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Coinbase valued above $100B, ahead of direct listing (axios.com)
206 points by DLay 17 days ago | hide | past | favorite | 288 comments

Only tangentially related: How do bitcoin network costs scale with market price?

We can expect the marginal cost to mine a coin to scale with price. So if btc worth $52,000 then people will invest on average $52,000 in equipment and electricity.

There are 6.5 coins mined every 10 min. So daily network cost approximates to 6.5 * 6 * 24 * $52,000 = $48,000,000

This is not strictly accurate as past equipment costs less and people may over invest expecting appreciation. But it should be close enough.

So to run the network at a price of $52,000 you need $17.76 billion dollars to enter as fresh capital to be burned as electricity and equipment, correct?

And if the price hit $1,000,000 as boosters claim, mining difficulty would rise to adjust and the new annual maintenance cost would be: 6.5 * 6 * 24 * * 365 * $1,000,000 = $341,640,000,000

And then this would decrease as halving happened. In May 2020 and then 2024. So the annual cost to run a $1,000,000 btc network post the may 2020 halving would be about $170 billion per year. That much new capital needs to enter the market and be burned up simply to maintain the price at $1,000,000. And to be useful to the world a $1,000,000 bitcoin would need to generate $170,000,000,000 in value annually.

Have I got this right or did I make a grievous error somewhere?

I think you’re on track. I found this article to be a great analysis of the electric consumption as it relates to the price of BTC. https://www.ofnumbers.com/2021/02/14/bitcoin-and-other-pow-c...

> We can expect the marginal cost to mine a coin to scale with price.

This feels correct but I don’t think it is. For example gold has decreased by $200/oz recently - it definitely didn’t just get cheaper to mine. I know mining is different and it’s not a great comparison, but costs don’t scale immediately, miners don’t make decisions entirely based on the price of btc now, etc.

Economic principles like supply and demand meeting on an agreed price are very muddy.

No no bitcoin mining and gold mining don’t have the same economics. Gold mining average costs are determined by the actual physical costs of mining. Marginal costs will rise in marginal mines if the gold price goes up. But that won’t affect average gold mining costs in existing mines.

But in bitcoin average costs have to work out to marginal costs. When more mining power enters mining gets harder to compensate and mining costs rise.

That makes a lot of sense. On the other hand, that also suggests that if the price of bitcoin were to rise rapidly, mining costs would take some time to catch up, no? The connection between mining costs and price is an economic one (that can be in temporary disequilibrium), right?

Depends how rapidly. You can buy the hardware as a commodity, and connect to the power grid. Existing miners prob have expansion plans too they can accelerate. So the market may move pretty fast.

Though I read an analysis that there were surplus profits in the 2017 bubble.

You say "it definitely didn't just get cheaper to mine", which sounds obviously true, but in a way I'm not sure it is. If the price of gold decreases by $200/oz, that probably makes a bunch of mines unprofitable, leading them to close down (or at least pause) their operations. Which in a way would mean that (on average) gold got "cheaper to mine". And it seems to me that the Bitcoin mining market works basically the same in that sense.

stock exchanges separate (and occasionally reacquire for commercial reasons) trading from custodian services.

I'm not at all up to date but I long ago presumed bitcoin needed to move to a custody transfer market instead of processing on the block chain and the expense involved or beholden attachment that creates to a miner.

if Citi (eg) will lend me to trade against collateral of my existing holdings finding risk less (cp counterparty and ops*) liquidity from stock borrowers (typically short players) and happily create a new income that's limited by the value at risk of my trading up to my collateral underlying assets and therefore greater than the principal, surely so can Coinbase. I assumed that was why the London Stock Exchange invested in them.

edit I forgot *: see Herstatt Risk inherent in closing currency cash dealing causing the eponymous bank's failure in 1974. possibly more interesting to today was a year earlier in the Cedar Bank crisis in '73 that although little known was the most existential threat to the markets certainly pre LTCM and I'd say still far more dangerous. relevant today because Cedar was a pseudo official shadow bank living by profits from high risk secondary mortgage loans. Cedar was only a bank under a statutory loophole the infamous (to my career at least) Section 123 of the English banking act. interestingly none of the UK so called challenger banks are clearing banks the only new one in 400 years is a white label specialist running on Azure called Clear.bank at that url. a notable lot of UK transactions are happening on Azure with Clear.

The maths seem right, but I don't think the 6.5 btc/10 minutes is a given for the future, so you're extrapolation contains the rather large assumption that it stays the same.

You are not wrong. However

1= $1m/bitcoin is x20 from here. And here is already a pretty high price.

2= $170bn is a lot of money. But on an international/global scale, it's a drop in the bucket.

Yeah I just want to think through the claims of the maximalists. For example I often hear them say “it’s digital gold, so it has 10x to grow”.

That would be $85 billion for mining, whereas gold mining annually is about $1.3 billion. ~$1000 per ounce mining cost * 130 million ounces mined.

Of course it’s not an exact comparison as you prob ought to add in storage costs for gold but then maybe you’d need to add crypto online wallets and it gets messy. Mining to mining is clear and simple.

It is a drop in the bucket globally, but it also means you need that much capital flowing in to maintain the market price. Just to maintain. So you would want the network to be producing that much value at least.

> you need that much capital flowing in to maintain the market price

There's something off about the argument that you're making and I think it's that you have cause and effect backwards.

You keep phrasing this as if mining moves first before price, and investments in hardware are necessary to sustain high prices. But the reality is that high prices come first and incentivize investment. That investment is not required for Bitcoin to continue to operate, it's just an expected effect for a given cause.

Hmm. I’m not 100% sure I follow so I’ll restate and see if we can go from there. I’m saying:

1. The market price is set by people deciding to buy bitcoin, and

2. Bitcoin miners will invest in equipment and energy up to whatever the market price is

3. Thus, at a market price of X, at current mining rates, the miners will have costs roughly equal to 6.5 * 6 * 24 * X per day, or C

4. So to maintain a given market price, $C must enter the market at any given time, to covet the costs of the miners.

5. If less than the miners costs enters the market in money, the price will drop and miners will exit the market until their new cost structure is in equilibrium with the new price.

In other words, as new coin at a given break even point enters the market, that dictates how much new capital must enter the market to keep prices steady. If more capital than that enters prices rise, if less then they fall.

This is so because unusually in the bitcoin network marginal cost equals average cost as the network adjusts difficulty based on miner effort. So I think this makes things kind of backwards and breaks our intuitions.

#4 and 5 are false

Just wanted to point out that 130M * $1000 = $130B, not 1.3B

Whoops. That’s a radical difference. Thanks for catching that.

Think about it this way: There is 7bn people on the planet. $170bn works out an average of $24/person. Or $2/month. Even poor people in poor countries can afford that. It might actually be cheaper for them, many poor countries (think Africa, Argentina, Brazil, etc...) are going through hyperinflation that it is safer and less volatile to hold Bitcoin.

That calculus doesn’t work as a store of value. For the substantial minority of people earnings ~$2 per day, $24 per year is a sizeable fraction of wealth.

As far as currency goes, it bitcoin transactions rise, does that have no impact on price? I realized my price thinking makes no mention of them and I don’t know how they affect things.

$24 is not a sizeable fraction of wealth by any measure. And here we are talking averages. The average per capita GDP is $18k. $24 is a very small number to that.

The median wealth per adult in africa is $1600.

And the cost per adult would be over $24. At least a quarter of people in africa are under 18 I think, though I couldn’t find great stats. So the correct number would be more like $32. 2% of wealth per year.

You've got it right. That being said, I dont think anyone realistically expects 1m / btc this decade.

Right just thinking through the claims of the boosters to their logical end.

If it did happen in nine years the next halving is 2028 so the cost would be ~$85 billion per year. And that would be less than it is now due to inflation.

Ok that’s actually not as bad as I thought, though still pretty expensive. You need $85 billion from new entrants in burnt capital just to maintain the value of existing bitcoins at that price, and people need some reason for putting in capital other than price appreciation assuming appreciation stops.

You seem to have a good grasp of creating high level models.

I always see people referring to the energy consumption of bitcoin as though it’s strictly additive.

What I’d be interested to know is how it compares relative to energy costs for transacting with and securing fiat currencies.

Second, what people tend to ignore is that innovation doesn’t come in a vacuum - there are second, and third degree improvements triggered from it. In a world where bitcoin is $1million, it means the world has agreed on the benefits, and we will see innovations to address the tradeoffs that come from this. For example, we could see significant investment into renewable energy as a means to support the energy consumption of bitcoin.

Third, and this isn’t directed at you, just a general statement based on arguments I see on HN - cryptocurrency itself does not have high energy consumption. Proof-of-work mining does. There are methods to support cryptocurrency that do not result in high energy consumption (Proof of Stake, DAGs). It’s wrong to generalize energy consumption issues to all cryptocurrencies.

> What I’d be interested to know is how it compares relative to energy costs for transacting with and securing fiat currencies.

Very hard to compare. One thing I’m unsure of for bitcoin: do costs go up if there are more transactions or does mining difficulty adjust so that costs don’t rise no matter how many transactions bitcoin does? I realize this is a major gap in my understanding.

The finance and currency system does much that bitcoin doesn’t currently do. So comparing as a whole isn’t adequate unless bitcoin network costs don’t scale up with numbers of transactions because mining gets easier.

Actually how do miners make money once there are no more coins to mine?

> In a world where bitcoin is $1million, it means the world has agreed on the benefits, and we will see innovations to address the tradeoffs that come from this. For example, we could see significant investment into renewable energy as a means to support the energy consumption of bitcoin.

That actually doesn’t follow. All that follows is that the world has decided to move $170 billion in capital into bitcoin per year.

The world is presently set to move about $20 billion of capital into bitcoin per year, and there’s no real consensus above usefulness.

The world could be putting $170 billion in because there is value, or it could be a massive waste of resources. The world has certainly misallocated resources before.

And yeah I was restricting my own comments to bitcoin. Ethereum et al I know much less about.

> Actually how do miners make money once there are no more coins to mine?

With BTC (and I would assume most other cryptocurrencies), by transaction fees.

Wait is my whole calculation wrong then? I thought miners only got paid for receiving bitcoins.

They also get additional payments in fractions of a bitcoin for transactions and this is in addition to the costs I wrote above?

