Obviously it's bad if people lose their entire life savings and all that dead horse beating disclaimer stuff.
I fancy myself as a somewhat esoteric idea person, and so when I first discovered cryptocurrency a few years ago, I was very excited to explore the mind bending ways we can build __NEW__ things.
Instead, JPEGs and skeuomorphic representations of traditional financial vehicles in web3 space.
I'm hoping this crash and those in the future rid the space of the toxic backrooms these $30,000 jpegs provide access to and get us to collectively work on building really exciting cool new things.
What do you all think?
This came off as pretty bitter. I apologize, but I am bitter, and I'm having a shit couple weeks.
What real math is involved in predicting the stock market? I understand there is a lot of theory behind TRYING to predict it, just as there is a lot of study in trying to predict trends in the stock market, which is why you are better off investing in groups of stocks as opposed to a singled stock (there you go, that's the grand total of what I know about the stock market). But so far as shorting stocks (betting that they'll fall) and buying stocks (betting that they'll rise), there isn't much real math, is there? Isn't it all just a gamble? Not even a statistical gamble, like dice or cards, but a public market analysis with the uncertainty of public trading and public sentiment thrown in, not to mention the hope of government bailouts on occasion?
I don't see a huge amount of difference in crypto except for physical assets, which don't cover the stock price for public companies, generally.
Now, how horribly wrong am I? I'm willing to admit I missed the mark, entirely as I don't understand trading. That's what my broker does.
I have a MSC in Statistics, studied quantitative finance. Generally I'd agree with you. For general investing there's often little math involved other than some simple ratios and comparisons. Three numbers I look at most often are the Price-to-Sales ratio, Gross Profit %, and annual revenue growth. There's no complex math involved here at all.
Where investing does get mathy is in calculating risk. When constructing a portfolio, generally the aim is to maximize returns while minimizing risk below some threshold. There is some very interesting and fun maths involved in this process that is beyond the scope of general investing.
These types of analysis don't necessarily predict anything on their own especially in the short term, though they likely do have value in the long term when you stack up lots of these signals.
The problem with applying math to crypto investing (not trading) is that there's no market, no sales, no cash burn rate, no actual accounting going on to base a longer term thesis on.
Are we really comparing the two markets?
Owning a stock means owning a piece of a business. If you have all the stock in the world, you seized all means of production, good job.
If you own all the UnpossibleJimCoins in the world what exactly has changed? Oh but that coin is not insert another coin, it doesn't have the consensus/cult.
1. Stock market valuation has a fairly tidy theoretical foundation that is not too much use in practice for prediction. (It is used for IPOs etc. in some form, when a market price hasn't been established yet.) It involves basic algebra, along the lines of sum_t=1^infty D/(1+r)^t = D/r, etc.
Fisher Black (of Black-Scholes fame) memorably wrote: "An efficient market is one in which price is within a factor 2 of value", where price = market price, and value = true value, as determined by that tidy formula assuming you had all the correct inputs, which you don't.
2. Similar for FX and Rates, though there is a bit more to it.
3. In derivatives, you have much more sophisticated maths (stochastic processes, Ito calculus, PDEs, Monte Carlo). Its focus is not so much prediction of the future, but a) deducing the true current state of the market from observable prices, and then b) from that true state deduce the price of derivative products, and c) computing risks (partial derivatives), which then lets you d) synthesise these derivative products. But that's not very relevant here.
4. Trying to predict the market is a whole other ballgame. You can work with time series analysis, regression and more sophisticated statistical methods and ML, and use any number of inputs: price history, company fundamentals, macro fundamentals, text/sentiment analysis, order book (market micro structure), etc.
Funny thing about this business is that there's a lot written about it, but those that have figured it out use it to make money, and don't write about it.
5. Now, cryptography involves real maths, but entirely different again, mostly number theory (such as n^p = n (mod p), for p prime).
GP might have been complaining that many vociferous crypto bros lack the basics to understand the mathematical foundations of cryptography. Though, I must say, I think one can understand e.g. hash functions and asymmetric encryption etc. quite well from their functionality alone, without needing to understand the math behind it (just as you don't need to understand transistors to understand what a NAND gate does).
Given the apparently inability of active funds to routinely outperform passive funds[0], "not much" would be my response.
