The article looks like some kind of ad for 21shares, which isn't even primarily an on chain analytics firm. I assume it is looking at on chain data for liquid btc to see what percentage of that is currently being held at a price lower than when it was last transacted.
On-chain data is basically useless when it comes to Bitcoin investors. The vast majority of people who hold Bitcoin for price speculation do so through an exchange like Coinbase or Binance. There the Bitcoin is just held in an exchange's wallet, commingled with millions of other customers, and the exchange holds a private record of each customer's individual balance. The exchange generates a wallet address for a customer only when they want to send crypto to their account.
It's the civil libertarians, criminals, and tech aficionados that hold Bitcoins in unhosted wallets. When there's on-chain activity for these groups, though, it's usually a transaction rather than a trade. They hold Bitcoin for the activities they can do with it, not for any hope of the price rising.
Sure you can. Whatever those transactions of bitcoin represented to the buyer and seller, they were worth a certain value on a certain exchange at a certain time. That has a different value on a certain exchange now, hence the evaluation of a delta.
Whether the bitcoin holder sees it as a loss of value is beside the point, since purchasing in bitcoin is hard still.
It's like using Euros in the US. Some folks accept them, but generally dollars are preferred.
And used all the time for Forex, no? Currency transfers need not be tracked to happen either? Yet we can still say how strong the yen is relative to the peso.
I’ll give you an example, I bought at BTC $36k last month and just withdrew it from exchange after all the fiat cleared in from the legacy banking channel today. It hit the chain when BTC was $42k, so these jokers would think the cost was 42. You can’t get an accurate picture from on chain data alone.
Not really the same, because you can look at what currencies are actually being traded for. These researchers are not looking at bitcoin trades.
A better analogy would be like looking at clearing house data, and examining the net number of shares bought or sold at each broker, to determine how many individual investors are in the red. Even though the price changed throughout the day and you're only looking at the price at settlement time. And the net doesn't tell you anything about how many investors actually traded.
The data these statements are based on seem dubious? Or is that just me?
> if you bought in 2014, we would know that [someone] bought at 5pm CDT
But if I bought BTC on an exchange, e.g. Coinbase, then that purchase would not necessarily be recorded on the blockchain, right? Just CB internally updating a value in their DB. All BTC buying and trading would be a larger superset of the collected data.
Also if I transfer 1 BTC from one of my wallets to another, then that counts as a buy/sell transaction for this dataset!
It also implies that Bitcoin, at the range between $42K (current price) and $65K (all time high), gained half its user base, they were all first time purchases, and yet despite all that growth and buying, and division of liquidity, the price still fell 30%.
It has an intrinsic value that can easily be explained. You absolutely need it for many uses (electronics, medical devices, jewelry in practice, ...).
So there is always gonna be a buyer at a non-zero price.
Bitcoin, on the other hand, has a few things going for it (fixed monetary policy, decentralization, permissionless, ...) but I am not sure about the intrinsic value. The only thing that I can think of is its network effect and derived amazing hash power that secures it. You can't recreate that easily in a new cryptocurrency.
I'd wager the intrinsic value of gold has little to do with its valuation, since the vast majority of it is used for banking and jewelry. Contrast that with metal from the platinum group, like palladium, which are heavily use for things like catalytic filters.
From an industrial point of view, gold is just fancy copper.
Gold is useful for less tangible purpose because it's accepted, and it's accepted because it's useful. BTC is similar in that respect.
Unlike the guy replying to you I think BTC has nothing going for it in practice when compared to gold. Gold has value because every government and market agreed on it. It's regulated and safely stored.
BTC is theoretically decentralized. In practice it goes through wallets and exchanges which get robbed all the time. It can't be used for any transaction because it's expensive so it's no replacement to currency. Even buying gold physically is cheaper than buying BTC (transaction costs). It's even less private than gold. I can walk into a shop, pay cash for gold and there will be no record of the transaction. With BTC the government just tracked crooks who moved BTC through the dark web and through private currencies. It leaves a huge, traceable digital trail.
Finally, BTC isn't regulated. That means a lot of the transactions are internal wallet to wallet transfers meant to "pump" the market. That's legal for BTC. So the idea that it's value is "objective" is BS.
The only people who would go into BTC in these conditions are crooks and useful idiots.
BTC was a smart idea that just doesn't work in reality. Right now it's running on the fumes of people who "believe" in it since it keeps bouncing back up. Faith based monetary systems run the world, but unlike BTC we have government to support them when we lose faith.
Equities are investment vehicles. If you choose to trade them, that's your decision - but you will lose, on average. 95% of day traders lose money [1]. Zero-sum financial instruments like futures and options and cryptocurrencies are trading vehicles. These are not the same.