> They also get additional payments in fractions of a bitcoin for transactions and this is in addition to the costs I wrote above?

Yeah, the basic design of bitcoin is for the block rewards to dominate early on with no/low transaction fees, but transaction fees to gradually take over as the main reward for miners maintaining the network.

Ah interesting. Any estimates of how transaction costs scale? Currently iirc it is 100 million transactions per year at $20-$30 each, so adds about 10-15% to network upkeep costs at that transaction volume.

miners are getting payed for every transaction. if you don’t include transactions fees your transaction will spend a lot of time in limbo and may actually never be mined.

the way it works, let’s say you have A bitcoins and you want to pay someone B bitcoins. you create a transaction that say: I want to move A to B and A-B-fee the miners see it and see the fee. it gets included (ie mined) in a block.

actual example 50BTC -> 20BTC + 29BTC

when the miner mines it, it will send the tx fee to its own wallet

also, most miners sort transactions by the most profitable to less profitable and mine only the most profitable ones

good question about baseline infrastructure energy cost

> >I always see people referring to the energy consumption of bitcoin as though it’s strictly additive. What I’d be interested to know is how it compares relative to energy costs for transacting with and securing fiat currencies.

the base load of the combined major central banks, transfer networks and custodial institutions is undoubtedly considerable

not least I'm thinking how much still runs on Itanium and OPENVMS. Just ten years ago I would have wagered the majority is on Itanium running vms or nonstop or the Honeywell legacies virtualized by Unisys. now a significant UK clearing bank ( at clear.bank) has run on Azure with white label customers who would have brought plenty of attention in the event of any problems, I'm no longer sure at all that I have any real idea what infrastructure is on.

re the energy costs of the network and that growth, I'm baffled - surely bitcoin should have moved to a custody model of settlement in view of the energy and other costs and risks of on chain transactions by now?

imagine I have a bitcoin account and my bank lends me to trade against the bitcoin as collateral.

if the account is a true bitcoin account I borrow btc and owe a greater amount of btc to settle.

it's not unreasonable for my bank to expect me to close my trading profits into my bitcoin account.

that's just two regular bitcoin demanding and regular transactions creating more demand

Presumably the 85B would have to be paid in network fees assuming price doesn’t move?

One important thing to note is that these are secondary transactions and not where the stock may potentially trade.

Secondly, Coinbase doesn’t allow any secondary transactions, this was a company sponsored (approved) secondary. As a result this created immense scarcity so you can see how much the price changes just in these limited sales.

Third, as we saw with the last bull run of Bitcoin everything with blockchain in the name had a halo effect so there is definitely upward momentum.

Fourth, there is no Bitcoin tracking security on public markets. Obviously if Bitcoin succeeds so does Coinbase, this is an Avenue to get exposure to that without having to invest in Bitcoin directly and since Coinbase makes money on volatility which Bitcoin has a tremendous amount you get to ride the swings up and down by investing in Coinbase and not having exposure to Bitcoin directly. Investing in the shovels not the gold.

Eventually companies grow in to their valuations and that is determined by supply and demand and ultimately revenue and profits. Coinbase is still growing rapidly and profitable so in today’s market there will be a huge premium for that.

Technically it most closely resembles zoom from a financial perspective and from a capturing the trends perspective so while the valuation may seem high if Coinbase isn’t worth this then neither is zoom.

When will there be a market correction it’s impossible to know. We could have said the same thing for the post two years and it still hasn’t happened.

Don’t forget that getting yield outside of stocks is increasingly difficult and while we are on HN trapped in the echo chamber of tech and tech stocks when you look at the old staples like Coca-Cola they haven’t appreciated during this time.

Large mutual funds could be rebalancing their portfolios to move more into tech which they should have done from 2010 onwards but largely resisted outside of FAANG stocks.

The only thing that is certain is that this is a wild ride.

>> When you look at the old staples like Coca-Cola they haven’t appreciated during this time.

Pretty tough to eat appreciation; meanwhile Coca-Cola (and all those other old, boring companies) pays ~ 3.5% dividends annually. I'm sick of companies using my money for free to only fund their own growth.

Yes, dividends count as a valid source of income and that’s a reason to own Coca-Cola. However, appreciation of a publicly traded stock is fine too, better even. When a publicly traded stock goes up, you can sell some stock and the money is just as good. Furthermore you’re paying less income tax since it’s capital gains, and you get to decide when to pay taxes on the gains.

This is why stock buybacks are better in some ways than dividends for returning money to shareholders.

Long term capital gain taxes are lower than dividend taxes which are taxed as income, no?

dividends can also be taxed at long term gain rates if the stock was held for some period of time before hand (see qualified dividends)

“Obviously if Bitcoin succeeds so does Coinbase”

This seems obvious, but I’m not sure it’s the case anymore.

DeFi has been growing, although hampered by ethereum right now, could eventually consume much of Coinbase’s income stream.

They may need to pivot to more of a banking role as ethereum solves tx fees and DeFi grows on L2. Whether that means more or less profit is not clear. I have a theory this IPO is really a calculated approach to facing such a reality, while they’re still considered untouchable.

Coinbase's primary function isn't to supplant blockchain transaction volume, it's to provide a fiat gateway to acquiring cryptocurrency. Transaction throughput on ethereum only helps Coinbase, because it makes what they sell more attractive.

I’m talking about DeFi - distributed exchanges, yield generating savings accounts, and collateralized loans. Additionally ERC20 stables so on and off ramps are significantly less important. I see Coinbase’s primary function as an exchange and a way to convert to dollars. Both are threatened now. They have low fees, low latency, and more usability... but will that last?

Could be true, but the "de" in "defi" prevents it from killing Coinbase's main purpose, which is being the fiat -> crypto gateway.

True, it is a challenge do do a decentralized on/off ramp. But it is also questionable if that’s worth $100B valuation, too, without everything else they do.

It probably isn't itself, but as long as they're able to provide an attractive centralized alternative to the things happening in defi, they can capture a lot of that growth. Custody, trading, wallet, etc.

A successful model for Coinbase at this point is probably what Google does: let others innovate, clone the ideas once they start becoming popular, keep them under an umbrella and provide easy integration/movement among them.

I sincerely hope that the corollary doesn't apply

edit meaning that you at least wouldn't want that to be exclusively true

> Fourth, there is no Bitcoin tracking security on public markets.

Bitcoin futures are available since 2017 on CME and CBOE.

> Fourth, there is no Bitcoin tracking security on public markets

Because of their big purchases Microstrategy stock (MSTR) tracks Bitcoin pretty well.

If you buy microstrategy because you want to be exposed to bitcoin then you will be overpaying by a lot.

If you don't gain exposure to btc through MSTR or otherwise, then you will have fun staying poor.

>Fourth, there is no Bitcoin tracking security on public markets.

$MARA and $RIOT are publicly traded companies in the US that professionally mine for Bitcoin. Their stocks ride the same wave as that of Bitcoin.

Wave crest is higher. Similar to gold and gold miners.


Not sure of how it applies but there it is.

One way I could see this going: the smallest unit of a Bitcoin is a Satoshi. What happens when that value is greater than a transaction base cost?

Right now it’s $0.0005 or 100 millionth the cost of a coin. This implies a lot of runway.

Swift:Visa/Venmo/Zelle, as Btc:Lightning/other Layer1 solutions.

In other words, off chain transactions are a potential solution.

It can be extended if necessary.

> Third, as we saw with the last bull run of Bitcoin everything with blockchain in the name had a halo effect so there is definitely upward momentum.

We did, but blockchain tech rallying on the bitcoin price is a little like paper producers rallying on a baseball card fad. But markets are irrational, so...

>Fourth, there is no Bitcoin tracking security on public markets.

There are a few in Europe look up Exchange Traded Products.

There is a Bitcoin etf on the TSX since this week, both in CAD and USD

So when markets closed on Friday, BTC was at about $55,000 and BTCC-B closed at $10.83. BTC continues to trade over the weekend obviously and is now at $57,000. Given this inbalance in trading times, should we see BTCC-B pop on Monday morning to catch up to BTC? Could one not buy/sell BTCC-B each morning depending on overnight activity of BTC?

> Could one not buy/sell BTCC-B each morning depending on overnight activity of BTC?

If the price went up, the sellers also know this and will adjust their offers though, so you won't be able to buy underpriced BTCC shares in the morning. You can bid at the previous day's closing price but good luck getting your bid filled.

I think the real arbitrage is between crypto exchanges.

Probably yes. It works the same way with after hours trading on the stock market.

>there is no Bitcoin tracking security on public markets

$GBTC Grayscale Bitcoin Trust

The grayscale products come pretty close.

We're just at a point in the economy where it doesn't make sense to hold on to cash. It's just completely losing its value thanks to a long sustained QE.

People are just putting their money into anything as a hedge - real estate, stocks, crypto, gold. Until the value of the at can be sustained and inflation comes back, it's unlikely much else will change.

> We're just at a point in the economy where it doesn't make sense to hold on to cash.

One of the whole purposes of conversion to pure fiat is to eliminate any reason to hold cash other than short-term liquidity in order to encourage investment in productive assets, driving production.

> It's just completely losing its value thanks to a long sustained QE.

Except...it's not, the quantity of direct, utility-producing goods and services you can get for a given number of dollars is declining much slower than the long-term average rate. Easy-money policies aren’t driving significant inflation, probably because we’d be seeing significant deflation without those policies given other conditions.

Zero/negative interest rates drive capital misallocation. You are spewing MMT dogma. This is why we have zombie companies like IBM chortling around.

There is asset price inflation for the things we want to buy. Stonks. Real estate in desirable places.

If you examine the 500 most commonly bought household goods, inflation is tracking ~10%+ in major metro areas in the US. This is before covid.

Do you have a reference for that 10% on the top 500 items?


I'm really starting to wonder what makes sense to hold?

Maybe I need to start looking into land prices. And for that I mean forest or agricultural...

With land you'll have to pay property tax, which will be impacted by inflation as the land will be reappraised. Just something to keep in mind.

A lot of states have tax breaks for ag land, or land that doesn't contain a permanent dwelling. Taxes overall can be quite low in rural counties regardless. And even with property tax, money can be made leasing the land to farmers or timbering it. There is plenty of value to be had in owning land. Plenty to be lost too, sure if you don't know what you're doing.