One could be really cynical and reduce it to: some people get lucky, some of the time. That's all.
[0] https://www.ft.com/content/06317e0e-b6bf-4fdc-9255-cf664cb92... ( https://archive.ph/NumMp )
Stocks represent part of real businesses which produce real goods or real services. So they are tangible.
Crypto are just some bits somewhere. They don't represent anything meaningful.
- former "investment advisor" with all those licenses, CFA, etc
Stock market has something called "fundamentals" which gives you insights into the real value of stocks. If a company invests $1bn to develop their business, their value will go up. Major oil producer goes to war? Crude oil futures will go up. 100% every time. It is not rocket science, and no astrology is involved.
It is what people do that turns it into a gambling machine. They try to predict tomorrow's price by looking at chicken entrails and they get cocky and confident during bull runs. This behavior is not restricted to the crypto space.
A lot of the math is automated these days. PE ratios, SMA (simple moving average), etc. etc.
The basis of most stock analysis is price per earnings, or also known as "How much does $1 of profits cost?". Ex: PE of 20 means that it costs $20 to buy $1/year of profits. PE of 100 means it costs $100 to buy $1/year of profits.
Using this as a baseline, you can estimate the future performance of many stocks. You then correct for public sentiment, bailouts, supply changes (are chips getting rarer and/or more expensive?), and try to predict _future_ profits, not just historical profits.
The company with the most profits, at the lowest price, wins in the long run. Buying $100/year worth of profits for just $1000 investment is better than buying $100/year worth of profits for $50,000.
But the "math" is easy. You just take the profits from last year, then divide it by the #shares * $value of the shares. You can also try to be "forward-PE" by predicting next year's profits and dividing it with today's #shares * $value of shares.
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The #shares changes over time. Companies can make new shares or "buyback" shares at any time. That is why when you hear about company "share buybacks", the stock goes up (fewer shares means lower PE, meaning the people who are buying the remaining shares get more $profits per $investment).
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EDIT: Note that under this theory, it doesn't "matter" what the company does with its profits. Profits can go back to the investors through dividends. Or, profits can be spent back on the same company through Capital-Expenditures (ie: building bigger factories or larger systems). "Growth" companies issue no dividends, because they "recycle" all profits into growing. Or the company can buy another company with the profits. Etc. etc.
While "Value" companies tend to return the money as dividends to the share holders.
Shareholders don't really care. If the profits are given to the shareholders, then shareholders can buy up more of the stock (growing their %ownership, and they themselves get more % of the profits next cycle).
If the profits are invested into itself, then shareholder value goes up as appropriate (instead of $1-million worth of factories, next year the company is doing everything with $1.1-million worth of factories and gets 10% higher profits all around).
If another company was bought, same thing, except the factories are separated by different names / locations.
Of course, the "details matter". Some industries are better suited for growth than others. But the fundamental assumption is "control more profits for fewer dollars".
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EDIT2: Anyway, what ends up happening is that the math-part is easy. Its the prediction part that's hard.
For what it's worth, you seem consumed by your envy. Accept that crypto investors, even the most stupid ones, took a risk you didn't take and were rewarded handsomely.
Long story short: That project is long gone. I viewed BTC as an interesting payment method that might have some inherent value as an efficient and anonymous means of transfer, which it's not anymore. I never trusted it and I didn't want to gamble on its fluctuations since the casino was denominated in USD and I was already exposing my savings to literal gambling risk (albeit playing as the house - still scary). So eventually I took to just getting rid of BTC daily, trading out the day's rake, and only buying it to do payouts. Closed the casino in 2013 and never saw any major profit, stakes being as low as they were.
I'm a middle aged working coder with a net worth short of $1m. I've thought a lot about what my life could have been like if I hadn't done ANYTHING except hold that initial 5000 BTC instead of getting out of it. And you know what? I'm not sorry about it. I did what seemed smartest to me at the time: I got rid of what I thought was a bad investment. And by then I knew plenty more about Bitcoin than most of the people who've bought into crypto since. Under the same set of conditions, where that was a meaningful chunk of my savings, I'd do the same again every time.
You're absolutely right that there is nothing healthy about being bitter or angry towards people who strike it rich - even, or perhaps especially, if they do so by pure luck.
