What do you think of adding a low% of crypto allocation

[maizefolk]

So pretty much every exchange is/was fraudulent? Is that where we're at with this?

I guess I'm not really surprised. But it's infuriating that the original promise of crypto (get rid of the vampire squid credit card companies!) has failed so abjectly.

-W

Reading through Matt Levine's summary of the SEC's lawsuit against coinbase it sounds like the main thing coinbase is being accused of is listing some cyptocurrencies on their exchange that the SEC now argues should count as securities and be regulated like stocks.

End it may be six of one/half a dozen of another I would describe the current situation as "operating (almost) any crypto exchange is now illegal" rather than "every cypto exchange is fraudulent."

Some relevant excerpts below the spoilers tag.

Spoiler: show

There are basically two ways for a crypto exchange to get in trouble with the SEC. The good way is that you get in trouble for running an illegal securities exchange. ... Just being a crypto exchange in the US is, in the SEC’s eyes, illegal. The bad way is that you get in trouble for stealing all the money. ... With Coinbase, I think the answer is obvious. Coinbase is, as crypto exchanges go, quite law-abiding. It is a US public company, incorporated in Delaware, listed on the Nasdaq. It went public in a direct listing in 2021, filing extensive disclosures with the SEC. Its financial statements are audited by Deloitte & Touche. Its business model seems to consist of taking money from customers, using the money to buy crypto, and keeping the crypto somewhere safe with the customers’ names on it. I hesitate to make any bold claims about any crypto actors, and I have been wrong before, but it is my impression that Coinbase does not steal the money.

And in fact the SEC’s complaint against Coinbase is very dry and focused entirely on the fact that Coinbase did not register as a securities exchange. Again, in the SEC’s view, every crypto exchange is violating US securities law. But Coinbase is doing so politely and, relatively speaking, harmlessly. Not totally harmlessly — “Coinbase’s failure to register has deprived investors of significant protections, including inspection by the SEC, recordkeeping requirements, and safeguards against conflicts of interest,” says the SEC — but relatively.

[crimp]

I'm not surprised that the only business models which have proven profitable around crypto are scams.

The VC model seems to work.   A13Z has raised billions for useless crypto projects, which skimming off hundreds of millions in fees. 

On second though, that sounds like a scam too.

The big actors make money on every play. My understanding from friends in the industry (and, frankly, what they’ll admit directly in interviews — I work in an adjacent field) is that the big investor/trading firms make deals to get a 20-40% discount off the ICO price in exchange for helping to market the “product” and making connections to other entities. They can exit enough of the position early to cover their initial bet and then use the knowledge they have about the broader ecosystem to decide whether to stay long or not after they help get the project off the ground. It’s an opportunity to push the risk elsewhere by getting immediate access to exit liquidity in the form of regular investors. This in addition to other profitable arrangements: https://fortune.com/crypto/2023/05/15/jump-trading-billion-propping-up-terra-algorithmic-stablecoin-collapsed/amp/

[seattlecyclone]

I'm not surprised that the only business models which have proven profitable around crypto are scams.

The VC model seems to work.   A13Z has raised billions for useless crypto projects, which skimming off hundreds of millions in fees. 

On second though, that sounds like a scam too. 

Crypto startups aren't finding it as easy to raise capital as they once were. I was at a gathering for angel investors recently that featured a panel discussion about AI, its uses in startups, and how to think about investing in startups that rely on LLM technology. As the emcee introduced the panel he mentioned how AI seems like the hot new thing of the year, comparing it to how every company a year or two ago was going after the "web3! blockchain!" craze. That drew a laugh, as though most of the folks in the room believe now (even if they didn't believe then) that blockchain isn't really a smart thing to bet on. The VCs are certainly taking their cut from the folks who bought into the hype though.

[ChpBstrd]

I'm not surprised that the only business models which have proven profitable around crypto are scams.

The VC model seems to work.   A13Z has raised billions for useless crypto projects, which skimming off hundreds of millions in fees. 

On second though, that sounds like a scam too. 

Crypto startups aren't finding it as easy to raise capital as they once were. I was at a gathering for angel investors recently that featured a panel discussion about AI, its uses in startups, and how to think about investing in startups that rely on LLM technology. As the emcee introduced the panel he mentioned how AI seems like the hot new thing of the year, comparing it to how every company a year or two ago was going after the "web3! blockchain!" craze. That drew a laugh, as though most of the folks in the room believe now (even if they didn't believe then) that blockchain isn't really a smart thing to bet on. The VCs are certainly taking their cut from the folks who bought into the hype though.

There's a definite fad cycle in tech. The best VCs know this and try to exit their stakes somewhere near the top.

Dot-com
Housing, 2002-2008
Oil, 2002-2008
BRICs
FANGs
Clean energy
Augmented reality
Crypto, 2015-2021
Meme stocks
Vegan meats
Metaverse
Housing, 2020-?
AI

Funny how it gets harder and harder to remember investment fads as they fade into history. The fad always starts after a big run up in prices, then the run up continues for a while as media attention grows, and then the growth fades until the fad doesn't perform as well as the indices, and then we rinse and repeat.

There seems to be an alternation between intangible software-like things (dot-com, crypto, metaverse, AI) and hard physical things (oil, housing, vegan meats, electric cars). At any given time there seems to be an intangible fad and a tangible fad to choose from.

It's also funny how the proprietors of the last fad always try to rebrand their products as the new fad. Thus, Apple's augmented reality goggles are being described as an AI appliance because they came out too late for the AR fad. Similarly a lot of crypto businesses tried to tag along with the metaverse fad, selling NFTs of digital real estate and so forth.

It seems the fad cycle is accelerating. Fads that once lasted for years like the dot-com, BRICs, and crypto fads are being replaced by fads that last maybe a year or two, like meme stocks, the metaverse, and vegan meats. This is essentially the musical chairs music playing faster. The speed-up is driven by the habits of retail investors who are consuming ever-greater amounts of financial media and influencing each other in places like Reddit. Investors who lost money hopping on the latter end of previous fads are determined to hear about the new fad early and get out before it starts the inevitable decline. I.e. they are trying to sell at the same time as the VCs.

[MustacheAndaHalf]

ChpBstrd - If housing is a "fad", it's one of the longest running ones.  I seem to recall people liking housing a lot between 2009-2019, when it didn't make your list.  More on topic for this crypto focused thread, you don't make an argument for crypto being a fad, or for that fad being over.

Looking at BTC (+59% YTD) and ETH (+54% YTD) in 2023, the two largest crypto currencies have been recovering in 2023.  How do you reconcile that with calling them a fad that ended in 2021?  Do fads recover?

https://finance.yahoo.com/quote/BTC-USD/
https://finance.yahoo.com/quote/ETH-USD/

[ChpBstrd]

ChpBstrd - If housing is a "fad", it's one of the longest running ones.  I seem to recall people liking housing a lot between 2009-2019, when it didn't make your list.  More on topic for this crypto focused thread, you don't make an argument for crypto being a fad, or for that fad being over.

The Case-Shiller home price index, when displayed as "percent change from year ago", looks like this. The housing bubble periods are apparent in the charts.

Of course, if you were among the cohort of Mustachians or entrepreneurial types between 2009-2019, you probably did have a lot of people in your circle who liked housing a lot. And yes, that was a smart time to invest in hindsight, with very low mortgage rates, high cap rates, and falling unemployment.

Looking at BTC (+59% YTD) and ETH (+54% YTD) in 2023, the two largest crypto currencies have been recovering in 2023.  How do you reconcile that with calling them a fad that ended in 2021?  Do fads recover?