Interesting, thanks for adding that. I'm not a sophisticated investor but I do like to invest in REITs to capture rising property values.


> We're just at a point in the economy where it doesn't make sense to hold on to cash.

We're not at that point, and I'm speaking as someone that supports a gold standard or equivalent to prevent rampant fiat debasement. I take it you didn't live through the 1970s. There have been numerous times in the past century where currency in major economies was prominently debased far worse, far faster than what we're seeing today. Sutained QE has done far less damage to the USD as one example, than what the 1970s did to it or the extreme destruction we saw during the George W Bush years (go to Google, type in "Belgium GDP", Netherlands GDP, Czech GDP, or Brazil GDP, almost any nation; you'll see a comical liftoff in their GDP chart, far beyond any real growth rates, that's the dollar getting massacred thanks to the idiotic fiscal policies during the GWB years).

Gold went from around $250 to $1900 over a little more than a decade from ~2000-2011, before sustained QE became a thing. In the 1970s it basically went up 1,000%. Not much has actually changed about how governments destroy currencies, it's the same old same old. Perma QE didn't change much, it's not a new tool, and nothing is very different today versus the past (except that so far this is a cakewalk compared to the destruction in the past; maybe it'll get a lot worse yet, of course).

You're better off holding cash than Tesla shares at $800 or $900. I'd rather take a 3% average debasement per year than sit in the S&P 500 at these levels (especially given what the US economy is going to look like in the coming decade). From these heights I'll bide my time for the next inevitable crash or significant decline, that's when the serious returns are generated, not chasing mania ever higher in markets at late stages. The big money was already made in Bitcoin, from $0 to $50,000; the upside from here is a joke by comparison to the risk. So it goes to $150,000 (maybe). That isn't a crazy return vs the outsized risk, that's the kind of return you could have gotten in any cloud stock after IPO. Yet it takes an extraordinary move of adding ~$2 trillion in market cap for Bitcoin to get there. The risk vs reward in Bitcoin at these levels is like a lot of absurdly overvalued stocks presently. And of course everyone becomes certain that something is fundamentally different today - it's not, this mania won't endure either (to be clear, we're not just in an asset bubble, this is a mania, the 8th or 9th inning of a bubble phase).

Significant inflation isn't coming back anytime soon (not until or unless they start devaluing the USD directly, but that isn't for at least 20 years yet), the US is in a heat-death stage of economic erosion. Ever greater sums of capital are being put into the freezer in the form of very low yielding debt, that process will continue to rob the US of dynamism and growth, trending growth toward zero as it goes. This is the exact same process Japan went through, and it's why they were unable to spark traditional inflation with their crazy spending and QE-like programs, they tried everything in the Keynesian book and it all failed (for the same reason the US didn't drown in inflation from 2010-2020 despite the rather insanely low interest rates over that time). We're not going to see a serious wave of inflation this decade now for the same reason we didn't the prior decade.

> Yet it takes an extraordinary move of adding ~$2 trillion in market cap for Bitcoin to get there. The risk vs reward in Bitcoin at these levels is like a lot of absurdly overvalued stocks presently.

Bitcoin is not a stock, it's a deflationary asset. There are not just a limited amount of bitcoin, but a constantly decreasing amount and a constantly increasing amount of people wishing to use them. People sounded very much like you at every step of the way, including in the rise to $1,000. "The risk isn't worth it."

> Significant inflation isn't coming back anytime soon

I mean except in the commodities markets, the housing market, the price of ammo, of course. Unless you believe those are just "bubbles" as well.

> We're not going to see a serious wave of inflation this decade now for the same reason we didn't the prior decade.

We are seeing inflation, it's just occurring in hard asset classes like real estate.

> and nothing is very different today versus the past (except that so far this is a cakewalk compared to the destruction in the past; maybe it'll get a lot worse yet, of course).


It is worse though.

Yeah, people call it the everything bubble, when the obvious explanation is the money is being massively debased to pay debt that can't be serviced otherwise.

In all historical episodes of hyperinflation, at the start, everyone holding assets just thinks they are getting rich.

> a constantly increasing amount of people wishing to use them

I find this hard to believe, at least not to the extent you're implying. People don't actually use Bitcoins that much, they mostly speculate on it.

Bitcoin was created after the last financial crisis. I'm genuinely curious to see what will happen when the next one hits.

Holding bitcoin as a hedge is use.

> I mean except in the commodities markets, the housing market, the price of ammo, of course. Unless you believe those are just "bubbles" as well.

Do you have anything I can read to learn how to distinguish asset bubbles from inflation? Why does inflation sometimes take this form?

I would like to subscribe to your newsletter.

What’s your strategy? Because if that’s the case with the US then holding cash has its own issue too?

Even Silver is being pumped.

Can’t we say the reason why gold isn’t up 1000% is because its digital form of it, bitcoin, took that position?

Isn’t QE inflating assets instead of monetary value hence why stocks/equity is going up?

Btw very interesting take thank you!

No I don't think gold would be up 1,000% if Bitcoin didn't exist.

Bitcoin is a more of a speculative investment than a store of value at this stage, because it has been producing such extraordinary returns (whereas gold is the opposite, on average far more of a store of value than a speculative investment (with some rare bursts of euphoria)). Bitcoin still isn't very widely/greatly (immense sums) held by the rich or the elite institutions, they're only beginning to dip their toes into it. Will Bitcoin end up primarily as a store of value over time (and less of a speculative frenzy)? Sure, that appears to be the likelihood at this point.

Gold moves, across time, in line with the destruction of the US Dollar (it'll see occasional temporary bursts due to fear / panic / commodity bubbles etc). Gold is overwhelmingly priced in dollars. Most commodities are. If gold would be up 1,000% as representative of enormous inflation / destruction in the USD, we'd be seeing that in an epic commodity bubble of the sort we saw in the 2000s. You'd see it in everything from copper to oil to silver. While those commodities are clearly seeing some inflationary push-up from the dollar losing value (and bets on future dollar destruction), it's not remotely close to a 1,000% gold move type debasement.

Low interest rates over a very long period of time, is indeed inflating assets, exactly as it helped cause the 2003-2007 real-estate bubble previously. I wasn't disputing any of that in what I said. Those low interest rates are causing housing values to rest far beyond where they otherwise would be (people buying more house than they otherwise could, due to artificially low mortgage rates). Those low interest rates are driving speculative money into most asset classes, from art & collectible cards to stocks and real-estate and most everything inbetween. It took a while but the high asset prices became a bubble which then became a mania, which will then either crash or otherwise be forced to stagnate across a very long period of time (think: Nasdaq from 2000 to 2015). This market doesn't have to crash, it may just decline or swing in tantrums, while inflation erodes its value and brings the valuations back in line with the mediocre US (and global) growth rates. The China boom phase is well over and there is no next China-like outcome coming soon, so global growth will largely disappoint this decade. This current market is a rather extreme case of future returns - distant future returns - being pulled forward. How many decades will it take for Tesla or Snowflake or Shopify to grow into their valuations? Tesla needs to become as profitable as 2 to 4 Toyotas to justify its present valuation, that should only take about 40 years of perfect execution and world conquering dominance. When you pull returns forward from so far into the future, the penalty you pay is stagnation as you eventually pass through that future time. And if this market does crash spectacularly, they'll pump and pump and pump and reinflate the valuations again at some point, most likely, even if it takes the better part of a decade to do it (which isn't to say those valuations will reach present mania levels again, maybe that doesn't happen but once every several decades; but to get back to abnormally elevated valuations, they can certainly drive us back to that after a crash with QE and low interest rates plus 5-10 years).

My strategy is to pay as far below what I consider to be fair value as I can for high quality assets. It ends up being taking advantage of the fact that very few investors are capable of objectivity, capable of controlling themselves, capable of controlling their greed or emotions. Markets always go too high and sell down too low; you sell into the froth and buy the panic (Buffett's mantra of being greedy when others are fearful, and fearful when others are greedy, it is that simple; then repeat it with discipline across a lifetime). The disciplined win over time. I generated enormous returns from both the run up to the present, and the March quick crash. You don't need to do that very often to make a lot of money over time, as returns compound, you only need a few giant hits rarely; as such you can afford to be very strategic and very patient about it; this is one of the points that amateur investors most often fail to learn, they think you must always have your money at work, you must always be doing something, it's entirely wrong. Understanding there are many times when you should do nothing, when you should be patient, is very important. There are critical times to act, where you can strike and generate the extreme bulk of max potential returns, and that doesn't happen constantly (although people think it does during mania phases, a lot of those people will ride the mania back down the other direction though; see: Dave Portnoy as a microcosm of a typical bubble amateur routinely losing playing with a mania he doesn't understand). One of the most important rules is to first do no harm, first don't lose money, and if you can do that compounding returns will generate an extraordinary outcome over time. The people that ride this mania back down (which will be most investors), may see their progress reset by a decade (or worse), as happened with the dotcom bubble crash or real-estate bubble crash. It can take a very long time of average returns to climb back out of a 40% or 70% drop in your portfolio (eg playing with speculative fire in a stock like Tesla that could drop by 90% and still be overvalued).

I don't know whether we'll see sustained damage to the economy from whatever the next crash-type event is, such that stocks stay down for a long time, or if we'll see something more like micro crashes more frequently (with QE & low interest rates bouncing valuations back up faster). Either way, my strategy is to take advantage of any event where I can buy value cheaply or cheapish. I don't need that to happen very often, I only need to make sure I get a nice hit when that pitch arrives, and I can safely stay out of the mania while others take all that risk (I seek to unload my previously purchased assets to buyers during the mania, rather than be buy-heavy at that time, in other words; then I'll reload later at a cheaper value). The only way this fails is if values never - literally never - become cheap, or reasonably priced, ever again. I don't believe that's going to be the case. If you generate a huge return from doing this, you can afford to sit out the volatile ending mania stage, even if it lasts multiple years, you become free to disregard all of it, the risk gets assumed by everyone playing in the fire and they're ultimately the desperate sellers I'll buy from later on.

