[aardvarkr]

I agree with your premise but the s&p isn’t going up by 7% right now and the author is just taking a calculated risk. That’s his business. If he thinks Tether is going to collapse then he’ll make a massive return on his investment.

He’s essentially gambling $46/yr to get a $450 payout if Tether collapses.

[OscarCunningham]

> s&p isn’t going up by 7% right now

It always sounds weird to me when someone uses the present continuous tense to refer to the rate of change of stock prices. Like, how are you taking the one-sided derivative of a fractal?

[aardvarkr]

I bet you’re fun at parties. The right way to phrase it would be to throw in a “YoY” but clearly you care too much to ever let someone on the internet dare to make such a pedantic mistake. Try contributing to the conversation instead of detracting from it.

[tedunangst]

Pick a shorter timeframe like one month, calculate annualized rate.

[mgaunard]

That's a bad idea, since equities have a lot of calendar events and a given month is never representative of a year's performance.

[OscarCunningham]

Then you'd say 'the S&P hasn't been going up at 7% recently'.

[tedunangst]

The pedantry hasn't been making you a more effective communicator recently.

[TheRealPomax]

Welcome to finance: if you're not being pedantic, you're probably trying to sell a lie. Verb tense absolutely matters.

[tedunangst]

Does anybody here believe aardvarkr was trying to sell a lie with their casual verb tense?

[bagacrap]

pick 3 months and try it.

[jmathai]

Humans are terrible at gauging risk. I think the parent comment was highlighting the risk component of this.

VTSAX-and-chill is gambling also. But the risks are so wildly different that Tether is closer to buying lottery tickets than index funds.

Everyone does what they want with their money but there seems to have been an explosion of “massive returns” content that I think is generally harmful.

(I’m neither saying that this post is or isn’t harmful.)

[wjnc]

I’ll just go out and enjoy “neither A or B” instead of “not A or B” or “A nor B”. I had to parse “neither is or isn’t harmful”.

[dghlsakjg]

I don't have a deeply researched position behind this, but my feeling has always been that (long term, I say again, LONG TERM) VTSAX and chill is the same bet as holding cash.

If your VTSAX ends up being worth nothing long-term, there is almost certainly no chance that your currency survived the same event.

[jmathai]

Curious about this. The geometric mean of return for the S&P500 is about 7% over several decades. The longer the time horizon the more likely you’ll hit 7%.

Why do you think it’s similar to holding cash?

[dghlsakjg]

Not that its the same return as holding cash (clearly that isn't true), just that if VTSAX doesn't pay off as a bet long term, it will be because the dollar has ceased to be valuable.

Basically, a bet on VTSAX is underpinned by faith in the dollar. If either one crashes the other is worthless.

[edmundsauto]

The most important line in finance is "Past performance is no guarantee of future results". This is generally treated as a warning label: Don't assume an investment will continue to do well in the future simply because it's done well in the past.

However, what it really means is that nobody can predict future performance, even with historical data. I think it's negativity bias that this phrase is used to apply to downside; it should also be used when considering upside. (The reason, I think, is many people prefer to miss out on upside rather than experience downside, ie we are risk-averse.)

Over some future time frame, the S&P will go up again. It doesn't feel like that will be soon, but as I always admit to myself: I am really bad at predicting the future.

[arisAlexis]

If Tether collapses Aave will collapse too, the plan is hilariously defective

[seviu]

Aave as a token might collapse but Aave is a protocol, and it will continue working as designed. When Ethereum collapsed to sub 900$ we could all see how robust these decentralized protocols are. The price of the token has nothing to do with how Aave works.

[arisAlexis]

I am talking about the protocol. They are untested protocols with potential design flaws or potential hacks. We have seen these happening for tens of billions of losses for years now. Waiting for something to collapse in something that can collapse is total irrationality.

[scotty79]

> massive return

Just around 100%. That's not massive for crypto gambling.

You could just buy BTC and have 600% in less than 3 years if only BTC won't break out of its 12 year trend.

And that's a very conservative gamble.

[eli]

Not if you believe BTC is wildly overvalued. I personally don’t think it sets a new record high, ever, and is mostly down from here

[swyx]

look i'm as skeptical as the next HN'er but the evidence of past history is against you and "ever" is a very long time...

BTC doesn't have to win mass adoption for it to set new highs, it just has to be the "store of value" (i know, i know) for enough people and for the next QE cycle to start in 3 years to get going again

[shadowgovt]

BTC hasn't been around long enough for it to have a past history to be evidence against the belief it will downtrend. Not relative to other currencies or commodities.

That's like putting a match to gunpowder and claiming based on the trend of the first few microseconds, the flame will engulf the world.

[scotty79]

Bitcoin doesn't raise exponentially. It slows down over time. Each swing cycle is shallower than previous one.

It's more like putting a match to a gunpowder and theorizing that at some point some equilibrium will be reached at greater volume than currently observed.

