Prove Me Wrong: Cryptocurrencies are NOT good investments

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

Post by HomerJ »

txhill wrote: Sun May 09, 2021 11:50 amBitcoin has for 12 years stored value better than any other comparable speculative investment like gold, cash, commodities, etc.
Bitcoin hasn't "stored value". Going up 10,000% (or whatever) isn't "storing value".

Bitcoin is a speculative bubble.

Bitcoin has existed for 12 years, but it really only hit mainstream about 4 years ago. 4 years isn't that long for a bubble to last.

I know you guys hate comparisons to tulips, but what the tulip bubble proved is that PEOPLE ARE CRAZY.

The point is, the fact that an asset has gone way up isn't enough proof to say "See, it's way up over the past 4 years (or even 12 years). That means it must be a good investment".

No, it doesn't prove that at all. Because PEOPLE ARE CRAZY. We've seen the madness of crowds over and over and over throughout history.

"Those who cannot learn from history are doomed to repeat it."
-George Santayana?
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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watchnerd
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by watchnerd »

HomerJ wrote: Sun May 09, 2021 12:08 pm Bitcoin hasn't "stored value". Going up 10,000% (or whatever) isn't "storing value".

Bitcoin is a speculative bubble.

Bitcoin has existed for 12 years, but it really only hit mainstream about 4 years ago. 4 years isn't that long for a bubble to last.

I know you guys hate comparisons to tulips, but what the tulip bubble proved is that PEOPLE ARE CRAZY.

The point is, the fact that an asset has gone way up isn't enough proof to say "See, it's way up over the past 4 years (or even 12 years). That means it must be a good investment".

No, it doesn't prove that at all. Because PEOPLE ARE CRAZY. We've seen the madness of crowds over and over and over throughout history.

"Those who cannot learn from history are doomed to repeat it."
-George Santayana?
I think anyone who is intellectually honest with themselves admits that the crypto space is highly speculative, frothy, and bubbly.

But then again, so are some portions of the stock market.

So where does one draw the line?

I'm taking a position of philosophical agnosticism and letting the market decide for me.
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Prahasaurus
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Prahasaurus »

The assets I despise are in a speculative bubble. The assets I hold are continuing to perform per Efficient Market Theory.
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txhill
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by txhill »

HomerJ wrote: Sun May 09, 2021 12:08 pm
txhill wrote: Sun May 09, 2021 11:50 amBitcoin has for 12 years stored value better than any other comparable speculative investment like gold, cash, commodities, etc.
Bitcoin hasn't "stored value". Going up 10,000% (or whatever) isn't "storing value".

Bitcoin is a speculative bubble.

Bitcoin has existed for 12 years, but it really only hit mainstream about 4 years ago. 4 years isn't that long for a bubble to last.

I know you guys hate comparisons to tulips, but what the tulip bubble proved is that PEOPLE ARE CRAZY.

The point is, the fact that an asset has gone way up isn't enough proof to say "See, it's way up over the past 4 years (or even 12 years). That means it must be a good investment".

No, it doesn't prove that at all. Because PEOPLE ARE CRAZY. We've seen the madness of crowds over and over and over throughout history.

"Those who cannot learn from history are doomed to repeat it."
-George Santayana?
This is the way I view it:

1. Bitcoin stored value better than pretty much any other investment over the past decade, as in storing purchasing power. Sort of undeniable.
2. Increasing numbers of people are recognizing that bitcoin might be the better store of value over other options, which means it might well continue to store value. Because that's all a store of value is: a repository of people's trust.
3. All that said, past performance REALLY does not mean future success, so you can't draw too many conclusions about where Bitcoin goes from here.
4. And all of that said--just because tulips and bitcoin both experienced exponential price growth does not mean they are equivalent. It might be a good analogy, but it might not; there are similarities but there are also differences. Crowds can go mad but not every exponential increase in value is due to the madness of crowds. That's the fallacy I see repeated here way too often.

In other words, Bitcoin was one of the best investments ever. Whether it continues to be a good (or smart) investment is totally up for debate.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by banook »

Not a maximalist on any one, BTC is very different than ETH. Decided on 2% of net worth. Fully prepared to lose that amount at any moment. DCA in - set amount monthly. I try to learn the tech as I go, and try to participate - this has been the most fulfilling part for me. Here is the AA I have started with, and it's not based on "coin" market cap - fully.

ETH 50% (30% staked on ETH 2, 20% "liquid")
BTC 30% (in hard wallet)
ADA 18% (staked)
LINK 2%

Could it all blow up? Yes. Is it a good investment? I don't know. I fully don't know.

Side note: I owned only BTC in 2016 before 2017 (not a significant amount) - it blew up, but if you held it till now you had between 3x-20x gains (I continued to hold). No one can see the future, and yes, eventually with enough people in any diversified thing the tendency is for those things (bonds, equities) to regress to the mean. That mean over enough of a time period generally crushes most everything else, that you could pick out of a hat. So 98% rides the mean, 2% is on a rollercoaster. I can live with it. Some can't and may be shouldn't. That is fine.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by txhill »

watchnerd wrote: Sun May 09, 2021 12:04 pm
txhill wrote: Sun May 09, 2021 11:50 am
Ethereum generated $700+ million in revenue in April 2021 on transaction fees from folks using it as a platform for decentralized apps.
Based on the current run-rate, I don't think that's right.

It should be about $100M per month based on the 7 day average.

https://cryptofees.info/
I think those are the daily average fees over the past 7 days. So multiply the right column by 7, and then by 4.5 to get close to monthly :) Also can look at coinmetrics or theblockcrypto for more detailed info

Edit to add links:
Block Crypto: https://www.theblockcrypto.com/data/on- ... s/ethereum
Coinmetrics: https://charts.coinmetrics.io/network-data/
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watchnerd
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by watchnerd »

txhill wrote: Sun May 09, 2021 12:33 pm
I think those are the daily average fees over the past 7 days. So multiply the right column by 7, and then by 4.5 to get close to monthly :) Also can look at coinmetrics or theblockcrypto for more detailed info

Edit to add links:
Block Crypto: https://www.theblockcrypto.com/data/on- ... s/ethereum
Coinmetrics: https://charts.coinmetrics.io/network-data/
Ah, yeah, that makes sense.
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watchnerd
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by watchnerd »

banook wrote: Sun May 09, 2021 12:28 pm Not a maximalist on any one, BTC is very different than ETH. Decided on 2% of net worth.
Ditto.

Although I didn't decide on 2%, it just happens to be what the $2.4T market cap of crypto is when weighed vs stocks / bonds.

From a portfolio level, I'm allocated at market weight.

However, my specific holdings only represent 63% of market weight.

We'll see how closely my 'index' tracks the markets and how much I have to adjust accordingly in the future.
banook wrote: Sun May 09, 2021 12:28 pm Fully prepared to lose that amount at any moment.
Ditto.

2% of our Risk Portfolio is <1% of our total liquid portfolio.

And we've already funded our cost of living in a TIPS and STRIPS ladder for the next 16 years.

So even if it all blows up completely, we won't be ruined.

P.S. no debt, no mortgage, so we are fully capable of handling more risk
banook wrote: Sun May 09, 2021 12:28 pm ADA 18% (staked)
ADA has enough market cap that I originally included it, but it fell off when I set the criteria to have a 7 day average fees >$100k.

But maybe I missed something.
banook wrote: Sun May 09, 2021 12:28 pm Is it a good investment? I don't know. I fully don't know.
Me, neither. Just no idea. I'm not 'pro crypto', per se.

However...

I do find the MPT aspects interesting. It's a highly volatile asset class with sky high beta and interesting correlation patterns. Or lack of pattern.

