[SpicyLemonZest]

The question isn't whether the price is right or wrong, but what it's a price of.

For example, the market cap of Tether is a couple billion dollars. This doesn't mean that Tether as an abstract concept is worth a couple billion dollars, or even that market participants think it is. It just means that there are a couple billion Tether tokens floating around, and people are confident that they'll get $1 for their Tether if they want.

[TaylorAlexander]

The same is true of the stock market, or regular “fiat” currency.

I guess the question is, does it matter if it’s “not really worth it”?

The fact that people have been willing to pay so much for US dollars or British pounds or Japanese yen has meant a lot in this world.

Isn’t it justified to awe at the power of a decentralized currency? Certainly it’s in the realm of heady ideas.

[airstrike]

> The same is true of the stock market, or regular “fiat” currency.

No, it's not. Stocks are priced at the present value of future cash flows generated by the underlying assets.

Fiat currency has no value in and of itself. Foreign exchange is essentially determined by the difference in interest rates between countries (and investors' beliefs as to which way those interest rates will go in the future). Those interest rates are (indirectly) related to what is produced by each country.

Bitcoin is just plain make-believe.

> The fact that people have been willing to pay so much for US dollars or British pounds or Japanese yen has meant a lot in this world.

People also gave Bernie Madoff ~$65 billion dollars and it was all make-believe as well.

> Isn’t it justified to awe at the power of a decentralized currency?

Decentralization for decentralization's sake isn't inherently valuable. Or at least I wouldn't argue that to be an axiomatic truth. The burden of proof is on the bitcoin bulls.

[gfodor]

Stocks are not priced at the present value of future cash flows of the underlying asset. You're conflating valuation metholdogies with price. Stocks are priced at whatever the market decides, which may or may not be based at all on market participants' assessment of future cash flows.

[airstrike]

I'm not conflating things. "What the market decides" is either the PV of future cash flows or investors' expectation of what other market participants estimate the PV of future cash flows to be. It's turtles all the way down.

Markets aren't perfect but they are efficient; feel free to believe in the strength of that efficiency as you see fit, but in any case there is an underlying asset that generates cash flows.

You can nitpick arguments in my response, and I'll be happy to clarify any omissions, but my whole point is that crypto has no similar underlying asset and is therefore an entirely different beast.

[gfodor]

You've moved the goalposts I think -- you've conceded that what the market decides is in part based on what market participants' think other future participants will do. This means that the price of a stock is not the discounted future cash flows of a company -- the price of a stock is what the market will pay for it. There is no reason to assume present or future market participants will pay a price for a stock based upon a specific valuation model. If you even consider for a second how most people invest and how the derivative markets work you should call into question the idea that the stock market should ever be expected to converge universally on a price based on such a simplistic valuation model such as discounted future estimated cash flows. It's an unfalsifiable proposition anyway, so is a fairly useless mental model imho.

[airstrike]

I've not moved the goalposts. I'm just saying the fact that stocks are also driven by people's perceptions of other people's perception of the stock's true price doesn't negate the fact that the discounted value of future cash flows ultimately underpins the asset's value.

For what it's worth, this is my field of expertise. I work at a top bank in Wall Street and assure you discounted cash flows isn't a "useless mental model". Just ask the Court of Chancery in Delaware.