Sure, fad investments can recover. Yahoo.com (formerly YHOO) went from being a $5.40 stock in late 2001 to being a $42 stock in 2006. That doesn't mean the dot-com fad wasn't over, that the media hadn't moved on, or that most people who invested in tech stocks at the height of the mania didn't lose money.
https://www.advfn.com/stock-market/NASDAQ/YHOO/historical/more-historical-data?current=2&Date1=03/10/00&Date2=06/08/02

Also with crypto in particular, the price action does not capture the returns actually experienced by investors, because theft is so common.

[clarkfan1979]

ChpBstrd - If housing is a "fad", it's one of the longest running ones.  I seem to recall people liking housing a lot between 2009-2019, when it didn't make your list.  More on topic for this crypto focused thread, you don't make an argument for crypto being a fad, or for that fad being over.

Looking at BTC (+59% YTD) and ETH (+54% YTD) in 2023, the two largest crypto currencies have been recovering in 2023.  How do you reconcile that with calling them a fad that ended in 2021?  Do fads recover?

https://finance.yahoo.com/quote/BTC-USD/
https://finance.yahoo.com/quote/ETH-USD/

I agree with @ChpBstrd on the overall emotional timeline of fad investments. Is Bitcoin a fad investment? That's probably a subjective question that we can debate for another 5 years. However, does Bitcoin fit the model of a fad investment? Yes it does.

The original post was on September 6, 2021 which can be described as near the top of emotional confidence. If you want proof, just read the hundreds of comments from September to November 2021. According to an amateur google search, bitcoin closed at 52,663.90 on September 6, 2021. Today, Bitcoin is trading at 26,485.20. While Bitcoin might be on a rebound since January 1, 2023, it's down 49.7% since the original post. Can it recover? Maybe. However, at the moment, it's not even close.

I personally do not believe that housing is a fad investment, although I will admit that it did have some emotional exuberance in 2021. Housing is tricky because the numbers are different for different cities and can also vary across different neighborhoods within the same city. At a national level, housing appears to be up by about 5% since September 6, 2021 (411K to 436K). Housing also appears to be down by about 9% (479K to 436K), from the peak (end of 2022). The lower price reflects affordability with higher interest rates, not desirability. People are paying more for housing in 2023 (mortgages & rents), which kind of makes it an all-time high. 

The S & P 500 appears to be down by about 6% since September 6, 2021. Probably only down about 3% after factoring in dividends.

Could you time the market with Bitcoin and make great returns? Definitely. It's currently up 60% since January 1, 2023. Could you time it poorly and be down 75%? Absolutely.   



 


 

[MustacheAndaHalf]

ChpBstrd - If housing is a "fad", it's one of the longest running ones.  I seem to recall people liking housing a lot between 2009-2019, when it didn't make your list.
...

By "longest running" I meant people have liked having a roof over their heads for thousands of years.  I was poking fun at "living in a house" as a fad, but I edited out the hints of sarcasm to make my post (too) short.  People didn't live outdoors from 2009-2019, they liked living in a house.

Search engines are not a fad.  Google provided a better product than Yahoo, and displaced it.  That doesn't make Yahoo a fad.  Social media isn't a fad because MySpace went out of business, nor will Facebook be a fad when TikTok / Roblox / ... displace it.

If the claim is that 2015-2021 was "a fad" for the price of Bitcoin, why is 2022 the ending year?  The crash of 2018 was deeper than the 2022 crash, so why does a slightly smaller crash end a fad, while a deeper crash is in the middle of a fad?  We can go back to pre-history and cite Mt Gox, and make it three crashes.  At which point, do you claim Bitcoin is "three fads" or "a fad"?

[ChpBstrd]

ChpBstrd - If housing is a "fad", it's one of the longest running ones.  I seem to recall people liking housing a lot between 2009-2019, when it didn't make your list.
...

By "longest running" I meant people have liked having a roof over their heads for thousands of years.  I was poking fun at "living in a house" as a fad, but I edited out the hints of sarcasm to make my post (too) short.  People didn't live outdoors from 2009-2019, they liked living in a house.

Search engines are not a fad.  Google provided a better product than Yahoo, and displaced it.  That doesn't make Yahoo a fad.  Social media isn't a fad because MySpace went out of business, nor will Facebook be a fad when TikTok / Roblox / ... displace it.

If the claim is that 2015-2021 was "a fad" for the price of Bitcoin, why is 2022 the ending year?  The crash of 2018 was deeper than the 2022 crash, so why does a slightly smaller crash end a fad, while a deeper crash is in the middle of a fad?  We can go back to pre-history and cite Mt Gox, and make it three crashes.  At which point, do you claim Bitcoin is "three fads" or "a fad"?

I'll define an investment fad as a pricing trend that defies the norms of valuation and attracts a lot of media attention. So the dot-com bubble was a bubble because a lot of stocks with negative earnings were valued far higher than stocks with positive earnings had previously been priced, and the media breathlessly reported stories of dot-com millionaires. Similarly, houses are now being priced at many times higher than local incomes have traditionally supported, and that was also the case in Las Vegas circa 2007 and the media is all over a housing "shortage".

Maybe it's not an on/off thing and more like a matter of degree. People invested in various things have an interest in them becoming the next fad, so there are always people and news stories talking about how exciting a particular investment is (except investments at the low end of the risk spectrum). There are still people excited about past fads and promoting them hoping for a comeback. There are still people hyping every one of the fads that have ever been. E.g. there are people on WallStreetBets still talking about Gamestop.

[MustacheAndaHalf]

I think in a crypto thread, crypto should be the focus rather than various fads that are not on topic.

Here is the dictionary definition of "fad":
"a practice or interest followed for a time with exaggerated zeal"
https://www.merriam-webster.com/dictionary/fad

Claiming "Crypto, 2015-2021" was a fad requires those dates be "a time with exaggerated zeal".  From Wikipedia :

"2013 boom and 2014–15 crash"
"2017 boom and 2018 crash"
https://en.wikipedia.org/wiki/Cryptocurrency_bubble

2015 was the tail end of the "2014-2015 crash", and a crash doesn't make for "excessive zeal", which is the definition of a fad according to Meriam-Webster.  For the same reason, "2018 crash" should not be in the middle of the "2015-2021" date range because a crypto crash is not a fad.

[waltworks]

Jesus, crypto peeps are the *definition* of excessive zeal...

-W

[Telecaster]

ChpBstrd - If housing is a "fad", it's one of the longest running ones.  I seem to recall people liking housing a lot between 2009-2019, when it didn't make your list.  More on topic for this crypto focused thread, you don't make an argument for crypto being a fad, or for that fad being over.

The context was VC funding for crypto/blockchain, which is way, way down:

Just eight venture capital funds focused on crypto had raised a combined $500 million globally as of May 16, according to a report from Fortune citing PitchBook data. That adds up to only 2.3% of the total value raised in 2022, and marks a 90% drop in the number of funds to receive financial backing.

https://qz.com/venture-capital-funding-crypto-firms-plunge-in-2023-1850506521

I'm certain the fad for blockchain/crpto in the VC world is over.  And it is clear why.   The thing that hasn't arisen out of all the blockchain hype is use cases.

[MustacheAndaHalf]

The original post was on September 6, 2021 which can be described as near the top of emotional confidence. If you want proof, just read the hundreds of comments from September to November 2021. According to an amateur google search, bitcoin closed at 52,663.90 on September 6, 2021. Today, Bitcoin is trading at 26,485.20. While Bitcoin might be on a rebound since January 1, 2023, it's down 49.7% since the original post. Can it recover? Maybe. However, at the moment, it's not even close.

I think you're underestimating the volatility of Bitcoin's price when you say the recovery is "not even close".  I count a number of calendar years when it at least doubled.

Bitcoin's peak year was 2017, when opened on Jan 1 at $963.66 and closed on Dec 31 at a price of $14,156.40, a total gain of +1369%.  Does the highest percentage gain represent the emotional peak?  I think that could be a fair way to measure it.

Could you time the market with Bitcoin and make great returns? Definitely. It's currently up 60% since January 1, 2023. Could you time it poorly and be down 75%? Absolutely.

