
Why you can’t cash out pt 3: Bitcoin is not a Ponzi! It just works like one - davidgerard
https://davidgerard.co.uk/blockchain/2018/01/04/why-you-cant-cash-out-pt-3-bitcoin-is-not-a-ponzi-scheme-it-just-works-like-one/
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gruez
title: Why you can’t cash out pt 3: Bitcoin is not a Ponzi! It just works like
one

but if you're cashing out, doesn't that mean you already made your money?
cashing out is completely orthogonal to actually making money. at least your
first two posts were at least vaguely related to "cashing out" .

>This makes Bitcoin a zero-sum investment

>This is, again, why “market cap” is a misleading and useless number. If
someone bought a fraction of a bitcoin at $19,000 per BTC, that doesn’t make
anyone else a “Bitcoin billionaire” whose bitcoins could be sold at $19,000
each — the total actual money recoverable from the system hasn’t gone up.

so basically, just like any asset?

~~~
davidgerard
You shouldn't expect not to be the bag holder; statistically, you will. _Most
people are simply not going to be able to cash out_ at anything other than a
_massive loss_ , and this is important and worth saying.

Perhaps I'm missing something, but I'm failing to see what's unclear about
this ...

> so basically, just like any asset?

The difference being that if you buy all of a stock, you've bought a company,
an enterprise that exists. Also, non-penny-stocks tend to have rather fatter
order books than any crypto (even Bitcoin).

Think of it like this: what was the market cap of Beanie Babies in July 1999?
Let's keep it to "investment grade" Beanies, per the jargon Beanie speculators
were using. _Where did all that value go??_ Answer: nowhere, it was illusory.

~~~
gruez
sorry, asset isn't the right word here. "commodities" (ie. goods) is a better
description.

~~~
vec
The money doesn't go up with traditional goods, but the total value in the
system does.

This is easier to understand if you think about a specific traditional
commodity, say timber futures. A timber future is created by some arborist who
has some trees to sell, and will hopefully be ultimately purchased (after
probably passing through a few investors' hands) by someone who has need of
trees, like a sawmill operator.

But here's the magic bit: the same tree is worth more to the sawmill operator
than it is to the arborist. Because she owns a sawmill, she can make finished
boards from the tree which she can then sell at a profit. The arborist, who
lacks a sawmill, can't take advantage of that opportunity. So there is some
range of prices for a tree where the arborist and the sawmill operator will
both think, correctly, that they benefited from the deal. By moving the same
tree from someone who can't make further use of it to someone who can, the
total value has gone up. And as long as the price of the future remains in
that magic range, any number of middlemen can skim some off in between and
everyone still wins.

Bitcoin doesn't work like that. There's nothing one can do with a bitcoin
other than sell it, so there's no two parties who will mutually benefit from
an exchange at any price. If two people disagree about the value they,
personally, can extract from a fixed amount of BTC they can't both be right.
They may disagree about their predictions or their risk appetite. But there's
no sale of Bitcoins that both parties can look back on with perfect hindsight
and agree that they both benefited.

~~~
dragonwriter
> If two people disagree about the value they, personally, can extract from a
> fixed amount of BTC they can't both be right.

This is a absolutely not true if either party has outside opportunities
(including the “opportunity” to avoid a unique personal disutility) not
available to the other party; sure, all you can do with a Bitcoin is exchange
it for other goods/services, but the goods/services A can exchange it for may
not be the same that B can exchange it for. And even if they are, the
utilities each party attaches to those things may not be the same.

------
Viliam1234
Dude, if I offer to buy your Bitcoins now for 1% of their market price, will
you stop writing about how you can't cash them out? I mean, if they have no
value, then 1% of the market price is a generous offer you should not refuse.

