Author Topic: What do you think of adding a low% of crypto allocation  (Read 31381 times)

Malcat

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Re: What do you think of adding a low% of crypto allocation
« Reply #550 on: November 09, 2021, 06:45:51 AM »
Malcat - I prefer Google as middle man over the phone book.  Crypto could replace an existing middle man.  As to my post you wondered about, the other poster claimed they would still be a multi-millionaire if crypto crashed, which seems to me like a bullying tactic.  I'm surprised all my ELI5 explanations got nothing from you, but this caught your attention.
I understand how Google displaces Yellopages. I can't grasp how crypto would displace Ticketmaster. I'm not saying it won't, but I am failing to perceive the market forces that would cause it to be displaced, since every argument I've seen is how crypto would benefit the consumer and Ticketmaster has never benefited the consumer in the first place, and yet still exists. So if their lack of utility to the consumer was a market force that would make them disappear, they would have disappeared ages ago.

Unfortunately, "being beneficial to the consumer" is not the driving force behind, well, the vast overwhelming majority of businesses. Sometimes utility is what's used to gain market share, that's what people are sold on as the benefit of capitalism, but that's not actually how it works, it's only part of the picture.
Who are you quoting after the word "Unfortunately"?  It's not me.  It looks like you're creating a strawman argument with your quote, and then disagreeing with the quote you made up.

Sorry, no, I'm not quoting you, I'm quoting a number of crypto proponents who have made use arguments for crypto currencies that hinge on being beneficial to the consumer, and it doesn't make sense to me.


ChpBstrd

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Re: What do you think of adding a low% of crypto allocation
« Reply #551 on: November 09, 2021, 07:10:47 AM »
To be honest, everyone is entitled to their opinion. I have the exact opposite experience where I lost a ton in the stock market but gained orders of magnitude back through crypto. Yet we cannot say one or the other is the right investment for anyone.

Yes and no.  Perhaps comes down to the question that we're trying to answer.

For me, the question has been something like "What is the best way for me to almost certainly reach financial independence in a reasonable amount of time?"  For others, the question appears to be something like "What is the best way for me to potentially reach financial independence as quickly as possible?"  The question may be a matter of personal opinion.  Once you know the target, though, I do think there are objectively better and worse ways of reaching it.

If, like me, your primary financial question is the former, it's objectively true that you're better off investing in broad-based, low-fee index funds than trying to pick individual stocks or crypto coins.  This isn't necessarily the answer to the second question, though, which is why I think folks are sometimes talking past each other on this thread.

At the same time, there is a part of me that thinks that the first question is objectively better.  If the goal is financial independence, surely certainty / reliability / reproducibility has to be part of it, no?  Otherwise, by definition, the approach will work for some, fail for more, and thus isn't (as I understand it) a true source of independence.  I'm willing to concede, though, that this may not be objectively true -- it might just be that I hold my opinion very strongly.

Or perhaps I'm articulating the second question incorrectly.  It isn't mine, after all.  Maybe it's more accurate to express it as "What is the best way for me to potentially make a lot of money as quickly as possible?" and it isn't explicitly about a desire for financial independence.  If that's the case, taking chances makes more sense.  Again, though, that isn't a mindset I can really relate to, so I could still be stating it incorrectly.  Regardless, I've definitely found this thread to be helpful in clarifying some fundamental aspects of my investing philosophy.

This reminds me of Walter White's dilemma in Breaking Bad; he must get rich within a short timeframe or fail, so he is driven to an extreme strategy with extreme risks. I think you're right that MMM/Bogleheads/standard financial advice is constantly in tension with perspectives that require getting rich within a low single digit number of years, if not months. WallStreetBets, social media, and lotteries cater to (or victimize?) those who have imposed speed requirements upon themselves.*

When a MMM cultist says they have a strategy to get rich and retire in 12 years with index funds, and someone else on the internet says "bro, those are boomer returns, you could have made 5,000% on Nonamecoin and GME next-day-expiration call options last week" what's missing from the conversation is a discussion of risk. If 2,000 people try the strategy across the next two decades, how many end up rich and how many end up broke? If the number is 2 rich and 1,998 broke, the lesson to be learned about the internet is the story of the 2 rich ones will be replicated everywhere until it looks like the obvious outcome.

Also, if a strategy promoted on the speculative sites starts cranking out failures, the focus will seamlessly shift to the next thing as if all those people who lost their nest eggs and added a decade to their working careers never existed. The old fad becomes an Obviously Dumb Thing To Do compared to the new fad, which is full of potential. This is in contrast to, for example, EarlyRetirementNow.com, which obsesses about portfolio failures that occurred a century or more ago! You might find some snarky comments about past bubbles or investment fads in the abstract, but never the compelling "it changed my life" or "I made $xxx,xxx in three weeks" personal stories like you get when people are winning. 

You see the same dynamic with weight loss. Legitimate nutritionists, trainers, and coaches will develop multi-year plans for obese people, but magic pills advertised on the internet promise results within weeks. Some victims might rationalize that they could try a dozen of these pills in half the time the legitimate professionals say their strategies will require, and at a fraction of the cost. We know how the story ends. More importantly, we know why there is a market for magic weight loss pills - because the promise of faster is irresistible.

Walter White himself got rich quick, but it wouldn't have been much of a series if he had been murdered a few episodes in. That's why the plot didn't go that direction. The plot couldn't go that more likely direction, because then there wouldn't be a show. There's a lesson buried in there.

*Many of the people who impose speed requirements on retirement feel compelled to do so because they're strivers with life-sucking, high-stress, long-hours jobs. In this way, high-pressure jobs corral people into high-stakes gambles, a likelihood of eventual failure, and increased odds of being stuck in such a job even longer. Desperation is never a position of strength, and the popularity of crypto or meme stocks is a measure of desperation in our world.
« Last Edit: November 09, 2021, 07:16:32 AM by ChpBstrd »

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Re: What do you think of adding a low% of crypto allocation
« Reply #552 on: November 09, 2021, 07:36:18 AM »
The thing that bothers me about crypto is all the justification people are using to make it a stupid high % of their asset allocation. There are plenty of small cap stocks and even some large cap stocks that have great 5 and 10 year returns. If you asked if I thought there was a problem adding a low % allocation to TSLA on the forum, people would ask what a small % allocation is exactly and advise you to keep your fun money to under 5-10%. People here are trying to justify their 50% crypto positions as safe because it's "currency" and a "store of value" and everyone is "adopting it" etc. All of the same arguments could be made for holding a stupid high % of Tesla. 

If you want to hold a high % of crypto then fine, but don't expect a different response than the person who starts a thread defending a 50% allocation to a single stock.

What bothers me is crypto now has a market cap over 1T (i've seen 3T thrown around here as well). We saw what happened to the overall economy when $2-3T of housing value was destroyed in 2008. What happens to the overall economy when/if there is a major hack or government crackdown on crypto and 1-3T of value is destroyed?

boarder42

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Re: What do you think of adding a low% of crypto allocation
« Reply #553 on: November 09, 2021, 07:51:09 AM »
The thing that bothers me about crypto is all the justification people are using to make it a stupid high % of their asset allocation. There are plenty of small cap stocks and even some large cap stocks that have great 5 and 10 year returns. If you asked if I thought there was a problem adding a low % allocation to TSLA on the forum, people would ask what a small % allocation is exactly and advise you to keep your fun money to under 5-10%. People here are trying to justify their 50% crypto positions as safe because it's "currency" and a "store of value" and everyone is "adopting it" etc. All of the same arguments could be made for holding a stupid high % of Tesla. 

If you want to hold a high % of crypto then fine, but don't expect a different response than the person who starts a thread defending a 50% allocation to a single stock.