That's my view as well, on both counts.  But what I've seen is that most people will not hold both of those thoughts at the same time.

[Stimpy]

The original post was on September 6, 2021 which can be described as near the top of emotional confidence. If you want proof, just read the hundreds of comments from September to November 2021. According to an amateur google search, bitcoin closed at 52,663.90 on September 6, 2021. Today, Bitcoin is trading at 26,485.20. While Bitcoin might be on a rebound since January 1, 2023, it's down 49.7% since the original post. Can it recover? Maybe. However, at the moment, it's not even close.

I think you're underestimating the volatility of Bitcoin's price when you say the recovery is "not even close".  I count a number of calendar years when it at least doubled.

Bitcoin's peak year was 2017, when opened on Jan 1 at $963.66 and closed on Dec 31 at a price of $14,156.40, a total gain of +1369%.  Does the highest percentage gain represent the emotional peak?  I think that could be a fair way to measure it.

Could you time the market with Bitcoin and make great returns? Definitely. It's currently up 60% since January 1, 2023. Could you time it poorly and be down 75%? Absolutely.

That's my view as well, on both counts.  But what I've seen is that most people will not hold both of those thoughts at the same time.

To be fair, your correct, per my extremely rough count it at least doubled 7 times from July of 2010, went negative 4 times and roughly no where twice.  (Including this year at a no where... at least to date.)   I am assuming if it didn't at least double it went no where for the sake of this data.   So that is just above a 50% chance of doubling your money on any given year.... Not terrible odds.

I will post my rough data below and it was obtained from: https://coinmarketcap.com/currencies/bitcoin/

Mon-Year	Price	D-N-NW
Jul-2010	.07	-
Jul-2011	14.11	d
Jul-2012	7	neg
Jul-2013	90	d
Jul-2014	625	d
Jul-2015	292	neg
Jul-2016	624	d
Jul-2017	2560	d
Jul-2018	7400	d
Jul-2019	10100	nw
Jul-2020	9900	neg
Jul-2021	33100	d
Jul-2022	21030	neg
Jun-2023	25900	nw

And as far as up... from .06 to ~25k is quite a ways up over the ~13 years of data.  (You could argue from 0.00 but lets stick to the graph for ease). 

Will it double again!   Maybe, but I have a feeling the boom is over.  Does that mean it won't go up?  No.  Does it mean it's going to the other moon?  (Zero if your unfamiliar.) No. 

Personally I think if your putting your money in BTC your probably going to lose.  BUT I will admit, the possibility to go up is there.  AND I expect as do some crypto bros (at least the ones that are a little more rational...) that if it sticks around it's probably going to normalize.   What does that look like?  Don't know, but it's probably not going to go to the moon ever again.  Especially with the SEC's current push.... 

Only time will tell.

[ChpBstrd]

I'm resurrecting this very tired thread to point out that we are no longer hearing very much about crypto in the media. At least I'm not. And we're not even talking about it on this thread anymore. It's like a fad that has suddenly passed.

One would think low media coverage would correspond with a period of disappointing returns, but GBTC's year to date performance has been 142% and ETHE has returned 138%! Plus, you have the juicy trials of SBF and the spectacle of Coinbase/Binance fending off investigations while insisting everything is fine. You'd think the media would be all over it.

Thoughts:

1) These contradictory pieces of information - less interest and rising prices - contradict any narrative that bitcoin is a media-driven fad, and suggest a disconnect between crypto prices and media coverage. Price influences may only include artificial manipulation (e.g. self-selling to boost prices) and criminal demand.

2) The demise of Silvergate and Silicon Valley Bank, on the heels of the FTX collapse, seems not to have meaningfully dented the rise of bitcoin prices. Of course, it's debatable whether any of these prices are real or manipulated, but they are what they are. But basically we can see the prices are not dependent upon linkages to financial institutions. Such institutions just got dynamited and crypto rose despite it.

3) For people hunkering down in treasuries and CDs amid relentless rate hikes and recession expectations, maybe these "assets" now represent a leveraged call option on a soft landing or risk appetites returning. Because of the correlation to stock returns, a small long investment in GBTC or ETHE could offset the risk that a new bull market leaves the bears in the dust.

4) I recently watched a video where it was explained that Twitter advertisers could pay 10x more to advertise in a way that prevents their ads from appearing next to objectionable content. Almost all blue-chip brands prefer to pay the higher price. Crypto content is so scammy that few corporate advertisers will touch it. So scammy advertisers are the only ones placing highly discounted ads next to crypto content. This observation may reflect a drying-up of the ad ecosystem for crypto promoters. If the ad money has dried up, and if the platforms are prioritizing content that can attract reputationally-aware advertisers willing to pay top dollar, then maybe the crypto pumpers are off to the next thing. As the overall crypto noise on social media has declined, the corporate media noise has declined too, because they mostly report what people are talking about on social media. Also, every media company is trying to avoid becoming the ghetto of advertising, where sketchy content targeting broke idiots is accompanied by sketchy ads sold at a loss. This is the explanation for why Twitter lost half its ad revenue; Musk's free-speech absolutism turned it into a swampland where corporate reputations fear to tread - i.e. another 4-chan. As other media companies learned from Twitter's mistake, they cut or demoted their own crypto content. So maybe the crypto bros are very excited but they can no longer get their posts and videos in front of a large audience.

[LateStarter]

I'm resurrecting this very tired thread to point out that we are no longer hearing very much about crypto in the media. At least I'm not. And we're not even talking about it on this thread anymore. It's like a fad that has suddenly passed.

One would think low media coverage would correspond with a period of disappointing returns, but GBTC's year to date performance has been 142% and ETHE has returned 138%! Plus, you have the juicy trials of SBF and the spectacle of Coinbase/Binance fending off investigations while insisting everything is fine. You'd think the media would be all over it.

Thoughts:

1) These contradictory pieces of information - less interest and rising prices - contradict any narrative that bitcoin is a media-driven fad, and suggest a disconnect between crypto prices and media coverage. Price influences may only include artificial manipulation (e.g. self-selling to boost prices) and criminal demand.

Meme-coins (and meme-stocks) require and feed off and encourage media coverage by definition. And again, pretty much by definition, they generate most of the media noise AND tend to be fads. It is blissfully quiet at the moment but, regrettably, it will probably all kick off again in time.

Meanwhile, Bitcoin quietly carries on doing its thing - building its base, hashrate steadily climbing, applications developing, etc.

2) The demise of Silvergate and Silicon Valley Bank, on the heels of the FTX collapse, seems not to have meaningfully dented the rise of bitcoin prices. Of course, it's debatable whether any of these prices are real or manipulated, but they are what they are. But basically we can see the prices are not dependent upon linkages to financial institutions. Such institutions just got dynamited and crypto rose despite it.

Bitcoin was never dependent on these institutions, and their failures highlighted some of the foundational elements of Bitcoin, ie. self-custody, no requirement for trust, etc. The failures of these institutions were shrugged off - as expected.

3) For people hunkering down in treasuries and CDs amid relentless rate hikes and recession expectations, maybe these "assets" now represent a leveraged call option on a soft landing or risk appetites returning. Because of the correlation to stock returns, a small long investment in GBTC or ETHE could offset the risk that a new bull market leaves the bears in the dust.

Maybe. Bitcoin is certainly in its speculative growth stage and (imo) will be for a long time yet. With regard to Bitcoin, we're right back at the topic title - maybe a low% Bitcoin allocation is a good plan.