ETH, in particular, has low correlation to VT.

BTC is quite a bit more correlated, interestingly.

The low correlation aspect was also mentioned by Gensler.
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txhill
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by txhill »

watchnerd wrote: Sun May 09, 2021 12:59 pm
banook wrote: Sun May 09, 2021 12:28 pm ADA 18% (staked)
ADA has enough market cap that I originally included it, but it fell off when I set the criteria to have a 7 day average fees >$100k.

But maybe I missed something.
ADA has essentially no applications on its blockchain. It's a very risky bet at this time even if it is in theory a potential ethereum competitor. I'm not buying it until it starts to prove itself.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by banook »

txhill wrote: Sun May 09, 2021 1:22 pm
watchnerd wrote: Sun May 09, 2021 12:59 pm
banook wrote: Sun May 09, 2021 12:28 pm ADA 18% (staked)
ADA has enough market cap that I originally included it, but it fell off when I set the criteria to have a 7 day average fees >$100k.

But maybe I missed something.
ADA has essentially no applications on its blockchain. It's a very risky bet at this time even if it is in theory a potential ethereum competitor. I'm not buying it until it starts to prove itself.
Yup. ADA is risky, but I also said I enjoy the learning aspect (tech/educational link if you are inclined): https://developers.cardano.org/en/progr ... /overview/. The best protocol may not win. The most efficient may not win.For those that saw James Wang lay into ADA/Cardano - well, I don't necessarily agree, but he is not completely wrong. BTC has no leader (supposedly), Ethereum does have a leader who does not court regulators and had leaders, one of those leaders spawned his own protocol and took a very different route in developing it, which I think is interesting. That particular leader is also courting regulators, which is a hedge against "the global cosmopolis".
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by txhill »

banook wrote: Sun May 09, 2021 2:07 pm
txhill wrote: Sun May 09, 2021 1:22 pm
watchnerd wrote: Sun May 09, 2021 12:59 pm
banook wrote: Sun May 09, 2021 12:28 pm ADA 18% (staked)
ADA has enough market cap that I originally included it, but it fell off when I set the criteria to have a 7 day average fees >$100k.

But maybe I missed something.
ADA has essentially no applications on its blockchain. It's a very risky bet at this time even if it is in theory a potential ethereum competitor. I'm not buying it until it starts to prove itself.
Yup. ADA is risky, but I also said I enjoy the learning aspect (tech/educational link if you are inclined): https://developers.cardano.org/en/progr ... /overview/. The best protocol may not win. The most efficient may not win.For those that saw James Wang lay into ADA/Cardano - well, I don't necessarily agree, but he is not completely wrong. BTC has no leader (supposedly), Ethereum does have a leader who does not court regulators and had leaders, one of those leaders spawned his own protocol and took a very different route in developing it, which I think is interesting. That particular leader is also courting regulators, which is a hedge against "the global cosmopolis".
I really like the way James Wang thinks about things and definitely saw him lay into it... I agree it might not necessarily be fair because who can really predict with total certainty where the space is 5 years from now. Hoskinson does seem to be on a PR tour but I'm just not sure it's effective. Take a look at where developers are working as of April 2021, and it's really not Cardano. Check out slides 64+ here: https://medium.com/electric-capital/ele ... 17165c6444
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by ballons »

watchnerd wrote: Sun May 09, 2021 12:14 pm
HomerJ wrote: Sun May 09, 2021 12:08 pm Bitcoin hasn't "stored value". Going up 10,000% (or whatever) isn't "storing value".

Bitcoin is a speculative bubble.

Bitcoin has existed for 12 years, but it really only hit mainstream about 4 years ago. 4 years isn't that long for a bubble to last.

I know you guys hate comparisons to tulips, but what the tulip bubble proved is that PEOPLE ARE CRAZY.

The point is, the fact that an asset has gone way up isn't enough proof to say "See, it's way up over the past 4 years (or even 12 years). That means it must be a good investment".

No, it doesn't prove that at all. Because PEOPLE ARE CRAZY. We've seen the madness of crowds over and over and over throughout history.

"Those who cannot learn from history are doomed to repeat it."
-George Santayana?
I think anyone who is intellectually honest with themselves admits that the crypto space is highly speculative, frothy, and bubbly.

But then again, so are some portions of the stock market.

So where does one draw the line?

I'm taking a position of philosophical agnosticism and letting the market decide for me.
Using TINA to justify your FOMO. ;)

I think Michael Burry is going to be proven right.
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HomerJ
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by HomerJ »

txhill wrote: Sun May 09, 2021 12:23 pm
HomerJ wrote: Sun May 09, 2021 12:08 pm
txhill wrote: Sun May 09, 2021 11:50 amBitcoin has for 12 years stored value better than any other comparable speculative investment like gold, cash, commodities, etc.
Bitcoin hasn't "stored value". Going up 10,000% (or whatever) isn't "storing value".

Bitcoin is a speculative bubble.

Bitcoin has existed for 12 years, but it really only hit mainstream about 4 years ago. 4 years isn't that long for a bubble to last.

I know you guys hate comparisons to tulips, but what the tulip bubble proved is that PEOPLE ARE CRAZY.

The point is, the fact that an asset has gone way up isn't enough proof to say "See, it's way up over the past 4 years (or even 12 years). That means it must be a good investment".

No, it doesn't prove that at all. Because PEOPLE ARE CRAZY. We've seen the madness of crowds over and over and over throughout history.

"Those who cannot learn from history are doomed to repeat it."
-George Santayana?
This is the way I view it:

1. Bitcoin stored value better than pretty much any other investment over the past decade, as in storing purchasing power. Sort of undeniable.
You're using the term "store of value" all wrong.

"store of value" is supposed to mean inflation resistant, something that maintains its value over a long period, something that doesn't go down in value over time. It's not whatever investment did the best in the recent past.
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: Sun May 09, 2021 2:31 pm You're using the term "store of value" all wrong.

"store of value" is supposed to mean inflation resistant, something that maintains its value over a long period, something that doesn't go down in value over time. It's not whatever investment did the best in the recent past.
I'm not sure that I agree with you. In a way, past performance is more important to investing in a store of value than a productive asset. What makes gold a store of value? The 5000 year history of it storing value, because for 5000 years people have agreed that it stores value. It's circular, but really that's it. Bitcoin has only 12 years of history but now 100+ million people have agreed it stores value (well, increases it, but who's complaining there?). Yes this could all change in a moment--80% price swings are not unheard of--but if it stored value at 80% below current valuation that is still higher than it was before the latest crypto bull market. Meaning that the baseline support for it as a store of value is increasing over time.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Gadget »

banook wrote: Sun May 09, 2021 2:07 pm
txhill wrote: Sun May 09, 2021 1:22 pm
watchnerd wrote: Sun May 09, 2021 12:59 pm
banook wrote: Sun May 09, 2021 12:28 pm ADA 18% (staked)
ADA has enough market cap that I originally included it, but it fell off when I set the criteria to have a 7 day average fees >$100k.

But maybe I missed something.
ADA has essentially no applications on its blockchain. It's a very risky bet at this time even if it is in theory a potential ethereum competitor. I'm not buying it until it starts to prove itself.
Yup. ADA is risky, but I also said I enjoy the learning aspect (tech/educational link if you are inclined): https://developers.cardano.org/en/progr ... /overview/. The best protocol may not win. The most efficient may not win.For those that saw James Wang lay into ADA/Cardano - well, I don't necessarily agree, but he is not completely wrong. BTC has no leader (supposedly), Ethereum does have a leader who does not court regulators and had leaders, one of those leaders spawned his own protocol and took a very different route in developing it, which I think is interesting. That particular leader is also courting regulators, which is a hedge against "the global cosmopolis".
I can't help but feel ADA is wildly overpriced unless ETH 2.0 fails. It's not that it's a bad project, it's just a weird programming language, has no smart contracts, no DeFi scene, etc.