Life is a casino. Envy gets you nowhere, and it's not a good look. Show a little class and you might get comped for the show.
[edited for readability]
Narrator: It wasn't
"Hey, look, just take risks, because if you don't, you'll be poor AND bitter."
You shouldn't be, these cryptobros have been orchestrating general scams, rugpulls, hype scams, pump and dumps and all this having an effect on normal people's lives.
Do not be sorry.
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"What good is envy? It’s the one sin you can’t have any fun at." - Charlie Munger
I'd rather listen to someone closer to the bottom, who actually had to sacrifice for that viewpoint, like Jesus or a well adjusted homeless person.
> It's less that I'm glad the market is crashing, and more that I'm glad that the insufferable homeowners are finally getting a punch to the mouth. Seriously, these people are the worst. Your average "home investor" has no skills, no mathematical foundations, nothing. Except for pure stupid luck, and the ability to spew inane economic babble 24/7. And yes, they think they are much smarter than you, because they achieved better financial results than you did while only doing 1/1000 of the work to get there. I truly hate the fact that these people are so rich. It makes me want to move to Alaska and just try to ignore society for the rest of my days.
> This came off as pretty bitter. I apologize, but I am bitter, and I'm having a shit couple weeks.
Not trying to criticize you too much; I'm more reflecting on this text because this is how I catch myself feeling about people who have participated in the inflation in the bay area with respect to homes.
The crypto stuff is just another bubble, sticking to fundamentals will still lead you to (well earned) success. Bubbles come and go, skills and financial acumen are forever.
Never mind that their processes are a bureaucratic hell and it takes 100 of their engineers to implement the same thing which just 1 really good engineer working for a startup could implement in the same amount of time - Look at Whatsapp as an example; before they were acquired, they had hundreds of millions of users and only 55 engineers in total... Facebook has over 10K of them and gets a lot less done...
Talent outside of big tech is not unusual; it is the norm, but most startups which are full of talented engineers don't go on to become Whatsapp because the market doesn't care about technical talent above a certain (rather low) threshold.
Everything is a lottery. Any appearance of meritocracy is an illusion crafted by media and PR firms in an effort to keep the system from falling apart. Only extremely lucky, delusional outliers think that the narratives make sense nowadays.... Through a lot of people who know that the narratives don't make sense still pretend that they do.
what sickens me more is all these companies jumping on the crypto.nft.metaverse bandwagon, like f off seriously.
What do you do when literally everyone you know IRL is into it? Everyones brain has been warped by speculation.
A significant fraction of young single men feel a deep compulsion to indulge in risky behavior with a potential high reward in order to make a name for themselves or earn their place in society. I don't know if it's genetic, cultural, both. But for many young dudes, it's not enough to simply work a good job and enjoy their leisure time.
Men like this are the free radicals of society. If the society can't find a healthy productive outlet for their drive to compete, take risks, and seek fame and adventure, then they will just do outright dangerous shit with potentially large collateral damage.
For most of human society, hunting, exploring, dangerous jobs, and war were significant outlets for this. They gave men a way of doing something courageous that their culture held in high esteem.
But today, we have domesticated animals, explored every square inch of the Earth, automated all of the risky manufacturing and resource-gathering jobs, avoided large-scale war outbreaks (and used technology to reduce military casualties and fatalities). There are simply less paths available for a young man who feels like he has nothing to take pride in unless he succeeds in some bold risky adventurer.
For a while, videogames functioned as a simulated output for that impulse. I think that's why many gamers flipped the fuck out during Gamergate when they felt that their avenue to satisfy that urge was being invadaded and taken from them.
It was, I think, a driver of the rise of the alt-right, doomsday preppers, and Trumpism. This impulse elect a wildcard as President, burn it out down and start over because in a world of chaos, there is maybe an opportunity for the bold.
And now, I believe, much of the crypto world is driven by that exact same impulse. Young, overwhelmingly male, "crypto bros" desperately looking for some unexplored frontier where they can build something new and forge an identity for themselves.
The problem is that there is no there there. It's all a house of cards. No actual new value is being created, so it's just crypto bros competing with other crypto bros in what will likely end up being a zero sum game (except for all the unfortunate other investors who get sucked in).
Even if crypto all collapses, the core problem will remain. These dudes will just find something new to slake their thirst for risk. Hopefully it will be on something less destructive to society.