[eli]

Instead of price history look at utility history: It’s never been anything other than a speculative asset or a temporary medium of exchange for criminals. There’s no future here.

Future returns on BTC cannot be compared to the S&P!

[wmf]

Gold is also speculative and it's much larger than BTC. I hate crypto but $100K BTC is completely possible.

[eli]

Anything’s possible but gold is useful and has intrinsic value. Bitcoin isn’t very similar. I don’t think one implies anything about the other.

[broast]

Is there currently new and previously not knowable information regarding its utility compared to when the price was going up?

[eli]

No, it’s never been particularly useful.

Do you believe a popular pyramid scheme has demonstrated utility? If a pyramid scheme made people a lot of money in the past does that suggest it has long term value?

[scotty79]

So you don't believe that scarcity can capture and hold any value? Only utility can do that?

[this_user]

This because something is scarce, doesn't make it valuable. Claims to the contrary are just another example of crypto bros not understanding economics or human behaviour. Otherwise, a whole bunch of people with boxes of Beaning Babies would be rich by now.

[lanstin]

Isn’t scarcity relative to demand? I mean each cubic meter of soil is globally unique, but no one cares. And, in the long term, demand plausibly has a relation to utility?

I do speculate that part of the appeal of a non-loan/investment based store of value to very rich people is that hey wish they could keep all their wealth in a vehicle that didn’t involve investing in the overall good of society, but that is a childish wish - wealth is inextricably linked with the prosperity of the society in which it is enmeshed. A billionaire in a society ravaged by disease, hunger, and conflict, shorn of the comforts of science and technology, will be poorer by far, in terms of objective measures, than a billionaire in a society where the people are educated and science and medicine are widely available, especially over he generations.

[anonymouskimmer]

There are a limited number of pure collectors, or even FOMO collectors. And much of this collection value comes about through increasing limitation of an item(1), along with a population increase (making more collectors)(2), and increasing wealth of current collectors used to bid up the price on collectibles (wealth increase through means other than their collection, obviously).(3)

(1) - If you buy bitcoin now you might be part of increasing the price of a bitcoin by increasing its rarity through the means of losing your private keys. But this doesn't benefit you.

(2) - We're reaching the point where our carrying capacity is starting to hit limits. Maybe in a few hundred years we'll have space colonies to keep increasing the population, but: 1) This won't benefit you, as you probably won't be around then; 2) There will be other collectibles that the then population may be more interested in. It is the case that certain collectibles are incredibly rare (single digit numbers), but also cost less then $10k, simply because there are not that many interested collectors.

(3) - If you sink most of your investments into crypto this limits the ability of your wealth to grow outside of your collection.

[ma3gl1n]

There is a finite amount of BTC, but infinite amount of cryptocoins

[the_gastropod]

I've got some fresh toenail clippings you may be interested in! I only clip my toenails about twice a month, and probably will cease production entirely within 45 years.

[marvin]

Your tulip futures from 1637 would still be out of the money, even though global tulip consumption is much, much higher and the Netherlands is the world's leading supplier.

[andirk]

Finally! It took this many comments for someone to show, via the age-old tulip example, they know nothing about crypto except that there is hype around it. And thank you for adding the date to show you read the top of a Wikipedia article.

[marvin]

I think you misread me. I think crypto will be very, very big in terms of utilization and value, much bigger than it is today. But I also believe this does not imply that there will be much expected gain from purely speculating in the price of current cryptocurrencies.

That's where the tulip analogy comes in. Not an implication that crypto is useless, just like tulips, but that a speculative mania can leave a novel and in-demand product (asset class, in this instance) with prices that are much higher than they will be at the steady-state in the future where both adoption and production is much higher.

I will probably buy Coinbase stock if Tether finally blows up, but before that the speculation is too much for me to commit to anything.

[NicoJuicy]

Evidence of history?

It took COVID to get Bitcoin back up. That's it

Not history, just a rare event.

No one cares about Bitcoin anymore.

[BlueTemplar]

You seem to have forgotten the other... IIRC 3 (?) times it has gotten back up ?

(But feel free to short bitcoin of course - not the kind of risk I would take.)

[NicoJuicy]

Other 3 times?

Error. 1 long streak before COVID and a large decline then too.

And 2 times jumping around during COVID-19 = over a very short period.

[mancerayder]

Almost every speculative asset was up then, capital was desperate to go anywhere as borrowing was cheap and savings rates were high.

[NicoJuicy]

Explain why Bitcoin went down before COVID then.

As you say, borrowing was cheap. There was no reason for it to decline after 2018 till 2020...

Reminder: other speculative assets didn't decline then :)

As I said before, Covid, with boredom and free money. No one used Bitcoin as investment and not many would borrow money for buying crypto.

Still: no one cares about Bitcoin anymore except some select people that live in the past.

[Tepix]

If you assume that Tether is going down, BTC will crash, too.

[bagacrap]

Since October 12 it has been going up at an annualized ~30% rate.

Where it goes next is anybody's guess.