What bothers me is crypto now has a market cap over 1T (i've seen 3T thrown around here as well). We saw what happened to the overall economy when $2-3T of housing value was destroyed in 2008. What happens to the overall economy when/if there is a major hack or government crackdown on crypto and 1-3T of value is destroyed?

this is another argument as to why it won't fail which i do not understand.  It's too big to fail doesn't make sense to me. 

dandarc

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Re: What do you think of adding a low% of crypto allocation
« Reply #554 on: November 09, 2021, 08:01:37 AM »
The thing that bothers me about crypto is all the justification people are using to make it a stupid high % of their asset allocation. There are plenty of small cap stocks and even some large cap stocks that have great 5 and 10 year returns. If you asked if I thought there was a problem adding a low % allocation to TSLA on the forum, people would ask what a small % allocation is exactly and advise you to keep your fun money to under 5-10%. People here are trying to justify their 50% crypto positions as safe because it's "currency" and a "store of value" and everyone is "adopting it" etc. All of the same arguments could be made for holding a stupid high % of Tesla. 

If you want to hold a high % of crypto then fine, but don't expect a different response than the person who starts a thread defending a 50% allocation to a single stock.

What bothers me is crypto now has a market cap over 1T (i've seen 3T thrown around here as well). We saw what happened to the overall economy when $2-3T of housing value was destroyed in 2008. What happens to the overall economy when/if there is a major hack or government crackdown on crypto and 1-3T of value is destroyed?

this is another argument as to why it won't fail which i do not understand.  It's too big to fail doesn't make sense to me.
That's because crypto itself cannot be too big to fail - it is not an institution that our governments rely heavily on. The big banks might get too intertwined with crypto, and they might be deemed too big to fail. How that plays out for some average schmuck who is just holding crypto likely won't be nearly as good as it works out for the huge banks.

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Re: What do you think of adding a low% of crypto allocation
« Reply #555 on: November 09, 2021, 09:01:47 AM »
I noticed the anti-crypto folks here constantly claim the pro-crypto folks say XYZ but in reality it's the opposite.  The post always start with something like, "I keep reading the pro-crypto folks say XYZ but..."  Why I this so common on one side and why don't they rebut the actual arguments raised?

boarder42

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Re: What do you think of adding a low% of crypto allocation
« Reply #556 on: November 09, 2021, 09:05:00 AM »
I noticed the anti-crypto folks here constantly claim the pro-crypto folks say XYZ but in reality it's the opposite.  The post always start with something like, "I keep reading the pro-crypto folks say XYZ but..."  Why I this so common on one side and why don't they rebut the actual arguments raised?

please go re read the entire thread there are many comments that have been made by pro crypto folks about the size of crypto and how that means it will stick around. i'm not going to go pull all the direct quotes from everyone every time someone questions when they said something b/c honestly i dont care.  crypto will not make me rich b/c i dont own any but its highly likely to make alot of people poor who are over tilted either here or in the world.

ChpBstrd

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Re: What do you think of adding a low% of crypto allocation
« Reply #557 on: November 09, 2021, 09:09:54 AM »
The thing that bothers me about crypto is all the justification people are using to make it a stupid high % of their asset allocation. There are plenty of small cap stocks and even some large cap stocks that have great 5 and 10 year returns. If you asked if I thought there was a problem adding a low % allocation to TSLA on the forum, people would ask what a small % allocation is exactly and advise you to keep your fun money to under 5-10%. People here are trying to justify their 50% crypto positions as safe because it's "currency" and a "store of value" and everyone is "adopting it" etc. All of the same arguments could be made for holding a stupid high % of Tesla. 

If you want to hold a high % of crypto then fine, but don't expect a different response than the person who starts a thread defending a 50% allocation to a single stock.

What bothers me is crypto now has a market cap over 1T (i've seen 3T thrown around here as well). We saw what happened to the overall economy when $2-3T of housing value was destroyed in 2008. What happens to the overall economy when/if there is a major hack or government crackdown on crypto and 1-3T of value is destroyed?

this is another argument as to why it won't fail which i do not understand.  It's too big to fail doesn't make sense to me.
That's because crypto itself cannot be too big to fail - it is not an institution that our governments rely heavily on. The big banks might get too intertwined with crypto, and they might be deemed too big to fail. How that plays out for some average schmuck who is just holding crypto likely won't be nearly as good as it works out for the huge banks.
"Too big to fail" was a phrase applied to banks which had to be bailed out by the US government, using established mechanisms such as the FDIC and overnight lending markets. In the event of a crypto-burst, there will be no government bailout because there are no legal mechanisms or existing bureaucracies to make crypto holders whole. Additionally, there would be too much political heat to invent such mechanisms on the fly. It would be more like 2000 than 2008.

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #558 on: November 09, 2021, 09:17:11 AM »
The thing that bothers me about crypto is all the justification people are using to make it a stupid high % of their asset allocation. There are plenty of small cap stocks and even some large cap stocks that have great 5 and 10 year returns. If you asked if I thought there was a problem adding a low % allocation to TSLA on the forum, people would ask what a small % allocation is exactly and advise you to keep your fun money to under 5-10%. People here are trying to justify their 50% crypto positions as safe because it's "currency" and a "store of value" and everyone is "adopting it" etc. All of the same arguments could be made for holding a stupid high % of Tesla. 

If you want to hold a high % of crypto then fine, but don't expect a different response than the person who starts a thread defending a 50% allocation to a single stock.

What bothers me is crypto now has a market cap over 1T (i've seen 3T thrown around here as well). We saw what happened to the overall economy when $2-3T of housing value was destroyed in 2008. What happens to the overall economy when/if there is a major hack or government crackdown on crypto and 1-3T of value is destroyed?

this is another argument as to why it won't fail which i do not understand.  It's too big to fail doesn't make sense to me.
That's because crypto itself cannot be too big to fail - it is not an institution that our governments rely heavily on. The big banks might get too intertwined with crypto, and they might be deemed too big to fail. How that plays out for some average schmuck who is just holding crypto likely won't be nearly as good as it works out for the huge banks.
"Too big to fail" was a phrase applied to banks which had to be bailed out by the US government, using established mechanisms such as the FDIC and overnight lending markets. In the event of a crypto-burst, there will be no government bailout because there are no legal mechanisms or existing bureaucracies to make crypto holders whole. Additionally, there would be too much political heat to invent such mechanisms on the fly. It would be more like 2000 than 2008.

Agreed that there won't be a bailout for people who own crypto.  But there wasn't a bailout for the people who took out loans on houses that they couldn't afford either.  That's a big part of why 2008 was a serious problem.  Reckless investors and banks who didn't give a shit about buying/trading garbage for lots of money seems pretty similar though.  Getting rich on crypto has a disturbingly similar feel to buying houses subprime mortgages.

How many times did you hear "But housing only goes up!"?

ChpBstrd

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Re: What do you think of adding a low% of crypto allocation
« Reply #559 on: November 09, 2021, 09:30:41 AM »
The thing that bothers me about crypto is all the justification people are using to make it a stupid high % of their asset allocation. There are plenty of small cap stocks and even some large cap stocks that have great 5 and 10 year returns. If you asked if I thought there was a problem adding a low % allocation to TSLA on the forum, people would ask what a small % allocation is exactly and advise you to keep your fun money to under 5-10%. People here are trying to justify their 50% crypto positions as safe because it's "currency" and a "store of value" and everyone is "adopting it" etc. All of the same arguments could be made for holding a stupid high % of Tesla. 

If you want to hold a high % of crypto then fine, but don't expect a different response than the person who starts a thread defending a 50% allocation to a single stock.

What bothers me is crypto now has a market cap over 1T (i've seen 3T thrown around here as well). We saw what happened to the overall economy when $2-3T of housing value was destroyed in 2008. What happens to the overall economy when/if there is a major hack or government crackdown on crypto and 1-3T of value is destroyed?

this is another argument as to why it won't fail which i do not understand.  It's too big to fail doesn't make sense to me.
That's because crypto itself cannot be too big to fail - it is not an institution that our governments rely heavily on. The big banks might get too intertwined with crypto, and they might be deemed too big to fail. How that plays out for some average schmuck who is just holding crypto likely won't be nearly as good as it works out for the huge banks.
"Too big to fail" was a phrase applied to banks which had to be bailed out by the US government, using established mechanisms such as the FDIC and overnight lending markets. In the event of a crypto-burst, there will be no government bailout because there are no legal mechanisms or existing bureaucracies to make crypto holders whole. Additionally, there would be too much political heat to invent such mechanisms on the fly. It would be more like 2000 than 2008.

