'Cryptocurrencies Are Like Lottery Tickets That Might Pay Off in Future' (theguardian.com) 122
With the price of bitcoin down 80% from its peak a year ago, and the larger cryptocurrency market in systemic collapse, has "peak crypto" come and gone? From a column: Perhaps, but don't expect to see true believers lining up to have their cryptocurrency tattoos removed just yet. At a recent conference I attended, the overwhelming sentiment was that market capitalisation of cryptocurrencies could explode over the next five years, rising to $5-10tn. For those who watched the price of bitcoin go from $13 in December 2012 to roughly $4,000 today, this year's drop from $20,000 was no reason to panic.
It is tempting to say, "Of course the price is collapsing." Regulators are gradually waking up to the fact that they cannot countenance large expensive-to-trace transaction technologies that facilitate tax evasion and criminal activity. At the same time, central banks from Sweden to China are realising that they, too, can issue digital currencies. As I emphasised in my 2016 book on the past, present, and future of currency, when it comes to new forms of money, the private sector may innovate, but in due time the government regulates and appropriates.
But as I also pointed out back then, just because the long-term value of bitcoin is more likely to be $100 than $100,000 does not necessarily mean that it definitely should be worth zero. The right way to think about cryptocurrency coins is as lottery tickets that pay off in a dystopian future where they are used in rogue and failed states, or perhaps in countries where citizens have already lost all semblance of privacy. It is no coincidence that dysfunctional Venezuela is the first issuer of a state-backed cryptocurrency (the "petro").
It is tempting to say, "Of course the price is collapsing." Regulators are gradually waking up to the fact that they cannot countenance large expensive-to-trace transaction technologies that facilitate tax evasion and criminal activity. At the same time, central banks from Sweden to China are realising that they, too, can issue digital currencies. As I emphasised in my 2016 book on the past, present, and future of currency, when it comes to new forms of money, the private sector may innovate, but in due time the government regulates and appropriates.
But as I also pointed out back then, just because the long-term value of bitcoin is more likely to be $100 than $100,000 does not necessarily mean that it definitely should be worth zero. The right way to think about cryptocurrency coins is as lottery tickets that pay off in a dystopian future where they are used in rogue and failed states, or perhaps in countries where citizens have already lost all semblance of privacy. It is no coincidence that dysfunctional Venezuela is the first issuer of a state-backed cryptocurrency (the "petro").
And using lotto tickets as currency (Score:1)
Is stupid.
Checkmate.
Yesterday, when I was young (Score:4, Insightful)
I'm old enough to remember when cryptocurrencies were going to replace fiat currency.
Now, they're lottery tickets. Do the coinbros know that almost everyone loses money on lottery tickets?
Re:Yesterday, when I was young (Score:5, Insightful)
You do if the corn, boats or steaks or crypto are on their way to being worth zero.
Better to get something than lose everything. And it is absolutely possible for crypto to go to zero. We've seen it happen to assets that have actual items of value backing them up. Cryptocoins have nothing backing them up. No firebreak. They could fall through the floor.
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If they stay that way long, they're gone.
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He's saying bitcoin will be gone because process bitcoin transactions because mining will not be profitable. Bitcoin will never hit zero because if it did, nobody would be around to process the transaction that puts it there.
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Ah, but as long as there is someone who thinks it's going to rebound, there will be someone who will pay more to mine it than the coin is worth. And someone who will pay more in processing fees than the coin is worth. It's called the "Greater Fool Theory".
True believers do weird thing
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That's not true, because there doesn't have to be a transaction for an assets value to change. If noone is interested in bitcoin from now on and never will be again, it's value is zero. Regardless of who holds how many and if any transactions have taken place.
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Because of transaction fees, I think it's theoretically possible for cryptocurrencies to have a negative value. If, for example, you have to sell your ultimatemagicsuretoappreciateforevercryptocoin "investment" to establish a loss for tax purposes, and if the transaction fee to rid yourself of it is higher than the price you fetch for the coin, the value will be negative.