As a side note, this isn't timing markets (which is a common misconception). This is calculating value and making a determination about what one considers a good price to pay for an asset. When Buffett sits out the insanity, as in 1999, he isn't timing anything, he's deciding not to overpay based on his personal judgment about price vs value (price is what you pay, value is what you get). We all make such value judgments, consciously or subconsciously; you have a choice as to whether it's conscious & deliberate or abdicated, you can be calculated about it or you can throw dice or play follow the leader in a mania (eg they're all buying GME on Reddit, so I should too; shit it crashed from $500 to $40). You can train yourself to get good at judging price vs value, or you can offload to someone else's opinion of that. Those are the only choices.

> You can train yourself to get good at judging price vs value

Could you give some guide lines on how to achieve this?

Along these lines, any reading recommendations other than https://www.amazon.com/dp/B000FC12C8/ ?

I don't generally recommend the Intelligent Investor. I think it's almost always a mistake for ... 99% of new investors to bother with Benjamin Graham. His material is far too dense and often advanced for anyone that isn't quite an experienced investor. I'm sure there are exceptions, however I've found it's a huge turn-off for most new or newish investors, it delays / stunts their learning process, it's an obnoxious book to try digest if you're starting out. It'll make you hate investing or think that value investing is difficult (it's not, it's simultaneously the best approach for generating consistently high returns over time and very easy to learn).

Here is what I point new investors to:

- Buffett: The Making of an American Capitalist, by Roger Lowenstein.

- Margin of Safety, by Seth Klarman

- The Little Book That Still Beats the Market, by Joel Greenblatt

- Common Stocks and Uncommon Profits, by Philip Fisher

- Business Adventures: Twelve Classic Tales from the World of Wall Street, by John Brooks

- This article from 1984 by Warren Buffett: https://www8.gsb.columbia.edu/articles/columbia-business/sup...

- Peter Lynch also has a couple of optional books that are decent and very easy to digest for a new investor, very common sense oriented.

- Also optionally, Buffett's various writings are often excellent, however they're all over the place in focus, so it's hard to pick one. His annual letters for example can be acquired on the Kindle or from Berkshire's website and many are worth reading (if somewhat boring for most people I suspect).

The single most important thought in investing, in my opinion, is to always be cognizant of price vs value. What you're paying, what you're getting in return. Then always be aware of, always estimate as best you can, what your moat is for the investment at the price you're paying (what Klarman and others have called a margin of safety). How much can go wrong with your investment before you drown? How much room for error is there in the price that you paid? I like the Buffett book I reference above, because it pounds home that concept while introducing how Buffett came up, how he thinks (I don't particularly like his book, The Snowball, for that).

Also, Margin of Safety is out of print. However, there is a certain Archive site with a time machine, that if you were to put this url into it:


You'll find an archived copy of the book in PDF format. Alternatively you can put that file name into Google and find some other copies of it floating about still (Klarman refuses to put it back into print and had been having the PDF copies taken down).

Bless your dear soul for the Margin of Safety link. I've been meaning to read it for quite awhile, but you can guess why not. All your other commentary is top notch, although I still think the SP500 is fairly valued (won't have great 8% returns going forward, but won't be 0% stagnant).

Some if it is time and experience. Seeing markets come and go, seeing valuations come and go. You could perhaps study historical markets to gain some of that, but there is no better teacher than going through it (including taking some beatings along the way, along the process of learning and instilling discipline).

The absolute easiest things to look for (things most anybody can do), is growth vs valuation, along with having enough of an understanding of the business you're buying part of, to know whether they have an enduring position in their market, whether they have a moat or edge that isn't going to easily vanish. It's important to understand the context of the business you're buying into. Ultimately if you're going to self-manage, you have to decide what kind of ratio on growth vs valuation you're willing to accept, what's too high. These are largely subjective decisions, there is no right or wrong answer in most cases, only answers that entail more or less risk (the worse the ratio (eg high valuation + negative growth), the closer you get to it being an objectively wrong, dangerous answer though). Personally I prefer a balance on that equation. I'm a value investor, and it's commonly thought that value investing is a conservative, low return approach, however that's not inherently the case, that's up to the investor's approach (Benjamin Graham was a cigar butt value investor, looking for a last puff on cheap stocks, and his approach produces far lower returns over time than Buffett's approach to value investing). If a stock has a medium or high valuation, it can be a great value proposition if the necessary growth is there as a proper offset.

For example, if you go back to December 2018, Facebook was trading for around a $370 billion market cap, around 14.8 times operating income for that year. Why didn't more investors see that opportunity? It should take only a few minutes at most to run a basic extrapolation of a modest growth rate and see how that Facebook value proposition would end up a few years into the future. And yet, sentiment on the stock was irrationally bearish. That's nothing more than emotion, herd behavior, and it's extremely common. It's investors listening to other low-value opinions, it's Wall Street money being the typical followers that they are. People are generally terrified to stand apart on any decision, much less an investment. Many of those investors end up being the desperate sellers you want to buy from as they sell you FB at $137. They have no idea what they're doing, they have no idea when to buy or sell. And that's true of most of the professionals on Wall Street, they're almost all clowns (very highly paid clowns, because they're operating in a protected cartel). Was Facebook's social monopoly - their moat, their edge - going to vanish soon circa December 2018? That was an absurd, silly, borderline stupid premise, and yet it was a commonly floated notion; there was wildly bearish sentiment going around at the time - and yet back in objective land, where you always want to remain, their business was still firing soundly. So if an investor could brush away the irrational people spewing their emotional bias about FB, you could focus on the actual business and what it was actually doing, and run some very straight-forward projections into the future (even being conservative about it).

I'll give you another obvious example from my perspective. In March I posted here about which stocks I thought were interesting during the crash. I argued about Square and why I liked it. For that stock I looked at a few things. They did $4.7b in sales in 2019 and their market cap was down to like $17-$19 billion during the crash, so it was trading for around four times trailing sales with a solid growth profile (and, in theory, a lot of growth ahead of them, as they were still relatively early into their growth phase). Their operating profit/loss picture had persistently improved as well, they weren't at any risk of bleeding to death. Now, that's a laughably obvious value opportunity, that's dirt cheap value. That's a margin of safety or moat of safety that is massive, a lot of things would have to go wrong for Square to not be a great buy at that price. The calculation when you input all of that, including its business context (putting in risk for the pandemic), is that they could probably see their sales fall by a lot during the pandemic and their growth rate plunge and it'd still be fairly valued at near a $18b market cap with maybe some further downside risk of 1/3 from there if the damage were really bad. And then you'd have to believe they weren't going to resume growth, that they'd never get back up, to think the position would be really dire. That easily goes into the low risk camp.

Most stocks and situations aren't so obvious, so easy. The principle is the same though, it just takes more effort, thought, measurement, well considered projection, to reach a conclusion about the price you're paying vs the value you're getting. Start by asking: what value am I getting for my money? What value is represented behind that price. That includes the business comprehensively, its prospects, its growth near-term, its potential or likely growth longer term, its risks; and often it can include externals, depending on the business (is this business depending on a trend sustaining, on a commodity price remaining high/low, on politics in China, on hurricanes in Florida, and so on).

Getting really good at rapidly extrapolating with multiple outcomes is a great skill to acquire. Take a stock, absorb its P&L statements from the last 3-5 years or so, learn some about its business, and run some scenarios in your head (or write it down, whatever works). It's a training exercise, and over years you get to mentally compare your projections vs reality, and you can adjust your mental models if you're missing by too great of a margin about how you gauge such things, how you extrapolate forward. Over time you learn some things - risks, potential upsides - to look out for in businesses, to put into the calculations, that you maybe didn't know in the beginning. Did you include a variable and apply a discount for the potential that corporate income taxes might increase (and is this corporation's earnings primarily domestic, like an airline or bank)? Etc etc. Eventually you can look at the profile of a company, its valuation and P&Ls, and get a great sense almost immediately whether it's in your risk wheelhouse, on what value its presenting at the current price.

Run a value calculation on a bubble stock. What value is Snowflake presenting to me at a $82 billion market cap? That when it finally gets around to $3 billion in profit, it'll have a 27 PE ratio and probably low growth to match, all just to get it to where it's already at. What do I think its growth will look like in the century it finally gets there? Why should I pull returns so far forward for that stock, what extraordinary value am I getting to make up for the hyper price I'm paying? When Salesforce had a $82 billion market cap back in 2017, they were set to do $8 billion in sales that year. Snowflake presents something around a 20x worse value proposition than 2017 CRM (when you include their horrible burn rate and dramatically lower sales). Who the hell in their right mind would go anywhere near that? It has disaster written all over it (or at best, extended mediocre returns). And 2017 CRM wasn't a steal, that was a rich valuation. Snowflake requires that you pay an extreme price for growth. That's where an investor has to decide what ratios they think are acceptable; place those settings in the wrong place and you increase the odds of getting crushed, getting trapped in a lost decade, or taking a haircut you have to potentially spend years to recover from. Do I think I can buy Snowflake in the future at a steep discount to the $429 highs it previously hit? I wouldn't be surprised if it can be picked up in the future below $100, possibly far below that. Do I think this market's hyper valuations will persist forever? No. And you can go from there. Inevitably something will crash the stock, something won't go right, growth will be weak for a year or multiple quarters, any number of a thousand things, and it'll tank the stock hard, and they're priced for perfection. Snowflake has to execute to perfection for the next decade, non-stop, to prevent that stock from tanking at some point, and even then the market may kick their feet out from under them regardless. Do I think it's likely they can execute like that for a decade? No, hell no. They'll have their Qwikster moment too, and if they're lucky they won't go out of business (classic dotcom bubble scenario, high burn rate, market crashes, economy tanks, business vanishes; the supposedly impossible happens).

Why are people buying Tesla at $780 when they could have had it for under $180 a year ago? Where were these people a year ago? It's a great buy at four times the price and wasn't back then? Wild irrationality, a complete failure to understand anything about Tesla, a failure of due diligence, people generally buying things having no idea what they're doing. The market is always filled full of investors looking to buy your high priced stock at the wrong time, and later they'll be begging you to buy it from them at 10% or 20% the price. Rinse and repeat, it never stops happening, it will never stop happening, it's standard issue human behavior, and you can generate consistently great returns taking advantage of that fact, so long as you can control yourself and maintain discipline about your behavior during times of manic greed or intense panic (because the other people sure can't).

Thanks for all the detailed responses. Very much appreciated food for thought.

