BITCOIN

Aegis

Scottex99 said:

I've also said that this has nothing to do with risk profile.  My tolerance for risk is extremely high, but I still need to make sense of a proposal before investing, and as I have mentioned, I do not see the investment case for crypto assets other than price increases that can be completely explained by mania.

 Exactly, you don't see it because you don't get it. That's fine.

But if you're going to use the argument of company do good = stock price go up = not greater fool theory because... dividend. Then you need to better understand the tokenomics and governance of some of these crypto protocols and what they also do/can do. Plus the value and liquidity that is already locked in them. Which is Billions.

Just found this, only 4 mins in but looks like it's at least trying to be balanced:

https://www.youtube.com/watch?v=l5TqlnD1ZSI

I'm not.  Dividends are important if you're looking for an income stream, and you can look at things like revenue and dividend cover to get an idea for how stable the dividend is going to be.  More generalised, you can look at the revenues, both now and in future.  Future revenues are hard to gauge and come with a great deal of risk, which I think is fairly reflected in the number of companies I hold which have failed to develop as hoped.  This is offset by the successes, where a company takes a step closer to getting a product or service to market or manages to turn laboratory knowledge into something they can scale up and manufacture on an industrial level.  Importantly, owning part of a company in the form of equities gives you the legal right to participate in the successes and failures of that company.  This means that if the company brings in external revenues through selling their product, part of that is "yours".  If the expectation is that at some point in future the company is likely to generate such revenues, then shares may have some perceived value now which starts from the assumption that the company might generate an income, then applies a discounting factor depending on how long it is expected to remain in the growth stage and a risk premium based on how likely the company is to achieve its goals.  Once all of those are factored in, you have an opportunity to buy what is essentially future ownership for a price today.  You can argue that during the growth phase, before companies generate revenues, there is an element of Greater Fool Theory here too.  The difference is that you buy shares with the expectation that they will do something productive to grow and bring in those revenues.  If you bought shares which effectively did nothing and were never expected to generate revenues, then you would rightly expect those shares to fail.

Now, without going into too much detail on how and why revenues come into effect, it's worth mentioning that assets which pay out "interest" in the form of more assets of the same type are not carrying out a like for like function to dividends or interest payments.  Instead this is closer to a share split/award, where existing shareholders are granted additional shares.  Importantly, when such events happen, the market capitalisation is generally expected to remain the same, meaning the existing shares are each watered down by the generation of new shares.  If the underlying asset price goes up, it can seem like a petty difference, but it is crucial to understand that if they are effectively splitting the tokens and awarding new "shares", this doesn't create any actual new value, it just relies on price rigidity in people's minds, which is a behavioural finance problem that has been documented pretty extensively.  Regardless of terms, what it means is that people can think of the "interest" payments as free money while the price is rising at enough of a rate to cover the dilution, but when it starts falling in value it will quickly become apparently that the interest payments aren't worth anything in fixed GBP terms.

bugbyte_2

There is absolutely nothing wrong with 'Greater Fool' trading apart from it having the word 'Fool' in there, and trading crypto is in my mind pretty much the essence of Greater Fool - but that shouldn't be seen as an insult. My greatest increase last year (4,900%)* was through flipping vintage watches and that is also Greater Fool.


* Before you think I am showing off, My 'rainy day in case I get sacked again' fund which is a lot larger than my hobby fund is held in Premium Bonds and managed 0.85%.

Aegis

bugbyte_2 said:

There is absolutely nothing wrong with 'Greater Fool' trading apart from it having the word 'Fool' in there, and trading crypto is in my mind pretty much the essence of Greater Fool - but that shouldn't be seen as an insult. My greatest increase last year (4,900%)* was through flipping vintage watches and that is also Greater Fool.


* Before you think I am showing off, My 'rainy day in case I get sacked again' fund which is a lot larger than my hobby fund is held in Premium Bonds and managed 0.85%.