I feel like social media ups the ante on a lot of borderline or negative human traits because instead of CONNECTING us it's actually pushing us further apart.
It's a tangential thought I know but the fact that there exist people bragging/boasting/ saying LOOK AT ME LOOK AT ME LOOK HOW EASY IT IS - this creates a pretty unhealthy feedback loop and like you said, there's no value there.
I have smaller kids and I fear for their mental well being because of the pressures of the internet and how it's bleeding into reality in weird new ways that aren't exactly healthy.
That's your whole theory, and there's nothing weird about it. Everyone knows young men take risks to make their fortune and gain esteem. It's just window dressing for a claim you threw out there without any supporting argument.
This is a deeply unsatisfying and spiritually empty existence. This leads to all the behaviors you mentioned as a form of rebellion and/or attempt at escaping the bonds of that kind of life. This sentiment has been catalogued in a variety of movies, including "Fight Club," the ur-text of Gen X anomie.
My dislike of bitcoin is mostly due to its enormous energy usage. And the scarcity of GPUs.
I senserely hope your weeks will get better.
> I truly hate the fact that these people are so rich.
Envy is fairly toxic
Amazing that this is the top comment on this thread. HN is so anti-crypto now it's almost comical
> pure stupid luck
I say
> A bigger idiot
I used to be a huge believer. Brian Armstrong gave me my first Bitcoin in 2011 at District in SOMA. Electricity was included in my rent so I bought 10 video cards and mined for about two years on 5 systems. At a company I founded, I use Bitcoin to pay for food and drinks. According to the Barista, I was the first person to ever pay for coffee with Bitcoin at Coupa Cafe (despite having to stand there and wait 10 minutes while the transaction cleared).
But nothing has come of it. All the years of promises and applications, nothing. Ether DApps, sure, but how much of the modern internet runs on those? I also mined StorJ and Monero for years. Apart from a way of making money and storing value, crypto is useless. Processing fees are way too high to even be considered as a replacement for payments not to mention other barriers such as the ability to integrate with antiquated point of sale systems entirely designed around credit/debit and cash.
So I put all of my holdings into a retirement account and don't worry about the price. But I've given up on crypto and everyone who babbles on endlessly like they know something I don't about how it's going to change the world. So even if Crypto loses its value some, I'm glad because the lack of easy, effortless gains will disappear for a lot of those people and most of these short term hucksters will fade away. I'll gladly exchange crypto's price for less crypto bros. My cost basis is around $150 so I have a long ways to go before I care that much.
That's how I feel about the crypto (and to a lesser extent stock) bros. The future is unknowable, and even people who trade these thing professionally make fairly marginal gains (that they make up for in quantity); saying you made millions from bitcoin just says "this guy got really lucky!".
This entire viewpoint made a lot of sense until this final sentence. Your point is that you’re okay the market crashed because your cost basis is 150$ and BTC is still at 28.5k$?
That said, regarding your perspective on crypto's limited utility, I just want to point out there's a crypto few folks have paid attention to which actually addresses your issues head-on: Nano is a feeless and PoW-less crypto which has been around for a few years and was started by one of the early contributors to Bitcoin. Nano is not a "hot coin." It's seen little market speculation and it's not programmable and riding the smart contract wave; it does one thing well: transacting. It's free (as in truly and completely free, fee-less, zero cost), near-instant (<1 second transactions/validations), and green a(~0.1Wh per transaction, or for context about 1/6 millionth of the energy cost of a single Bitcoin transaction). It's also decentralized, without being mined/staked, so it's not controlled according to the interests of miners/whales.
This seems to me the holy grail, so I'm always surprised that discussions of crypto on HN don't mention it or even that that veterans like yourself don't seem to know about it. Maybe it's still too young/obscure? But I think it will see significant interest post-crash as it fulfills the initial promise of crypto—it's money you can by a coffee with, send across borders at zero cost, make micro-micro payments with, etc... you know, like real money, just better.
> Apart from a way of ... storing value
Do you think USD (or some other fiat) is a good medium for storing value? If not, can you see that your latter claim invalidates the former?
Whether or not you need that will depend on where the world goes. A CDBC social-credit system world presents a lot of incentives to use something else.