Agreed that there won't be a bailout for people who own crypto.  But there wasn't a bailout for the people who took out loans on houses that they couldn't afford either.  That's a big part of why 2008 was a serious problem.  Reckless investors and banks who didn't give a shit about buying/trading garbage for lots of money seems pretty similar though.  Getting rich on crypto has a disturbingly similar feel to buying houses subprime mortgages.

How many times did you hear "But housing only goes up!"?

It's a good point that the people who were actually foreclosed, held mortgage assets or derivatives, or who bought Lehman / AIG stock were not made whole, or really helped in any way. Bailouts benefitted areas adjacent to the central crater, such as propping up the value of homes which had not yet been foreclosed, propping up banks which had not yet failed, and propping up the markets for stocks and bonds that had not already gone bankrupt. This was where the political will was located, not in the already bankrupt and powerless. Plus, there was a moralistic narrative that the responsible should not pay for the losses of the gamblers.

A sudden crypto collapse would definitely affect the stock market in a big way, and government fire lines might be set up very far behind one's own positions or after massive losses had already occurred.

boarder42

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Re: What do you think of adding a low% of crypto allocation
« Reply #560 on: November 09, 2021, 09:36:50 AM »
The thing that bothers me about crypto is all the justification people are using to make it a stupid high % of their asset allocation. There are plenty of small cap stocks and even some large cap stocks that have great 5 and 10 year returns. If you asked if I thought there was a problem adding a low % allocation to TSLA on the forum, people would ask what a small % allocation is exactly and advise you to keep your fun money to under 5-10%. People here are trying to justify their 50% crypto positions as safe because it's "currency" and a "store of value" and everyone is "adopting it" etc. All of the same arguments could be made for holding a stupid high % of Tesla. 

If you want to hold a high % of crypto then fine, but don't expect a different response than the person who starts a thread defending a 50% allocation to a single stock.

What bothers me is crypto now has a market cap over 1T (i've seen 3T thrown around here as well). We saw what happened to the overall economy when $2-3T of housing value was destroyed in 2008. What happens to the overall economy when/if there is a major hack or government crackdown on crypto and 1-3T of value is destroyed?

this is another argument as to why it won't fail which i do not understand.  It's too big to fail doesn't make sense to me.
That's because crypto itself cannot be too big to fail - it is not an institution that our governments rely heavily on. The big banks might get too intertwined with crypto, and they might be deemed too big to fail. How that plays out for some average schmuck who is just holding crypto likely won't be nearly as good as it works out for the huge banks.
"Too big to fail" was a phrase applied to banks which had to be bailed out by the US government, using established mechanisms such as the FDIC and overnight lending markets. In the event of a crypto-burst, there will be no government bailout because there are no legal mechanisms or existing bureaucracies to make crypto holders whole. Additionally, there would be too much political heat to invent such mechanisms on the fly. It would be more like 2000 than 2008.

Agreed that there won't be a bailout for people who own crypto.  But there wasn't a bailout for the people who took out loans on houses that they couldn't afford either.  That's a big part of why 2008 was a serious problem.  Reckless investors and banks who didn't give a shit about buying/trading garbage for lots of money seems pretty similar though.  Getting rich on crypto has a disturbingly similar feel to buying houses subprime mortgages.

How many times did you hear "But housing only goes up!"?

It's a good point that the people who were actually foreclosed, held mortgage assets or derivatives, or who bought Lehman / AIG stock were not made whole, or really helped in any way. Bailouts benefitted areas adjacent to the central crater, such as propping up the value of homes which had not yet been foreclosed, propping up banks which had not yet failed, and propping up the markets for stocks and bonds that had not already gone bankrupt. This was where the political will was located, not in the already bankrupt and powerless. Plus, there was a moralistic narrative that the responsible should not pay for the losses of the gamblers.

A sudden crypto collapse would definitely affect the stock market in a big way, and government fire lines might be set up very far behind one's own positions or after massive losses had already occurred.

but didnt we see a huge pivot in the crash surrounding covid to not bail out big business and instead bailout the individual and in turn let them spend money to bailout big business.  Obviously this wouldn't be targetted to crypto holders but could help keep them on their feet when it crashes.  Just like the stimulus packages werent 100% targetted at job loss and trickled pretty far up the food chain of AGI.  Maybe i'm overly hopeful the politicians learned alot from that crash and the speed of recovery thru putting money in at the middle/bottom and letting the top work itself out.

But just like the other thread i personally believe the next bubble collapse will be caused by crypto.  There is nothing there to support it if it crashes hard and causes people to start to pull their margin.  at least when markets collapse the companies there typically have some underlying value and assets to lean on and its easy to be quite diversified in the space with index funds.

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Re: What do you think of adding a low% of crypto allocation
« Reply #561 on: November 09, 2021, 09:56:08 AM »
The thing that bothers me about crypto is all the justification people are using to make it a stupid high % of their asset allocation. There are plenty of small cap stocks and even some large cap stocks that have great 5 and 10 year returns. If you asked if I thought there was a problem adding a low % allocation to TSLA on the forum, people would ask what a small % allocation is exactly and advise you to keep your fun money to under 5-10%. People here are trying to justify their 50% crypto positions as safe because it's "currency" and a "store of value" and everyone is "adopting it" etc. All of the same arguments could be made for holding a stupid high % of Tesla. 

If you want to hold a high % of crypto then fine, but don't expect a different response than the person who starts a thread defending a 50% allocation to a single stock.

What bothers me is crypto now has a market cap over 1T (i've seen 3T thrown around here as well). We saw what happened to the overall economy when $2-3T of housing value was destroyed in 2008. What happens to the overall economy when/if there is a major hack or government crackdown on crypto and 1-3T of value is destroyed?

this is another argument as to why it won't fail which i do not understand.  It's too big to fail doesn't make sense to me.
That's because crypto itself cannot be too big to fail - it is not an institution that our governments rely heavily on. The big banks might get too intertwined with crypto, and they might be deemed too big to fail. How that plays out for some average schmuck who is just holding crypto likely won't be nearly as good as it works out for the huge banks.
"Too big to fail" was a phrase applied to banks which had to be bailed out by the US government, using established mechanisms such as the FDIC and overnight lending markets. In the event of a crypto-burst, there will be no government bailout because there are no legal mechanisms or existing bureaucracies to make crypto holders whole. Additionally, there would be too much political heat to invent such mechanisms on the fly. It would be more like 2000 than 2008.

Agreed that there won't be a bailout for people who own crypto.  But there wasn't a bailout for the people who took out loans on houses that they couldn't afford either.  That's a big part of why 2008 was a serious problem.  Reckless investors and banks who didn't give a shit about buying/trading garbage for lots of money seems pretty similar though.  Getting rich on crypto has a disturbingly similar feel to buying houses subprime mortgages.

How many times did you hear "But housing only goes up!"?

There won't be a bail out for crypto, but that doesn't mean the bubble bursting won't affect investors who have nothing to do with crypto. Berkshire was down 35% after the tech bubble burst despite Buffet actively steering clear of anything related to tech.

At best, crypto should be considered in the "alternatives" portion of portfolio allocation and the general advice is 10 to no more than 20% should be allocated to alternatives. The OP asked about a low% crypto allocation and turned out to be 20% allocated to crypto! The posters here seem to be viewing crypto as a currency akin to the USD or EUR and seem to use the terms currency, coin, crypto bank, store of value to justify a high asset allocation. This is the "investment advice" forum. Several of the posters here are not anti-crypto, but my advice at least is watch your asset allocation.

Maybe BTC is the next big thing, maybe Tesla replaces all cars, or Netflix all cable and satellite, but that doesn't mean I would invest 20%, 30%, 50% in Tesla or Netflix.

You can make all the same crypto arguments for Tesla and electric vehicles. Blockchain and EVs are the way of the future; therefore, I buy 50% TSLA. I'm not going to argue blockchain and EVs are going to have a huge impact on our lives in the future, but I would argue investing 20% in Tesla is a really bad idea. Blockchain will be used in the future, but that doesn't mean any of the current coins are a good investment so size accordingly.     