Re: Yesterday, when I was young (Score:2)
And it is absolutely possible for crypto to go to zero.
It is absolutely impossible for it not to.
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I'm not an expert on Shitcoin (like 99.99% of "investors") but I do know that the amount it costs to mine a Buttcoin reduces if the mining pool reduces. The number of bits that your generated hash has to match reduces when the total processing power reduces.
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"You don't sell your product -- be it corn, or boats, or steaks, or crypto coins for less than they cost to make."
But if you don't sell them they are effectively worthless anyway as you cannot buy anything else to keep trading.
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The cost of manufacture is adaptive: the difficulty level will track the level of processing power down as well as up.
If the price drops -> less companies see a return on mining -> less companies mine -> difficulty level drops -> cost goes down.
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You don't sell your product -- be it corn, or boats, or steaks, or crypto coins for less than they cost to make.
It happens all the time. A firesale is where some product is heavily discounted to get rid of it and cut someone's losses rather than hang onto and see those losses increase.
Dream On (Score:5, Informative)
The premise here is that people will suddenly see the value of cryptocurrency, and not some better cryptocurrency that they create then, but the old cryptocurrency. The problem with this is that the naive folks who bought cryptocurrency on its run up, mortgaging their homes and running up their credit cards, aren't going to be in the market that way a second time.
It's over. It only goes down from here. It never had any intrinsic value, and the folks who were in denial about that have had to face it now.
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But I'm willing to go as far as saying the closest crypto has to "intrinsic value" is the cost of making them.
They can't go below that for long, and when (as they did not long ago) they go far above that, it's pretty clearly a bubble.
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But I'm willing to go as far as saying the closest crypto has to "intrinsic value" is the cost of making them.
They can't go below that for long
This is precisely why the mining difficulty automatically adjusts. When a coin is no longer profitable to mine, people shut the mining rigs down. The network difficulty adjusts itself, and the same number of coins continue to be produced by less miners (and by extension, less electricity being used).
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Unless the currency you're using is a commodity, there is zero "intrinsic value".
Any currency has value to the extent there are existing contracts for future exchanges of that currency for value. Perhaps that's "extremeness value", but whatever. Dollars have in the fact that I'm going to have to pay my taxes with them, and if I have a lease I'll be trading them for a place to live for some time.
I don't see that for Bitcoin, so there's nothing to keep it from plummeting overnight.
Re: Dream On (Score:2)
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It's over. It only goes down from here. It never had any intrinsic value, and the folks who were in denial about that have had to face it now.
While it seems reasonable to say the price was too high, this is overly pessimistic. It only goes down from here? Really? I seriously doubt that's a position you want to commit to.
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You can't have been reading me that much if this surprises you. I've never believed in cryptocurrency, and have rejected at least one board position in a cryptocurrency company.
I can't believe a retraction would ever be necessary.
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You just wait for the next generation of naive folks. There's a sucker born every minute ...
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What you mean is that you found a greater fool to sell BTC to. Perhaps that person did in turn, or perhaps he didn’t. At some point all markets of this kind run out of greater fools to sell to.
Name calling time (Score:3, Funny)
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Sure (Score:2)
Just like that Power Ball ticket I bought hoping to get the billion dollar jackpot "paid off" a few weeks ago.
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Reading on though, it becomes clearer. The author of the piece doesn't se
Past Performance Does Not Indicate Future Results (Score:5, Informative)
I also have a few zero volume penny stocks back from gambling... Err day trading penny stocks.
I keep them around as a reminder of what results from hubris and greed.
Most of these cyryptocurrencies will end up the same: no bid.
Don't be a bag hodler.
The $100,000 thesis (Score:2)
The $100k/BTC thesis - in my mind - was always supported by the idea that BTC would be used in the third world. Just talk to any Venmo user about installing a Bitcoin wallet to see that it's mostly a non-starter as a currency in the developed world. But the opportunities in Latin America and Africa (at least where Internet penetrates) are huge.