4) I recently watched a video where it was explained that Twitter advertisers could pay 10x more to advertise in a way that prevents their ads from appearing next to objectionable content. Almost all blue-chip brands prefer to pay the higher price. Crypto content is so scammy that few corporate advertisers will touch it. So scammy advertisers are the only ones placing highly discounted ads next to crypto content. This observation may reflect a drying-up of the ad ecosystem for crypto promoters. If the ad money has dried up, and if the platforms are prioritizing content that can attract reputationally-aware advertisers willing to pay top dollar, then maybe the crypto pumpers are off to the next thing. As the overall crypto noise on social media has declined, the corporate media noise has declined too, because they mostly report what people are talking about on social media. Also, every media company is trying to avoid becoming the ghetto of advertising, where sketchy content targeting broke idiots is accompanied by sketchy ads sold at a loss. This is the explanation for why Twitter lost half its ad revenue; Musk's free-speech absolutism turned it into a swampland where corporate reputations fear to tread - i.e. another 4-chan. As other media companies learned from Twitter's mistake, they cut or demoted their own crypto content. So maybe the crypto bros are very excited but they can no longer get their posts and videos in front of a large audience.

I hope you're right. I'm as opposed to scammy meme pumping BS as you are.


My main comment on this post is that I think it's a naive mistake to discuss Bitcoin and broader "crypto" in the same breath as if they were all the same thing. The gulf between Bitcoin and ShibaInu/monkeyJpegs (and those that respectively enthuse about them) is as big as that between Index Funds and GME/AMC meme stocks (and those that respectively enthuse about them).

[clarkfan1979]

I'm resurrecting this very tired thread to point out that we are no longer hearing very much about crypto in the media. At least I'm not. And we're not even talking about it on this thread anymore. It's like a fad that has suddenly passed.

One would think low media coverage would correspond with a period of disappointing returns, but GBTC's year to date performance has been 142% and ETHE has returned 138%! Plus, you have the juicy trials of SBF and the spectacle of Coinbase/Binance fending off investigations while insisting everything is fine. You'd think the media would be all over it.

Thoughts:

1) These contradictory pieces of information - less interest and rising prices - contradict any narrative that bitcoin is a media-driven fad, and suggest a disconnect between crypto prices and media coverage. Price influences may only include artificial manipulation (e.g. self-selling to boost prices) and criminal demand.

2) The demise of Silvergate and Silicon Valley Bank, on the heels of the FTX collapse, seems not to have meaningfully dented the rise of bitcoin prices. Of course, it's debatable whether any of these prices are real or manipulated, but they are what they are. But basically we can see the prices are not dependent upon linkages to financial institutions. Such institutions just got dynamited and crypto rose despite it.

3) For people hunkering down in treasuries and CDs amid relentless rate hikes and recession expectations, maybe these "assets" now represent a leveraged call option on a soft landing or risk appetites returning. Because of the correlation to stock returns, a small long investment in GBTC or ETHE could offset the risk that a new bull market leaves the bears in the dust.

4) I recently watched a video where it was explained that Twitter advertisers could pay 10x more to advertise in a way that prevents their ads from appearing next to objectionable content. Almost all blue-chip brands prefer to pay the higher price. Crypto content is so scammy that few corporate advertisers will touch it. So scammy advertisers are the only ones placing highly discounted ads next to crypto content. This observation may reflect a drying-up of the ad ecosystem for crypto promoters. If the ad money has dried up, and if the platforms are prioritizing content that can attract reputationally-aware advertisers willing to pay top dollar, then maybe the crypto pumpers are off to the next thing. As the overall crypto noise on social media has declined, the corporate media noise has declined too, because they mostly report what people are talking about on social media. Also, every media company is trying to avoid becoming the ghetto of advertising, where sketchy content targeting broke idiots is accompanied by sketchy ads sold at a loss. This is the explanation for why Twitter lost half its ad revenue; Musk's free-speech absolutism turned it into a swampland where corporate reputations fear to tread - i.e. another 4-chan. As other media companies learned from Twitter's mistake, they cut or demoted their own crypto content. So maybe the crypto bros are very excited but they can no longer get their posts and videos in front of a large audience.

Interesting post on how the media influences crypto. My personal opinion is that the media amplifies the true effect. If crypto is on a run, the media can amplify it. If crypto is falling, the media can amplify a fall as well. I think the FTX media coverage amplified the fall of crypto and now the prices are regressing back toward their true mean.

Media can also influence stock prices. However, people can use balance sheets from companies as an anchor. With crypto there is no balance sheet to use as an anchor. It's 100% speculation. As a result, I think the media influences crypto prices more than stock prices.

[MustacheAndaHalf]

I have added an extremely low allocation - a negative one.  I hold $0 in crypto currencies, and today shorted a company that depends on crypto to stay in business.  My theory is that falling markets will take crypto down with it.  That's what happened in 2022 and in March 2020.  Market drops seem to take crypto along for the ride, so I view that as the strongest influence on crypto prices.

Personally I still view Ethereum as more interesting than Bitcoin.  Both are unproven technologies where fans say give it time, and detractors say that time is up.

[Telecaster]

Bitcoin was never dependent on these institutions, and their failures highlighted some of the foundational elements of Bitcoin, ie. self-custody, no requirement for trust, etc. The failures of these institutions were shrugged off - as expected.

Their existence also highlighted the failures of some of the foundational elements of Bitcoin.   Try this as an experiment:   Go to Bitcoin Beach or someplace where Bitcoin is widely understood, and try to make a peer-to-peer Bitcoin transaction for a cup of coffee and a sandwich.   You can't do it.  You have to use a third-party app.   I just checked and the Bitcoin Conference in Amsterdam accepts deposits in Bitcoin--also only using a third party app.   So even Bitcoin maxis don't accept peer-to-peer Bitcoin transactions.   So if you want to use Bitcoin was money, it is extremely difficult to do so without a third party, which also means you can't self-custody all of your Bitcoin.   And while self-custody isn't hard, it isn't particularly easy either and there are some clear downsides.   That along with the transaction problem is why the third party exchanges exist in the first place (or existed in some cases).  To put it another way, if Bitcoin worked well in the first place there would be no need for exchanges. 

There is a narrative that Bitcoin is gradually expanding and as it expands there will be more and more demand,  driving the price inevitably upwards.   But I'm not sure if that is happening (the increasing demand).   It seems like around 2015 a number of companies jumped on the bandwagon and started accepting Bitcoin (through apps).    I can't say for sure, but it seems like that number is declining.   Companies like Expedia, Steam, and Wikipedia all eventually stopped accepting crypto.    I don't see much energy for acceptance anymore.  Could be wrong, but I'm not seeing it. 

[Scandium]

4) I recently watched a video where it was explained that Twitter advertisers could pay 10x more to advertise in a way that prevents their ads from appearing next to objectionable content. Almost all blue-chip brands prefer to pay the higher price. Crypto content is so scammy that few corporate advertisers will touch it. So scammy advertisers are the only ones placing highly discounted ads next to crypto content. This observation may reflect a drying-up of the ad ecosystem for crypto promoters. If the ad money has dried up, and if the platforms are prioritizing content that can attract reputationally-aware advertisers willing to pay top dollar, then maybe the crypto pumpers are off to the next thing. As the overall crypto noise on social media has declined, the corporate media noise has declined too, because they mostly report what people are talking about on social media. Also, every media company is trying to avoid becoming the ghetto of advertising, where sketchy content targeting broke idiots is accompanied by sketchy ads sold at a loss. This is the explanation for why Twitter lost half its ad revenue; Musk's free-speech absolutism turned it into a swampland where corporate reputations fear to tread - i.e. another 4-chan. As other media companies learned from Twitter's mistake, they cut or demoted their own crypto content. So maybe the crypto bros are very excited but they can no longer get their posts and videos in front of a large audience.

At least from watching coffezilla's investigations, it's my sense that most crypto/NFT pumping occurs via paying influencers to promote it, usually undisclosed. It don't think standard sidebar ads are that influential in comparison. Some instagrammer gets $100,000, or a few cents per impression in twitter ads..?

