20 lines
2.7 KiB
Markdown
20 lines
2.7 KiB
Markdown
# Crypto assets do not have a verifiable valuation model
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Crypto tokens have no reliable [valuation method](../concepts/valuation-model.md). It is not possible to develop a theoretical [value](../concepts/value.md) for a crypto token because there is no demand curve generated by a [use case](../concepts/use-value.md) or any [income or cashflows](../concepts/income-cashflows.md) associated with the [security](../concepts/security.md). Crypto tokens have a strictly zero [fundamental value](../concepts/fundamental-value.md) and a [present value](../concepts/present-value.md) of zero because they have zero income.
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Instead the price of a crypto asset swings about wildly depending on the whims of fluctuating demand, random sentiment and market mania of the larger crypto [bubble](../concepts/bubble.md). Crypto assets are a manifestation of the [greater fool theory](../concepts/greater-fool-theory.md) and the price of a crypto asset is defined simply by what people believe the next "fool" will pay for it.
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Models such as "Stock To Flow" have shown no predictive power to explain the [price formation](../concepts/price-formation.md) of assets like [bitcoin](../concepts/bitcoin.md) on long time scales. These models have no rigorous foundations based on any mainstream economics.
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Other products in [bubble](../concepts/bubble.md) such as tulips or beanie babies have exhibited similar market structure to crypto tokens but on smaller scales.
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## References
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1. Shiller, Robert J. 2017. ‘What Is Bitcoin Really Worth? Don’t Even Ask.’ The New York Times, 15 December 2017, sec. Business. https://www.nytimes.com/2017/12/15/business/bitcoin-investing.html.
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1. Taleb, Nassim Nicholas. 2021. ‘Bitcoin, Currencies, and Fragility’. ArXiv:2106.14204 [Physics, q-Fin], July. http://arxiv.org/abs/2106.14204.
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1. Cembalest, Michael. 2022. ‘The Maltese Falcoin: On Cryptocurrencies and Blockchains’. https://privatebank.jpmorgan.com/content/dam/jpm-wm-aem/global/pb/en/insights/eye-on-the-market/the-maltese-falcoin.pdf.
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1. Silverman, Gary. 2021. ‘Crypto Has “No Inherent Worth” But Is Good to Trade, Says Man Group Chief’. Financial Times, 26 July 2021. https://www.ft.com/content/9275baf4-0422-43a1-b8c9-9317882ca874.
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1. Stolfi, Jorge. n.d. ‘Bitcoin Is a Ponzi’. Accessed 19 March 2022. https://ic.unicamp.br/~stolfi/bitcoin/2020-12-31-bitcoin-ponzi.html.
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1. Diehl, Stephen. 2021. ‘The Intellectual Incoherence of Cryptoassets’. 7 November 2021. https://www.stephendiehl.com/blog/crypto-absurd.html.
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1. Krugman, Paul. 2018a. ‘Bitcoin Is Basically a Ponzi Scheme’. The Seattle Times 30.
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1. ———. 2021a. ‘Technobabble, Libertarian Derp and Bitcoin’. The New York Times 21.
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1. ———. 2021b. ‘The Brutal Truth About Bitcoin’. The New York Times 21. |