I also really don't like Charles Hoskinson when he goes on his video rants about things. I don't feel like the leader of any business or crypto should be wildly antagonistic. He seems like he's one video away from a rant that turns off large chunks of ADA holders. We can't discuss politics here, but I get the vibe from him that he's got a near political level of polarizing personality.

That said, if ETH 2.0 merge fails, ADA will likely skyrocket.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by lowkeytaco »

txhill wrote: Sun May 09, 2021 2:35 pm
HomerJ wrote: Sun May 09, 2021 2:31 pm You're using the term "store of value" all wrong.

"store of value" is supposed to mean inflation resistant, something that maintains its value over a long period, something that doesn't go down in value over time. It's not whatever investment did the best in the recent past.
I'm not sure that I agree with you. In a way, past performance is more important to investing in a store of value than a productive asset. What makes gold a store of value? The 5000 year history of it storing value, because for 5000 years people have agreed that it stores value. It's circular, but really that's it. Bitcoin has only 12 years of history but now 100+ million people have agreed it stores value (well, increases it, but who's complaining there?). Yes this could all change in a moment--80% price swings are not unheard of--but if it stored value at 80% below current valuation that is still higher than it was before the latest crypto bull market. Meaning that the baseline support for it as a store of value is increasing over time.
Agree. Store of value is something that people agree has value. But, other characteristics are important such as limited supply (or at least controlled supply as in fiat currency). A good store of value would also have efficient mechanisms for transfer. These characteristics are why cryptocurrencies have great potential, I think.
Last edited by lowkeytaco on Sun May 09, 2021 2:44 pm, edited 1 time in total.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by abuss368 »

Speculation at best. Not investment. One speculator will purchase and hope to sell at a higher price to another speculator in the future. No earnings or intrinsic value.

Own total market index funds instead.

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

Post by HomerJ »

txhill wrote: Sun May 09, 2021 2:35 pm
HomerJ wrote: Sun May 09, 2021 2:31 pm You're using the term "store of value" all wrong.

"store of value" is supposed to mean inflation resistant, something that maintains its value over a long period, something that doesn't go down in value over time. It's not whatever investment did the best in the recent past.
I'm not sure that I agree with you. In a way, past performance is more important to investing in a store of value than a productive asset. What makes gold a store of value? The 5000 year history of it storing value, because for 5000 years people have agreed that it stores value. It's circular, but really that's it. Bitcoin has only 12 years of history but now 100+ million people have agreed it stores value (well, increases it, but who's complaining there?). Yes this could all change in a moment--80% price swings are not unheard of--but if it stored value at 80% below current valuation that is still higher than it was before the latest crypto bull market. Meaning that the baseline support for it as a store of value is increasing over time.
Gold has basically tracked inflation over the long run. It has some run ups, and some declines, but nothing as crazy as Bitcoin.

Seriously, you're using "store of value" wrong. Nothing that goes up 1000% in a year, or drops 80% in a few months is considered a "store of value".

100+ mlllion people do not agree that bitcoin "stores value" They think bitcoin is a way to get rich. An 80% crash would drive the vast majority of them away.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by txhill »

HomerJ wrote: Sun May 09, 2021 3:02 pm
txhill wrote: Sun May 09, 2021 2:35 pm
HomerJ wrote: Sun May 09, 2021 2:31 pm You're using the term "store of value" all wrong.

"store of value" is supposed to mean inflation resistant, something that maintains its value over a long period, something that doesn't go down in value over time. It's not whatever investment did the best in the recent past.
I'm not sure that I agree with you. In a way, past performance is more important to investing in a store of value than a productive asset. What makes gold a store of value? The 5000 year history of it storing value, because for 5000 years people have agreed that it stores value. It's circular, but really that's it. Bitcoin has only 12 years of history but now 100+ million people have agreed it stores value (well, increases it, but who's complaining there?). Yes this could all change in a moment--80% price swings are not unheard of--but if it stored value at 80% below current valuation that is still higher than it was before the latest crypto bull market. Meaning that the baseline support for it as a store of value is increasing over time.
Gold has basically tracked inflation over the long run. It has some run ups, and some declines, but nothing as crazy as Bitcoin.

Seriously, you're using "store of value" wrong. Nothing that goes up 1000% in a year, or drops 80% in a few months is considered a "store of value".

100+ mlllion people do not agree that bitcoin "stores value" They think bitcoin is a way to get rich. An 80% crash would drive the vast majority of them away.
Maybe my point would benefit from further precision. At this time, bitcoin appears to store value at a $12k/BTC level, and perhaps higher. At current levels, it's unclear that it will store value past the next big crash (yes I agree a big crash is coming) because such levels are untested over time. But if the last few 80% drawdowns couldn't bring BTC below $10k, I think we are seeing that it does store value at least at that level. And that base level of support probably will be increasing over time if adoption trends are anything to go by. In fact I think it's not unreasonable to conclude that BTC is storing value very effectively already at $30k+ levels, although we'll see what the actual drawdown is after the next crash.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by txhill »

Gadget wrote: Sun May 09, 2021 2:42 pm I can't help but feel ADA is wildly overpriced unless ETH 2.0 fails. It's not that it's a bad project, it's just a weird programming language, has no smart contracts, no DeFi scene, etc.

I also really don't like Charles Hoskinson when he goes on his video rants about things. I don't feel like the leader of any business or crypto should be wildly antagonistic. He seems like he's one video away from a rant that turns off large chunks of ADA holders. We can't discuss politics here, but I get the vibe from him that he's got a near political level of polarizing personality.

That said, if ETH 2.0 merge fails, ADA will likely skyrocket.
Totally agree with this. Including on the subject we shall not speak of :)
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by hilink73 »

abuss368 wrote: Sun May 09, 2021 2:43 pm Speculation at best. Not investment. One speculator will purchase and hope to sell at a higher price to another speculator in the future. No earnings or intrinsic value.

Own total market index funds instead.

Tony
Yes, we had that already.
Thank you.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by watchnerd »

ballons wrote: Sun May 09, 2021 2:22 pm

I think Michael Burry is going to be proven right.
If he's right about crypto in insolation, crypto blows up 2% of my port.

If he's right about stocks and they blow up, that's 60% of my port.

If crypto takes down stocks, that's either 62% of my port or 60% of my port, depending if I hold crypto or not.

I take a similar sized hit either way.

*shrug*

Good thing I have a lot of bonds and no debt, I guess.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by abuss368 »

hilink73 wrote: Sun May 09, 2021 4:37 pm
abuss368 wrote: Sun May 09, 2021 2:43 pm Speculation at best. Not investment. One speculator will purchase and hope to sell at a higher price to another speculator in the future. No earnings or intrinsic value.

Own total market index funds instead.

Tony
Yes, we had that already.
Thank you.
Exactly! Along the lines of gold, silver, and other commodities.

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

Post by watchnerd »

abuss368 wrote: Sun May 09, 2021 5:11 pm Exactly! Along the lines of gold, silver, and other commodities.

Tony
Except I can earn interest on some crypto assets.

So that's a bit different.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by HanSolo »

watchnerd wrote: Sat May 08, 2021 5:22 pm 1. Staking.

As a financial analogy (not at all description of what's happening, technically), it's similar to holding a bond or CD or other fixed income asset.

You earn APR.

But where does the return come from?