[ChpBstrd]

4) I recently watched a video where it was explained that Twitter advertisers could pay 10x more to advertise in a way that prevents their ads from appearing next to objectionable content. Almost all blue-chip brands prefer to pay the higher price. Crypto content is so scammy that few corporate advertisers will touch it. So scammy advertisers are the only ones placing highly discounted ads next to crypto content. This observation may reflect a drying-up of the ad ecosystem for crypto promoters. If the ad money has dried up, and if the platforms are prioritizing content that can attract reputationally-aware advertisers willing to pay top dollar, then maybe the crypto pumpers are off to the next thing. As the overall crypto noise on social media has declined, the corporate media noise has declined too, because they mostly report what people are talking about on social media. Also, every media company is trying to avoid becoming the ghetto of advertising, where sketchy content targeting broke idiots is accompanied by sketchy ads sold at a loss. This is the explanation for why Twitter lost half its ad revenue; Musk's free-speech absolutism turned it into a swampland where corporate reputations fear to tread - i.e. another 4-chan. As other media companies learned from Twitter's mistake, they cut or demoted their own crypto content. So maybe the crypto bros are very excited but they can no longer get their posts and videos in front of a large audience.

At least from watching coffezilla's investigations, it's my sense that most crypto/NFT pumping occurs via paying influencers to promote it, usually undisclosed. It don't think standard sidebar ads are that influential in comparison. Some instagrammer gets $100,000, or a few cents per impression in twitter ads..?

But who would pay the influencers? Someone would have to corner the market for a crypto asset for them to escape a game theory outcome where it is more profitable not to cooperate with the other crypto owners, and to instead rely on those others to pay the costs of pumping the asset.

E.g. if I own 40% of Poopcoin, and you own 40%, which of us is responsible for paying the $100k to pump it? We could certainly collude and find ways to verify each others' cooperation, but notice how 20% of any effect will be enjoyed by freeloaders. Once ownership is more spread out it would become impossible for the incentives to stay aligned.

I think it's far more likely the influencers are selling their own ads and product placements, or at least building audiences so they can do so in the future. Some of these advertisers will be crypto-adjacent for-profit services, but overall it doesn't make sense to pump an asset that is widely owned and expect to personally profit. It would be like me going on YouTube to talk about how great Pfizer stock is and expecting my commentary to boost the price of a $205B corporation owned by millions of people.

[Scandium]

4) I recently watched a video where it was explained that Twitter advertisers could pay 10x more to advertise in a way that prevents their ads from appearing next to objectionable content. Almost all blue-chip brands prefer to pay the higher price. Crypto content is so scammy that few corporate advertisers will touch it. So scammy advertisers are the only ones placing highly discounted ads next to crypto content. This observation may reflect a drying-up of the ad ecosystem for crypto promoters. If the ad money has dried up, and if the platforms are prioritizing content that can attract reputationally-aware advertisers willing to pay top dollar, then maybe the crypto pumpers are off to the next thing. As the overall crypto noise on social media has declined, the corporate media noise has declined too, because they mostly report what people are talking about on social media. Also, every media company is trying to avoid becoming the ghetto of advertising, where sketchy content targeting broke idiots is accompanied by sketchy ads sold at a loss. This is the explanation for why Twitter lost half its ad revenue; Musk's free-speech absolutism turned it into a swampland where corporate reputations fear to tread - i.e. another 4-chan. As other media companies learned from Twitter's mistake, they cut or demoted their own crypto content. So maybe the crypto bros are very excited but they can no longer get their posts and videos in front of a large audience.

At least from watching coffezilla's investigations, it's my sense that most crypto/NFT pumping occurs via paying influencers to promote it, usually undisclosed. It don't think standard sidebar ads are that influential in comparison. Some instagrammer gets $100,000, or a few cents per impression in twitter ads..?

But who would pay the influencers? Someone would have to corner the market for a crypto asset for them to escape a game theory outcome where it is more profitable not to cooperate with the other crypto owners, and to instead rely on those others to pay the costs of pumping the asset.

E.g. if I own 40% of Poopcoin, and you own 40%, which of us is responsible for paying the $100k to pump it? We could certainly collude and find ways to verify each others' cooperation, but notice how 20% of any effect will be enjoyed by freeloaders. Once ownership is more spread out it would become impossible for the incentives to stay aligned.

I think it's far more likely the influencers are selling their own ads and product placements, or at least building audiences so they can do so in the future. Some of these advertisers will be crypto-adjacent for-profit services, but overall it doesn't make sense to pump an asset that is widely owned and expect to personally profit. It would be like me going on YouTube to talk about how great Pfizer stock is and expecting my commentary to boost the price of a $205B corporation owned by millions of people.

nono, that's not how they do it. Check out some of Coffee's videos if you haven't. A gang of "bros", sometimes already influential people with an audience, get together and plan a new crypto/nft project. For example the Logan Paul thing. They "pre-sell" (i.e. split up) coins to their buddies, pay influencers to promote the "launch". Then they sell it to the public, and dump their shares when the price rises (well, rises from zero). The people paying the promoters already own the majority, and all agree to pay to pump the price, so they can offload it. You're right, they won't pay to "pump the stock" after it's selling on the general market.

[ChpBstrd]

4) I recently watched a video where it was explained that Twitter advertisers could pay 10x more to advertise in a way that prevents their ads from appearing next to objectionable content. Almost all blue-chip brands prefer to pay the higher price. Crypto content is so scammy that few corporate advertisers will touch it. So scammy advertisers are the only ones placing highly discounted ads next to crypto content. This observation may reflect a drying-up of the ad ecosystem for crypto promoters. If the ad money has dried up, and if the platforms are prioritizing content that can attract reputationally-aware advertisers willing to pay top dollar, then maybe the crypto pumpers are off to the next thing. As the overall crypto noise on social media has declined, the corporate media noise has declined too, because they mostly report what people are talking about on social media. Also, every media company is trying to avoid becoming the ghetto of advertising, where sketchy content targeting broke idiots is accompanied by sketchy ads sold at a loss. This is the explanation for why Twitter lost half its ad revenue; Musk's free-speech absolutism turned it into a swampland where corporate reputations fear to tread - i.e. another 4-chan. As other media companies learned from Twitter's mistake, they cut or demoted their own crypto content. So maybe the crypto bros are very excited but they can no longer get their posts and videos in front of a large audience.

At least from watching coffezilla's investigations, it's my sense that most crypto/NFT pumping occurs via paying influencers to promote it, usually undisclosed. It don't think standard sidebar ads are that influential in comparison. Some instagrammer gets $100,000, or a few cents per impression in twitter ads..?

But who would pay the influencers? Someone would have to corner the market for a crypto asset for them to escape a game theory outcome where it is more profitable not to cooperate with the other crypto owners, and to instead rely on those others to pay the costs of pumping the asset.

E.g. if I own 40% of Poopcoin, and you own 40%, which of us is responsible for paying the $100k to pump it? We could certainly collude and find ways to verify each others' cooperation, but notice how 20% of any effect will be enjoyed by freeloaders. Once ownership is more spread out it would become impossible for the incentives to stay aligned.

I think it's far more likely the influencers are selling their own ads and product placements, or at least building audiences so they can do so in the future. Some of these advertisers will be crypto-adjacent for-profit services, but overall it doesn't make sense to pump an asset that is widely owned and expect to personally profit. It would be like me going on YouTube to talk about how great Pfizer stock is and expecting my commentary to boost the price of a $205B corporation owned by millions of people.

nono, that's not how they do it. Check out some of Coffee's videos if you haven't. A gang of "bros", sometimes already influential people with an audience, get together and plan a new crypto/nft project. For example the Logan Paul thing. They "pre-sell" (i.e. split up) coins to their buddies, pay influencers to promote the "launch". Then they sell it to the public, and dump their shares when the price rises (well, rises from zero). The people paying the promoters already own the majority, and all agree to pay to pump the price, so they can offload it. You're right, they won't pay to "pump the stock" after it's selling on the general market.