Yeah, trading any assets which don't generate any income internally is Greater Fool trading.  Art, wine, watches, etc.  I stay clear of all of it, but if you have the time (pun intended) to learn about watches and enjoy it, fill your boots and good luck!

silvercue

Shocking_Blue said:

To tell you the truth, the seemingly complicated nature of buying/holding BTC. However, have been looking at eToro and they seem to have a consumer-friendly approach. Wondered what opinions were on their 

Crypto CopyPortfolios

https://www.etoro.com/crypto/how-to-invest-in-cryptocurrency/

I use eToro.   They are easy to use and good for beginners, no commission.   But, be aware eToro is not the best place for Crypto as they charge a very large spread on any buys you make.  As high as 4% (unless this has changed recently).   They are also more difficult to move and control your crypto if you want to do anything other than simple buy low/sell high.  They also force closed all of my leveraged positions some time ago.  Having said that - they do serve a purpose.   

I own a few crypto positions there, small amount as 99% of my crypto is bought elsewhere, but some of them are currently sitting at 1600% profit.   Feel free to check my portfolio out if you want.  Same username as here. 

User232002

Aegis said:

You can't run the numbers because you have no idea of timings at all.  This can be illustrated by taking an asset which doubles in value in a year, and looking at the different returns you would see if you invested on day 1 (100%) or day 365 (0%).  This then has a huge effect on the calculated annualised return for the portfolio.  This is why comparisons to benchmarks have to be time-weighted to make any sense at all.  I'm genuinely surprised that you are having trouble grasping this - it's something every investor should know so they can check how they are doing compared to chosen indices.  Indeed, it's even stated for regular savings accounts, where people are always cautioned that they will not earn the full headline rate (e.g. 5%) on the full balance because they will be adding funds monthly

Haha. Sir, whilst you are busy using high school mathematics to calculate your returns more accurately to 1 decimal place, I'm rounding my returns to the nearest whole multiple of my initial investment. 

Aegis said:

For the record, the comparison figure for the S&P500 over the same timespan as the ISA is 16.3%, taking into account flows of cash into the portfolio and assuming instant purchase of the index with no fees.  I'm quite happy to have outperformed this index by 6% a year annualised net of all fees, as I'm sure anyone would.

My approximation was 16-17%. So I guess it turns out I'm pretty good with numbers.

Aegis said:

In any case, this wasn't intended to be a brag, merely an attempt to point out that no, I am not settling for a 0.25% annual return.  Instead I am growing my capital at a rate considerably over inflation while focusing on investments where I can fully understand where the value comes from.

Stocks > Savings Accounts is not news.

Aegis said:

Frankly I am fed up of the idea that anyone not investing in crypto is ignorant of investment principles.  I firmly believe that I can show myself to be a savvy investor, and I have chosen to avoid crypto assets because I can't get good answers to simple questions on how to work out fair value.  Without that, it doesn't matter how much it goes up by, I'm not buying if the only way to make money is for someone else to buy into the asset at a greater price.  This is Greater Fool Theory, and I made a decision a long time ago not to invest in anything where this was the only way to make money.

So why continue to post in a crypto thread repeating to everyone that you don't get it? Just leave and go talk about your next IPO with people that care about it.


Lastly, imagine reading this:

Scottex99 said:

Then you need to better understand the tokenomics and governance of some of these crypto protocols and what they also do/can do. Plus the value and liquidity that is already locked in them. Which is Billions.

And then writing all this

Aegis said:

I'm not.  Dividends are important if you're looking for an income stream, and you can look at things like revenue and dividend cover to get an idea for how stable the dividend is going to be.  More generalised, you can look at the revenues, both now and in future.  Future revenues are hard to gauge and come with a great deal of risk, which I think is fairly reflected in the number of companies I hold which have failed to develop as hoped.  This is offset by the successes, where a company takes a step closer to getting a product or service to market or manages to turn laboratory knowledge into something they can scale up and manufacture on an industrial level.  Importantly, owning part of a company in the form of equities gives you the legal right to participate in the successes and failures of that company.  This means that if the company brings in external revenues through selling their product, part of that is "yours".  If the expectation is that at some point in future the company is likely to generate such revenues, then shares may have some perceived value now which starts from the assumption that the company might generate an income, then applies a discounting factor depending on how long it is expected to remain in the growth stage and a risk premium based on how likely the company is to achieve its goals.  Once all of those are factored in, you have an opportunity to buy what is essentially future ownership for a price today.  You can argue that during the growth phase, before companies generate revenues, there is an element of Greater Fool Theory here too.  The difference is that you buy shares with the expectation that they will do something productive to grow and bring in those revenues.  If you bought shares which effectively did nothing and were never expected to generate revenues, then you would rightly expect those shares to fail.