Both are trading vehicles and are treated the same by traders [1] similar to the VIX. Hedge funds, asset management companies and institutions spend their time and their clients money trading, not investing [2]. For groups like these, trading is where the money is.
The VIX is a synthetic index whose value is derived from the implied volatility of the S&P 500 index options (computed from the premium of around-the-money options on the SPX cash index a certain amount of time ahead), without fundamentals, tradeable only via futures contracts and ETFs that own those futures.
It's a second derivative tradeable only via third derivative.
This is very very zero-sum.
The overwhelming majority of these actively managed funds fail to beat the returns of the S&P 500. [1]
In fact over 15 years 92% of actively managed large-cap funds trail the returns of the S&P 500.
A lot of semi educated traders frankly don't care. They follow crowd psychology based idioms with risk management. Cryptos are just a more volatile asset class to profit on.
Ok, but Twitter is a company with intrinsic value?
Not all equities will be a good investment but equities in aggregate are positive sum. Cryptocurrencies are negative sum or zero sum depending on consensus mechanism.
Wouldn't it be expected for people in profit and people in loss to converge 50/50 as amount of trading increases? If it was a guranteed profit, everyone would pile in. If it was guaranteed loss, everyone would leave. The middle point represents the fact that no one can truly predict the future price accurately.
Not really, because not all people trade the same amount and not all trading happens equally distributed at all price levels. You can have relatively few winners leave the larger majority holding the bag.
that assumes that the competency of all the participants are relatively similar, and thus, the trades on average net out zero profit for everyone. That's not what i would observe empirically - like intelligence or athletic distributions, the distribution of competency in this arena is probably like a long tail, with a few people making the most profits and a lot of people losing out.
Bitcoin is down 18% on a real dollar 1-year basis, during the most inflationary period since the 80s, and has underperformed the NASDAQ for much of the last 4 years.
- End of 2017, BTC hit 19K. Today, it's 42K. That's 2.2X!
- End of 2017, QQQ hit $150, today it's $345. That's 2.3X.
- End of 2017, TQQQ hit $11. Today its $53. That's 4.8X.
This is unsurprising. The cost to mine it is lost.... that isn't coming back. So it is a supremely negative sum game. Clearly a lot more money has been lost than made, and that which has been made is essentially borrowed from the future.
the cost to mine is a separate cost to the lost money in trading.
The cost to mine is somewhat "fixed" - and tbh, a miner would not choose to lose money to mine, but just stop mining if their source of electricity is too high for profit.
The trade losses are speculative losses, and it comes from the "wins" that someone else on the other side of the trade.
But Bitcoin has appreciated in value, from < $1 to $42,000. In other words, Bitcoin has a market cap of ~$800B, so for Bitcoin as a whole to be "supremely negative sum" as you say, Bitcoin mining hardware would need to have cost > $800B, which seems... unlikely.
Market cap is most recent trade price * supply. It's not a reflection of how much money or value can be withdrawn from the market, that's more a function of market depth.
For instance if I create my own token with a supply of 1,000,000,000 and I sell 1 token to my buddy for $1, I'm, now a "billionaire." That's market cap. Where did that come from, is what you're asking. The answer is, whoever controls the most recent transaction.
However, the total market for my shitcoin is my buddy, and the total amount I can get back out is $1. That's a function of market depth.
Yes and no. I'll admit market cap alone doesn't demonstrate this, but market cap + trade volume does, unless you have reason to believe the majority of transactions are wash trading.
In your example it's $1 between two parties, in Bitcoin's case it was $17B over the last 24hrs between a huge number of parties, which indicates that a significant amount of value can be pulled out of BTC.
But where did the money come from to create an $800B market cap? It came out of investor's pockets. The early ones might have made more money than they lost, but the later ones lost money.
If I bought BTC at $50,000 and still own some, I've "lost" money but not actually since I haven't sold it. This is the reality for 100% of owned Bitcoins. There is $800B worth of USD in Bitcoin that has no "loss" side to it because at any given moment they are owned by people who have clearly not sold their share.
When the market cap goes down there is of course loss, but in Bitcoin's 13 year history it has gone from a $0 market cap to an $800B market cap, which means it is massively a net gain for people who have held Bitcoin.
Of course this changes if Bitcoin is revealed as the massive Ponzi scheme that so many HNers say it is / want it to be, but until that actually happens and BTC goes to 0, then as long as the market cap is above the cost of mining hardware it is a net gain for people who have held / continue to hold Bitcoin, not "negative sum". Negative sum would be:
(market cap - mining hardware) < 0
As pointed out by the other poster it is a bit more complicated than just market cap as market cap can be "gamed", but not really in the case of something with a healthily circulating supply, which is true of BTC at the moment.