Juan Ponce de León

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Re: What do you think of adding a low% of crypto allocation
« Reply #562 on: November 09, 2021, 03:52:30 PM »


I like the pretty patterns

LateStarter

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Re: What do you think of adding a low% of crypto allocation
« Reply #563 on: November 09, 2021, 05:15:09 PM »
I noticed the anti-crypto folks here constantly claim the pro-crypto folks say XYZ but in reality it's the opposite.  The post always start with something like, "I keep reading the pro-crypto folks say XYZ but..."  Why I this so common on one side and why don't they rebut the actual arguments raised?
please go re read the entire thread there are many comments that have been made by pro crypto folks about the size of crypto and how that means it will stick around.

i'm not going to go pull all the direct quotes from everyone every time someone questions when they said something b/c honestly i dont care.  crypto will not make me rich b/c i dont own any but its highly likely to make alot of people poor who are over tilted either here or in the world.

Zero pro-crypto posters have made any claims about "too big to fail" in this topic. The only prior mention was from, you guessed it, boarder42.

Several pro-crypto posters have emphasised how big the crypto market is, but only to counter ravings about it all being worthless and just like beanie babies, etc. That's not the same thing.


boarder42

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Re: What do you think of adding a low% of crypto allocation
« Reply #564 on: November 09, 2021, 05:27:04 PM »
I noticed the anti-crypto folks here constantly claim the pro-crypto folks say XYZ but in reality it's the opposite.  The post always start with something like, "I keep reading the pro-crypto folks say XYZ but..."  Why I this so common on one side and why don't they rebut the actual arguments raised?
please go re read the entire thread there are many comments that have been made by pro crypto folks about the size of crypto and how that means it will stick around.

i'm not going to go pull all the direct quotes from everyone every time someone questions when they said something b/c honestly i dont care.  crypto will not make me rich b/c i dont own any but its highly likely to make alot of people poor who are over tilted either here or in the world.

Zero pro-crypto posters have made any claims about "too big to fail" in this topic. The only prior mention was from, you guessed it, boarder42.

Several pro-crypto posters have emphasised how big the crypto market is, but only to counter ravings about it all being worthless and just like beanie babies, etc. That's not the same thing.

Sweet so we can all agree then that the size of the crypto market has absolutely no value as to whether it will succeed long term. So we can stop referring to the market cap of crypto as indication of it's success or lack there of.

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Re: What do you think of adding a low% of crypto allocation
« Reply #565 on: November 09, 2021, 06:10:32 PM »
I noticed the anti-crypto folks here constantly claim the pro-crypto folks say XYZ but in reality it's the opposite.  The post always start with something like, "I keep reading the pro-crypto folks say XYZ but..."  Why I this so common on one side and why don't they rebut the actual arguments raised?
please go re read the entire thread there are many comments that have been made by pro crypto folks about the size of crypto and how that means it will stick around.

i'm not going to go pull all the direct quotes from everyone every time someone questions when they said something b/c honestly i dont care.  crypto will not make me rich b/c i dont own any but its highly likely to make alot of people poor who are over tilted either here or in the world.

Zero pro-crypto posters have made any claims about "too big to fail" in this topic. The only prior mention was from, you guessed it, boarder42.

Several pro-crypto posters have emphasised how big the crypto market is, but only to counter ravings about it all being worthless and just like beanie babies, etc. That's not the same thing.

Sweet so we can all agree then that the size of the crypto market has absolutely no value as to whether it will succeed long term. So we can stop referring to the market cap of crypto as indication of it's success or lack there of.

FFS - yet another straw-man response in a discussion about persistent straw-manning ! The irony would be hilarious if it wasn't such a tedious waste of time.

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Re: What do you think of adding a low% of crypto allocation
« Reply #566 on: November 09, 2021, 06:12:50 PM »
I noticed the anti-crypto folks here constantly claim the pro-crypto folks say XYZ but in reality it's the opposite.  The post always start with something like, "I keep reading the pro-crypto folks say XYZ but..."  Why I this so common on one side and why don't they rebut the actual arguments raised?
please go re read the entire thread there are many comments that have been made by pro crypto folks about the size of crypto and how that means it will stick around.

i'm not going to go pull all the direct quotes from everyone every time someone questions when they said something b/c honestly i dont care.  crypto will not make me rich b/c i dont own any but its highly likely to make alot of people poor who are over tilted either here or in the world.

Zero pro-crypto posters have made any claims about "too big to fail" in this topic. The only prior mention was from, you guessed it, boarder42.

Several pro-crypto posters have emphasised how big the crypto market is, but only to counter ravings about it all being worthless and just like beanie babies, etc. That's not the same thing.

Sweet so we can all agree then that the size of the crypto market has absolutely no value as to whether it will succeed long term. So we can stop referring to the market cap of crypto as indication of it's success or lack there of.

FFS - yet another straw-man response in a discussion about persistent straw-manning ! The irony would be hilarious if it wasn't such a tedious waste of time.

Kinda like joining a fire forum to talk about crypto?

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Re: What do you think of adding a low% of crypto allocation
« Reply #567 on: November 09, 2021, 06:25:08 PM »
I noticed the anti-crypto folks here constantly claim the pro-crypto folks say XYZ but in reality it's the opposite.  The post always start with something like, "I keep reading the pro-crypto folks say XYZ but..."  Why I this so common on one side and why don't they rebut the actual arguments raised?
please go re read the entire thread there are many comments that have been made by pro crypto folks about the size of crypto and how that means it will stick around.

i'm not going to go pull all the direct quotes from everyone every time someone questions when they said something b/c honestly i dont care.  crypto will not make me rich b/c i dont own any but its highly likely to make alot of people poor who are over tilted either here or in the world.

Zero pro-crypto posters have made any claims about "too big to fail" in this topic. The only prior mention was from, you guessed it, boarder42.

Several pro-crypto posters have emphasised how big the crypto market is, but only to counter ravings about it all being worthless and just like beanie babies, etc. That's not the same thing.

Sweet so we can all agree then that the size of the crypto market has absolutely no value as to whether it will succeed long term. So we can stop referring to the market cap of crypto as indication of it's success or lack there of.

I can't think of a sector where the market cap size WOULDN'T be an indication of the current state of the sector.  If the market cap for automotives worldwide was 500 Billion, and the next year was 450B, then 400B, then 350B, I think that would be an indicator.  I think every CEO for every automotive company would be crapping their pants, and it would be talked about (for good reason) by every pundit on TV.

Is it possible that I'm missing something important in this conversation that happened earlier?  But it seems like crypto's quickly growing market cap is a REALLY good indication that it is having some success.  Whereas if coders were pouring tons of hours into projects, and no one was putting any money behind them year after year, that'd be a real indication of a problem to me.

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Re: What do you think of adding a low% of crypto allocation
« Reply #568 on: November 09, 2021, 06:54:05 PM »
What was the market cap for subprime mortgages in 2007 again?

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Re: What do you think of adding a low% of crypto allocation
« Reply #569 on: November 09, 2021, 07:07:58 PM »
What was the market cap for subprime mortgages in 2007 again?

Probably looks something like the CAPE.

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Re: What do you think of adding a low% of crypto allocation
« Reply #570 on: November 09, 2021, 07:30:47 PM »
I noticed the anti-crypto folks here constantly claim the pro-crypto folks say XYZ but in reality it's the opposite.  The post always start with something like, "I keep reading the pro-crypto folks say XYZ but..."  Why I this so common on one side and why don't they rebut the actual arguments raised?
please go re read the entire thread there are many comments that have been made by pro crypto folks about the size of crypto and how that means it will stick around.

i'm not going to go pull all the direct quotes from everyone every time someone questions when they said something b/c honestly i dont care.  crypto will not make me rich b/c i dont own any but its highly likely to make alot of people poor who are over tilted either here or in the world.

Zero pro-crypto posters have made any claims about "too big to fail" in this topic. The only prior mention was from, you guessed it, boarder42.

Several pro-crypto posters have emphasised how big the crypto market is, but only to counter ravings about it all being worthless and just like beanie babies, etc. That's not the same thing.

Sweet so we can all agree then that the size of the crypto market has absolutely no value as to whether it will succeed long term. So we can stop referring to the market cap of crypto as indication of it's success or lack there of.

FFS - yet another straw-man response in a discussion about persistent straw-manning ! The irony would be hilarious if it wasn't such a tedious waste of time.