And if you do need it, you need it ahead of time. Good luck trying to learn and set up networks from scratch when they are considered illegal etc.
The people who hate the intermediaries are the sellers, because they don't like losing a small % of their sale to a payment processor. But sellers do not have the power to change this. They have to accept payment in whatever form customers are willing to provide it in. Customers aren't going to move away from PayPal and credit cards without a good reason, and so far crypto has failed to provide that reason.
In practice you need a bank account to use bitcoin, there's essentially nobody who uses bitcoin that doesn't have a bank account, so the "no intermediaries" thing isn't really meaningful, nobody cares about this.
You're connecting to some nodes, right, to send the transaction? Those are intermediaries. Very very few holders of crypto run their own nodes, these days.
Well, you rely on a bunch of intermediaries, but the profit incentive outweighs the power of any large (but still minority) intermediary blocking specific transactions at will.
Saying that "crypto has not lived up to its potential at all" merely 12 years after Satoshi mined the first bitcoin is laughable if anything. It took 15 years of the internet to have Facebook. It took 27 years (!!) of the internet to have something like TikTok. How can you say that crypto will amount to nothing ?
That's an amazingly ridiculous statement. There's been bulletin boards and chat on the Internet about as long as it has existed. All manner of utility has existed on the Internet since the beginning. Neither Facebook nor TikTok were required for the Internet to be useful.
The best uses for cryptocurrency are speculation and crime. Even the speculation requires some amount of criminality because speculators only get a payout if more rubes "invest".
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The security of your average software developer job is strongly tied to market cycles.
If you want a place to direct your hate and bitterness, I would do it at the architects of the BOOM/BUSTS cycles that keeps happenings and destroys people lives.
Luna went from $100 to 1 cent.
UST was also meant to be a stable coin, it was sold as being equivalent to stacking your money in a savings account, just stable currency that follows the USD value. Lots of people took their money OUT of many coins, and moved it to UST for "stability" thinking that their nest was safe during the storm. (Of course their trust was misplaced as it was not equivalent to keeping your money at the bank, but that's what they were led to believe)
It's equivalent as if banks were bankrupting all over the place in the United States with no bank insurance from the government.
No common measure comparaison with the SP 500 being down for a few months (or even a few years).
The market crash is the inevitable consequence of stopping the pandemic liquidity faucet. We were waiting for this for quite a while now, and with the FED having to rein in two years of crazy, a massive market correction was inevitable. The fundamentals of most companies are still firmly there, so they're mostly underperforming. There'll be casualties, but this was a much needed purge.
Just don't check your 401k balance for the rest of the year.
The general crypto economy and the general stock market have declined similarly in volatility adjusted terms.
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Of course, the fundamentals have been horrible because the economy has been in a bad way for several years (certainly, after March 2020, but it wasn't great before then) but the stock market has been divorced from the actual economy longer than that.
Here's some pretty charts:
Wilshire 5000 / GDP Ratio https://www.longtermtrends.net/market-cap-to-gdp-the-buffett...
Dow / GDP Ratio https://www.macrotrends.net/2574/dow-to-gdp-ratio-chart (Yeah, the Dow is a horrible index, but check out that period from 1966 to 1982. The 1970s were not a happy time, either economically or financially.
The architects of boom/bust cycles are...you. I hope you picked up on the lessons from 2000 and 2008 and saved some of that six-figure average software developer pay.
Should the fed have stepped in to prevent a flash freeze in liquidity in March 2020? Probably. Did they go way way way too far? Maybe. Did they go way way too far in Aug 2020 and Nov 2020 and Dec 2020 and Jan 2021, etc? Definitely.
But a comprehensive theory exists. It won Friedrich Hayek the Nobel Prize in 1974. You should at least be familiar with it.
https://mises.org/library/austrian-theory-business-cycle-7
"Is anyone else <obvious case of pandering to common HN tribal confirmation bias for a dominant position on HN>" -> lots of upvotes and in-group people agreeing with each other.
It's basically just hating on an HN out group.
Good crypto/finance conversations HN on are unfortunately not possible. I just flag posts like this, they're just flame bait.
I've been DCA'ing ETH for a few years now and have somehow managed to both not make it my entire identity, and not constantly complain about the people who do.