This video helps explain:

https://www.youtube.com/watch?v=sF3WIjX ... fromCrypto
I watched the video, thanks. The net effect is that it further confirms to me that I'm more of a capitalist than a tokenist.

As a capitalist, I consider "work" as meaning something like growing food and building houses (rather than meaning something else, like playing guessing games with numbers), and I consider "stake" as meaning something like owning part of a business that does actual work (rather than meaning something else, like being listed on a ledger as a player in a numbers game). It strikes me as Orwellian when long-standing terminology is reused to have new meanings that are bereft of their ordinary meanings and associated practical implications.

I'm not saying it's "wrong" to be a tokenist. I'm just saying that some of the promotion (including the use of word games) strikes me as more evangelistic than informative. In my opinion, we have not reached the point where crypto promoters are being completely honest and forthright. I don't know if we will.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by banook »

HanSolo wrote: Sun May 09, 2021 5:25 pm
watchnerd wrote: Sat May 08, 2021 5:22 pm 1. Staking.

As a financial analogy (not at all description of what's happening, technically), it's similar to holding a bond or CD or other fixed income asset.

You earn APR.

But where does the return come from?

This video helps explain:

https://www.youtube.com/watch?v=sF3WIjX ... fromCrypto
I watched the video, thanks. The net effect is that it further confirms to me that I'm more of a capitalist than a tokenist.

As a capitalist, I consider "work" as meaning something like growing food and building houses (rather than meaning something else, like playing guessing games with numbers), and I consider "stake" as meaning something like owning part of a business that does actual work (rather than meaning something else, like being listed on a ledger as a player in a numbers game). It strikes me as Orwellian when long-standing terminology is reused to have new meanings that are bereft of their ordinary meanings and associated practical implications.

I'm not saying it's "wrong" to be a tokenist. I'm just saying that some of the promotion (including the use of word games) strikes me as more evangelistic than informative. In my opinion, we have not reached the point where crypto promoters are being completely honest and forthright. I don't know if we will.
A question on the definition of "capitalist" with the examples of building houses and growing food vs "tokenist" - which I take to mean the broad category of crypto(some currencies). Where do you categorize things like user data for selling ad revenue where users "get the service" of searching a forum like BH using google? More tokenist or more capital? I'm being serious - I want to know if there's a middle category here. Are most centralized soft big tech companies "tokenist" vs oil/corn/Mazlov base need companies "capitalist"? It would be good to have a vocabulary to articulate.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by chinchin »

Is Wall Street tokenist?
not financial advice
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by HanSolo »

banook wrote: Sun May 09, 2021 8:07 pm A question on the definition of "capitalist" with the examples of building houses and growing food vs "tokenist" - which I take to mean the broad category of crypto(some currencies). Where do you categorize things like user data for selling ad revenue where users "get the service" of searching a forum like BH using google? More tokenist or more capital? I'm being serious - I want to know if there's a middle category here. Are most centralized soft big tech companies "tokenist" vs oil/corn/Mazlov base need companies "capitalist"? It would be good to have a vocabulary to articulate.
Mazlov = Maslow? Mazola? Molotov?

Admittedly, although I got an 'A' in freshman econ, I didn't study it further. That being said, to answer your question, I've heard the practice you described as being called "surveillance capitalism". Unfortunately, capitalism can include some unsavory practives (like selling tobacco products, etc.).

I was mainly trying to emphasize that there's a difference between owning a crypto token and owning a share of stock in a business (even if the markets give a sense, at least to some people, that it's all just numbers going up and down). At a minimum, we can observe that there's a difference in laws and regulations pertaining to business ownership vs. crypto token ownership.
chinchin wrote: Sun May 09, 2021 8:34 pm Is Wall Street tokenist?
To my knowledge, they trade more in the securities (stocks, bonds, etc.) of actual businesses (and are therefore subject to the laws and regulations pertaining thereto) than they trade in crypto tokens.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Green Street »

HomerJ wrote: Sun May 09, 2021 12:08 pm
txhill wrote: Sun May 09, 2021 11:50 amBitcoin has for 12 years stored value better than any other comparable speculative investment like gold, cash, commodities, etc.
Bitcoin hasn't "stored value". Going up 10,000% (or whatever) isn't "storing value".

Bitcoin is a speculative bubble.

Bitcoin has existed for 12 years, but it really only hit mainstream about 4 years ago. 4 years isn't that long for a bubble to last.

I know you guys hate comparisons to tulips, but what the tulip bubble proved is that PEOPLE ARE CRAZY.

The point is, the fact that an asset has gone way up isn't enough proof to say "See, it's way up over the past 4 years (or even 12 years). That means it must be a good investment".

No, it doesn't prove that at all. Because PEOPLE ARE CRAZY. We've seen the madness of crowds over and over and over throughout history.

"Those who cannot learn from history are doomed to repeat it."
-George Santayana?
Ahhhh another bubble!
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by banook »

HanSolo wrote: Sun May 09, 2021 9:03 pm
banook wrote: Sun May 09, 2021 8:07 pm A question on the definition of "capitalist" with the examples of building houses and growing food vs "tokenist" - which I take to mean the broad category of crypto(some currencies). Where do you categorize things like user data for selling ad revenue where users "get the service" of searching a forum like BH using google? More tokenist or more capital? I'm being serious - I want to know if there's a middle category here. Are most centralized soft big tech companies "tokenist" vs oil/corn/Mazlov base need companies "capitalist"? It would be good to have a vocabulary to articulate.
Mazlov = Maslow? Mazola? Molotov?

Admittedly, although I got an 'A' in freshman econ, I didn't study it further. That being said, to answer your question, I've heard the practice you described as being called "surveillance capitalism". Unfortunately, capitalism can include some unsavory practives (like selling tobacco products, etc.).

I was mainly trying to emphasize that there's a difference between owning a crypto token and owning a share of stock in a business (even if the markets give a sense, at least to some people, that it's all just numbers going up and down). At a minimum, we can observe that there's a difference in laws and regulations pertaining to business ownership vs. crypto token ownership.
chinchin wrote: Sun May 09, 2021 8:34 pm Is Wall Street tokenist?
To my knowledge, they trade more in the securities (stocks, bonds, etc.) of actual businesses (and are therefore subject to the laws and regulations pertaining thereto) than they trade in crypto tokens.
Sorry Maslow - and thanks for clarifying. I just wanted to figure out if NASDAQ == tokenism vs DJI == capitalism per the last post. It sounds like NASDAQ is capitalism even if not brick and mortar, surveillance/user data is exchanged, i.e. user information is exchanged for profit. If enough volume of peoples' data or flows of information of people are on Facebook vs Myspace, Facebook wins because of ad revenue, selling information. If Facebook loses user base, then they lose their non brick and mortar flows of information and transactions. With web3 instead of giving up personal information with your attention, you give up a "token" which you in theory "own" (or bought it for fiat currency) that token is then exchanged for fiat or held until a later time to obtain other information. Do you think a better term for "tokenism" might be "attention-ism?" That's kind of where I picture this all going.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by HanSolo »

banook wrote: Sun May 09, 2021 9:26 pm Sorry Maslow - and thanks for clarifying. I just wanted to figure out if NASDAQ == tokenism vs DJI == capitalism per the last post. It sounds like NASDAQ is capitalism even if not brick and mortar, surveillance/user data is exchanged, i.e. user information is exchanged for profit. If enough volume of peoples' data or flows of information of people are on Facebook vs Myspace, Facebook wins because of ad revenue, selling information. If Facebook loses user base, then they lose their non brick and mortar flows of information and transactions. With web3 instead of giving up personal information with your attention, you give up a "token" which you in theory "own" (or bought it for fiat currency) that token is then exchanged for fiat or held until a later time to obtain other information. Do you think a better term for "tokenism" might be "attention-ism?" That's kind of where I picture this all going.
"Attention economy" is already a term, so you might not want to create a new term that sounds like the same thing (unless that's the concept you meant to reference).

