Merged Bitcoin - Part 3

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

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

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

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

To quote economist Paul Samuelson:

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

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

To quote economist Paul Samuelson:



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

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

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

To quote economist Paul Samuelson:



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

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

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

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

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

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

At least that's how it is for actual commodities, for crypto essentially everyone is a trader so there are no cases where both sides get something more valuable to them personally.
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Even with currency specifically, hedging --- using options --- serves a solid economic function. That of locking in a price in offshore deals. And also price discovery, so that even the speculator is part of a wider economic "purpose", and contributes to a larger " sum". But an economic sum, not a strictly financial one, not a transactional sum.

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

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

Bitcoin may not be in the same category as oil or gold but it is certainly
not in the same category as game tokens.
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Commodity, a raw material or agriculture product, that can be bought
or sold, consumed in the production of goods and services.
​


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

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


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


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

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


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

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

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

I think this solves the problem.
 
Solitaire said:

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

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

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

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

You are not going to prove that bitcoin is "useless" by cherry picking dictionaries.
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Is a dollar a commodity?
 
The hash rate is at record highs so bitcoin is increasingly secure.

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

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

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

Equity analyst Dan Ives:
This is a black swan event that adds more fears in the crypto space. This cold winter for crypto now takes on more fear
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Given the number of black swans in the crypto world, I'm beginning to think they might all be black.
 
jeremyp said:
Looks like yet another crypto currency exchange is biting the dust.

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

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

Equity analyst Dan Ives:


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

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

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

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

Unlike an every day example of a house which cannot be used to obtain
multiple mortgages as there are records allowing a bank to confirm whether
a house already has a mortgage against it.
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No transparency. Eek!

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

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

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

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

Equity analyst Dan Ives:


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


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

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

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

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

-----

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

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