I see what you're saying, and yes that makes sense. I think crypto assets start this way, but we can't easily apply this explanation to anything after the rug-pull has been completed.

Maybe it's possible for influencers to launch coordinated pumps of already-distributed assets, sort of like the old pump and dump strategies with microcap stocks. You'd need thin trading volumes and cheap ways to distribute information. The influencers have the latter, just like the email/fax pump and dumpers, so what about the former? Bitcoin may seem like a liquid market, but Forbes' 2022 estimate about over half of transactions being fake may have been an understatement. The P&Ders can't coordinate their wash sales, because that would lead to a prisoner's dilemma where everyone would try to front-run everyone else to the exit. However they probably can affect flows of new money into the system - at least when the media companies aren't blocking them.     

[Glenstache]

Sooo.... what we're saying is that crypto is largely speculative and subject to manipulation due to the lack of regulation?

[ChpBstrd]

Sooo.... what we're saying is that crypto is largely speculative and subject to manipulation due to the lack of regulation?

Of course.

The issue is we can't explain the ups and downs of an already-distributed asset with a rug-pull explanation. After the rug pull, the asset would plummet to nearly no value*. And now it seems crypto can rise without media / social media attention, so there goes another possible explanation.

We need an explanation that fits the observed data and also allows for the wash-sellers and pump-and-dumpers to make at least a semi-consistent profit that keeps them in business. E.g. the social media influencers can earn cash through advertisements without ever taking on the risk of owning crypto assets or requiring inflows of new money into crypto assets. They can fake their data about being exposed to crypto assets too. In contrast, the pump-and-dumpers and wash sellers are in constant competition with one another and exposed to the risk of crypto-assets, so to stay in business they need to corner the market, attract new fiat currency by manipulating crypto price movements, and sell at the right time.

To some extent, people would be attracted to work and take risks in the crypto economy even if it was a zero net sum game (which it is). Online sports gambling, poker, and options/futures speculation are zero net sum games of chance, and people are flocking to them for the entertainment value. Lotteries actually have a negative net sum for players, and yet Americans spend billions on tickets. The game of being a crypto asset manipulator has perhaps become something similar, since laws against fraud are not being consistently enforced against such people. 

*The rug-pull explanation is actually all the explanation needed for many obscure penny cryptos and NFTs dumped on the market in recent years and abandoned by virtually everyone.

[Scandium]

Sooo.... what we're saying is that crypto is largely speculative and subject to manipulation due to the lack of regulation?

[MustacheAndaHalf]

Sooo.... what we're saying is that crypto is largely speculative and subject to manipulation due to the lack of regulation?

Of course.

I'd say "largely speculative" is a good description of your conversation.  Why do you two think $1.8 million taken by Logan Paul defines "crypto"?

Is the stock market is a scam because penny stocks can be pumped and dumped?  That's what you're doing here, with crypto.  Stick with Bitcoin (market cap $500 billion) and Ethereum ($200 billion) and you won't see these influencer pump and dump scams.

[Telecaster]

Saw an interesting article about Bitcoin miners the other day:   

Data retrieved by Finbold from CompaniesMarketCap shows that the 16 publicly traded Bitcoin mining companies have accumulated over $4.47 billion in losses in the past 12 consecutive months (TTM)....

...The average mining cost is calculated by Cambridge University and plotted in a chart by MacroMicro. On August 27, it registered an average cost of $45,877 per mined BTC, against a spot price of $26,089 on the same day — accounting for a loss of $19,588 per unit of the leading cryptocurrency produced coins.

https://finbold.com/16-bitcoin-mining-companies-have-4-47-billion-in-losses-in-a-year/

If you look at the full MacroMini chart, it looks like Bitcoin mining has been mostly unprofitable the whole data series.

https://en.macromicro.me/charts/29435/bitcoin-production-total-cost

[LateStarter]

. . .

If you look at the full MacroMini chart, it looks like Bitcoin mining has been mostly unprofitable the whole data series.

https://en.macromicro.me/charts/29435/bitcoin-production-total-cost

You think ? I'm not seeing that at all.

If I look at that full MacroMini chart, it looks like Bitcoin mining has probably been profitable over any period > 2yrs.
It looks like most days were unprofitable, but many of the good days were very good days.*

* purely according to that chart - taking it at face value

[MustacheAndaHalf]

Cambridge University is the source of the data used in that article.

The Cambridge Bitcoin Electricity Consumption Index (CBECI) provides an up-to-date estimate of the Bitcoin network’s daily electricity load. The underlying techno-economic model is based on a bottom-up approach initially developed by Marc Bevand  in 2017 that uses the profitability threshold of different types of mining equipment as the starting point.

Given that the exact electricity consumption cannot be determined, the CBECI provides a hypothetical range consisting of a hypothetical lower bound  (floor) and a hypothetical  upper bound  (ceiling) estimate. Within the boundaries of this range, a  best-guess  estimate is calculated to provide a more realistic figure that approximates Bitcoin’s real electricity consumption.

https://ccaf.io/cbnsi/cbeci/methodology

The article states "accounting for a loss of $19,588 per unit", as though this is an accounting exercise that gives precision down to the last dollar.  But the source of their data uses words like "estimate" and "cannot be determined" for electricity costs.  Where did a "best-guess estimate" become something with certainty down to the last dollar?

[Telecaster]

You think ? I'm not seeing that at all.

If I look at that full MacroMini chart, it looks like Bitcoin mining has probably been profitable over any period > 2yrs.
It looks like most days were unprofitable, but many of the good days were very good days.*

* purely according to that chart - taking it at face value

I agree that for periods when it is profitable it appears to be very profitable.  So it could well be that more money has been made than lost.  It isn't consistently profitable, for sure. 

Cambridge University is the source of the data used in that article.

The article states "accounting for a loss of $19,588 per unit", as though this is an accounting exercise that gives precision down to the last dollar.  But the source of their data uses words like "estimate" and "cannot be determined" for electricity costs.  Where did a "best-guess estimate" become something with certainty down to the last dollar?

Yes, it seems that it would be better expressed as a range.  Still, based on what we know from publicly traded miners, it has been an awfully tough year.  I would expect to see further consolidation (in deed, that seems inevitable), especially as the next halving occurs sometime next spring.

[LateStarter]

Cambridge University is the source of the data used in that article.

The Cambridge Bitcoin Electricity Consumption Index (CBECI) provides an up-to-date estimate of the Bitcoin network’s daily electricity load. The underlying techno-economic model is based on a bottom-up approach initially developed by Marc Bevand  in 2017 that uses the profitability threshold of different types of mining equipment as the starting point.

Given that the exact electricity consumption cannot be determined, the CBECI provides a hypothetical range consisting of a hypothetical lower bound  (floor) and a hypothetical  upper bound  (ceiling) estimate. Within the boundaries of this range, a  best-guess  estimate is calculated to provide a more realistic figure that approximates Bitcoin’s real electricity consumption.

https://ccaf.io/cbnsi/cbeci/methodology

The article states "accounting for a loss of $19,588 per unit", as though this is an accounting exercise that gives precision down to the last dollar.  But the source of their data uses words like "estimate" and "cannot be determined" for electricity costs.  Where did a "best-guess estimate" become something with certainty down to the last dollar?

Also note that the "loss of $19,588 per unit" concerns the estimated activity from one single day - taken from a chart that clearly shows significant day-to-day volatility, particularly in recent weeks.

If we generously assume that the only reason they selected the 27th August was because it was the most recent day, a re-print/update published right now would read as follows:

"The average mining cost is calculated by Cambridge University and plotted in a chart by MacroMicro. On August 27 29, it registered an average cost of $45,877 $26,699 per mined BTC, against a spot price of $26,089 $27,727 on the same day — accounting for a loss profit of $19,588 $1,028 per unit of the leading cryptocurrency produced coins."