I assume "capitalism" to refer to a system (and relevant laws, etc.) where individuals can own the means of production.

I assume that crypto tokens could (at least in theory) exist and be traded in countries that don't have a capitalist system. There, one might not be allowed to own businesses or shares of businesses, but they might be allowed to own crypto tokens (just as they might be allowed to own gold, forex, etc.).

I'm not saying there's a conflict between the two kinds of investing. I'm just using the term "capitalist" to refer to the things you can invest in specifically in a capitalist system (like stocks, corporate bonds, entire businesses, etc.), and "tokenist" to refer to investing in crypto tokens (which can exist in both capitalist and non-capitalist countries, or so I assume), just as a way to distinguish the two kinds of investments, since they're different things.

Since NASDAQ deals in shares of lawfully registered businesses, I don't know of any definition of "capitalism" that would not apply to it. Also, NASDAQ contains lots of brick-and-mortar (Costco, Starbucks, Kraft Heinz, CSX, etc.). But that has nothing to do with whether it's a capitalist thing or not.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by txhill »

HanSolo wrote: Sun May 09, 2021 10:17 pm
banook wrote: Sun May 09, 2021 9:26 pm Sorry Maslow - and thanks for clarifying. I just wanted to figure out if NASDAQ == tokenism vs DJI == capitalism per the last post. It sounds like NASDAQ is capitalism even if not brick and mortar, surveillance/user data is exchanged, i.e. user information is exchanged for profit. If enough volume of peoples' data or flows of information of people are on Facebook vs Myspace, Facebook wins because of ad revenue, selling information. If Facebook loses user base, then they lose their non brick and mortar flows of information and transactions. With web3 instead of giving up personal information with your attention, you give up a "token" which you in theory "own" (or bought it for fiat currency) that token is then exchanged for fiat or held until a later time to obtain other information. Do you think a better term for "tokenism" might be "attention-ism?" That's kind of where I picture this all going.
"Attention economy" is already a term, so you might not want to create a new term that sounds like the same thing (unless that's the concept you meant to reference).

I assume "capitalism" to refer to a system (and relevant laws, etc.) where individuals can own the means of production.

I assume that crypto tokens could (at least in theory) exist and be traded in countries that don't have a capitalist system. There, one might not be allowed to own businesses or shares of businesses, but they might be allowed to own crypto tokens.

I'm not saying there's a conflict between the two kinds of investing. I'm just using the term "capitalist" to refer to the things you can invest in specifically in a capitalist system (like stocks, corporate bonds, entire businesses, etc.), and "tokenist" to refer to investing in crypto tokens (which can exist in both capitalist and non-capitalist countries, or so I assume), just as a way to distinguish the two kinds of investments, since they're different things.

Since NASDAQ deals in shares of lawfully registered businesses, I don't know of any definition of "capitalism" that would not apply to it. Also, NASDAQ contains lots of brick-and-mortar (Costco, Starbucks, Kraft Heinz, CSX, etc.).
I think it's nice that you are trying to come up with some terms to help clarify the discussion but I fear that you're muddying the waters by artificially repurposing already existing terms. "Capitalist" typically means when the allocation of capital is determined by individuals rather than the state. Decentralized systems are pretty much the purest expression of capitalism in the more traditional sense of the word; the state's involvement is far more limited.

Maybe you're referring more to whether crypto tokens are securities (like the stocks and bonds you referenced). To some extent, they can be kind of like a security, and some indeed are and have been the subject of SEC enforcement actions. Namely for cryptos that were disguised securities offerings to raise capital without complying with securities regulations (which is the case for cryptos where the founders pre-mined and reserved a majority of tokens for themselves, for example). But cryptos like bitcoin--not so much, where the founder didn't do any pre-mining. So that's not an easy way to define traditional securities from crypto.

I think you're just going to find it hard to lump all crypto assets together under one definition other than by reference to the underlying technology of cryptography. Lumping bitcoin and ethereum together is quite a challenge beyond that, honestly.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by watchnerd »

HanSolo wrote: Sun May 09, 2021 9:03 pm I was mainly trying to emphasize that there's a difference between owning a crypto token and owning a share of stock in a business (even if the markets give a sense, at least to some people, that it's all just numbers going up and down). At a minimum, we can observe that there's a difference in laws and regulations pertaining to business ownership vs. crypto token ownership.
This is definitely true.

It terms of it being 'capitalist', it took me a while to wrap my head around it, until, having worked in VC, I started looking at the strategies of the VCs using on some of the larger crypto projects (e.g. Andreesen Horowitz funded projects I look at, in particular, because I know people there).

Basically, instead of an IPO, they're banking on an ICO. A large supply of the coins being kept by the VCs, naturally, as investor shares.

This, in some ways, is like owning shares of a company, in that it gives you claims on future revenue streams if the token in question generates revenue, and capital gains in terms of valuation appreciation if the price of the crypto "currency" appreciates.

It's still throwing an offering at the public and getting them to bankroll the business in exchange for promised future earnings, but with much much less regulation and oversight than a stock offering.

Bypass all those pesky disclosures required of an IPO, save on lawyers, save on investment bankers, just hook up a deal with Coinbase (P.S. they backed that, too) to make your project one of the preferred investment options in their coin exchange and you've now got shelf space to the retail market.

It reminds me of 1997-1998 when Kleiner Perkins was at the peak of its power, but with a new set of investors pursuing new tactics, just like mainstream Silicon Valley did at the start of the internet.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Prahasaurus »

abuss368 wrote: Sun May 09, 2021 2:43 pm Speculation at best. Not investment. One speculator will purchase and hope to sell at a higher price to another speculator in the future. No earnings or intrinsic value.

Own total market index funds instead.

Tony
How many times do we need to point out this is wrong? I see my rebuttal to the last person who incorrectly said crypto does not have earnings or intrinsic value was removed. Too contentious! How do we educate Bogleheads that want to learn that crypto does have revenue streams?

Bogleheads poster with limited knowledge of crypto: No intrinsic value! No earnings! You only hope to sell to a bigger fool!

Me: Wait, what? No, that is clearly incorrect! I will give you specific examples of protocols that generate consistent revenue. I will include links so you can go see yourself.

Bogleaheads moderation: Too contentious! Posts removed.

It's no surprise we keep hearing the canard of "no intrinsic value" over and over again when push back is censored. I understand the Boglehead who says, "I think this asset class is interesting, but I have no need to include it in my investment portfolio, it's too speculative." But don't post here demonstrably false statements and confuse others who are trying to learn!
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by HanSolo »

txhill wrote: Sun May 09, 2021 10:26 pm I think it's nice that you are trying to come up with some terms to help clarify the discussion but I fear that you're muddying the waters by artificially repurposing already existing terms. "Capitalist" typically means when the allocation of capital is determined by individuals rather than the state.
I'm perfectly happy to defer to the dictionary definition of capitalism ("private ownership of the means of production", etc.).

While non-capitalist countries might not allow business ownership, I'm not aware that it necessarily means that crypto ownership is not allowed there. To the best of my knowledge, crypto (like gold, cars, watches, etc.) is orthogonal to capitalism (i.e., neither dependent on it nor conflicting with it).
Decentralized systems are pretty much the purest expression of capitalism in the more traditional sense of the word; the state's involvement is far more limited.
Business ownership is already as decentralized as it gets. I can own a restaurant, and you can own a dry cleaner, and we don't have to have anything to do with each other. And the state may tax both of us, but that says nothing about it being "more" or "less" capitalist than some other situation (according to the dictionary; although people with political agendas might disagree, e.g., those opposed to all forms of taxation).