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$100k is *very* easily achievable, I staked my next car on it... instead of buying a $35k ride, I just bought a $3500 beater last week and put the rest into crypto. That should net me a little over $900k in about 3-4 years.
Even $1M is pretty well within range as a max around 10-15 years out... $19T, but I'm not yet willing to stake on that till we hit $200k in about 4-5 years, at which point I won't be converting back to fiat, ever.
Adoption will happen pretty fast.
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Liquidity + Scarcity = Value. Whether it's shells on a beach or stone wheels or photographically signed tokens, it doesn't matter.
Which one(s) remains to be seen but I'm betting that the winner(s) are already out.
Both of these statements can't be true. Cryptocurrency advocates claim artificial scarcity because of the mining which is kindof true. The problem is that the currencies themselves are not scarce. It's free to create your own currency and you only need a minimal amount of liquidity and they all become equivalent.
You can't pick a winner because there likely won't be a single winner. Any and all currencies that reach minimal viability will likely all hover around the same dollar amount. My guess is that
Fiat currencies are the true lottery ticket (Score:1)
Unless I'm missing something (Score:2)
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I think the proper way to frame the discussion is for a given crypto-currency is to ask:
Is this one that has a lottery ticket's odds of paying off in the future, or one that has the same value as one where they already drew the numbers and found no match?
Currencies may exist for each, but like lottery tickets a heck of a lot more have been printed that are now in the later category.
A Lotery? Nothing new! (Score:1)
No they are useless crap. (Score:5, Insightful)
No the problem is that the value of your CURRENT cryptocurrency is just going downhill and will be worth nothing in the long run. This will happen for all cryptocurrencies and the reason is that people just create new and new cryptocurrency.
The only people that can cash in are the people that originally created the cryptocurrency and they cash in before it becomes worthless. So everyone is trying to create their own cryptocurrency to cash in. Rinse repeat. An endless cycle that will never stop and makes common cryptocurrency useless.
The only way that a cryptocurrency can work, is if it is backed up by a government state so that you are quaranted to have an actual value for the currency based on the trust for the government. We have a name for this it's just called "Currency".
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No, cryptocurrencies are not like lottery tickets (Score:5, Interesting)
Lottery usually has (a) certain guaranteed odds of winning, crypto has no guarantees. (b) Lotteries are usually licensed with a limited number of licenses at any time. There is literally no limit on the number of possible cryptocurrencies.
The value of major cryptos is unlikely to go to hard zero though. There is utility in BTC and friends which is circumvention of regulations. Someone will always want to launder money and sell drugs.
But it's very unlikely for a legit application of blockchain to exist at all because a distributed transaction with consensus is fundamentally more expensive than a centralized one with a trusted third party. All, and I mean absolutely all with no exceptions, all current companies/products in "legit" space are doing things with blockchain purely for marketing/FMO reasons. All of these apps can be done more efficiently without the blockchain.
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It's just a bad analogy.
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I bet 100 trillion dollars ZWB that that can happen with anything that isn't backed by some actual good.
The best lottery ticket statistic (Score:2)
I heard somewhere that the chances of you buying a winning ticket in the NY lottery are the same as you finding that a winning ticket in the gutter. I can't imagine the stats are much different in other parts of the world.
At least I don't have to listen to people in the local pub telling me how they are going to make millions on the BTC they bought at the top of the market anymore, now it is only the desperados trying to talk the market up.
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I heard somewhere that the chances of you buying a winning ticket in the NY lottery are the same as you finding that a winning ticket in the gutter.
I'm not sure how this would be the case. Sure the chances are the same if you find a discarded lottery ticket before the drawing. But the odds of finding a "good" lottery ticket of any kind is low. I've found lots of discarded lottery tickets but they have always been discarded after they were known to be bad. The odds of finding a "good" lottery ticket is likely similar to the odds of finding a $20 on the ground. People don't usually discard something of potential value. So once you have found a good
Let me fix it for you. (Score:4, Insightful)
There. Done.