Kinda like joining a fire forum to talk about crypto?

Who joined a FIRE forum to talk about crypto ? Not me. I joined long ago to learn about FIRE.

I understand that crypto is not mainstream MMM and I would expect the majority here to be against putting money into crypto. I don't understand why that should mean that crypto can't be discussed in a rational / logical manner. Maybe it can't but it's quite puzzling . . .

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Re: What do you think of adding a low% of crypto allocation
« Reply #571 on: November 09, 2021, 07:54:52 PM »
Let me start  by saying I don't see anything wrong with a 5-10% crypto allocation. Even if you start just now, and the entire crypto market goes on to lose >99% sometime in the next 20 years, it could still be useful depending on the timing, circumstances, and how you structure your rebalance bands. Now to my main point.



I like the pretty patterns
Exciting isn't it? It only has to go up like another factor of 15X before it exceeds the value of all dollar debt, and another 100X before it exceeds the value of outstanding debt in all currencies. I should buy popcorn now before it is all sold out! This is history in the making.

Congress, please don't do anything about this.

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Re: What do you think of adding a low% of crypto allocation
« Reply #572 on: November 10, 2021, 07:55:08 AM »
If an asset were to experience a drawdown of 99%, that would be a deal-breaker for me. I tolerate the stock market despite its 50%-ish drawdowns that happened three times in my lifetime because I think I have the discipline to hold stocks through those drawdowns.

If--starting from equal weights--stocks drop 50%, and crypto drops 80%--suddenly it's a portfolio that's 84% stocks, and I couldn't imagine rebalancing to 50-50 at that point, I'd probably wonder what I was doing with so much crypto to start with.

Also, I've started posting my crypto trades over in a journal, check them out!

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Re: What do you think of adding a low% of crypto allocation
« Reply #573 on: November 10, 2021, 08:29:57 AM »
If an asset were to experience a drawdown of 99%, that would be a deal-breaker for me. I tolerate the stock market despite its 50%-ish drawdowns that happened three times in my lifetime because I think I have the discipline to hold stocks through those drawdowns.

If--starting from equal weights--stocks drop 50%, and crypto drops 80%--suddenly it's a portfolio that's 84% stocks, and I couldn't imagine rebalancing to 50-50 at that point, I'd probably wonder what I was doing with so much crypto to start with.

Also, I've started posting my crypto trades over in a journal, check them out!
The Mt Gox hack caused a 99% drop in Bitcoin's value in 2011.  There was an 84% drop that ended just 3 years ago.  Is that within your comfort zone?
https://finance.yahoo.com/news/7-biggest-bitcoin-crashes-history-180038282.html

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Re: What do you think of adding a low% of crypto allocation
« Reply #574 on: November 10, 2021, 08:38:49 AM »
I noticed the anti-crypto folks here constantly claim the pro-crypto folks say XYZ but in reality it's the opposite.  The post always start with something like, "I keep reading the pro-crypto folks say XYZ but..."  Why I this so common on one side and why don't they rebut the actual arguments raised?
please go re read the entire thread there are many comments that have been made by pro crypto folks about the size of crypto and how that means it will stick around.

i'm not going to go pull all the direct quotes from everyone every time someone questions when they said something b/c honestly i dont care.  crypto will not make me rich b/c i dont own any but its highly likely to make alot of people poor who are over tilted either here or in the world.

Zero pro-crypto posters have made any claims about "too big to fail" in this topic. The only prior mention was from, you guessed it, boarder42.

Several pro-crypto posters have emphasised how big the crypto market is, but only to counter ravings about it all being worthless and just like beanie babies, etc. That's not the same thing.
Sweet so we can all agree then that the size of the crypto market has absolutely no value as to whether it will succeed long term. So we can stop referring to the market cap of crypto as indication of it's success or lack there of.
You're caught making strawman arguments, and you respond by making wild exaggerations that nobody else has made?  Someone has shown you're debating a point only you raised, and then you go ahead and make some more exaggerations that nobody else has raised.  Are you going to quote anyone accurately?

If you actually cared about quoting people accurately, you would make fewer comments like that, and like this:

what do you think of adding a low percent of blackjack bets
what do you think of adding a low percent of air jordans
what do you think of adding a low percent of teletubbies - (you guys just don't get it, its coming back and these things going to be the next shiba inu!)

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Re: What do you think of adding a low% of crypto allocation
« Reply #575 on: November 10, 2021, 08:48:05 AM »
If an asset were to experience a drawdown of 99%, that would be a deal-breaker for me. I tolerate the stock market despite its 50%-ish drawdowns that happened three times in my lifetime because I think I have the discipline to hold stocks through those drawdowns.

If--starting from equal weights--stocks drop 50%, and crypto drops 80%--suddenly it's a portfolio that's 84% stocks, and I couldn't imagine rebalancing to 50-50 at that point, I'd probably wonder what I was doing with so much crypto to start with.

Also, I've started posting my crypto trades over in a journal, check them out!
The Mt Gox hack caused a 99% drop in Bitcoin's value in 2011.  There was an 84% drop that ended just 3 years ago.  Is that within your comfort zone?
https://finance.yahoo.com/news/7-biggest-bitcoin-crashes-history-180038282.html

Excellent question.

I was aware of the Mt. Gox hack when it happened (Back when Bitcoin was so new and exciting), but I had zero position, and I wasn't tracking the day-to-day movements.

The 2018 drawdown caught me. I only had a few hundred dollars' worth, but I sold it and took the loss in the middle of it.

I need to rethink my risk tolerance. 

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Re: What do you think of adding a low% of crypto allocation
« Reply #576 on: November 10, 2021, 09:23:17 AM »
@MustacheAndaHalf - you yourself on the first page of this thread brought up the "total value of all BTC" and how it is larger than the market caps of Visa and Mastercard. There are no strawmen from anti-crypto, just pro-crypto forgetting what they posted.

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Re: What do you think of adding a low% of crypto allocation
« Reply #577 on: November 10, 2021, 09:30:07 AM »
@MustacheAndaHalf - you yourself on the first page of this thread brought up the "total value of all BTC" and how it is larger than the market caps of Visa and Mastercard. There are no strawmen from anti-crypto, just pro-crypto forgetting what they posted.

He'll now argue he didn't specifically call it too big to fail. And we'll discuss the semantics of what that means for the next 15 posts.  Also what you just wrote isn't word for word what he said so please waste time putting exact quotes in from 11 pages ago.

So I'll ask this again how is the market cap relevant at all?  If you're not arguing it's so big it will stick around.

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Re: What do you think of adding a low% of crypto allocation
« Reply #578 on: November 10, 2021, 09:35:41 AM »
On the other hand, that post was actually on-topic about an actual low % of crypto being stated, nothing like the late-comers with 50% of all their money in this stuff.

On a third hand, that sentence about BTC total value vs. Visa and Mastercard market caps illustrates a fundamental gap in understanding that has come up time and again in this thread - you don't own anything other than the BTC. It isn't ownership of a company like you would have in shares of Visa or Mastercard. Perhaps you understand the difference, but many subsequent pro-crypto posters clearly do not.

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Re: What do you think of adding a low% of crypto allocation
« Reply #579 on: November 10, 2021, 09:41:56 AM »
@MustacheAndaHalf - you yourself on the first page of this thread brought up the "total value of all BTC" and how it is larger than the market caps of Visa and Mastercard. There are no strawmen from anti-crypto, just pro-crypto forgetting what they posted.

He'll now argue he didn't specifically call it too big to fail. And we'll discuss the semantics of what that means for the next 15 posts.  Also what you just wrote isn't word for word what he said so please waste time putting exact quotes in from 11 pages ago.

So I'll ask this again how is the market cap relevant at all?  If you're not arguing it's so big it will stick around.
Need to wrap my head around SCV. Last time I finally took your advice on something important (others were saying it too, but you were adamant about it to the point I actually listened eventually), got me on a "make an extra $500K or more path with no effort" path after I had made the largest financial mistake you can make when you own your home. Made that error twice in my case before finally relenting - I'd have done even better had I listened / fixed it earlier than I did. I think a lot of people forget just how much money you've made members of this forum. So - thanks!