I have a specific question about the calculation of the fair value. My understanding is that there are two steps:

1. Project the future earning (that is the difficult part)

2. Discount the earnings and get the NPV - the fair value of the company

Currently the interest rates are so low that the NPV will be quite high and not that far from the current valuations. Indeed, this seems to be the rationalization by many for the sky high valuations of today. But this seems wrong to me. What would you advice? Pick some other interest rate, maybe an aspirational rate of return for ones investing? Or don't try to compute the NPV and think in terms of multiples like P/E and P/S?

When I say fair value, it's what I consider to be fair value. As an investor you always have to ultimately make those decisions for yourself, or you have to defer to another person's judgment on the matter (whether a talking head on TV, or pump & dumpers on Reddit, or newsletters, etc). I'm not basing that on something some guy put into a book 70 years ago about how to value a stock, even if some textbook'ish knowledge can be worth learning to use as you go about coming up with your own valuing formulation (as in the case of Ben Graham). It's based on my past ~26 years of experience with stocks and what I look for in investments. You'll find with experience as an investor, if you're self-educating and or managing some or all of your own investing, you'll come up with your own tests for investments, your own way of valuing what you're buying & selling (or you should anyway). You can take pieces here and there from others and assemble it based on how you like to invest, inevitably over a lifetime it no doubt becomes an amalgam from what you learn.

So for example if I think the fair value for Coca Cola (KO) is 30% to 50% lower than where it's at today, that's not based on a textbook valuation approach. I base it on what I'm willing to pay for growth, and Coca Cola is a pathetic non-growth machine (not to mention a giant sugar liability). I look at Coke's financials and, with some understanding of their business, I ask: what am I willing to pay for zero or negative growth across time? China's boom has come and gone and Coke's growth - as a global business - has recently been stagnant, mediocre, so what are their prospects going forward? I don't like that picture at all. I might be willing to pay somewhere between 8 to 15 times earnings for zero growth (depending on context; I might pay less for a financial firm than a tech firm, and so on), if there is something I like about a company. Coke's multiple is closer to 27-33 lately. Why would anybody ever pay 30 times earnings for zero growth and bad prospects for growth? Coke is a very easy fair value calculation as far as my personal judgment is concerned, their persistent growth problems make that a super fast decision. I'll look elsewhere. McDonald's is in a similar boat as Coke, it's a horrific value proposition, 30+ times earnings for a business with very little (or negative) growth. I might pay 12-15 times for MCD or KO, maybe. Personally I tend to really dislike companies with no growth or weak growth prospects going forward, it's a giant negative in the margin of safety calculation (growth is a first-aid kit for problems that inevitably crop up in a business over time, random messes, it applies a bit of a balm, helps as an offset in the value calculation; if you don't even have growth, inevitable problems are that much worse when they happen).

Fair value means I've looked at the stock in a way that I prefer to approach a stock and I've made a determination for myself, for my investment purposes, as to how much I think it should be worth. And I may come up with a few versions of that, one for an average market (with typical multiples), one for a slightly bubbly market; typically I disregard trying to come up with a value based on a mania, I'm not a buyer at that time in most cases. Those variations, models, are meant to inform myself as to the flex in my investment. If valuations merely go back to where they were in 2012 or 2016, how might my investment perform if its multiple is reset 1/3 lower? Will I get killed on the price I paid? It's modeling.

Interest rates will absolutely distort the context of deciding what something is worth, that falls into the variations, models, you build for different scenarios. The point of doing that is to check / prepare your position against a bad outcome. People claim that low interest rates will keep stocks inflated, so there's nothing to worry about; I like to point out that multiples were far lower at numerous points in the past decade when interest rates were at zero and we also had QE going on. How about if we just roll back to where multiples were in 2014 when rates were zero (and our economy was better positioned in 2014 than it is now, although our headline unemployment rate was similar)? If I were a buyer today I'd absolutely be running that simulation for myself whenever I buy.


I really appreciate your insights on this. Thank you for taking the time to write this up.

I find it interesting that BRK did not sell any SNOW in its latest 13F. They own 12% of SNOW...

Yeah they don't tend to talk very openly about who is doing the buying for what. Occasionally in the last few years Buffett will indicate if it was him specifically buying something, usually outsized positions.

I think either Ted or Todd is likely is doing the buying on Snowflake (at least instigated the premise), perhaps with Buffett's sign-off (given it's an increasingly large position). I also think one of the other buyers is likely responsible for Berkshire's position in VRSN.

There's a high risk that Snowflake position will humiliate Berkshire Hathaway. I think it's a mistake. It wouldn't be Berkshire's first mistake in dabbling in tech but it looks like it could be the biggest.

I have great respect for Buffett's historical performance, however I consider him mostly done at this point. He's conservatively managing the end game of his career now, he seems to be intentionally avoiding doing anything that might stretch beyond his lifetime now (I don't think he wants to do anything that might need a decade to manage that he might have to offload onto the next person). I think he should have taken advantage of KHC's weakness for example, to strip Heinz back out of the conglomerate and break it up and sell off the rest of Kraft, the stock was so cheap at times you could have almost gotten Heinz for free in the process. Instead Buffett is sitting on a hundred plus billion dollars yielding squat (KHC was down to near half the market cap it currently sports, which was the general time to grab it to try to get the Heinz business, and then sell off the lesser pieces, either after you repair what was ailing KHC or immediately depending).

Stock to flow ratio.

Btc is the ultimate store of value. An infinite stock to flow indicates this.

If you are argument is "but the volatility" then you enjoy not winning.

Upside volatility.

Number go up.

If the bull case was only $150k, I might agree with you. The bull case is $5 million. But bitcoin has always been risky and can always go to 0 rather quickly.

Anyway, there is no point at looking at nominal values given inflation, population growth, general progress. I like to look at everything as a ratio against total global numbers (global wealth, global debt, global population, global equality etc.). Unfortunately it’s hard to find reliable global numbers.

The IIF only gives its numbers to a few hundred global banks and similar sized institutions.

Once the bullish case is set at $5 million you might as well set it at $5 trillion.

At $5 million it's approaching the value of all stocks on the planet. I don't have to elaborate on the economy those stocks represent, the annual profit generation.

$100 trillion is nearly all household assets in the US, and nearly double all household assets in China.

I like Bitcoin, it's simply not a believable bullish case at all.

Total wealth 500 trillion. Frequently Recommended institutional allocation 30-50% bonds. Bitcoin replaces the bulk of cash equivalents. Not impossible.

Getting nearly everyone on the planet to do that, including all governments to allow it, is impossible. As one very prominent example, the odds are dramatically higher that China will banish Bitcoin from being legal inside of their country than that they'll allow everyone to switch to using Bitcoin instead of the currency system they directly control (and can manipulate as it fits their aims). All nations generally feel the same way about controlling their own currency, they more than overwhelmingly prefer to retain that power in their political system. If Bitcoin actually threatens that they have all the guns that matter and will act accordingly legislatively. They might be willing to allow Bitcoin to be a store of value competitor to gold however, but that's all they're going to allow.

We don't have gold backed currencies for the same reason we're not going to see Bitcoin overtake all national currency systems. The guys in power with the guns determine how your currency system works and they all universally say no: you may not have your fiat currency backed by gold (or in the future, swapped out for Bitcoin).

At $5 million, at current mining rates, it would cost $1.7 trillion dollars per year in energy and equipment costs to run the network. That is fresh capital that needs to be shovelled in and burned each and every year.

Not to increase the price, just to maintain the network. What is the network doing that would justify that investment?

After halving the cost would drop to $850 billion a year but still.

It doesn't really make sense to measure this in USD if one of the major hypothesis driving Bitcoin is that USD is being hyper inflated. Yeah, it might cost $1.7 trillion dollars but at that point a 3bd house might cost $5M. If you're going to pin BTC to USD, you need to use inflation adjusted numbers.

> It doesn't really make sense to measure this in USD if one of the major hypothesis driving Bitcoin is that USD is being hyper inflated

“USD is being hyperinflated” is an easily falsiable (and obviously false) statement, so basing anything on it is nonsense.

(That it is imminently going to slide into hyperinflation is less easily falsified, which is why that is actually the perennial cry of cryptobugs, as it was for goldbugs—sometimes, the exact same people—before then.)

Isn’t it easy to verify? How much did a house cost 20 years ago? A 4 year college degree? How much were you paying per month for health insurance in the 90s? Salaries have not kept up. They’ve been amazingly static my entire life.

You've mentioned three items that have experienced specific inflation at higher than the general rate of inflation (but even then mostly not at rates anywhere in the remote neighborhood that would qualify as hyperinflation [> +50%/month] even if they were the rate of general inflation.)

So,yeah, when even the rapidly inflating segments aren't anywhere close to hyperinflation, it's pretty clearly not general hyperinflation.

And stagnant wages are a completely unrelated issue to hyperinflation, though obviously wage increases mitigate and wage stagnation or decline exacerbates the effect of whatever inflation there is on wage earners.

They also just listed the set of the largest expenses for a vast majority of our society (even if you don't pay for education)

> They also just listed the set of the largest expenses for a vast majority of our society

Buying a house is an asset acquisition, not an expense. Housing is an expense (and typically the single greatest household expenses), but that expense has increased in price less than home prices.

The next greatest expenses are food and transportation.

Further people are buying more housing than they used to.

If people buy four household computers that isn’t inflation, but how does buying a 4 bedroom home rather than two bedroom show in inflation stats?

Isn’t cash losing value the definition of inflation?

conceptually holding more cash than you can usefully spend reduces your cash value and doesn't have to happen with inflation

I remember Buffets letter to shareholders apologising Berkshire Hathaway wasn't able to continue delivering the same historic returns because that trajectory would require them to own every publicly traded asset in the world after ten more years.

even now you can potentially eliminate the major inflationary risks by holding property without debt and rely on policy consumer price regulation to hold basic necessities in check but I personally think that energy risks and not only exceptional weather events put that out of contention for sanity sake. In fact if energy infrastructure and general infrastructure development is increasingly critical for the future it makes little sense to have a cash savings incentive in the economy despite this is unfortunately not a explicit case for the generational savings deprecated in a way that I readily appreciate.

edit to remove accidental negative from I personally [don't] think that energy risks....

This seems more like chasing yield and less like cash losing value or being a bad asset. Cash obviously has benefits to hold and that isn’t changing soon.

absolutely agreed I'm all cash since 2018 in fact, which is why I'm sensitive to the cost of that liquidity.