The only time I hear about crypto outside of my crypto-specific social spheres is people dunking on crypto and NFT's completely unprompted. We get it, you don't like it, move on.
are they even on hn anymore?
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Also, if you make software developer salary, you should absolutely be hedged against losing your job, having plenty of savings in reserve to last you well over a year.
Not to mention crypto marketcap and volume is a drop in the bucket compared to securities.
“What can you do when the entire economy is based on lies?”
Such an uncomfortable chuckle from the crowd!
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And, what's worse, is that the real grifters and crooks will walk away clean once again. There isn't enough time or justice in this universe to nail them all and that's a crime in itself.
There will always be people trying to scam people, and always people who get scammed. It's hard to feel bad about an inevitability.
I get it if it's someone you personally know - but otherwise - it's just how the world works.
It's like getting sad when a cheetah catches a gazelle.
Cheetahs, generally, are likely to be opposed. As long as there are sufficient prey/resources to go around, there is no intrinsic need for cheetahs to eat cheetahs.
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It’s always the little guys who lose their shirts. The big guys who caused the problems get celebrated.
A peg broke = a stable coin people thought was anchored to USD (ie= a safe place to park your money) suddenly lost 70% of its value overnight.
Luna going from a market cap of close to 100 billion to basically worthless in a few days is like 50 Mt Gox incidents in terms of wealth destruction.
Bitcoin has market cap swings larger than the loss during Mt Gox in minutes these days.
It's a net zero game. Someone sells at 10, someone pays 10. But we still have the 10 in the game, they just moved.
Profits aren't real until you have to pay taxes on them.
Then there's a surreal amount of noise. The hundreds of altcoins, the blockchain buzzword, insane speculation, insane energy use and carbon emissions, drama about losing funds.
So yes, I'd like to cut down the noise so we can focus on the innovations.
try sending money anywhere in the world by going to your bank.
also, everyone pretends that the current financial system is perfect and works just fine until it all of a sudden does not work for them.
are there scams out there? yes. are there a bazillion cryptocurrencies, some of which make 0 sense? yes.
Is crypto as a whole a bad thing? hard no.
People have just lost a sense of proportion that investing timelines are 5-40 years. Investing for "moon gains" in time periods less than that is for suckers, save for maybe people who are building a new business.
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People dont know why “Magic Internet Money” - a stablecoin - is a meta-meme on re-appropriated skepticism of all crypto while being designed decently well, much better than TerraLuna (overcollateralized, compared to "partially collateralized as a last ditch effort that predictably failed"), MIM is holding its benchmark price through this stress test so far.
Same for DAI, which has a similar but older and more convoluted design than MIM, and less native collateral choices.
All while neither of these are perfect. None of these are a model decentralized stablecoin (for those that dont want a central company being able to freeze some funds, but I understand thats a feature for some market participants).
I like that the shakeouts and implosions will cause great discount prices. “Discounts” because many implosions force selling that pushes a price down beyond the rest of the market’s feelings, and when that selling stops (which can be transparently seen), the prices reach back to the level people were willing to pay. A chance I am sometimes willing to take.
Well money isn't leaving the crypto space, its just in other more resilient stablecoins, so its ready to pounce or “ape-in” to anything at a moment’s notice. USDC and Tether have still $130billion collectively issued. Not moving much up or down.
In which case, popular things that sold off are still worth watching. I usually miss the bottom hoping for a steeper sell off.
Look for things that extract value, and accrue it to the token.
A cross-chain flash loan bot that shares with its community of stakers (distinct from and a subset of the token holders) could be fun. I haven't really seen one that shared.
Yield optimizers are still unperfected. Opportunity to compete with a better one there, that also involves the community better.
A decade is too hard for me.
But Helium had some cheap prices and their wireless network is robust enough with all the pieces coming into places for a recurring demand model to kick in.
Node software needs much improvement. But this is slow because there isnt a compensation path at the moment, a couple gitcoin grants have gone out that have resulted in major improvements, more likely that FAANGs will start doing contributions to node software, which will be the compensation path for developers as employment.
Lots of stuff on the private equity side, if you really want longer cycles and possibility of cashing out into a more mature financial market with regulated registered shares. Bear markets are the best time to build because your investors will leave you alone. As an investor you can make more onerous conditions to companies raising.