So total cryptocoin market cap just hit $0.5T today. But have we *earned* it?
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Yes, agree. I guess I am reacting to the fact that not only is there not $0.5T of actual (monetizable) impact, but I currently don't even see *the necessary precursors* for it. Alternatively, P/E ratios in the crypto space are waaaay higher than anywhere else.
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Not so: people can bid up the price in anticipation of better fundamentals tomorrow. (Markets are definitely being irrational though.) Also: P/E makes zero sense when applied to digital assets. There’s no earnings! Same with “market cap”, which is really just monetary base.
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I'd say transaction fees are one decent way to measure E.
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How? Earnings and transaction fees are barely comparable in my opinion.
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The earnings don’t accrue to assetholders, they accrue to miners. P/E is supposed to measure the asset’s RoI, not costs. Transaction fees are not wealth created but wealth (electricity) destroyed. It may be “earnings” to someone, but ideally that gets driven to zero.
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Oh, if you look at crypto as a production function, which anyone who looks at market cap inherently does, mining is the production, PoW-backed tx verification is the product, and miners are the residual claimants. Makes sense.
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So in that case shouldn't block reward and not tx fee be the E in P/E i.e. money going to shareholders
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Block reward is dilution to pay expenses.
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I should rephrase. In the last 3 years, the crypto market cap has increased by 200x, but I definitely don't feel like crypto's *potential* has increased by 200x. In some key sectors (eg. payments) it has even regressed.
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If we were going to die on the hill of EMH--which I don't think I would in just my first-order opinion, but I think Scott Sumner would and he may know better than I do--then the reply would be that the market's confidence in that potential was what increased 200x.
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If you wish, feel free to interpret my remarks as "the public clearly has very very high expectations of us, and this makes me feel worried and uneasy inside. We need to try harder to make this actually work"
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"There was something almost nightmarish about how everyone seemed to now expect Harry to pull miracles out of his hat, any time one was needed. It meant that if you couldn't do the impossible, you were disappointing your friends and failing to live up to your potential..."
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Your new book on this
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The other side of this is that weak EMH also prohibits a world where there is not a significant probability that the prices will later be justified - and not as a bubble. But bubbles do happen, and prices are forever and always simply reflecting the (sometimes irrational) demand.
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It's a bubble economy - don't you think ?
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“0.5T” is an imaginary number divorced from reality—this thread is navel-gazing bs—the product itself uses a multiplicand which is an unknown quantity, ignores the size of the economy, market depths, and is thus incomparable with almost every other real-world measure.
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However, expansionary monetary policy globally, related to fiat currency manipulation and lower than sustainable interest rates can create inflationary bubbles in various asset classes, and crypto is not immune. Just remember that bubbles begin with bad central bank policies.
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Then there is no price discovery unlike crypto and BTC prior to futures markets 'civilization'?
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Exactly. Rational expectations are priced in today on a risk adjusted basis.
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