I noticed a comment sadly without details reporting a third party obtained a crypto collateralized 7 figure loan obtained in a matter of minutes which interested me enough to plan a new survey of the infrastructure in the market. I'm personally interested in pending short term 5 figures as a business. but only if I can figure out how report to credit agencies specifically for positive feedback and I am only interested in non secured lending but whilst holding the underlying as the custodian. unsecured loan performance is a particularly valuable credit record history especially in the present volatility. the model I wish to pursue is to provide liquidity for trading traditional instruments and by acting as custodian for both crypto and trad assets, providing as USP analytical tools and guaranteeing fills on quotes from my ticker, acting as guarantor for the trades to a mainstream financial or bank. I won't go into the model but it does include kicking back fees from my prime broker for the volume and transparently revealing the collars around the spread enabling truly immediate liquidity and real time netting. hedge strategy p&l to benefit customers when closing in the market thereby paying every customer for anything that they left on the table excess for buying the liquidity.

Yes, and it's been sitting around or below 2% for some time which economists generally consider a good level for spurring spending.

Sure, until you want to go to college, or buy a house, or have access to healthcare or buy some stocks to save for retirement.

But if you don't want to improve your life and just want to survive until the next paycheck sure, I guess inflation is low.

Given that all of those things have increased in cost at rates far beyond 2%, I don't really see how you blame that on the inflation of the USD as a whole. They have their own systemic problems attributing to their astronomical costs.

> Given that all of those things have increased in cost at rates far beyond 2%, I don't really see how you blame that on the inflation of the USD as a whole.

My point is inflation isn't being measured in a way that actually matters to people worried about more than buying groceries and a new laptop.

If all those things were included in the measurement inflation would be way over 2%.

The 2% is complete b.s. unless you are homeless and surviving on canned food.


It has never made sense to hold on to cash, and it has absolutely nothing to do with QE. Read Keynes' theory of demand for money.

Cash is what you want to be sitting on when discounted opportunities abound. The people that lack cash at such critical times, suffer enormously for that error.

How nice was it to have plentiful cash after the real-estate implosion? They were practically giving homes and condos away in markets like Nevada or Florida, condos that were going for $250,000 during the bubble were being given away for $35k-$50k at the bottom of the implosion and there were few takers, entire buildings were sitting empty in formerly hot markets in Florida.

How nice was it to have a lot of opportunity cash at the ready as the S&P 500 collapsed in late 2008 / early 2009 (or March 2020 for that matter), while everybody else was getting mauled, worried about margin calls, fleeing the market in fear. You wanted to be buying from those people as they were dumping nice assets for $0.25 on the dollar. To do that you needed cash on hand.

The time period after steep asset declines or crashes, is when the majority of investors lack for cash the most, they're always pinned, scared by the hits they took, and can't seize the opportunities that become available; and that's when you make the biggest killing, that's when you take up your greatest potential return positions, not during rah rah times (that's when you cash out your prior opportunistic positioning and build cash, rinse & repeat).

That's not to suggest you should always be holding nothing but cash, that isn't the point. The notion that it never makes sense to hold cash is way off the mark however. At a minimum you want some opportunity cash on hand at nearly all times, and you can increase or decrease how much that is depending on the context of the economy/market/personal/etc.

bye bye cash

Ah yes, possibly the 5th company that I wished I joined this past 18 months...

Historically there were some exchanges that have been hacked. This caused not only the company to go bankrupt but people losing a lot of money. How does coinbase prevent this from happening? This is very much one of the reasons I will never hold crypto (FYI: I've wrote my own Golang flavour of ethereum blockchain and solidity when it first came out, since im gonna get bashed for this post. I also regret not putting 1k during ethereums ICO when that was the only money I had in my bank account. This is not an investment advice). If my etrade or bank account got hacked, I can still get my money back through FDIC and SIPC. If a non-tech personstarted hyping a cryptocurrency and placed 100k in it, and they get hacked, essentially their 100k evaporates right? I guess there are worse ways to gamble your money

What I like about crypto though is the 24/7 market. I wish there was something like this in the stock market.

It's not perfect, but I believe Coinbase uses a combination of cold (offline) storage for most of its coins and insurance for the rest. Also, as you probably already know, people should not hold large sums on exchanges if they can use secure their own keys (and wallets) instead.

> "Coinbase prioritizes the security of our customer's digital currency through a combination of online “hot storage” and offline “cold” storage. Coinbase maintains 98% or more of customer digital currency in cold storage, with the remainder in secure hot servers as necessary to serve the liquidity needs of our customers. All digital currency that Coinbase holds in its online hot storage is insured. If Coinbase were to suffer a breach of its online hot storage, the insurance policy would pay out to cover any customer funds lost as a result."


I'd imagine with SV money and SV knowledge building a secure exchange, with proper cold wallets and processes in place to secure them and manage access, is not that difficult.

I get the impression that a lot of exchanges are (or were in the early days) built by 'enthusiasts' who know just enough tech to be dangerous.

You are assuming cold storage can not be "hacked" or "stolen". It is much more difficult at Coinbase scale but such an event would have drastic impact on crypto markets. Coinbase is too big to fail :)

I'm not assuming that. I said "it's not perfect" and simply listed the security measures that I am aware of :)

Wow, that's a fun fact, there is an insurance. That's pretty cool, I wonder how much insurance are for these companies and brokerages

TD Ameritrade's 24/5 is the closest we have to this at this time. The volume is quite limiting.

That's interesting, I googled this and I didn't know this existed. Thank you

Regarding your last line: futures trade nearly 24 hours, 6 days/week. It's also several times bigger than the ETF market, in terms of average daily dollar volume, so you get the liquidity and smaller spreads as well. [1]

[1]: https://www.cmegroup.com/education/courses/futures-vs-etfs/w...

Perhaps a dumb question: why is Coinbase even entertaining an IPO? Give away shares for fiat money? Isn't that antithetical to what they're trying to do?

They are trying to "Exit". That is what they call a IPO or a Sale in startups. They get paid with cash, then they buy houses, stocks, bitcoin, cars with that cash. The "Mission" of Coinbase exists because they don't want to say "Our mission is to build a 100 billion dollar company and then cash out" it sounds better and feels better to say that you are democratizing and decentralizing power for the people.

Especially when you're running a company that facilitates the exchange of high-price trading cards. If those cards are popular and expensive, and the market thinks you're worth 22% as much as JP Morgan, it's a great time to cash out. They might be eyeing a direct listing because institutional investors know that price is ridiculous, but also because they see Coinbase as something of a competitor, so the only interest will be from retail investors.

If somehow you could dissociate the tech from the currency aspect, would you still qualify cryptocurrencies as "high-price trading cards"?

I wonder because where some people are attracted to crypto because of the monetary gain and then learn about the technology, others are turned off by the constant focus on the $ value and then don't learn about the technology.

I truly find it fascinating to imagine our future running on a crypto layer. I'm not talking about bitcoin specifically due to its inherent limitations (which may or may not be bypassed through second layer solutions).

But playing around with some of the DeFi stuff, seeing directed acyclic graph ledgers perform at 10k tps and seeing projects which truly can bring value to people really gets me hyped about these things working seamlessly together.

The internet is not worth a lot because of the protocols underneath it but because of what people have built on it over the years. These various cryptocurrencies interacting with each other more and more gives me the same impression.

Every boom/bust cycle crypto goes through brings in more creativity from people who are building on this new world and I have trouble finding fault with it.

Would love to hear some arguments on how this view of things could be biased or perhaps wrong.

What projects do you believe truly can bring value to people?

The three comments preceding mine are brilliant at cutting through the pump and dump hype around Coinbase.

Ah the unspoken words of most startups. No one will ever admit to it, but too many are conceited in their quest.

I don't see anything wrong with it, but the status quo is that building a company has to be a true calling to change the world.

Both can be true. ie. wanting to build something cool and potentially good for society while also enjoying the fruits.

Certainly. Just look at some of the people on Etsy. Some of them are pure artists who do what they do because they love it, not because they were hoping become a 100M brand some day. Some of them make good money because their products are so great and unique. But those same people are generally not looking to sell their company.

You don't think an Etsy artist who became popular enough to hire employees and make a large brand would ever sell shares of their business? Or is that type of Etsy user immoral/incorrect? Not clear to me what point you're making here.

Why did they create their Etsy store? Was it to make as much money as possible? If the goal is just to make money then they should cash out at the peak of their brand.

What I meant to convey with my original reply is that making as much money as possible and trying to improve society aren't necessarily mutually exclusive. Then you proceeded to seemingly present a mutual exclusion of either someone making art for art's sake or making art simply to make as much money as they can.

You can only have one #1 priority. Maybe following your #2 priority helps achieve #1. Is that what you are saying? Selling a Crypto Company for Fiat makes Crypto more legit?

A direct listing is markedly different than an IPO or sale. It should just be added to your list of examples.

Maybe you're confused about what they're trying to do. I'm pretty sure they're trying to get rich and nothing else.

21st century Levi Strauss

I'm someone who used crypto to buy my current residence. Until you and your staff can pay their rent and taxes in BTC, fiat money is the only real money.

That said, I have my doubts about the 'purity' of any crypto company.

I don’t think it’s antithetical, going public is a natural step for many companies. It makes the people at the top of the company that much richer. Also in a weird way going public is sort of decentralization because suddenly the people running the company are answering to the shareholders instead of a few key stakeholders.

If you built a giant business trading Beanie Babies would you want to cash it out for Beanie Babies or greenbacks?

The chart here provides context:


In case the tweet is deleted, a summary. Coinbase is now being valued at over half the combined market value of the companies that collectively own most major global markets outside of China. Those markets trade everything from currencies to stocks and bonds to commodities.

For scale of asset pools: The value of all Bitcoins ever mined just hit $1 trillion. The CME Group exchanges trade nearly 6x that daily. This funding values Coinbase ~50% higher than CME Group.

Something similar that intrigued me recently is that Airbnb is valued at more than all the USA publicly listed hotel chains put together (Marriott etc)

That's meaningless. For all we know, these companies could be buried in debt and thus have little value in their assets.

The price is a prediction of future payouts (whether in dividends or value of the assets the company is holding).

