This article is the classic bellcurve.jpeg meme with both ends saying 1 BTC = 1 BTC, and the middle IQ band sprouting out this non-sense.<p>To give concrete critique, the author is using a complex financial instrument on an obscure exchange to make the case that sophisticated crypto traders would rather be paid in USD than Bitcoin. (with a meaningful, but overall small premium)<p>As anyone who knows how professional Crypto markets work, its very nascent with a lot of arbitrage opportunity. When you see a 2-3% arbitrage in traditional markets, you can safely assume "market preference". But in Crypto land, it wasn't long ago that you can get a nice 20% arbitrage just by selling/buying Bitcoin between YEN/USD markets. It didn't mean that people had a preference between equal amounts of YEN/USD, it just meant an inefficient market with not enough professional market makers to arbitrage away the inefficiencies. (which how SBF of FTX made his money).<p>The only reason one of the readers here won't arbitrage away that premium is they don't know how, or if they know how - they have bigger fish to go after.
"No one cares about crypto-denominated wealth" is far too strong a conclusion to draw
from the mispricing of an obscure financial instrument.<p>One big problem with derivatives in the cryptocurrency space is that the counterparties may not be that strong financially and/or may not pay up if they lose. Or, even if the hedge is enforced by some smart contract, the contract might not have enough staking behind it to survive a major price change. And there's a war on. So we should expect mispriced derivatives.<p>Is there data available for cashout rates, such as USDC redemption and USDT being traded for USDC? That's more relevant here.
This is a lot of theory leading up to a not-so-interesting conclusion. Of course USD is the dominant currency right now, and things tend to be priced in terms of the dominant currency. But that doesn't mean people "don't care" about other financial instruments. Imagine swapping the word "crypto" for anything else:<p>> Strong evidence that no one cares about VTSAX-denominated wealth<p>> So in the end the market is clear: when money is on the line, people value their wealth in fiat, not VTSAX.<p>You bet I care more about the number of dollars I have than the number of shares of VTSAX, but that doesn't take away from the value of VTSAX.
We will always have to pay for goods in a fiat currency, so it makes sense for people to value everything relative to fiat. Even trading on a ratio still falls back to “which will be worth more fiat”.<p>This doesn’t mean that people don’t value crypto, it means they live in the real world.
"I think most people don’t realize that 'IV' numbers are the annualized volatility of the log process, so there’s a nonlinear conversion to non-log standard deviation."<p>Hmmm, yes. I think most people don't realize this.
No one cares about USD-denominated wealth either. People care about real wealth, which is a physical quantity. USD wins here because its volatility is much lower. But it's also nonzero. I'm shopping for a car this month, and I'll decide whether to borrow or pay cash by comparing the expected real cost of the loan vs the expected real return on cash.<p>Regarding the apple example, the customer and grocer do not disagree on the value of apples. The trade takes place because of the marginal value of apples and the pre-existing difference in apple inventories between the parties.
This article makes a point that doesn't need to be made, it's stating the obvious. Quite obviously most crypto traders/investors use the dominant fiat currency to track their wealth. Even a deep believer in crypto does so, as a frame of reference. The chart is BTC/USD, and that is what everybody is looking at, nobody stated otherwise.<p>USD denominated wealth is also a requirement for managing taxes and USD equivalents like stablecoins are used to survive deep dips and progressively take profit on the way up...so that you have "dry powder" to buy the next dip.<p>There is however a sizable group that does denominate their wealth in crypto: those that dollar-cost-average. For Bitcoin, also called "stacking sats". They express their progress in crypto, not in USD, as the USD input is fixed.
Many financial news sources are already casually mentioning price of bitcoin alongside the nasdaq and s&p 500.<p>Give me all the formulas and statistics you want, but if I see a fast car, I'm calling it a fast car.
I understood maybe 10% of what the article says. Can someone ELI5?<p>Or at least answer this question: Can a broke dummy like me make money from their observation and how?<p>Edit: Thanks for the downvote. I didn't know asking an honest question to better understand a topic (which I'm sure I'm not the only one who's confused about) was against the rules. Or maybe my sense of humor flew over someone's head, who knows.
