Money in general are traded for productive goods and services, not other kinds of money. That's why it's not negative sum. If you had a bunch of people trading between USD and GBP amd EUR and doing nothing else, that would be negative sum and look an awful like what people do with cryptocurrency.
> If you had a bunch of people trading between USD and GBP amd EUR and doing nothing else, that would be negative sum and look an awful like what people do with cryptocurrency.
That does happen. About a decade ago I dug into FX flows. The trade in USD was eighty times trade flows.
FX is a nasty business, huge profits to be made, profits that can be multiplied by the slightest bit of undetectable (now the traders know how to cover their communication traces) fraud.
Cryptocurrency is pure scam, true. But, in my educated opinion, the international financial system is dominated at the highest levels by out and out crooks.
The state of international finance, how it works against its consumers and saps the life out of the very economic activity it fosters (economic activity at the level we have would not be possible without sophisticated financial systems) is a huge incentive for developing crypto.
I just wish that there was a better solution (even a viable solution) than crypto
Complex social and economic problems do not have simple easy answers.
The difference is that stock, at its core, represents a claim on a portion of the future profits of a business. The business is out there building widgets, supplying people with a service, extracting raw materials, whatever. Most coins are just hollow marketing gimmicks designed to move money around.
Basically all the DeFi ecosystem boils down to trading one coin for another coin, there is no productive work at the core generating value.
This is a textbook distinction, but when I look at my nasdaq and crypto candles, they all have the same 3-year profile, crypto just feels like it’s 1.5x leverage but that’s it. If stock market is all about production and long-term investment, then it shouldn’t bounce up and down with fear waves. The sibling commenter is right, just from the charts it seems at least 66% of “investors” are short-term players and no forward-looking company will (to my limited understanding) build a long-term strategy around these volumes. I mean, they will, but that only confirms the idea?
> The difference is that stock, at its core, represents a claim on a portion of the future profits of a business.
Wow, that's so real, concrete and down-to-earth :-)
> The business is out there building widgets supplying people with a service
Or perhaps not doing these things, but making performative presentations on how its groundbreaking unproven innovation is certain to bring in a lot of money in the future. Or a mix of the former and the latter.
> Most coins are just hollow marketing gimmicks designed to move money around.
One could argue that some, or many, publicly-traded companies - when one considers the listed trade value of their stock - are 10% real business and 90% hollow marketing gimmicks serving as parking space for speculators' money.
The past decade companies have sold debt to raise funds to repurchase stock to drive up stock price so senior management can meet their KPI and get a larger bonus.
This is useful activity for society because senior management deserves more money and they work really hard to earn it. /s
Stocks give you share of ownership over the cashflow that a company generates from its business. Theoretically, that is where the value of stock comes from. Crypto does not generate any cashflows (due to selling no goods or services). So crypto is not like stocks. If anything, it is more like commodities than stocks.