In that case, the comparison is between a capital-efficient tech company and a real estate management company where capital is tied up in real estate around the world.

If there's a similar distinction between the business models of Coinbase and e.g. CME Group, I have yet to hear it.

> If there's a similar distinction between the business models of Coinbase and e.g. CME Group, I have yet to hear it.

Traditional finance and crypto finance are often hard to compare, but here's a surface level comparison: Coinbase is an exchange, a brokerage, and a clearing house all wrapped into one. I'm not aware of entity in traditional finance that is all three, though plenty are two out of three (Robinhood is a brokerage and clearing house, CME is an exchange and clearing house).

I don't get how everybody is just making a killing right now. What goes up must come down? Are people going to get uber burned?

Like somebody who put in 50% of their net worth today, and maybe it drops?

Prices go up because money flows in.

In a bubble (up to you to decide if this is a bubble) a lot of people end up very wealthy on paper, but they only keep what they manage to sell before the retraction. Sadly, a lot of people can't resist the urge to double down as prices get higher and higher, meaning they lose more on the way down than they thought they were risking on the way up.

> Like somebody who put in 50% of their net worth today, and maybe it drops?

YOLOing your net worth into stocks isn't something that happens in the real world very often, contrary to what you see on WSB. The only people doing that either have severe gambling problems, or small enough net worth that they feel like they don't really care if they lose it all because they can start over.

The weird thing about this bubble is everyone he gets rich on extreme gambles seems to want to post it for internet cred. Makes it look like everyone's doing it.

YOLOing is different than making cautious educated trades and investing in an index fund

There’s a lot of stimulus so assets are being inflated. It will pop at some point though and yea lots of people will get burned so don’t get too greedy on the ride up!

Stimulus isn't entirely responsible for this. Stimulus is partially offset by COVID losses.

This is a market mania at this point. Everything thinks stimulus is all-powerful at this point, but there's a lot of FOMO going on too.

Since everyone thinks that buying stock is a good idea, stocks grow, and buying more stock becomes a rational decision, fueling the flame even more. It becomes a self-fulfilling prophecy — for some time. A crash-up before a crash-down.

Jumping off this train in time is what takes a real skill, not jumping on it.

It's happened before, it'll likely happen again: a new high that's multiples of the previous high, months of exuberance, and then a 70%+ drop. 2-3 years of teeth gnashing and accumulation, and repeat the process. It seems to come several months after Bitcoin's halvings.

why must it come down?

there is no gravity.

All bubbles pop eventually. I think there's little doubt crypto is a bubble right now.

Maybe it pops tomorrow, maybe it goes on for years. I don't know, nobody really does.

If you value stocks based on book value + dividends and discounted cash flow, this bubble's been going on for almost a hundred years by now. We've just gotten used to the new multiples.

I don't see that. You'll need a source if you want to argue that. We've gone through cycles of higher and lower valuations. You also need to compare that to interest rates, because lower rates make the market more forward looking.

You also have to factor in growth into the equation as well. That's the most subjective part of a company's valuation.

>> All bubbles pop eventually. I think there's little doubt crypto is a bubble right now.

Same thing was said in 2013 and 2017..

I don't think it was wrong then either. I think this is a greater fool style of bubble like the famous tulip bubble, eventually we'll run out of fools.

That's my opinion, but we'll see.

The other possibility is that it will be widely used in the future as a store of value or for some other purposes. Might be rational to put at least some percentage of your net worth into it. People need and want something like that to exist where they have complete control over their assets without any worries about government or institutions.

> People need and want something like that to exist where they have complete control over their assets without any worries about government or institutions.

The government can always just make a law and take whatever it wants from you (or imprison you). Doesn't matter if it's from a bank account or bitcoin cold storage on planet Musk.

> Doesn't matter if it's from a bank account or bitcoin cold storage on planet Musk.

It's a lot easier for the government to pilfer your bank account, than for them to torture you to hand over your seed phrase (that is if they even know your real identity). Decentralization absolutely takes power away from the state. That's not even touching the truly anonymous crypto like zCash.

They don't have to torture you, just hold you in contempt of court until you give it up. e.g.: https://en.wikipedia.org/wiki/H._Beatty_Chadwick

Works the same as with bank accounts or scamcoins.

They can’t take the money from me though. They can hold you in contempt and access your funds without your permission with USD in a bank.

> People need and want something like that to exist where they have complete control over their assets without any worries about government or institutions.

Are you sure? I have never in my life met anyone who thought they didn't have control over their assets or that they needed to have more control.

In reality it is probably both.

Unless governments take a hard line against bitcoin by banning it, something they mostly haven't been doing to date, I expect it will have a future as a kind of digital gold. However, gold has tens of thousands of years of history as an asset class, while bitcoin is a little less proven. Don't forget it used to be illegal to own gold in the US, so bitcoin is not as safe from government as people might think.

But all financial assets tend to follow cycles of booms and busts. So the question is, where are we in the cycle? Are we nearing the top in the near term? I think we are, the growth of bitcoin has gone nearly vertical lately.

Bitcoin is still only 1/10 the market cap of gold, with the argument by Bitcoiners being that the asset is a 10-100x improvement over gold.

I get this argument if it was for e.g. gold. A physical asset, thousands of years of people appreciating it, nothing else like it. But why might it be rational to put some of your net worth to bitcoin? What speaks for bitcoin existing in a meaningful form 50 years from now, instead of some improved, different (blockchain-based or not) digital asset?

I will leave you with this cartoon: https://images.app.goo.gl/dzZNEDdz4HkcSEaS8

That's the thing about bubbles, you don't know you're in one. My life is a bubble. I'm not going to worry about when it pops.

Isn't inflation the economic equivalent of gravity?

If an asset isn't growing faster than inflation, it's losing money. If there are other assets offering better risk/reward then money will flow to them and out of the inflated assets.

Inflation is high, but it's nowhere near enough to explain the recent market mania. Likewise, stimulus isn't enough to explain the market mania, especially after you subtract out COVID economic losses.

Personal savings rate is up, discretionary spending is down, people are stuck at home, and everyone is glued to their phones. I think a lot of people's extra money is going into crypto and the market. FOMO reigns supreme, at least until the numbers turn red.

CPI might not be high, but inflation can show itself in different places. Asset inflation has been increasingly high since 2019, which is clearly visible in stock market, real estate and commodity markets. Similarly, construction materials are up significantly.

It may or may not show up in consumer prices eventually.

Sure, but this is not inflation. Inflation is an increase in the price level. When some prices are up and others down so that there is no general increase in prices, we cannot speak of inflation.

What prices are down? Big Macs? Flat screen TVs? Crap from Walmart?

How about the actual things you need: housing, groceries, college, gas, electricity, a vacation?

Due to the pressure on government to keep inflation low to avoid devaluing their dollar inflation is a gamed number and the goal posts have been moved to keep it low so things look good. Meanwhile the price on everything that I buy or want to buy is through the roof and I can’t find a job that will pay me more than my current one - guess I should have gone with software instead of hardware

In the Bay Area I've seen groceries creep up a bit but basically everything I buy(rent, fuel, consumer goods, information/entertainment services) has stayed the same over the last year or two.

Now, thanks to economic inequality, I think a lot of folks are feeling effective inflation, but the true value we define as 'inflation' has not risen much yet. Sure, some things are up, but they're not included in the calculation of 'inflation' so it makes sense to talk about them in different terms, I think.

Inflation is a general term for when the nominal price of goods increases disproportionately to the intrinsic or real value.

Inflation as represented by CPI is only one measure of inflation. Just because the Fed uses that measure to drive policy doesn't mean there isn't inflation in other areas of the economy, like housing.

Latest data I saw showed factory input prices are up but not currently being passed on to consumers, possibly because businesses know it will be very poorly received by both consumers and the media.

Inflation is coming, but it seems to be inflation driven by supply disruptions and not monetary policy driven inflation. I'm still not 100% on board with the idea, but I've been reading lately that QE is basically low-velocity money and doesn't necessarily contribute to inflation. I know we didn't get much inflation after QE'08 and the velocity of money has been in the toilet since then. Combined with the USD reserve currency status I think we could actually end up with deflation but IDK. Real economists can't figure it out and I'm just some idiot on the internet.

Ok. My advice is, if you are interested in economics, get yourself informed from reputable sources, and be always sceptical, but especially of claims made by non-economists who have read some bitcoin whitepaper and think they understand economics.

The market can stay irrational something something.

Coinbase will make a lot on their staking products, I can see huge growth there!

I am surprised by this multiple but I can see it, as the law of diminishing returns has not set in and won't for a while.

Pretty much all aspects of this require growth in other parts of the market to support, but they are all things I agree with.

For example, Coinbase should be allowing people to pool their REN to run hosted darknodes - darknodes function as a progressively more trustless exchange letting people move assets across blockchains. Coinbase already lists REN. Taking a cut of that as the volume grows there will essentially allow Coinbase to double dip. They get the transaction fees when people trade, move funds off of their exchange, and a cut when people move funds to other blockchains through RenVM, which will be a many-to-many relationship. The Forex market does several trillion $ a day in trades, so another mere order of magnitude in growth of the crypto economy would support the growth of all the infrastructure projects inside of the economy.

I see a lot of people talking about the market being in a bubble, and that they’re holding cash waiting for a crash.

Even if that’s true, I recently read about the bubble potentially “bursting up”: instead of prices coming crashing down, prices stay stagnant or grow slowly, while earnings grow quickly. The net result is the same (P/E ratios stabilize), but you lose out on a lot by staying out of the market.

> instead of prices coming crashing down, prices stay stagnant or grow slowly, while earnings grow quickly

Do you have a link where I could read more about this? As a layman I fail to understand how this would work, and I couldn't find a page explaining it.

My naive understanding is that a bubble pops when investors lose confidence in the market, and instead of anticipating growth, anticipates a correction and create a feedback loop down to a certain level (at which some counter feedback stabilizes the movement).

How can earnings increase when investors have lost confidence?

The market is overvalued when the price-to-earnings ratio is too high (ie, valuations outweigh the actual money that a company makes). When it gets really high, investors can panic, and sell stocks, driving prices down and hence reducing the PE ratio.

The alternative I’m describing is one where panic selling doesn’t occur. Earnings can continue to rise (because earnings reflect consumer spending and other similar trends), whereas prices don’t go up as much because market speculation reduces and people are less bullish. It doesn’t have to devolve to panic selling.