Whether the state is involved is up to the state. In the US, the IRS treats crypto as property.
Maybe you're referring more to whether crypto tokens are securities (like the stocks and bonds you referenced). To some extent, they can be kind of like a security, and some indeed are and have been the subject of SEC enforcement actions.
I'm perfectly happy to let the SEC (and other competent authorities, e.g., the courts) decide what's a business and what's not. To my knowledge, crypto is considered different from a business (e.g., no quarterly SEC filings, business income tax, etc.).
I think you're just going to find it hard to lump all crypto assets together under one definition other than by reference to the underlying technology of cryptography. Lumping bitcoin and ethereum together is quite a challenge beyond that, honestly.
Maybe hard for me, but some people get away with it, e.g., the IRS... they lump all crypto assets together as "virtual currencies". I'm perfectly happy to let them do that.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by HanSolo »

watchnerd wrote: Sun May 09, 2021 10:42 pm
HanSolo wrote: Sun May 09, 2021 9:03 pm I was mainly trying to emphasize that there's a difference between owning a crypto token and owning a share of stock in a business (even if the markets give a sense, at least to some people, that it's all just numbers going up and down). At a minimum, we can observe that there's a difference in laws and regulations pertaining to business ownership vs. crypto token ownership.
This is definitely true.

It terms of it being 'capitalist', it took me a while to wrap my head around it, until, having worked in VC, I started looking at the strategies of the VCs using on some of the larger crypto projects (e.g. Andreesen Horowitz funded projects I look at, in particular, because I know people there).
OK, then please tell Marc and Ben I said that now they're not only VCs but also VTs (venture tokenists)!
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by watchnerd »

HanSolo wrote: Sun May 09, 2021 10:58 pm
I'm perfectly happy to let the SEC (and other competent authorities, e.g., the courts) decide what's a business and what's not. To my knowledge, crypto is considered different from a business (e.g., no quarterly SEC filings, business income tax, etc.).
“To the extent that something is a security, the SEC has a lot of authority. And a lot of crypto tokens — I won’t call them cryptocurrencies for this moment — are indeed securities,” he said.
https://www.cnbc.com/2021/05/07/sec-cha ... rkets.html

i.e. some of them are not really currencies, they're just a new type of security

He then goes on to stay legislation is needed.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by HanSolo »

watchnerd wrote: Mon May 10, 2021 12:32 am i.e. some of them are not really currencies, they're just a new type of security

He then goes on to stay legislation is needed.
That's fine. My only point was that there's a difference between investing in businesses and doing other things. If they think some cryptos are businesses, then I suppose someone will be paying business income tax, etc. I'm perfectly happy to let them decide.

I'm not saying all securities are investments in a business (e.g., Treasury bonds). I suppose the SEC also regulates securities that have nothing to do with businesses, and I don't know whether crypto falls into that category, but it doesn't affect me in any case.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Prahasaurus »

Just did some analysis on my crypto portfolio. Currently, it can be split as follows:

47% ETH
26% BTC
27% Small cap crypto projects (e.g. AAVE, REN, UNI, etc.).

My main takeaway is that - had I only been interested in risk adjusted return - I would have been better off putting 100% of my money in ETH from the beginning.

Yes, some tokens like UNI have done better than ETH. Some tokens have more or less equaled ETH. Some have done slightly worse. But I could have simplified my life immensely had I just invested in ETH only.

However, the main benefit to me was participating in DeFi through these tokens, as I have not left them in my wallet collecting dust. I have put them to work within DeFi, staked, provided liquidity, loaned, ran nodes, etc. It has been a fantastic learning experience, a huge intangible benefit! There is no way I could even begin to process what is happening in crypto in general, and DeFi specifically, without participating in DeFi. That was my main benefit.

However, if you only want to gain exposure to crypto and do not want to deal with wallets and MetaMask and could care less about synthetic assets or collateral ratios, then my recommendation is as follows:

80% ETH
20% BTC

Yes, even a few months ago I would have probably reversed these percentages. But my thinking on BTC has evolved significantly, and I'm no longer bullish as before. I still believe BTC has a bright future, just its relative performance will not match ETH longer term, in my opinion. But I still think you need exposure to BTC long term. I will definitely keep BTC in my portfolio.

So for the "crypto curious" Boglehead who wants exposure to this space, but does not want to think too much about crypto, my recommendation is to purchase ETH and BTC. And predominantly ETH.

I would also recommend locking your ETH in validator nodes (staking). If you buy at Coinbase, you can do it there. 6% return may not sound like much, but it's 6% paid in ETH, an asset that should appreciate significantly over the coming decade.

If you are curious about DeFi and want to experiment, then perhaps modify to 80% ETH, 15% BTC, 5% DeFi projects. Learn to use MetaMask, get a hardware wallet like Trezor, and enjoy!

As to what % crypto should be within your total portfolio, I have always said keep it small, around 5% or so. Nothing has changed there. But that really varies by risk profile, etc. I would also not rebalance, unless that 5% grows to something that becomes too stressful for you. Again, varies by person.

I do believe avoiding this asset class entirely is a mistake for long term investors. While we don't know how this will all develop, and it's going to be a very bumpy road, I do believe portfolios that include a small % of crypto will outperform your standard 60-40 or 80-20 Boglehead portfolio, long term.

We can revisit this thread in 10 years and see!
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Orangutan »

Prahasaurus wrote: Mon May 10, 2021 1:22 am Just did some analysis on my crypto portfolio. Currently, it can be split as follows:

47% ETH
26% BTC
27% Small cap crypto projects (e.g. AAVE, REN, UNI, etc.).

My main takeaway is that - had I only been interested in risk adjusted return - I would have been better off putting 100% of my money in ETH from the beginning.

Yes, some tokens like UNI have done better than ETH. Some tokens have more or less equaled ETH. Some have done slightly worse. But I could have simplified my life immensely had I just invested in ETH only.

However, the main benefit to me was participating in DeFi through these tokens, as I have not left them in my wallet collecting dust. I have put them to work within DeFi, staked, provided liquidity, loaned, ran nodes, etc. It has been a fantastic learning experience, a huge intangible benefit! There is no way I could even begin to process what is happening in crypto in general, and DeFi specifically, without participating in DeFi. That was my main benefit.

However, if you only want to gain exposure to crypto and do not want to deal with wallets and MetaMask and could care less about synthetic assets or collateral ratios, then my recommendation is as follows:

80% ETH
20% BTC

Yes, even a few months ago I would have probably reversed these percentages. But my thinking on BTC has evolved significantly, and I'm no longer bullish as before. I still believe BTC has a bright future, just its relative performance will not match ETH longer term, in my opinion. But I still think you need exposure to BTC long term. I will definitely keep BTC in my portfolio.

So for the "crypto curious" Boglehead who wants exposure to this space, but does not want to think too much about crypto, my recommendation is to purchase ETH and BTC. And predominantly ETH.

I would also recommend locking your ETH in validator nodes (staking). If you buy at Coinbase, you can do it there. 6% return may not sound like much, but it's 6% paid in ETH, an asset that should appreciate significantly over the coming decade.

If you are curious about DeFi and want to experiment, then perhaps modify to 80% ETH, 15% BTC, 5% DeFi projects. Learn to use MetaMask, get a hardware wallet like Trezor, and enjoy!