There are plenty out there that trade between BTC/ETH and other coins, in the hope to increase their BTC/ETH holdings.<p>There are atomic trades happening on DeFi that have to be denominated by ETH, because of gas costs.<p>Looking at the fiat price doesn't mean you don't care about crypto.<p>Not looking at the fiat price doesn't mean you care about crypto.<p>Personally, I don't look at the price until end of the month when I need to pay the bills.
I dunno, I care very much about increasing the number of BTC I have because I believe that though the price is variable, the trend is up over time. I study and try to employ everything from dollar-cost averaging to loan platforms with interest, to bitcoin-backed long positions. I don't think I'm the only one who thinks this way.
People think in fiat terms because their incomes and their expenses are in fiat... But people do have a sense of how much 1 Bitcoin is worth in terms of real-world economic value but they don't think about it in the same way as fiat.<p>Although people are more familiar with the value of 1 USD at any given time, they instinctively (and correctly) feel that it's a depreciating instrument which loses value over time. On the other hand, when people think about 1 Bitcoin, they feel that it's an appreciating instrument which gains value over time. Not only do people instinctively (without having to do a mental conversion) understand that 1 Bitcoin represents a lot of real-world economic wealth, they understand that it represents an increasing share of the world's wealth.<p>It's a bit like shares of a big corporation. How many laptop computers can I buy with 1 Google share? Essentially any Google shareholder will still need to do a conversion to USD (or their local currency) in their minds in order to give an answer. But this means nothing in terms of perceived value. The Google shareholder knows instinctively that GOOG is an appreciating instrument which gains value over time and this is what makes them want to hold it and not use it as a currency.<p>The reason why Bitcoin is valuable is because Bitcoiners understand that the main mechanism of wealth accumulation in the modern fiat-based global economy has nothing to do with value creation. Wealth in the modern era is all about tribalism and social networking. Bitcoiners are confident that their tribe is best positioned to acquire the world's wealth in a flawed system founded on money printing.<p>In a world of printed money wherein wealth is acquired primarily on the basis of value extraction (not value creation), wealth accumulation depends primarily on the size of one's tribe and the ability of its members to reach consensus and to conspire together.<p>By the way, this conspiracy element is not unique to Bitcoin; it's also an intrinsic part of all big corporations... Bitcoin is just the most effective mechanism for taking advantage of it due its substantial network effects and low-friction barriers to entry.<p>IMO in a world without money printing, the value of conspiring would be near 0 at scale because the focus (and incentive) would be value creation, not extraction.
And if I'm in Japan I still think of cost of items in pounds sterling converted.<p>...that doesn't make the Japanese Yen worthless.<p>It's a bad line of reasoning.
Those who aren't paying attention, anyway...<p>In Canada, we just went through a 10-day period where, in an <i>afternoon</i>, the government casually made it retroactively illegal to have supported a peaceful cause -- and began locking up peaceful, law-abiding citizens' bank accounts.<p>In Russia, citizens have been instantly locked out of international financial transactions, and non-local currencies have become unavailable. It is likely that further, dramatic interventions in ingress/egress of wealth are forthcoming.<p>In China, random decisions regarding the legality of Cryptocurrencies are regularly enacted. Huge businesses doing legal, ethical mining are one day accepted, and the next -- made illegal.<p>Sorry, but anyone who doesn't find this worrisome is ... naive, for lack of a more charitable term.
I think you could reach the opposite interpretation, based on this:<p>> You might argue that this is a pretty lightly traded product these days so the evidence is weak, but this product used to be one of the dominant ETH products and exhibited the same behavior.<p>If in the past this was one of the dominants products, and now it is not, it could be because the market now cares _more_ than before about crypto-denominated wealth, and therefore stopped investing in it. Now, there are less people than before who prefer fiat-denominated. What are people trading these days mostly, and what does _that_ instrument tell in terms which denomination is preferred?
i was applying for a mortgage last year and the broker told me to send an accounting of all my assets except crypto as it was worthless in getting a loan