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Re: What do you think of adding a low% of crypto allocation
« Reply #580 on: November 10, 2021, 09:46:55 AM »
@MustacheAndaHalf - you yourself on the first page of this thread brought up the "total value of all BTC" and how it is larger than the market caps of Visa and Mastercard. There are no strawmen from anti-crypto, just pro-crypto forgetting what they posted.

He'll now argue he didn't specifically call it too big to fail. And we'll discuss the semantics of what that means for the next 15 posts.  Also what you just wrote isn't word for word what he said so please waste time putting exact quotes in from 11 pages ago.

So I'll ask this again how is the market cap relevant at all?  If you're not arguing it's so big it will stick around.
Need to wrap my head around SCV. Last time I finally took your advice on something important (others were saying it too, but you were adamant about it to the point I actually listened eventually), got me on a "make an extra $500K or more path with no effort" path after I had made the largest financial mistake you can make when you own your home. Made that error twice in my case before finally relenting - I'd have done even better had I listened / fixed it earlier than I did. I think a lot of people forget just how much money you've made members of this forum. So - thanks!

Glad I made it thru I'd say I've approached it less aggressively than my previous huge free money making change.  I'd start with Paul's data. That's where I started and it was just too good to not proceed. If you understand and buy into VTSAX and forget it then I think it's pretty simple to pivot an asset allocation to 8nclude more of a different market sector. I believe the jlcollins mantra that you own the whole market so why bother but the small value you hold in VTSAX is so small bc of market cap it's statically insignificant.

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Re: What do you think of adding a low% of crypto allocation
« Reply #581 on: November 10, 2021, 09:47:42 AM »
What was the market cap for subprime mortgages in 2007 again?

Too high, and a fair point.  Market cap as a stand alone factor is an unwise way to judge something.  However, to not make market cap a consideration seems equally unwise. 

I think the correct statement would be: Don't make any one metric your complete guide for what to invest in.  Instead, look at a variety of factors to make an investment decision, one of which should be market cap. 

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Re: What do you think of adding a low% of crypto allocation
« Reply #582 on: November 10, 2021, 09:51:53 AM »
What was the market cap for subprime mortgages in 2007 again?

Too high, and a fair point.  Market cap as a stand alone factor is an unwise way to judge something.  However, to not make market cap a consideration seems equally unwise. 

I think the correct statement would be: Don't make any one metric your complete guide for what to invest in.  Instead, look at a variety of factors to make an investment decision, one of which should be market cap.

At this given point the size can be argued to be a positive and a negative.  And due to the given history the case would be it's so big now in relation to it's long term avg why wouldn't it fall back to earth. And the positive case is what exactly. It's so big now it has to keep getting bigger? Remain just as big?
Size of this particular collectible is a risk a huge risk in its current state and the pro crypto crowd seems to apply the idea that we apply to 100 years of market returns. It goes up. It's normally at an all time high. I don't think this logic applies.

What's the actual positive argument for the size from the pro crypto crowd. Bc again you didn't answer the question. You just said it should be considered.
« Last Edit: November 10, 2021, 09:54:35 AM by boarder42 »

aceyou

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Re: What do you think of adding a low% of crypto allocation
« Reply #583 on: November 10, 2021, 10:40:50 AM »
What was the market cap for subprime mortgages in 2007 again?

Too high, and a fair point.  Market cap as a stand alone factor is an unwise way to judge something.  However, to not make market cap a consideration seems equally unwise. 

I think the correct statement would be: Don't make any one metric your complete guide for what to invest in.  Instead, look at a variety of factors to make an investment decision, one of which should be market cap.

At this given point the size can be argued to be a positive and a negative.  And due to the given history the case would be it's so big now in relation to it's long term avg why wouldn't it fall back to earth. And the positive case is what exactly. It's so big now it has to keep getting bigger? Remain just as big?
Size of this particular collectible is a risk a huge risk in its current state and the pro crypto crowd seems to apply the idea that we apply to 100 years of market returns. It goes up. It's normally at an all time high. I don't think this logic applies.

What's the actual positive argument for the size from the pro crypto crowd. Bc again you didn't answer the question. You just said it should be considered.

The positive argument would be Metcalf's Law: the value of a communications network is proportional to the square of the number of its users.  When there are more users of something, there is inherent value and stability in the increased nodes.  The increased market cap of crypto is mostly a function of all the new wallets that have entered the space. 

Again, I'm not saying that this is proof that crypto will continue going up.  I'm merely suggesting that it's not something to completely ignore, nothing more, nothing less.  I'm looking for common ground with you and others who have a different overall sentiment on crypto, and I hope this can be a point of common ground:) 

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Re: What do you think of adding a low% of crypto allocation
« Reply #584 on: November 10, 2021, 11:16:30 AM »
Too high, and a fair point.  Market cap as a stand alone factor is an unwise way to judge something.  However, to not make market cap a consideration seems equally unwise. 

I think the correct statement would be: Don't make any one metric your complete guide for what to invest in.  Instead, look at a variety of factors to make an investment decision, one of which should be market cap.

But market cap in the world of crypto means very little, if anything. I gave this example before, but I'll give it again. You can create a cryptocurrency today with a $1T market cap. How? Create a cryptocurrency. Create 1,000,000,000,000 coins. Sell one for $1 (you can even just buy it yourself). Tada, brand new $1T market cap crypto coin on the scene!

It means nothing. There is no transparency about how much leverage is in the system, there is virtually no transparency into stable coins and their backing. Naively multiplying today's price by the number of coins that've ever been mined across all cryptocurrencies is... overly simplistic. It makes for good headlines, I guess, but that's about it.

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Re: What do you think of adding a low% of crypto allocation
« Reply #585 on: November 10, 2021, 12:06:27 PM »
Too high, and a fair point.  Market cap as a stand alone factor is an unwise way to judge something.  However, to not make market cap a consideration seems equally unwise. 

I think the correct statement would be: Don't make any one metric your complete guide for what to invest in.  Instead, look at a variety of factors to make an investment decision, one of which should be market cap.

But market cap in the world of crypto means very little, if anything. I gave this example before, but I'll give it again. You can create a cryptocurrency today with a $1T market cap. How? Create a cryptocurrency. Create 1,000,000,000,000 coins. Sell one for $1 (you can even just buy it yourself). Tada, brand new $1T market cap crypto coin on the scene!

It means nothing. There is no transparency about how much leverage is in the system, there is virtually no transparency into stable coins and their backing. Naively multiplying today's price by the number of coins that've ever been mined across all cryptocurrencies is... overly simplistic. It makes for good headlines, I guess, but that's about it.

That's not how it works gastropod.  In the scenario you created, the market cap of your coin is $1.  Until someone actually buys the 999,999,999,999 other coins for $1 each, they add no value to the market cap of the stock. 

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Re: What do you think of adding a low% of crypto allocation
« Reply #586 on: November 10, 2021, 12:12:25 PM »


It means nothing. There is no transparency about how much leverage is in the system, there is virtually no transparency into stable coins and their backing.

It actually means plenty, and it works mostly like stocks do...
A stock's market cap is the number of shares x the price for each share. 
A crypto's market cap is the number of coins x the price for each coin. 

And yes, it is transparent.  Here is a listing of some of the most common coins, so you can see examples of what I mean:  https://coinmarketcap.com/

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Re: What do you think of adding a low% of crypto allocation
« Reply #587 on: November 10, 2021, 12:21:42 PM »
Too high, and a fair point.  Market cap as a stand alone factor is an unwise way to judge something.  However, to not make market cap a consideration seems equally unwise. 

I think the correct statement would be: Don't make any one metric your complete guide for what to invest in.  Instead, look at a variety of factors to make an investment decision, one of which should be market cap.

But market cap in the world of crypto means very little, if anything. I gave this example before, but I'll give it again. You can create a cryptocurrency today with a $1T market cap. How? Create a cryptocurrency. Create 1,000,000,000,000 coins. Sell one for $1 (you can even just buy it yourself). Tada, brand new $1T market cap crypto coin on the scene!

It means nothing. There is no transparency about how much leverage is in the system, there is virtually no transparency into stable coins and their backing. Naively multiplying today's price by the number of coins that've ever been mined across all cryptocurrencies is... overly simplistic. It makes for good headlines, I guess, but that's about it.