A completely different story   (and just as statistically meaningless and pointless as the original . . . ).

[MustacheAndaHalf]

I dug into Marathon Digital Holdings ($MARA) to see what a real bitcoin mining company experienced in the recent past.  Overall, they had $132M revenues on $143M in costs over the past 6 months.  The costs include energy, hosting, equipment aging, and "other".  The revenues came from block rewards, block transaction fees, and rewards from lending hashrate to other mining pools.  But overall, they had a 7.5% loss when comparing revenues vs costs.



---  stop here if you think Bitcoin and/or math is a waste of your time  ---


Assuming block rewards were 100% BTC, and the average price of $25,000 over the first 6 months of 2023, I calculate roughly 4200 BTC mined.  Dividing, I get $21,000 per BTC for "energy, hosting and other" costs.

On page 4 of their 10-Q I found "Cost of revenues - energy, hosting and other".
https://ir.mara.com/sec-filings/all-sec-filings/content/0001493152-23-027174/0001493152-23-027174.pdf#page=4

For 2023 Q2 : $55.2 M costs
Q2 + Q1 - Q2 (Q1): $88.6M - $55.2M = $33.4M

On page 18, I found their revenues from bitcoin mining.  This includes running their own private mining pool ("Operator") and lending their hashrate to other mining pools for rewards ("Participant").
https://ir.mara.com/sec-filings/all-sec-filings/content/0001493152-23-027174/0001493152-23-027174.pdf#page=18

2023 Q2: $81.8M
Q2 + Q1 - Q2 (Q1): $132.9M - $81.8M = $51.1M

Putting all of this together, I get:
2023 Q1: $51.1M revenue versus $33.4M "energy, hosting and other" costs
2023 Q2: $81.8M revenue versus $55.2M "energy, hosting and other" costs

[ChpBstrd]

I dug into Marathon Digital Holdings ($MARA) to see what a real bitcoin mining company experienced in the recent past.  Overall, they had $132M revenues on $143M in costs over the past 6 months.  The costs include energy, hosting, equipment aging, and "other".  The revenues came from block rewards, block transaction fees, and rewards from lending hashrate to other mining pools.  But overall, they had a 7.5% loss when comparing revenues vs costs.



---  stop here if you think Bitcoin and/or math is a waste of your time  ---


Assuming block rewards were 100% BTC, and the average price of $25,000 over the first 6 months of 2023, I calculate roughly 4200 BTC mined.  Dividing, I get $21,000 per BTC for "energy, hosting and other" costs.

On page 4 of their 10-Q I found "Cost of revenues - energy, hosting and other".
https://ir.mara.com/sec-filings/all-sec-filings/content/0001493152-23-027174/0001493152-23-027174.pdf#page=4

For 2023 Q2 : $55.2 M costs
Q2 + Q1 - Q2 (Q1): $88.6M - $55.2M = $33.4M

On page 18, I found their revenues from bitcoin mining.  This includes running their own private mining pool ("Operator") and lending their hashrate to other mining pools for rewards ("Participant").
https://ir.mara.com/sec-filings/all-sec-filings/content/0001493152-23-027174/0001493152-23-027174.pdf#page=18

2023 Q2: $81.8M
Q2 + Q1 - Q2 (Q1): $132.9M - $81.8M = $51.1M

Putting all of this together, I get:
2023 Q1: $51.1M revenue versus $33.4M "energy, hosting and other" costs
2023 Q2: $81.8M revenue versus $55.2M "energy, hosting and other" costs

I suspect this calculation is sensitive to any assumptions we make about the price they are able to obtain for their cryptos. MARA had $62M of "other long term assets" on their most recent balance sheet, down from $714M in 3Q2022 - are these crypto assets?

For at least a year, MARA has had nothing but negative operating earnings, negative net earnings, negative free cash flow from operations, negative free cash flow from investing, and negative YTD total cash flows. According to the cash flow statements, MARA funds itself though the sale of its own stock. Are they holding crypto-assets in addition to being dependent upon the sale of their own stock while incinerating cash? It would seem like they'd need to sell a bitcoin the moment they mined it to meet their cash flow needs, but I'm probably wrong about that, because why would anyone buy this $2.2B money pit stock based on the dollar fundamentals if it didn't represent a claim on possible future bitcoins?

That is to say, if MARA is holding crypto in inventory, it is a different investment than if it sells its product almost immediately to cover expenses.

[MustacheAndaHalf]

From their 10-Q and an article online, I believe MARA holds 12,500 Bitcoin with a current value of about $340 million.  What confuses me is the comparison to their market cap of $2.4 billion ... I don't see why they should move in sync with a bitcoin fund like GBTC.

[ChpBstrd]

From their 10-Q and an article online, I believe MARA holds 12,500 Bitcoin with a current value of about $340 million.  What confuses me is the comparison to their market cap of $2.4 billion ... I don't see why they should move in sync with a bitcoin fund like GBTC.

Yea that's a very good question. I suppose shares of MARA represents a claim on crypto assets that will be mined at a future time, and the current price is the best estimate of what crypto assets will be worth in the future? Sort of like how the value of an oil company goes up and down with the price of oil even though they haven't extracted oil from the ground yet.

[MustacheAndaHalf]

From their 10-Q and an article online, I believe MARA holds 12,500 Bitcoin with a current value of about $340 million.  What confuses me is the comparison to their market cap of $2.4 billion ... I don't see why they should move in sync with a bitcoin fund like GBTC.

Yea that's a very good question. I suppose shares of MARA represents a claim on crypto assets that will be mined at a future time, and the current price is the best estimate of what crypto assets will be worth in the future? Sort of like how the value of an oil company goes up and down with the price of oil even though they haven't extracted oil from the ground yet.

It's funny seeing seeing dividend discount model and Bitcoin mentioned together.  I don't think there's many value investors in crypto!  If you want to hear colorful insults directed towards crypto, famed value investor Charlie Munger is a good choice (Buffet is a bit more diplomatic)

From memory, about $700M to $800M of $MARA's assets are Bitcoin mining equipment, and then there's roughly $350M in Bitcoin.  The links I posted can help those who want to track down the last bit of their asset value, but I recall the total was $1.3 billion.  Maybe the gap between that and their $2.4 billion market cap reflects bitcoin mining in the future, and potential price jumps in Bitcoin.  But it doesn't add up to me.

[MustacheAndaHalf]

In other news, a spot Bitcoin ETF is getting closer.  The SEC lost a lawsuit on the grounds it was arbitrary and unfair in blocking spot ETFs but allowing futures ETFs.
https://techcrunch.com/2023/08/31/grayscale-wins-lawsuit-against-sec-while-the-agency-settles-first-nft-case-and-friend-tech-hype-crashes/

I actually think this won't change much for Bitcoin.  The existing leader, Grayscale Bitcoin Trust, will remain the leader.  They'll be easier to buy and sell for $0/trade in people's brokerage accounts, but I don't see them losing a battle against new ETFs.

[ChpBstrd]

It's funny seeing seeing dividend discount model and Bitcoin mentioned together.  I don't think there's many value investors in crypto!  If you want to hear colorful insults directed towards crypto, famed value investor Charlie Munger is a good choice (Buffet is a bit more diplomatic)

Yea, I'm really stretching homo economicus to the breaking point here, trying to find some excuse within the bounds of rationality when perhaps I should have moved on the the behavioral sciences for an explanation.

[LateStarter]

Happy Birthday Bitcoin - 15 years old today.

My, how you've grown . . .

[FINate]

Worth noting on this thread that SBF was found guilty on all 7 criminal counts this week. I've been following the case, very dramatic. SBF and his team tried to make it seem complicated, and really wanted to tell a story about lack of hedging and incompetence. Whereas the prosecution told a story of straightforward fraud and conspiracy.