Now, without going into too much detail on how and why revenues come into effect, it's worth mentioning that assets which pay out "interest" in the form of more assets of the same type are not carrying out a like for like function to dividends or interest payments.  Instead this is closer to a share split/award, where existing shareholders are granted additional shares.  Importantly, when such events happen, the market capitalisation is generally expected to remain the same, meaning the existing shares are each watered down by the generation of new shares.  If the underlying asset price goes up, it can seem like a petty difference, but it is crucial to understand that if they are effectively splitting the tokens and awarding new "shares", this doesn't create any actual new value, it just relies on price rigidity in people's minds, which is a behavioural finance problem that has been documented pretty extensively.  Regardless of terms, what it means is that people can think of the "interest" payments as free money while the price is rising at enough of a rate to cover the dilution, but when it starts falling in value it will quickly become apparently that the interest payments aren't worth anything in fixed GBP terms.

just to prove that he is correct.

Literally zero knowledge of the richness and complexity of some of the crypto protocols out there.

User232002

Shocking_Blue said:

To tell you the truth, the seemingly complicated nature of buying/holding BTC. However, have been looking at eToro and they seem to have a consumer-friendly approach. Wondered what opinions were on their 

Crypto CopyPortfolios

https://www.etoro.com/crypto/how-to-invest-in-cryptocurrency/

Fair point. Hard to make any good suggestion here really as I don't know your level of tech knowledge.

I think I'm on the side of recommending new entrants to hold their crypto on something like Binance or Coinbase. View these as an online wallet like Paypal where you can convert fiat to crypto easily. Use Coinbase pro and bank transfer for cheaper fees. There's some reg risk associated with using a centralised exchange (which is why Bitcoiners will usually always recommend self storage) and some hack risk of course too, but its just easier to access and deal with for a new entrant compared to wallets, cold wallets and seed phrases.

I would steer clear of platforms like eToro, RobinHood, Revolut and others. When I last checked a year ago, the custody nature of these platforms is a bit murky and most of them are using things like derivatives to get exposure to the asset on behalf of their customers. In other words, you'll own it on paper but won't ever be able to take custody of the asset (probably not an immediate problem for you, but something to consider for the future should you wish to attempt to generate a yield on them). Have a look in to whether this is still the case as I believe some of them recognised this as an issue and were moving away from that.

In summary, cant see anything horrible with using eToro but can't really recommend their product either.

Aegis

So why continue to post in a crypto thread repeating to everyone that you don't get it? Just leave and go talk about your next IPO with people that care about it.

I had a long reply, but the forum ate it, so instead I'll focus here.  Why do I post?  Because I want people to think about the risks associated with making an investment.  If they fully understand the risks, there's nothing stopping them from deciding that the reward to risk ratio is acceptable for them.  Without contrary opinions like mine, you can end up with an echo chamber that just has people talking about the mammoth returns available without once thinking about where those returns are coming from or any analogies to gambling.

Don't tell me to leave.  You aren't in any position to do so, and while this forum continues to be, in my view, poisoned by crypto bros, I'll continue to provide an alternative view.  I have no intention of going anywhere.

Scottex99

Wrote a explanatory post but deleted it by mistake and cant be bothered to type it out again.

eToro/Robinhood/Revolut - Mainly CFDs not "real" crypto but very easy to trade. Higher Fees.

Coinbase/Binance/Kraken and about 10 others. Load GBP, buy actual coins and leave them in your exchange wallet. If they gp bust, get hacked, steal your coins you have no comeback. With the big exchanges it's black swan unlikely as they make 10s of millions in fees daily already. They wont be stealing £1k of BTC from you anytime soon.

This is tip of the iceberg stuff. Buy some BTC and ETH, read about what they are and see if you want to go down the rabbit hole 

Scottex99

Little snapshot of just DeFi things:

https://defipulse.com/

And also posting this again, anyone with half an open mind should give it a watch:

https://www.youtube.com/watch?v=l5TqlnD1ZSI

silvercue

Maybe some of you guys can agree to disagree.  It is healthy do have different, even opposing, views in a forum.

Seem to be in a cycle of proving the other wrong.