That's not how it works gastropod.  In the scenario you created, the market cap of your coin is $1.  Until someone actually buys the 999,999,999,999 other coins for $1 each, they add no value to the market cap of the stock.

Both examples are incorrect.

You could sell 999,999,999,999 for 1 cent (altogether).  Then if you sell one more coin at 1$ it magically transforms the valuation of all the coins out there to be a trillion dollars - based on the present traded price of the crypto. 

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Re: What do you think of adding a low% of crypto allocation
« Reply #588 on: November 10, 2021, 12:25:11 PM »


It means nothing. There is no transparency about how much leverage is in the system, there is virtually no transparency into stable coins and their backing.

It actually means plenty, and it works mostly like stocks do...
A stock's market cap is the number of shares x the price for each share. 
A crypto's market cap is the number of coins x the price for each coin. 

And yes, it is transparent.  Here is a listing of some of the most common coins, so you can see examples of what I mean:  https://coinmarketcap.com/

That is exactly what was said. A shitcoin can be created out of thin air. I can create 1B shitcoins and hold all of them, but put 1M out on the open market listed for a penny. Idiots chasing shitcoins trade the 1M shitcoins back and forth and bid it up to a dollar.  My 999M shitcoins are now worth $999M in market cap. Now that doesn't mean i can sell them for $999M. I need to drum up enough excitement for my new shitcoin to build demand so i can dump more shitcoin and not tank the price.

Stocks operate the exact same way. Warren Buffet may have 100B worth of Berkshire stock, but he would have to sell it slowly and demand has to be there. Berkshire has some fundamentals of earning dollars. Shitcoin's fundamentals are hopefully someone else wants your shitcoin more than you and will pay more for it. Maybe drum up some excitement about it and talk about mass adoption, store of value, a developing country no one here has ever been to is using it, and talk about how block chain will change everything and shitcoin = blockchain.

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Re: What do you think of adding a low% of crypto allocation
« Reply #589 on: November 10, 2021, 01:10:52 PM »
@MustacheAndaHalf - you yourself on the first page of this thread brought up the "total value of all BTC" and how it is larger than the market caps of Visa and Mastercard. There are no strawmen from anti-crypto, just pro-crypto forgetting what they posted.

He'll now argue he didn't specifically call it too big to fail. And we'll discuss the semantics of what that means for the next 15 posts.  Also what you just wrote isn't word for word what he said so please waste time putting exact quotes in from 11 pages ago.

So I'll ask this again how is the market cap relevant at all?  If you're not arguing it's so big it will stick around.
Need to wrap my head around SCV. Last time I finally took your advice on something important (others were saying it too, but you were adamant about it to the point I actually listened eventually), got me on a "make an extra $500K or more path with no effort" path after I had made the largest financial mistake you can make when you own your home. Made that error twice in my case before finally relenting - I'd have done even better had I listened / fixed it earlier than I did. I think a lot of people forget just how much money you've made members of this forum. So - thanks!

Glad I made it thru I'd say I've approached it less aggressively than my previous huge free money making change.  I'd start with Paul's data. That's where I started and it was just too good to not proceed. If you understand and buy into VTSAX and forget it then I think it's pretty simple to pivot an asset allocation to 8nclude more of a different market sector. I believe the jlcollins mantra that you own the whole market so why bother but the small value you hold in VTSAX is so small bc of market cap it's statically insignificant.

@dandarc , would you like to create a separate discussion topic for those of us with Small-Cap value insights?

dandarc

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Re: What do you think of adding a low% of crypto allocation
« Reply #590 on: November 10, 2021, 01:25:49 PM »
Pretty sure B42 already did that - find it and follow it if you're inclined. Sorry for interrupting this gambling thread with actual investment talk though - I hope to see an actual strategy emerge from your journal, because there sure as hell hasn't been one articulated here in this thread.

ETA: there's actually lots of threads here over many years if you want to get deeper into it. Most recent one is MustacheAndAHalf not making any arguments one way or the other about SCV - just taking aim at B42. But there are many, many other threads on this forum about SCV.

I do think it is at least tangentially relevant here - the merits of allocating any percentage of your portfolio to crypto begs the question "what alternatives are out there". If you want to increase returns beyond the standard advice, SCV tilt is one way to do it, and it is much more proven, and frankly easier, than anything involving crypto could hope to be.
« Last Edit: November 10, 2021, 02:09:58 PM by dandarc »

the_gastropod

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Re: What do you think of adding a low% of crypto allocation
« Reply #591 on: November 10, 2021, 01:36:25 PM »
That's not how it works gastropod.  In the scenario you created, the market cap of your coin is $1.  Until someone actually buys the 999,999,999,999 other coins for $1 each, they add no value to the market cap of the stock.

Sorry, but that is precisely how it works. For instance, the 1M bitcoins Satoshi mined himself are absolutely counted towards Bitcoin's market cap. No money needs to have traded hands. You can mine 1T coins, sell 1, and the market cap will be 1T x the selling price. In practice, you'd probably sell more than just one, as Index explained. Mine 1T, sell 1M, and enjoy your sky high new net worth!

Both examples are incorrect.

You could sell 999,999,999,999 for 1 cent (altogether).  Then if you sell one more coin at 1$ it magically transforms the valuation of all the coins out there to be a trillion dollars - based on the present traded price of the crypto. 

This is not true. I think this is very important to understand. You do not have to sell all the tokens. This is significantly different from an IPO, where a set number of shares will all be up for sale (and the market cap only references the number of shares offered). With a cryptocurrency, you can mine an arbitrary number of tokens, sell an arbitrary number, and have a colossal (and, clearly, ridiculous) market cap. Shiba Inu and countless other "shitcoins" have exploited this fact, to fleece unsophisticated crypto "investors".

It actually means plenty, and it works mostly like stocks do...
A stock's market cap is the number of shares x the price for each share. 
A crypto's market cap is the number of coins x the price for each coin. 

And yes, it is transparent.  Here is a listing of some of the most common coins, so you can see examples of what I mean:  https://coinmarketcap.com/

Sorry, I probably wasn't clear enough. Market cap works similarly to stocks. But a business's market cap is a bit more realistic. There's a reason we don't refer to the market cap of the USD—it doesn't really make any sense. The market cap of a business is the market's best estimate of the value of a company. It's rather common for businesses to purchase other businesses at the full value of the market cap. Add to this fact that stocks are regulated and have a lot more actual transparency due to these regulations. Because of them, we have a much better grasp of actual trade volume, wash trading is illegal, margin is transparent, and market cap is denominated by shares in circulation—which can be readily measured.

The transparency I'm referring to isn't with respect to the market cap of these things. It's referring to: how much leverage is there? How much actual volume is there? How much is wash traded? Much of the volume is in the form of stable coins (USDT, USDC, etc.) What backs these? Publicly traded companies have accounting regulations, and banks have audits. Crypto has none. There's this widespread claim that it's all transparent, public to see on the blockchain!, but that's a rather unimportant aspect in the grand scheme of things. What's actually happening on the exchanges, between USD and these cryptocurrencies is very much a question mark.
« Last Edit: November 10, 2021, 01:59:12 PM by the_gastropod »

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #592 on: November 10, 2021, 01:58:32 PM »
Both examples are incorrect.

You could sell 999,999,999,999 for 1 cent (altogether).  Then if you sell one more coin at 1$ it magically transforms the valuation of all the coins out there to be a trillion dollars - based on the present traded price of the crypto. 

This is not true. I think this is very important to understand. You do not have to sell all the tokens. This is significantly different from an IPO, where a set number of shares will all be up for sale (and the market cap only references the number of shares offered). With a cryptocurrency, you can mine an arbitrary number of tokens, sell an arbitrary number, and have a colossal (and, clearly, ridiculous) market cap. Shiba Inu and countless other "shitcoins" have exploited this fact, to fleece unsophisticated crypto "investors".

Thinking about it further, I do believe that you're right.  The coins don't need to be sold, just mined.

dandarc

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Re: What do you think of adding a low% of crypto allocation
« Reply #593 on: November 10, 2021, 02:02:00 PM »
Both examples are incorrect.