While not exclusively about crypto, it's a good reminder of what happens when companies like FTX believe they operate outside the reach of regulators.

[clarkfan1979]

Dumb money is really preaching a Bitcoin rally because it's currently up 110% YTD. However, if you compare the current price to the price from the day of the original post, it's down 34%.

[MustacheAndaHalf]

Dumb money is really preaching a Bitcoin rally because it's currently up 110% YTD. However, if you compare the current price to the price from the day of the original post, it's down 34%.

That would be dumb money like BlackRock, Fidelity, Investco, ...
https://www.coindesk.com/consensus-magazine/2023/06/21/a-straightforward-explanation-for-why-financial-giants-want-to-issue-a-spot-bitcoin-etf/

... all of whom are creating Bitcoin ETFs, if the SEC lets them.  The SEC lost a court case, which suggests they have to allow Bitcoin ETFs.  So far, the SEC has just done nothing.  But that's the reason for a surge in BTC price in October (from $27k to $35k).

If you think anything gaining +110% YTD involves dumb money, are you shorting Facebook's stock (META +153% YTD)?

[Telecaster]

Bitcoin and the crypto movement grew in part as a response to the 2008 banking and the associated problems with big institutional banking.   At first blush, the benefits seem large.  Bitcoin is a peer-to-peer, cashless transaction system.    You do not need a bank to hold your Bitcoin, which could be a huge benefit for the hundreds of millions if not billions of the unbanked.  It also makes it  more difficult for the government or other entity to seize your Bitcoin, and you do not need a third party to make transactions.  All the transactions are immutably recorded on the blockchain and cannot be falsified.   Transactions can be conducted across international borders with no additional expense.  Bitcoin cannot be debased or manipulated by any central bank or government. 

Sounds good, right?  But has it grown?   I mean, within say the last five to ten years?  Anecdotally, it doesn't seem that any more businesses accept Bitcoin than back then, and the number might even have gone down.  And of those businesses that you've heard of that do accept Bitcoin, all use a third-party servicer like Bitpay to facilitate the transactions. 

El Salvador treats Bitcoin as legal tender, but by all accounts actual adoption is extremely low.   Custody is facilitated by a government controlled app, which again means there is typically no self-custody and no trustless transactions.  Bitcoin ATMs typically have higher fees than regular ATMs.   Remittances via Bitcoin--which was a major selling point of El Salvador's plan--are a rounding error of the total and dropping. 

All of these exchange collapses (FTX, Celsius, Genesis/Gemini, etc.) show that the institutions that have grown up around crypto lacked internal controls to ensure client's interests are safeguarded.  Therefore, there is a lot of excitement in the crypto space about the likely SEC approval of Bitcoin ETFs.     This will allow Wall Street investment banks to hold Bitcoin, and let retail investors speculate on the price without having to deal with self-custody, yet get the assurance of government oversight and regulation.

So we've seen that Bitcoin specifically and crypto in general have grown into something that looks identical to the traditional banking and finance system.   Customer's assets are held in the institution's name, transactions take place off the blockchain, and are regulated by the government.

So it raises the question:  What do you need Bitcoin for? 

[Telecaster]

That would be dumb money like BlackRock, Fidelity, Investco, ...

Keep in mind though, for the most part it isn't their money.   They want to take customer's money, package that into ETFs, and then make money on the trades.  As we saw with FTX, the brokerage side of crypto is extremely lucrative.   This allows Wall Street investment houses to get a piece of that action.   Getting into bed with Wall Street is what crypto is all about, right? 

[Scandium]

So it raises the question:  What do you need Bitcoin for?

I've tried to get an answer to this a few times, including here. But usually it just ends up as hand-wavy, borderline conspiracy stuff, or variations of "line goes up".  Maybe that's good enough for some, but I'm gonna pass on BTC as any part of my portfolio

[ChpBstrd]

So it raises the question:  What do you need Bitcoin for?

Dumb money is really preaching a Bitcoin rally because it's currently up 110% YTD. However, if you compare the current price to the price from the day of the original post, it's down 34%.

That would be dumb money like BlackRock, Fidelity, Investco, ...
https://www.coindesk.com/consensus-magazine/2023/06/21/a-straightforward-explanation-for-why-financial-giants-want-to-issue-a-spot-bitcoin-etf/

... all of whom are creating Bitcoin ETFs, if the SEC lets them.  The SEC lost a court case, which suggests they have to allow Bitcoin ETFs.  So far, the SEC has just done nothing.  But that's the reason for a surge in BTC price in October (from $27k to $35k).

If you think anything gaining +110% YTD involves dumb money, are you shorting Facebook's stock (META +153% YTD)?

Without an ETF, there are few ways for regular investors to short crypto. Given the huge demand for ways to short crypto, there are large premiums available to harvest, and that attracts more investors. E.g. if you want to sell a put on crypto to win the large premium, you need to offset your risk by going long crypto - ideally in the same liquid asset for which you sold the put.

So demand for a way to short crypto is a reason the world needs a long crypto ETF with an options market. The market participants don't have to believe in crypto any more than a person harvesting theta on SPY puts every week needs to have an opinion on the direction of the market next week.

Of course, the world needs another Bitcoin fund like the world needs another sports gambling site, but where there is demand there will be supply.

[Telecaster]

I've tried to get an answer to this a few times, including here. But usually it just ends up as hand-wavy, borderline conspiracy stuff, or variations of "line goes up".  Maybe that's good enough for some, but I'm gonna pass on BTC as any part of my portfolio

One thing I forgot to discuss in my prior post was banking the unbanked, which would appear to be an ideal use case for Bitcoin.   But about the same time Bitcoin was invented, Vodaphone noticed its costumers in Kenya were sending and receiving cell phone minutes as a form of payment.   So Vodaphone created mobile money, which allows users to send and receive money via their cell phones without the use of a bank.   Since then the use of mobile money has exploded, with the number of accounts well over a billion with annual transaction values of well over $1 trillion.  Growth continues in double digits every year. 

Clearly, there is enormous global demand in this area, and the demand is not being filled by Bitcoin.   I mentioned this before (back when there were only a few hundred million mobile money users), and the responses are along the lines of "few understand" and "have fun staying poor."  Oh, the other popular response was “If you don't believe it or don't get it, I don't have the time to try to convince you, sorry.”   

But clearly, somebody should have been taking the time to explain it because a billion potential Bitcoin users are using something else.   

[Scandium]

I've tried to get an answer to this a few times, including here. But usually it just ends up as hand-wavy, borderline conspiracy stuff, or variations of "line goes up".  Maybe that's good enough for some, but I'm gonna pass on BTC as any part of my portfolio

One thing I forgot to discuss in my prior post was banking the unbanked, which would appear to be an ideal use case for Bitcoin.   But about the same time Bitcoin was invented, Vodaphone noticed its costumers in Kenya were sending and receiving cell phone minutes as a form of payment.   So Vodaphone created mobile money, which allows users to send and receive money via their cell phones without the use of a bank.   Since then the use of mobile money has exploded, with the number of accounts well over a billion with annual transaction values of well over $1 trillion.  Growth continues in double digits every year. 

Clearly, there is enormous global demand in this area, and the demand is not being filled by Bitcoin.   I mentioned this before (back when there were only a few hundred million mobile money users), and the responses are along the lines of "few understand" and "have fun staying poor."  Oh, the other popular response was “If you don't believe it or don't get it, I don't have the time to try to convince you, sorry.”   

But clearly, somebody should have been taking the time to explain it because a billion potential Bitcoin users are using something else.

Munecat's excellent video on the whole...nonsense discusses this "bank the unbanked" bullshit well
https://youtu.be/u-sNSjS8cq0?si=z1ihtBrfpnW20Bvp&t=2626
Anarcho-capitalists reddit tech-bros are suddenly extremely! concerned about malnourished farmers in rural africa! Yeah right... not buying it.

[Juan Ponce de León]