As to what % crypto should be within your total portfolio, I have always said keep it small, around 5% or so. Nothing has changed there. But that really varies by risk profile, etc. I would also not rebalance, unless that 5% grows to something that becomes too stressful for you. Again, varies by person.

I do believe avoiding this asset class entirely is a mistake for long term investors. While we don't know how this will all develop, and it's going to be a very bumpy road, I do believe portfolios that include a small % of crypto will outperform your standard 60-40 or 80-20 Boglehead portfolio, long term.

We can revisit this thread in 10 years and see!
Are small caps even worth the risk? You have to choose winners and they’ll be built on ETH anyways. ETH looks like the only logical investment here.
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Prahasaurus »

Orangutan wrote: Mon May 10, 2021 1:33 am
Prahasaurus wrote: Mon May 10, 2021 1:22 am Just did some analysis on my crypto portfolio. Currently, it can be split as follows:

47% ETH
26% BTC
27% Small cap crypto projects (e.g. AAVE, REN, UNI, etc.).

My main takeaway is that - had I only been interested in risk adjusted return - I would have been better off putting 100% of my money in ETH from the beginning.

Yes, some tokens like UNI have done better than ETH. Some tokens have more or less equaled ETH. Some have done slightly worse. But I could have simplified my life immensely had I just invested in ETH only.

However, the main benefit to me was participating in DeFi through these tokens, as I have not left them in my wallet collecting dust. I have put them to work within DeFi, staked, provided liquidity, loaned, ran nodes, etc. It has been a fantastic learning experience, a huge intangible benefit! There is no way I could even begin to process what is happening in crypto in general, and DeFi specifically, without participating in DeFi. That was my main benefit.

However, if you only want to gain exposure to crypto and do not want to deal with wallets and MetaMask and could care less about synthetic assets or collateral ratios, then my recommendation is as follows:

80% ETH
20% BTC

Yes, even a few months ago I would have probably reversed these percentages. But my thinking on BTC has evolved significantly, and I'm no longer bullish as before. I still believe BTC has a bright future, just its relative performance will not match ETH longer term, in my opinion. But I still think you need exposure to BTC long term. I will definitely keep BTC in my portfolio.

So for the "crypto curious" Boglehead who wants exposure to this space, but does not want to think too much about crypto, my recommendation is to purchase ETH and BTC. And predominantly ETH.

I would also recommend locking your ETH in validator nodes (staking). If you buy at Coinbase, you can do it there. 6% return may not sound like much, but it's 6% paid in ETH, an asset that should appreciate significantly over the coming decade.

If you are curious about DeFi and want to experiment, then perhaps modify to 80% ETH, 15% BTC, 5% DeFi projects. Learn to use MetaMask, get a hardware wallet like Trezor, and enjoy!

As to what % crypto should be within your total portfolio, I have always said keep it small, around 5% or so. Nothing has changed there. But that really varies by risk profile, etc. I would also not rebalance, unless that 5% grows to something that becomes too stressful for you. Again, varies by person.

I do believe avoiding this asset class entirely is a mistake for long term investors. While we don't know how this will all develop, and it's going to be a very bumpy road, I do believe portfolios that include a small % of crypto will outperform your standard 60-40 or 80-20 Boglehead portfolio, long term.

We can revisit this thread in 10 years and see!
Are small caps even worth the risk? You have to choose winners and they’ll be built on ETH anyways. ETH looks like the only logical investment here.
That was the point of my entire post. Upon further analysis, I think the answer for most investors is no. Just buy ETH. Unless you are intellectually curious and want to experiment. Because so many top protocols are running on Ethereum, and need gas (ETH) for transactions, just buy ETH.

I once again link to analysis of fees generated by crypto projects over the past 24 hours: https://cryptofees.info

As you can clearly see, Ethereum is by far number 1. And all of the projects highlighted in pink are applications running on Ethereum! So you must buy ETH to interact with those apps, ETH is the gas that powers the network. It's total domination, nobody is close.

Ethereum by itself is a diversified portfolio of crypto assets, and that ecosystem is growing exponentially. It's like buying Berkshire Hathaway. But buying BRK in 1963...
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by dziuniek »

What if the next Avengers movie came out as a single copy NFT?
Would anyone pay a billion bucks or more for it?

Maybe someone is nuts enough.
Get rich or die tryin'
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by watchnerd »

dziuniek wrote: Mon May 10, 2021 7:07 am What if the next Avengers movie came out as a single copy NFT?
Would anyone pay a billion bucks or more for it?

Maybe someone is nuts enough.
Like 'Once Upon a Time in Shaolin'?
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by banook »

How often do pension funds pick NOT good investments? I ask because CalPERS (California state pension fund) has been investing (not a large amount) in bitcoin mining with RIOT Blockchain shares. CalSTRS (California teachers pension fund) has not seemingly, yet. I realize the initial amount invested is small, but still, a pension fund...

https://www.nasdaq.com/articles/califor ... 2021-02-02

Sidenote/off-topic (filed for another thread): in looking at these SEC filings of CalPERS... I can't believe the number of holdings for CalPERS. Why not just 3-4 fund? Is this typical?
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by watchnerd »

HanSolo wrote: Sun May 09, 2021 11:33 pm
OK, then please tell Marc and Ben I said that now they're not only VCs but also VTs (venture tokenists)!
Sequoia Capital are now also confirmed among the Venture Tokenists.

In this case, in a derivatives business:

https://www.coindesk.com/babel-finance- ... and-others
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by txhill »

Prahasaurus wrote: Mon May 10, 2021 1:49 am That was the point of my entire post. Upon further analysis, I think the answer for most investors is no. Just buy ETH. Unless you are intellectually curious and want to experiment. Because so many top protocols are running on Ethereum, and need gas (ETH) for transactions, just buy ETH.

I once again link to analysis of fees generated by crypto projects over the past 24 hours: https://cryptofees.info

As you can clearly see, Ethereum is by far number 1. And all of the projects highlighted in pink are applications running on Ethereum! So you must buy ETH to interact with those apps, ETH is the gas that powers the network. It's total domination, nobody is close.

Ethereum by itself is a diversified portfolio of crypto assets, and that ecosystem is growing exponentially. It's like buying Berkshire Hathaway. But buying BRK in 1963...
Prahasaurus, I have to ask. What is your approach to the crypto bull/bear cycles? It seems pretty clear to me that we should expect a massive run up and crash at some point; there are undeniable levels of mania and speculation in crypto already and I'm sure it'll get worse. Do you have a strategy for rebalancing out / exiting in certain % amounts based on certain % runup in price? Or are you going to hodl regardless?

I believe in the underlying value of ETH/BTC but I'm not quite sure what approach to take given my expectation that we'll see a further boom and bust soon. I've never been a market-timer--and I know in general that timing the market is futile--but it might make sense to think about timing the market at least somewhat. I've certainly already seen some substantial profits but I don't yet feel willing to take any off the table. But maybe I should?
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Prahasaurus »

txhill wrote: Mon May 10, 2021 9:51 am
Prahasaurus wrote: Mon May 10, 2021 1:49 am That was the point of my entire post. Upon further analysis, I think the answer for most investors is no. Just buy ETH. Unless you are intellectually curious and want to experiment. Because so many top protocols are running on Ethereum, and need gas (ETH) for transactions, just buy ETH.

I once again link to analysis of fees generated by crypto projects over the past 24 hours: https://cryptofees.info

As you can clearly see, Ethereum is by far number 1. And all of the projects highlighted in pink are applications running on Ethereum! So you must buy ETH to interact with those apps, ETH is the gas that powers the network. It's total domination, nobody is close.