Bitcoin has no earnings so I don't know how that could possibly work in the case of the bitcoin bubble.

I think growth in value could be substituted for earnings in the case of something like Bitcoin or a stock without dividends

I don't think so, because we're using earnings precisely to assess if the observed increase in value is justified. Stocks without dividends are not a problem, because businesses always have earnings regardless of whether they distribute dividends or not.

I think OP was talking about a possible market bubble, not Bitcoin.

It seems like the unlikely alternative. What would motivate everyone to keep money in assets that aren’t moving, or barely moving? Perhaps if there are zero alternatives — nothing is growing faster — then yeah... That’s hard to imagine.

I think the other practical issue is that a "bubble" can go high enough where a 70% downward correction could still land above where you originally decided to cash out. I made this error back in 2016 thinking that Obama had juiced things for 8+ years and there'd be no way for Trump to keep the party going. And that taught me a hard lesson on the foolishness of trying to time the markets.

The other issue we are dealing with now is also asset inflation, where the number on the screen does not reflect any intrinsic value, but moreso the ongoing devaluing of the dollar we hold in our pockets.

I personally think this whole "modern monetary theory" is a game where the smart folks at the Fed realize that rather than have people watch the number on their savings and 401ks obliterated in a crash, they prefer to keep that number appearing the same and bury the "cost" of the bubble into a deflating dollar. It keeps the masses happy because they see the $s in their savings account still going up, which retains confidence in the system. Who knows when everyone will catch on, but it's been working so far.

The same week SpaceX raises at $78B.

Doesn't quite add up, but what do I know.

Elon is promoting cryptocurrency. I would assume it makes him feel powerful when the price goes up.

I suspect launching cars into space makes him feel powerful, while pumping memecoins makes him feel somewhat entertained.

I am afraid that we might be on the verge of another dot com level bubble. It's interesting to see how one inflated asset is propping up another. Tesla - which rose by 1000% in 2020, bought bitcoin. Ark Invest Etfs - some of the biggest actively managed etfs, hold significant amount of Tesla, and with the profit generated from Tesla's phenomenal rise, they are investing more on bitcoin. I believe in the future of cryptocurrencies, but the current state of bitcoin is abysmal. It's slow, expensive and the hacky patches on top (lightning network) either haven't been widely adopted or are still buggy. This all seems so much like the pets.com of the dot com bubble era. Great idea but terrible implementation. https://www.forbes.com/sites/billybambrough/2020/07/09/bitco...

Is this like the dot com bubble? My understanding is that the mindset of the time was a true mania - people were convinced it was the new normal and that businesses got insane valuations preproduct even. It seems like with a lot of these bubbles everyone is like “get in this stupidly inflated asset with money you can lose to try and make a quick buck” with retail investing at all time highs rather than some dramatic distortion in people’s perspectives. Even while assets are so inflated the investor sentiment still seems sober.

> people were convinced it was the new normal and that businesses got insane valuations preproduct even

How is that any different from today?

Everyone is constantly saying it is a bubble and will pop soon. So sentiment is exactly the opposite.

Everybody is selling EVs now. I wonder what happens to TSLA in Q4 2022 when car manufacturers publish their numbers. Enjoy it while it lasts indeed but I'm worried if that will have a cascading effect into other stocks or even also crypto.

the nice thing with that bubble is that because it is manufactured by the Fed, you have an easy signal for when it has reached its top, just look at the weekly fed balance sheet:


And right now they are still printing more and more.

Fed contributes, but it's hardly a singular explainer for the current market mania.

The chart you shared hasn't even changed significantly since July.

The Fed didn't print enough money to buoy Tesla 1000% or send Bitcoin up 100% in a month. There's no mechanism directing money straight from the Fed into the riskiest assets. Market mania has taken hold.

It definitely plays a role in driving overall sentiment though. And indirectly plays a role in people taking more risks. There's a view that the economy won't collapse because central banks will just keep printing money... and it's probably correct because there's no real alternative right now unless you want civil unrest because that's what you'll get once you shut down the economy and then turn off the money taps simultaneously.

But at some point, in order for fiat currency to retain any sort of reliable buying power, there does need to be a rug pull of some sort. Doing it while so many are out of work and so many industries are effectively shut down by government regulation would be extremely dangerous (for the government of the day).

For bitcoin at least, Tether printed enough.

If you assume tether is largely legitimate, the observable behaviors would look indistinguishable from the claims of fraud.

Tether “being printed” is per design. Just like wire transfers and account signups to Coinbase, they align with spikes in price.

That’s not to say they are legitimate either, but the constant conjecture about it is mostly people confused about causation.

Tether FUD Era of this bullrun ended 15 Jan. See you in a few years.

I started paying attention to ARK funds lately because of seeing it here and there online. Then I subscribed to their YouTube channel last month and listened to this month's update from their fund principal manager (Cathie Wood). I have to say I learned some new stuff about Macro econ from listening to her video, BUT her talk about AI innovation [https://youtu.be/uwajUw4RFVk?t=1207], just convinced me that she is overestimating the potential of the AI's impact at least in the near term.

Could credit cards not be considered a "hacky patch" or really a layer 2 solution to the slowness of adoption and traditional banking policies?

And they eat up 2%+ fee even for people that wish to pay in cash?


I think Flooz coins had Super Bowl ads at the time.

What about the environmental impact / physical limitations of cryptomining? At this point BTC alone consumes more energy than Argentina (https://www.bbc.com/news/technology-56012952)- will legislators allow this to continue? Will it even be possible for it to continue much further?

Most crypto mining is done with renewables because it’s the cheapest kWh when you don’t have to factor in energy storage.

And? If miners use it, it means John Doe needs to use coal power to charge his Tesla instead of renewables because the mining setup next to the hydro plant is gobbling it all up.

Maybe coinbase stock becomes the next cryptocurrency! One coinbase is one coinbase?

Check out binancecoin. It shot up so fast last few days it looks like its #3 in market cap now!

I wouldn't be surprised to see Coinbase stock track bitcoin extremely closely.

There can only ever be 21 million Coinbases

ICE who owns the NYSE had a net income of $3Bn last year and is worth $68Bn - for context.

Not sure what the operating costs look like for Coinbase, but here's some napkin math based on just the Coinbase Pro exchange .

They get roughly $200 per bitcoin trade. That's on both sides, so $400 per bitcoin transaction. Today was a slightly higher volume day but they did $1.6B in BTC-USD, so around ~30k bitcoin changed hands.

30k * 400 = $12Million

Bitcoin is 1/3 of their volume (they have a lot of other crypto currency pairs), so let's take 3x of that = $36 Million in trading fees today.

Bitcoin is a 24/7 market, so 365 days = $13.14 Billion per year.

This does not even count what used to be (still is?) their main business of just buying and holding bitcoin for people through DCA buys or on their app. They also are starting to have a bunch of other revenue streams through loans, debit cards, etc and invest in a number of early crypto projects.

I'm not sure what the multiple is going to be like since I don't know their expenses, but since most tech companies are valued from revenue and future growth expectations anyway, who knows.

"Coinbase generated $141 million of net income on $691 million in revenue for the first nine months of 2020, according to documents shared with investors."

Though 2021 will be higher, will it be 20x higher?

The first nine months bitcoin was at a $10k and below level. They are making considerably more money since the boom took off after that.

I don't know if it will be 20x higher either. Just saying, this makes more sense than say, Zoom, which trades at $120B mcap.

I dont think the volumes will last, but if you look at volumes today and extrapolate further growth, then sure $100B makes sense.

About to have a lot more once they start liquidating their Coinbase shareholdings

How much do they own now?

No matter if you think we're in a bubble or if this valuation supports your view that we are in a bubble, at the end of the day we are all losers who have decided to spend our precious time on a Friday night glued to HN.

It’s Saturday morning for me in Thailand right now. I’m gonna drive a bit around on the 2nd hand motorcycle I bought this week - my own very first motorcycle. Lots of fun!

What model motorcycle did you get?

Honda CB300F. It’s an excellent beginner motorcycle.

Congrats and be safe!

I'm flying to Thailand tomorrow. Feel free to DM me if you wanna connect :)

Where ya at in Thailand?

I stay in Mea Thalop, a small village near amphur Chaiprakan in the Chiang Mai province. Close to the border with Myanmar.

Next Friday I plan to do the 2-3 hour trip on motorcycle to Chiang Mai city. It’s through a mountainous snake road and with good weather very beautiful to drive.

Covid makes it harder to be someone who has plans on a Friday night. Don't be so hard on yourself, it gets better.

I was on hacker news on a Friday night long before Covid! And I likely will be after as well.

I was thinking about writing that it gets better, but its too presumptuous when you dont know someone’s life circumstance.

If they aren’t of a mind stable enough to stay on this plane of existence, don’t not not stay.

Yeah dude I gotta quit this and my other forums lol. I spend so much time reading about stuff and trying to learn... instead of chilllin.

Same here. I convince myself by saying, hey this is not reddit or some sportsforum or <insert-forum-here> but this is probably a worse form of procrastination. At least when I visit /r/nba or espncricinfo, I can relax a bit and just enjoy.

The "noprocrast", "maxvisit", and "minaway" settings in your profile are meant to help with that.

They're for limiting your max amount of time on HN in a single stretch. :)

Talk about yourself, I am waiting for my build to finish compiling... (seriously)

while checking out HN, TikTok, Clubhouse and Facebook at the same time

dang should offer us an easy way to delete account and anonymize comments. I don't know why there's no such option (other than of course dropping the email).

I think it is so that you take care with what you post - it will be readable forever and someone who goes looking for you online may be able to link your profile to your posts by the details you divulge

> at the end of the day we are all losers who have decided to spend our precious time on a Friday night glued to HN.

It gets worse. Many of us are probably reading HN while listening to Clubhouse at the same time.

What are you listening to on there? I never have any idea what to do with the app

People in other parts of the world are not in your timezone fyi.

I'm in the bath relaxing and learning. How u doin'

I've got a 9 month old. when she sleeps, I'm catching up on the week

It's Saturday afternoon, I've already driven to another town to inspect a car and purchased and planted 10 trees today. Speak for yourself.

I swear I was just thinking the same thing :(

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