memes and tweets on it. I think Dogecoin is going to stick around, although I definitely cannot predict whether its price goes up or down. I just think it has a special appeal that is not really based necessarily on being a store of value, and not one that would appeal to institutions. I'm a little less worried about the threat it poses to BTC long term. Although I remain more bullish on ETH than anything else.

I think the triple halving idea is pretty interesting but I am more focused on the total addressable market of the global financial system rather than on immediate supply shocks. It seems that even if Ethereum takes just a small % of that, the value that would stick to ETH 2.0 seems massive. James Wang (former ARK analyst) pegs it at $40k price target if Ethereum captures 1% of the revenue of the global financial system, although I don't know exactly how he arrived at the price revenue multiple.

James is a pretty good person to follow on Twitter though. He puts out some really interesting content about Ether, like yesterday he noted that Ethereum's revenue from transactions last quarter was the same as AWS in 2015...
Freefun
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Freefun »

My investment in crypto is more related to blockchain and less about any specific currency. Of course there's a lot of hype and investing nonsense, but that's no different from any other asset. I'm sure there's plenty of Robinhood users buying things based on all things social-related with little fundamental understanding.

The potential for blockchain is enormous and much of it is not specific to finance - it can disrupt almost any industry.

One big challenge with crypto is lack of regulation, standards and interoperability. That will change over time. Even the U.S. government is highly motivated. Traditionally, the majority of ML events are undetected. Blockchain should dramatically help,
Remember when you wanted what you currently have?
YRT70
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by YRT70 »

Freefun wrote: Thu May 06, 2021 2:09 pm The potential for blockchain is enormous and much of it is not specific to finance - it can disrupt almost any industry.
What are the top other uses than finance?
Freefun
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Freefun »

YRT70 wrote: Thu May 06, 2021 2:11 pm
Freefun wrote: Thu May 06, 2021 2:09 pm The potential for blockchain is enormous and much of it is not specific to finance - it can disrupt almost any industry.
What are the top other uses than finance?
Healthcare
Entertainment / Media
Supply Chain / T&L
Retail / E-Commerce
Energy
Government / Public Sector / Defense
Construction
Real Estate
Remember when you wanted what you currently have?
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watchnerd
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by watchnerd »

Freefun wrote: Thu May 06, 2021 2:20 pm
YRT70 wrote: Thu May 06, 2021 2:11 pm
Freefun wrote: Thu May 06, 2021 2:09 pm The potential for blockchain is enormous and much of it is not specific to finance - it can disrupt almost any industry.
What are the top other uses than finance?
Healthcare
Entertainment / Media
Supply Chain / T&L
Retail / E-Commerce
Energy
Government / Public Sector / Defense
Construction
Real Estate
You left out porn.
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Freefun
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Freefun »

watchnerd wrote: Thu May 06, 2021 2:47 pm
Freefun wrote: Thu May 06, 2021 2:20 pm
YRT70 wrote: Thu May 06, 2021 2:11 pm
Freefun wrote: Thu May 06, 2021 2:09 pm The potential for blockchain is enormous and much of it is not specific to finance - it can disrupt almost any industry.
What are the top other uses than finance?
Healthcare
Entertainment / Media
Supply Chain / T&L
Retail / E-Commerce
Energy
Government / Public Sector / Defense
Construction
Real Estate
You left out porn.
No, I did not. That's under media.

Anyway, here's a decent (old) paper on government blockchain applications. Even skimming should be a good read... there's no hype and documented benefits are easily applicable to other industries (some of which are referenced in the paper).

https://www.dhs.gov/sites/default/files ... ations.pdf
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qwerty123
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by qwerty123 »

av111 wrote: Wed May 05, 2021 11:14 pm
Keenobserver wrote: Wed May 05, 2021 11:05 pm
av111 wrote: Wed May 05, 2021 3:31 pm
Keenobserver wrote: Wed May 05, 2021 3:18 pm
watchnerd wrote: Wed May 05, 2021 1:31 pm

How much longer do you think those returns will happen in the future?
Can you give me such a timeline for any investment with certainty?
It is not possible to give a timeline for speculative items. Look at DOGE. No revenue, no profit, no use. Perfect beanie baby and still goes up or down for no reason.

It is more possible to predict how a real investment will behave when it engages with the environment to hire people, make something, sell it and generate profits
So stocks are not speculative? We dont get stock bubbles? I thought it was simple; a stock is worth what whatever someone is willing to pay for it in the open market. Same holds true for crypto, even DODGE despite its lack of apparant utility. A bubble yes, but lets not pretend stocks are not speculative and dont have bubbles. Anyone investing in cryptosphere will acknowledge its a high risk high reward game simiar to penny stocks or pharma stocks. Why the hate?
Stocks represent regular businesses. They have a basis, book value, track record of revenue and profits and possibility of impact on these metrics from macro and micro environment. Crypto is nothing like that so it is hard to see anything but speculation
I agree that crypto is quite speculative, but some crypto does have a lot of that - ex: compound, aave, and uniswap. They have fairly warchests, and either have income, or have the ability to turn on income in the future.
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HanSolo
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by HanSolo »

watchnerd wrote: Wed May 05, 2021 11:09 pm
Keenobserver wrote: Wed May 05, 2021 11:05 pm a stock is worth what whatever someone is willing to pay for it in the open market.
Book value?
Careful... that language can get you banished from crypto circles.
Prahasaurus wrote: Thu May 06, 2021 12:38 am
av111 wrote: Wed May 05, 2021 11:14 pm
Keenobserver wrote: Wed May 05, 2021 11:05 pm So stocks are not speculative? We dont get stock bubbles? I thought it was simple; a stock is worth what whatever someone is willing to pay for it in the open market. Same holds true for crypto, even DODGE despite its lack of apparant utility. A bubble yes, but lets not pretend stocks are not speculative and dont have bubbles. Anyone investing in cryptosphere will acknowledge its a high risk high reward game simiar to penny stocks or pharma stocks. Why the hate?
Stocks represent regular businesses. They have a basis, book value, track record of revenue and profits and possibility of impact on these metrics from macro and micro environment. Crypto is nothing like that so it is hard to see anything but speculation
This is just not true. It's demonstrably false. It amazes me people still believe this with such confidence!
OK. But if what you say is true, then please tell us the book value per coin of BTC, DOGE, and ETH (otherwise, I'm not sure you understood the post you replied to).
Prahasaurus wrote: Thu May 06, 2021 12:57 am That's the beauty of crypto, nobody is forcing you to do anything. Just more options.
OK. Then DOGE should not be a problem. But as we've seen here, it's a problem for some crypto fans. Are they in favor of freedom and options? Or not?

If the consensus is that it's good to have options, then we should look forward to a future when there's as many coin varieties as there are ETFs today... or even more.

But there's that fly in the ointment... those who are trying to capture massive gains in one particular coin might not do so well if the market becomes widely diverse.

Suddenly, the beauty of having options becomes less beautiful... for some.
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