Absolutely true, but that's also the case of most stock trading. If you're not buying a stock expecting dividends, but instead hoping to just sell it for more later, that's not much different than speculating on BTC.
That's not even remotely true. Stocks are directly tied to the performance of a company providing goods or services. There's something you can directly gauge.
At BEST you could equate it to currency trading, but even THAT is tied to real-world governments and their policies nine times out of ten. Bitcoin is literally trading on the belief that a bunch of people are going to switch to it instead of the dollar or insert your currency of choice because...?
> That's not even remotely true. Stocks are directly tied to the performance of a company providing goods or services. There's something you can directly gauge.
I'm no stock expert but isn't the majority of a stock's value due to speculation on what it will be worth one day in the future?
I think the parent made a valid point. Sure, stocks are generally easier to "gauge" (and therefore lower risk) but you're still just speculating that it's future price will be greater than it's current price after all.
> I'm no stock expert but isn't the majority of a stock's value due to speculation on what it will be worth one day in the future?
That's true, but stock can represent a portion of an asset with production potential. A factory or a mine or a dot-com. Bitcoin is pure fiat money.
If I owned all stock in AAPL, I would own one of the most valuable companies in the world which would yield me several billion USD in profits every year. If I owned all bitcoins my asset would be completely worthless because there would be no market for it.
I defer to Warren Buffett's quote [1] on Gold - an asset similar in it's uselessness:
> Today the world's gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce -- gold's price as I write this -- its value would be $9.6 trillion. Call this cube pile A.
> Let's now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world's most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-aroundmoney (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?
>If I owned all bitcoins my asset would be completely worthless because there would be no market for it.
Of course, but you could say the same about having the entire internet to yourself. Or being the only person on Facebook. That's just a function of how networks work.
> isn’t the majority of a stock's value due to speculation on what it will be worth one day in the future?
It’s more accurate to say that it’s a reflection of the value to still be generated by the productive capacity that your share represents minus the discount-rate of future money. That’s mostly a multiple of expected earnings (plus the value of capital) which is why earnings calls are so important and heavily regulated. If you buy a stock you’re saying that you think the market has undervalued it, or that it’s fairly valued and you expect it to grow with the economy as a whole.
In a pure gambling scenario like a lottery or roulette wheel all the information you have to go on is contained within the game itself. Increasingly crypto-trading is less about the fundamentals and more about the trading game itself. We’ve watched Ethereum go from one screw up to the next: TheDAO hack and rollback, the first Parity wallet hack, the “I killed it” bug, all ethereum contracts being hobbled for a weekend by a cartoon cat breeding game. Every time there is a big discussion here about the fundamentals of the tech, and how flawed the design is, how there are better approaches or projects. Yet the price is totally disconnected and responds more to being listed on a new exchange than any consideration of the viability or usefulness of the thing itself.
It’s why technical trading, which is close to reading tea leaves when it comes to usefulness on equity markets, actually seems to work in crypto-asset markets. So many people fall back on in the absence or neglect of external information that it that it becomes a self-fulfilling prophecy.
With stocks, you can more easily separate out the actual performance of the company from speculation (profits vs. stock price), and in the worst case they have assets that provide some intrinsic value. They also operate in a more stable legal environment - it's unlikely that new regulations would instantaneously devalue companies (which could happen with crypocurrencies as they still aren't a settled part of the legal world), and statements made by the company (projected revenues etc.) are regulated.
You can certainly draw parallels between stocks and crypocurrency speculation, but I'd say the differences between the two are fairly fundamental.
That depends how you trade. They might be based on something, but sometimes either THEY are not (look up RIOT as a stock symbol) or those trading don't at all care (day traders).
Look, the reason why stock technical analysis exists is because people sometimes want to make money independently of their perceived value of the underlying asset.
Instead, they try to enter a poker game of mass psychology, some armchair, speculative game theory. Don't kid yourself. While the image of the responsible Warren admiring or index-fund, Boglehead type is a warm one, most of the rest is as speculative and manipulative as Bitcoin.
That is all true in a way, but stocks are still a projection of a projection of a projection ... of future performance of the underlying company. Only bitcoin is turtles all the way down.
I also find it hilarious that people tell that BTC should rise in value because in future some other(!) cryptocoin may/will replace fiat. Because even by their own admissions current BTC state doesn't allow to use it as a working currency. "Hey, Tesla is a future of automotive, lest buy Dacia shares and pump it to the moon".
Bitcoin isn't growing in value because it represents shares of a business that makes real money: it's growing in value because demand is increasing. You can directly connect AAPL's profitability with the value of the phones and computers they produce. Bitcoin does not have such an analogue. The "asset" behind Bitcoin is one part the group of miners who consider to keep the ledger going, one part the ability to facilitate a trade using that shared ledger, and three parts speculation. It's the speculative component that makes it, and all other cryptocurrency, more gambling than investment.
> Bitcoin isn't growing in value because it represents shares of a business that makes real money.
With bitcoin, you’re investing in whomever the individual is on the other side of your trade. I hope some of these techies become rich enough to take government positions.
Why do the assets behind a company matter? In the event they go bankrupt and have a liquidation event, first their assets will go to loan-providers, then to bond-holders, then to private preferred stock holders, then finally if there are crumbs remaining, to public common stock holders.
>Bitcoin isn't growing in value because it represents shares of a business that makes real money
Neither is Tesla making real money. Or Amazon.
Yet their stock prices continue to grow from speculation about how valuable they might be one day in the future.
There's nothing inherently wrong with that. It's the same with crypto.
For sure those two companies are "safer" bets than most (or perhaps all) cryptos... but the underlying principle is exactly the same. It's just degree of risk involved.
isn't the killer app for btc tax evasion and laundering? isn't this how wealthy chinese are getting money out of the country and how russians are routing around sanctions? is the rise in btc therefore perhaps related to paradise papers and banking coming under greater regulation globally? if this is the case, those use cases aren't going anywhere and maybe represent strong fundamentals
Holding USD is another form of gambling. Buying a house to live in is gambling.
The thing is that USD can be used to pay taxes in April, a house provides you shelter, a share of APPL entitles you to small fraction of the company... And a bitcoin entitles you to a mathematical number, with nothing backing it.
Not much! Which is the point. You choose index funds based on lower expense ratio, how spread they are in the market (more spread means lower risk and more likely to just replicate performance of the overall market; less spread means higher risk and less likely to replicate the performance of the overall market), and how much you trust the institution running it.
At BEST you could equate it to currency trading, but even THAT is tied to real-world governments and their policies nine times out of ten. Bitcoin is literally trading on the belief that a bunch of people are going to switch to it instead of the dollar or insert your currency of choice because...?