I mean, it's not really a surprise [0] when you have lots of people expecting BTC to 100K by 2021 and then buying BTC at $69K and holding it all the way down. Then they end up thinking that DOGE will be over $1 by the end of August 2021 and betting $10K with random people that it will happen. Well [1].
Speaking as someone who mined BTC profitably with a GPU and has my ETH mining rig churning away with gminer on flexpool.io right now, I sell everything I mine as soon as I get it.
I see no legitimate utility in it. It has enabled scourges on society like ransomware, wasted massive amounts of energy.
web3 is based on the false premise that people want to make 100 decisions per day to pay half a cent to read someone’s blog.
Big money NFTs are generally just a simple tax scam. Person X makes 10 NFTs, sells one to Person Y for $10,000. Donate the 9 remaining for a $90,000 write-off. Person Y does the same thing making 10 NFTs, selling one to Person X for $10,000. No money changes hands and only one losing out are other taxpayers. Other people see NFTs selling for big bucks and start buying them too thinking they’re investing rather than misunderstanding the scam.
The most ridiculous claim I see repeated now is that blockchains like BSV will replace cloud services like AWS.
I’ve spent many years making a modest amount of money with it; I just see all of it as just nonsense.
If you use a donation as a write-off you need an entity to claim receipt and value of the donation, since the donee would now have to claim the donation as an asset. If you’re asserting person X and Y are both selling and donating to each other, the IRS is not so dense as to let that fly. Alternatively, who are these entities that are claiming $90k of worthless NFTs as assets and getting taxed?
There are 1.6 million 501c3 organizations in the U.S. They range from huge to some dude who filled out some paperwork.
You’re right that the IRS has tightened up requirements but I disagree that the IRS isn’t dense. They’re horribly understaffed and enforcement has gone by the wayside.
> The most ridiculous claim I see repeated now is that blockchains like BSV will replace cloud services like AWS.
Especially since I ran the numbers in a different thread, and BSC is 625,000X more expensive than AWS lambda and offers the same level of centralization and trustlessnesness - and worse uptime guarantees.
Interesting tax evasion idea but the thing I don't get is who they would donate it to. Would they set up some fake non-profit? Otherwise who would take it? I'm sure the first thing a non profit would do is try to sell it to convert it to real money and then realize it's worthless and they didn't just get a $90,000 donation.
This is a snapshot statistic that is rather shallow. The more interesting point is the distribution of wealth in BTC. The majority of "investors" are scrounging to buy a fraction of a single bitcoin, while wealthy VCs, family offices, LLCs, etc etc are owners and are continual buyers of hundreds and thousands of bitcoins. Just think about how much BTC the Winklevoss brothers alone must own, and then add just two more people - Marc Andreesen and Chris Dixon. I'd love to know how much BTC these four men alone are in possession of...
At the end of the day stocks represent shares in actual companies that make profits and losses. Obviously this doesn't prevent speculative bubbles (exhibit A: GME), but sooner or later the tide goes out and we'll find out who's been swimming naked.
Well, duh! Bitcoin produces nothing, it shouldn't really be called an investment in the first place. Look at the other "investment" that people like: gold. Likewise, it does very badly for most buyers.
He allows it in his country, which has a lot of fossil fuels and a giant, unusable freezer called Siberia. This is a nice PR move, and a good way to get some money from hard to track sources, which may be a good idea if you are trying to start a war, but it doesn't mean that Putin is good sources of inspiration.
Interesting that supporters of the currency of freedom and the future rush in to flutter their eyelashes at any oligarch and dictator that looks their way from across the bar.
[edit] Well if Vladdy-P - 16 year veteran of the KGB - is doing it then I guess I must have been wrong this whole time. Thank you for setting me straight. WAGMI.
> Even more interesting that some people think Putin is an easily swindled dreamer.
I didn't say that at all. I maintain he doesn't support the espoused goals of advocates.
> Criminals usually lead technology adoption, as they don't have any moral or legal constaints, real or imagined.
That doesn't mean it's for the better, though, haha. Just pointing at the times that it did would be a form of survivorship bias. Criminals were quick to adopt fentanyl, human trafficking, and shooting your business rivals after all.
Let's face it, Putin's goal is to harm the west. So you could say his adoption of this technology is likely to undermine the west. Whether that's directly through the adoption of the technology or the perception it creates.
given that bitcoin is no longer a currency and its lack of liquidity, i'd say you're in the red until the moment you exit for more than your original position
If that's true it means that all those people got in while Bitcoin was north of $50k. Which is ridiculous. What were they expecting, to reach a fucking million each?
If i'm understanding the methodology here, the assertion that it translates to investors is really flawed. You can't assume:
- a transaction appearing on chain constitutes a buy
- that the transaction represents 1 investor
- that 1 investor = 1 address