You could sell 999,999,999,999 for 1 cent (altogether).  Then if you sell one more coin at 1$ it magically transforms the valuation of all the coins out there to be a trillion dollars - based on the present traded price of the crypto. 

This is not true. I think this is very important to understand. You do not have to sell all the tokens. This is significantly different from an IPO, where a set number of shares will all be up for sale (and the market cap only references the number of shares offered). With a cryptocurrency, you can mine an arbitrary number of tokens, sell an arbitrary number, and have a colossal (and, clearly, ridiculous) market cap. Shiba Inu and countless other "shitcoins" have exploited this fact, to fleece unsophisticated crypto "investors".

Thinking about it further, I do believe that you're right.  The coins don't need to be sold, just mined.
Kind of like the share's the founders retain after an IPO - included in market cap computations whether or not they are ever sold. Of course when we're talking about real companies, insiders with large numbers of shares have regulatory requirements to meet when they want to sell. And now we're back to crypto is a stupid investment - the lack of regulation is a bug and not a feature.
« Last Edit: November 10, 2021, 02:11:08 PM by dandarc »

Telecaster

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Re: What do you think of adding a low% of crypto allocation
« Reply #594 on: November 10, 2021, 05:17:59 PM »
What was the market cap for subprime mortgages in 2007 again?

Too high, and a fair point.  Market cap as a stand alone factor is an unwise way to judge something.  However, to not make market cap a consideration seems equally unwise. 

I think the correct statement would be: Don't make any one metric your complete guide for what to invest in.  Instead, look at a variety of factors to make an investment decision, one of which should be market cap.

I've never made an investing decision regarding a single stock based on market cap, ever.   Simply because market cap says nothing about the value of the underlying asset.  I suppose you could say market cap is related to the share price, so that plays into metrics like P/E or P/E.  But market cap by itself tells you nothing.  I don't know the market cap of any of the stocks I own, unless I happen to see it in a headline or something. 

With stocks, the share price is ultimately tied to the expectation of future profits.  With Bitcoin, the price is tied to supply and demand.  If more people want to buy it, the price will go up and vice versa.  So there's not even a tangential connection to Bitcoin price and market cap.   If we look at gold prices, there was a big run-up in the 1970s as the US went off the gold standard and people started buying gold as an inflation hedge.   The price went up 10x or something over the decade.  But as inflation cooled, so the gold market.  And if I'm not mistaken gold has never returned to its inflation-adjusted peak price. 

If anyone is interested in speculating on Bitcoin, they should ask themselves if the think more people will want to own it in the future than own it right now.  The answer may be "yes."  But keep in mind there is a finite limit on the number of people who want to own Bitcoin.   That means there is a finite limit on the price as well.   

Telecaster

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Re: What do you think of adding a low% of crypto allocation
« Reply #595 on: November 10, 2021, 05:50:10 PM »
The positive argument would be Metcalf's Law: the value of a communications network is proportional to the square of the number of its users.  When there are more users of something, there is inherent value and stability in the increased nodes.  The increased market cap of crypto is mostly a function of all the new wallets that have entered the space. 

Again, I'm not saying that this is proof that crypto will continue going up.  I'm merely suggesting that it's not something to completely ignore, nothing more, nothing less.  I'm looking for common ground with you and others who have a different overall sentiment on crypto, and I hope this can be a point of common ground:)

But are they users of crypto or owners of crypto?   I think we're kind of saying that same thing: more owners, the higher the price.  But I don't think Metcalf plays into it because most people don't use crypto for anything.   For example, this thread is about holding crypto as part of an investment portfolio.   

maizefolk

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Re: What do you think of adding a low% of crypto allocation
« Reply #596 on: November 10, 2021, 06:07:11 PM »
The Mt Gox hack caused a 99% drop in Bitcoin's value in 2011.  There was an 84% drop that ended just 3 years ago.  Is that within your comfort zone?
https://finance.yahoo.com/news/7-biggest-bitcoin-crashes-history-180038282.html

The 99% drop of the quoted price of bitcoin at MtGox lasted all of a few minutes when somebody tried to game the withdrawal limits (at the time people could withdraw maximum of $1,000 worth of bitcoin a day) by zeroing out the price with stolen bitcoin. They sold enough of someone else's coins to use up all the liquidity in the market. It turned out MtGox also had a less advertised 2,000 bitcoin/day withdrawal limit so this was only a modest success for the person trying to abscond with their ill gotten gains. Way more than you ever wanted to know about the June of 2011 MtGox flash crash: https://blog.bitmex.com/the-june-2011-flash-crash-to-0-01/

In any case, I don't think it's relevant when asking people about their comfort zones because it was over before almost anyone had time to see the low price and react.

The much scarier bit from a bitcoin-as-an-investment perspective than a short term flast crash was that afterwards MtGox was shut for several weeks which essentially ended USD:BTC price discovery until they reopened. Since 2014, there is no single exchange that has the power to end price discovery between US dollars and bitcoin the way MtGox did a decade ago.

Radagast

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Re: What do you think of adding a low% of crypto allocation
« Reply #597 on: November 10, 2021, 06:26:31 PM »
If an asset were to experience a drawdown of 99%, that would be a deal-breaker for me. I tolerate the stock market despite its 50%-ish drawdowns that happened three times in my lifetime because I think I have the discipline to hold stocks through those drawdowns.

If--starting from equal weights--stocks drop 50%, and crypto drops 80%--suddenly it's a portfolio that's 84% stocks, and I couldn't imagine rebalancing to 50-50 at that point, I'd probably wonder what I was doing with so much crypto to start with.

Also, I've started posting my crypto trades over in a journal, check them out!
The Mt Gox hack caused a 99% drop in Bitcoin's value in 2011.  There was an 84% drop that ended just 3 years ago.  Is that within your comfort zone?
https://finance.yahoo.com/news/7-biggest-bitcoin-crashes-history-180038282.html

The 99% drop of the quoted price of bitcoin at MtGox lasted all of a few minutes when somebody tried to game the withdrawal limits (at the time people could withdraw maximum of $1,000 worth of bitcoin a day) by zeroing out the price with stolen bitcoin. They sold enough of someone else's coins to use up all the liquidity in the market. It turned out MtGox also had a less advertised 2,000 bitcoin/day withdrawal limit so this was only a modest success for the person trying to abscond with their ill gotten gains. Way more than you ever wanted to know about the June of 2011 MtGox flash crash: https://blog.bitmex.com/the-june-2011-flash-crash-to-0-01/

In any case, I don't think it's relevant when asking people about their comfort zones because it was over before almost anyone had time to see the low price and react.

The much scarier bit from a bitcoin-as-an-investment perspective than a short term flast crash was that afterwards MtGox was shut for several weeks which essentially ended USD:BTC price discovery until they reopened. Since 2014, there is no single exchange that has the power to end price discovery between US dollars and bitcoin the way MtGox did a decade ago.
Ok, but does anyone seriously expect the crypto market to not lose 99%? The total US stock market lost 87% in the Great Depression. Amazon lost 95% in the .com crash. Any country's stock market that has been around a bit has lost 90+%. Do you think crypto has more fundamental support than any of those?

I think not, and it will crash 99.9%. The question is whether it will 100X first.

maizefolk

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Re: What do you think of adding a low% of crypto allocation
« Reply #598 on: November 10, 2021, 06:41:58 PM »
Ok, but does anyone seriously expect the crypto market to not lose 99%? The total US stock market lost 87% in the Great Depression. Amazon lost 95% in the .com crash. Any country's stock market that has been around a bit has lost 90+%. Do you think crypto has more fundamental support than any of those?

I think not, and it will crash 99.9%. The question is whether it will 100X first.

I'm just adding context to a statement about the history of the price volatility of bitcoin that was otherwise misleading. What the future holds I don't know, but I do know we've got a better chance at guessing what the future holds if we're at least as accurately informed about what the past holds as possible.

Radagast

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Re: What do you think of adding a low% of crypto allocation
« Reply #599 on: November 10, 2021, 07:16:00 PM »
If I wanted to make a guess about the future of the crypto, I'd ignore everything it's price has done so far and read:
Mandelbrot: The Misbehaviour of Markets
Taleb: Fooled by Randomness, The Black Swan, Antifragile