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Comment by airstrike | Hacker News Reader

BTC is not a stock so I really don't follow why people keep treating it like it has some underlying value

It sort of has underlying value, in that owning bitcoin lets you write entries in an extraordinarily inefficient append-only database.

(It seems clear to me that this isn't a valuable enough capability to justify the current price of BTC, but I guess that's a separate discussion.)

I mean, there's an argument for viewing Tesla and Gamestop similar to bitcoin; they clearly have _some_ underlying value, but it seems largely secondary to hype-induced valuation.

Like most stocks BTC's value depends on the buyers hope of a rise of the value. Buy low and sell high. For the original function of stocks, support a company and get a share of the profit, you are right about BTC.

That’s not really an accurate comparison. Stocks are ownership in a company, which is still subject to all of the realities of operating a company. We can’t simply continue trading Hertz stock as a speculative gamble when the company goes under.

Yes, cycles of hype and supply and demand do distort stock prices, but it’s still a capital allocation market. GameStop can choose to sell shares into the hot market, much as AMC did, to raise money. Buyers of those shares are allocating capital into the company.

One of the draws of Bitcoin as a speculative instrument is that there are no fundamentals. Without fundamentals, there is no mechanism to suggest if it’s undervalued or overvalued. The only thing a Bitcoin purchase funds is more energy expenditure on mining.

> We can’t simply continue trading Hertz stock as a speculative gamble when the company goes under.

What? Why not?

Not only can we continue to trade stock in a defunct corporation, we do. Take a look over here: https://www.liveauctioneers.com/item/85889867_imperial-india...

That's trading the stock certificates, not the stock itself. Nowadays there aren't any stock certificates anymore so that point is kind of moot. I doubt you can still trade enron shares, for instance.

The certificates still exist; the fact that you don't get one when you buy stock just reflects the fact that you don't technically own the stock. US stocks were not dematerialized.

I don't mean to quibble but I would say that even though bit coin is not a quote unsuited real currency you can apply purchasing powrr parity valuation to it and compare purchasing power of bitcoin compared to other currency like instruments additionally the cost to mint a bit coin is not meaningless, just easy to neglect.

The "original function" of stocks hasn't gone away. The S&P 500 paid out half a trillion dollars in dividends last year, and performed another half trillion or so in stock buy-backs.

Trading happens on the pure derivative of stock prices, yeah, and people get rich off of it, sure, but ignoring the trillion dollars a year that flows from the profits on the economic activities of the S&P 500 back to the investors in the stock is ... oversimplifying things.

How does that come with the sum of all monies lost on trading with S&P500 shares? Serious question.

The sum of all monies lost trading S&P500 shares should be negative, since the index as a whole was up. Which isn't to say it'll be up forever, but over a scale of years it has historically always been up. Even if you lost money trading S&P 500 shares, somebody else made more, which is why the index is up.

Even so, that figure isn't really relevant to the GP's point. Their point was that in addition to the price of the stocks, people who owned those stocks got cash money paid into their pockets, via dividends. That amounts to about 1.1% interest on money you spend buying the shares[1].

(That's not actually a great number. 2% is more common over the last 20 years. It suggests that as of right now the market is overpriced. But that's also for 2020, which is not a typical year. So far for 2021, it's more like 1.5%)

[1] https://www.multpl.com/s-p-500-dividend-yield

When you factor in stock buybacks -- which are sort of but not quite the same as dividends -- it's "sort of" like 3%.

(My vague understanding is that for complicated and silly reasons, many more companies have preferred stock buybacks to dividends in recent decades, but it's still money flowing back from companies to investors.)

That's a very good point. Thank you; I had missed that.

There are two factors. The tax code favors one form of compensation and low interest rate money means it is actually possible to execute this strategy. When companies borrow money to skip taxes you know that the central bank isn't doing its job properly.

BTC is a commodity and trades like one. fundamental value is hashed electricity... not much, but guess it counts as something for somebody.

for traders, it's something that has a ticker, a price and some volume. whatever works.

Production costs don't equal value of the product. You can certainly spend more on making something than it is worth. BTC has no intrinsic value. It has some utility, but mostly in the realm of illegal activities. But that is not the same thing as intrinsic value.

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