From an investment to a lottery ticket... (Score:2)
Petro (Score:3)
The right way to think about cryptocurrency coins is as lottery tickets that pay off in a dystopian future where they are used in rogue and failed states, or perhaps in countries where citizens have already lost all semblance of privacy. It is no coincidence that dysfunctional Venezuela is the first issuer of a state-backed cryptocurrency (the "petro").
They are really using Venezuela as an example? Maduro's government created the petro because he's blown all of their foreign currency reserves. It's supposedly backed 1:1 by a barrel of oil, from a specific region in Venezuela officially. Of course, investigations by reporters have found no investment in or increase of oil production facilities in that area. Oh, and the government, which pre-mined all the coins, hasn't released any yet. And the only hard currency the government accepts to purchase petros is the ruble (all the other options are other crypto coins). The whole petro thing was basically a way to get money from Russia while avoiding US sanctions. Oh, and fun fact, Russia has now started flying nuclear-capable Tu-160 bombers into Venezuela. Hmm, couldn't be because the Venezuelan government struck a deal with Russia for power projection in exchange for cash, could it?
Dystopia? (Score:2)
"The right way to think about cryptocurrency coins is as lottery tickets that pay off in a dystopian future where they are used in rogue and failed states, or perhaps in countries where citizens have already lost all semblance of privacy"
A dystopia future... where the government and major institutions have fallen... but the internet still works just fine enough to run a whole shadow economy.
That's so comically ridiculous. In such a situation of a failed state -of which we have several contemporary real-worl
Cryptocurrency vs Stockmarket (epic failure) (Score:5, Insightful)
When cryptocurrency was opened to the stock market it became doomed to failure. Before that, the "value" was rising because it was useful. Its only intrinsic value is that value it presents for exchanging goods and services. For people who actually "use" cryptocurrencies, it's value needs to be kept stable, or everyone would refuse to use it, and thus it would have zero value
Enter the stock market, and now the market traders all want to make money by trading the currency itself, a thing with no intrinsic value except for what it can do. If the people who use it all cashed out then the stock market price would be $0. The way the stock market "makes money" (actually move money from one account to another) is to second guess what the other traders will think its value will be tomorrow. Buy low, sell high of course. The stock market will not "make money" unless the price/value is volatile. If the price was consistent over time the traders would have zero interest in it, because they can't trick the other traders into valuing it more tomorrow than today, because the price would be stable. In order to make money in trading cryptocurrency, it is in the traders best interest to force the price to become volatile and then to correctly guess tomorrows value. They will try every trick in the book to force wide swings in the "market value", even emplying illegal tricks if they can find a way to make that happen.
See the problem yet? The traders WANT the price to vary, and the users of it DEMAND the price to be stable! The traders will do everything in their power to make the value fluctuate, while the people trying to use it will be moving their share to some other currancy which is more stable, thus forcing the value to further decline. This is a feedback loop biased towards zero value.
When a stock for a traded company does poorly you can sell off its assets and regain some of that original value. When a cryptocurrency tanks it becomes worthless, and nothing can be sold off or recouped from the electronic dust that remains. Its value then is merely nostalga. It has no value beyond what other people think it will be worth tomorrow. If everyone thinks it has zero value, because nobody can trust that value being stable tomorrow, then the cryptocurrency is 100%, without any doubt, completely worthless. At that point you can thank the stock market for making your cryptocurrency wallet worthless.
If you are going to invest in any cryptocurrency my advise is to pick one that states up front that it will never be openly traded on the stock market. That one may have a chance at actually being stable, and you can count on its only intrinsic value, trust in its worth tomorrow being the same as today.
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Wow really? The value was rising and the start of the big fall happened well before it was traded on the stock market.
Yes, because it was useful in buying and selling services or products. You would always see some market adjustments, because other currencies fluctuate, and the worth of cryptocurrency is balanced against those other currencies. If the US dollar were thought to be more valuable next week, someone with a lot of Bitcoin might cash out and try and ride that wave. That has nothing to do with the stock market. That is just simple money management and putting your holdings where it can beat inflation.
And there is an investigation into price manipulation.
Yes, anyone