Ethereum by itself is a diversified portfolio of crypto assets, and that ecosystem is growing exponentially. It's like buying Berkshire Hathaway. But buying BRK in 1963...
Prahasaurus, I have to ask. What is your approach to the crypto bull/bear cycles? It seems pretty clear to me that we should expect a massive run up and crash at some point; there are undeniable levels of mania and speculation in crypto already and I'm sure it'll get worse. Do you have a strategy for rebalancing out / exiting in certain % amounts based on certain % runup in price? Or are you going to hodl regardless?

I believe in the underlying value of ETH/BTC but I'm not quite sure what approach to take given my expectation that we'll see a further boom and bust soon. I've never been a market-timer--and I know in general that timing the market is futile--but it might make sense to think about timing the market at least somewhat. I've certainly already seen some substantial profits but I don't yet feel willing to take any off the table. But maybe I should?
Welcome to what keeps me up at nights now.... :sharebeer

Buying was easy, I was extremely confident BTC and ETH would appreciate. I loaded up throughout 2020. But now it's much harder.

My general feeling is we will likely see a large pull back, as the market is still stuck in this boom/bust mentality. With Ethereum, it shouldn't be! I understand with Bitcoin, a commodity asset like gold. But why Ethereum, with so much utility, with DeFi growing exponentially? Some say we are in a new age now, and there won't be a massive correction this cycle. They also point to 1559 and the move to Proof of Stake, which should act as a massive accelerant to Ethereum and DeFi. And of course institutions are just now starting to buy. A BTC and ETH ETF on the horizon (May/June?) So things still look extremely bullish still.

However, it's just when you start to think like that when you are punched in the gut and your portfolio falls 70%... :oops:

I've been easing out of some of my smaller caps over the past couple of months. My plan is to sell the minimum amount I need to pay the taxes on my gains and retire. While keeping a sizable crypto portfolio that can ride out a multi-year downturn. I'll lock it all in nodes and just forget about it. But the key in that strategy is determining what "keeping a sizable crypto portfolio" really means. I'm not sure I've got an answer, to be honest. Happy to hear from others!

My rough thinking is to keep enough ETH to run 2 full nodes, plus some extra. So maybe 80-90 ETH. Keep a minimal amount of BTC, perhaps 3 BTC. Keep all of my Aave ("cold dead hands," etc.). Keep a smattering of other smaller projects I think have good long term potential, but at the same time, I'm prepared to lose. And sell the rest. So when "the rest" hits my number for retirement, I'll sell. To be honest it's almost there.

What keeps my stress levels low is I can manage for 3-4 years even if the bottom drops out of crypto tomorrow, since I do believe Ethereum will be a massive winner eventually. I have enough cash, and I can still do projects to earn cash. I just need to hold on in that case. But my plans of getting a sail boat and tooling around the Mediterranean will definitely have to wait. :)
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by Prahasaurus »

txhill wrote: Mon May 10, 2021 9:51 amI've certainly already seen some substantial profits but I don't yet feel willing to take any off the table. But maybe I should?
For what it's worth, I think we are a long way away from the end of this bull cycle. Months. Doesn't mean I won't start to take some money off the table when ETH hits 6k or so. BTC maybe 85k or so. I think that's still a few months away. And I personally believe both will go much higher than that in 2021. Much higher... Of course, I have no idea, and it could all crash tomorrow.

It really just depends on what your goals are for crypto short and long term. If I were 35, my approach would be completely different...
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by txhill »

Prahasaurus wrote: Mon May 10, 2021 10:39 am
txhill wrote: Mon May 10, 2021 9:51 am Prahasaurus, I have to ask. What is your approach to the crypto bull/bear cycles? It seems pretty clear to me that we should expect a massive run up and crash at some point; there are undeniable levels of mania and speculation in crypto already and I'm sure it'll get worse. Do you have a strategy for rebalancing out / exiting in certain % amounts based on certain % runup in price? Or are you going to hodl regardless?

I believe in the underlying value of ETH/BTC but I'm not quite sure what approach to take given my expectation that we'll see a further boom and bust soon. I've never been a market-timer--and I know in general that timing the market is futile--but it might make sense to think about timing the market at least somewhat. I've certainly already seen some substantial profits but I don't yet feel willing to take any off the table. But maybe I should?
Welcome to what keeps me up at nights now.... :sharebeer

Buying was easy, I was extremely confident BTC and ETH would appreciate. I loaded up throughout 2020. But now it's much harder.

My general feeling is we will likely see a large pull back, as the market is still stuck in this boom/bust mentality. With Ethereum, it shouldn't be! I understand with Bitcoin, a commodity asset like gold. But why Ethereum, with so much utility, with DeFi growing exponentially? Some say we are in a new age now, and there won't be a massive correction this cycle. They also point to 1559 and the move to Proof of Stake, which should act as a massive accelerant to Ethereum and DeFi. And of course institutions are just now starting to buy. A BTC and ETH ETF on the horizon (May/June?) So things still look extremely bullish still.

However, it's just when you start to think like that when you are punched in the gut and your portfolio falls 70%... :oops:

I've been easing out of some of my smaller caps over the past couple of months. My plan is to sell the minimum amount I need to pay the taxes on my gains and retire. While keeping a sizable crypto portfolio that can ride out a multi-year downturn. I'll lock it all in nodes and just forget about it. But the key in that strategy is determining what "keeping a sizable crypto portfolio" really means. I'm not sure I've got an answer, to be honest. Happy to hear from others!

My rough thinking is to keep enough ETH to run 2 full nodes, plus some extra. So maybe 80-90 ETH. Keep a minimal amount of BTC, perhaps 3 BTC. Keep all of my Aave ("cold dead hands," etc.). Keep a smattering of other smaller projects I think have good long term potential, but at the same time, I'm prepared to lose. And sell the rest. So when "the rest" hits my number for retirement, I'll sell. To be honest it's almost there.

What keeps my stress levels low is I can manage for 3-4 years even if the bottom drops out of crypto tomorrow, since I do believe Ethereum will be a massive winner eventually. I have enough cash, and I can still do projects to earn cash. I just need to hold on in that case. But my plans of getting a sail boat and tooling around the Mediterranean will definitely have to wait. :)
Interesting. I'm really not sure myself. I think I'll always keep at least 1 BTC even if it's a very small % of my portfolio, just because... it's a whole coin. Kind of ridiculous but oh well. I've come around so much on ETH in the last couple of months that I think it really could be basically the only thing I invest in for the near future (while maybe hitting pause on allocations during further runup in this bull market). Maybe I'll sell some along the way if we see some outrageous numbers, but I just don't know how to approach that yet. I don't even know what an outrageous number would be. Based on what seem like reasonable valuation models based on the addressable market, I can see it being a multitrillion market cap, implying at least 5x-10x from here. Which sounds crazy...

Luckily I'm also not too worried about a crash as crypto remains a limited part of my mostly-S&P 500 index funds portfolio, and my lifestyle is relatively modest when it comes down to it (you'd certainly have to pay me a lot to get me to sail a boat). I know if left to my own devices I'd be way heavier into crypto already, but my wife, while bullish on crypto, is the wise one and has kept me in check :)
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Re: Prove Me Wrong: Cryptocurrencies are NOT good investments

Post by watchnerd »

txhill wrote: Mon May 10, 2021 11:12 am I think it really could be basically the only thing I invest in for the near future (while maybe hitting pause on allocations during further runup in this bull market)
Concentrated risk is super risky. It would be true even if it was just a stock.

I think that also starts to tilt less towards investing and more towards gambling. It's a lottery ticket mentality.

Is there a reason you need to hit a home run?

You have time on your side.

Perhaps consider spreading your money around a bit?
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