Damodaran on cryptocurrencies


A great and somewhat contrarian discussion about the surging prices for BTC, ETH, etc.

Good video. Thanks for sharing.

good stuff

Fantastic stuff from the King of valuation.

Thanks for the share blackmamba

You’re welcome guys!

Damodaran has way too many excited fanboys. What exactly makes him King of Valuation? Kingly investment returns? Kingly track record in anything measurable related to investments? Kingly academic research that has been published in top journals and changed the course of finance? None of this. He is OK. He is a very good and dedicated teacher which is increasingly rare. He makes relatively complicated finance concepts accessible to a wide variety of students and seems to be taking a lot of time to frame textbook material in a real world context. He might be a good contender for King of the Classroom.

He has no investment track record or any experience in anything but academia. Within academia, he doesn’t have any groundbreaking research or influential papers written for peer-reviewed highly ranked journals. He is neither King of Valuation nor King of Finance by a long stretch.

He’s the king of valuation man! You trying to take the crown?

If you want to know his returns, go to the blog and backrest how his outperform and underperform ratings go (maybe this has been done already?) If he was the king of investing, then maybe I’d want him to release his returns. But instead he’s the king of valuation - which involves building conceptually sound models to value a wide range of assets. Who cares if his forecasts are better than the market on average, people go to the king to learn how to think about the construction of the model. While intertwined, these seem to be to be two separate activities. Something like the best sword maker may not be the best sword fighter.

Should have taken his class… welp

Where do you all stand on the bubble vs revolutionary tech as it pertains to cryptocurrencies specifically (independent of blockchain tech)? I’m not convinced that there is long-term viability for bitcoin (or cryptos in general) if businesses, people, etc. are reluctant to adopt it as a medium for transacting goods/services (as Aswath discussed).

I know a few people in my social circle that (pretend to be) think themselves tech aficionados that are all crazy about BTC, ETH, etc. and now hold positions across various currencies. They conjure up really elaborate stories for why they bought it and pretend like they know all of the ins and outs of the currencies. It’s funny, but none of them have actually ever bought anything with their cryptos and when I’ve talked to them about it there doesn’t even seem to be the least bit of interest in trying to. I think that’s a big problem.

It’s obvious to me that most of these people are just caught up in owning it for speculative purposes (overnight millionaire anyone?) and not because they actually want to utilize it for buying/selling goods and services (which Damodaran corroborates in the chart showing BTC price vs how many times it has been used for transactional purposes).

they are all basically going to zero one day. it is basically the tulip mania without something as tangible as a tulip bulb. when the cryptos get big enough that they start partially circumventing monetary policy, the government will make it illegal to transact in cryptos. since its only true value is based on its function as a medium of exchange, any reasonable person would sell their bitcoin for traditional currency which can actually be exchanged for things. a credit crisis would also instigate a massive collapse in cryptos as people would need to access them for real dollar debts and expenses.

it is bonkers how long governments have let this thing go. a lot of normal people are going to be ruined as a result of this.

To me, the fact there is a new one each week is a big red flag. How can something be a medium of exchange when it is constantly being improved on and released as another version? Perhaps when you get to a point where each improvement is relatively meaningless, but I have no reason to believe we are anywhere close to that.

to be fair, fiat went through the same phase.

centralized payments company like visa has 300bln valuation. public cloud startup (bitcoin) 24bln.

bitcoin daily USD transactions = 3bln

visa daily USD transactions = 10bln

I would say visa is overvalued, as soon as the confirmation time on a public cloud can be reduced to 2-3 seconds it is game over.

I agree with those who don’t believe in long term viability of crypto currencies. Although, it might become widely acceptable for transactions, I have a feeling that it might take decades. Thus, to me it is a pure trading thing.

Having a clear investment strategy should be crucial for those,who invested in cryptos. If you don’t have a clear plan when you are going to close your long position (wondering how many people hold short positions in bitcoins?), then one day you may have nothing to close. I mean, if you invested in bitcoins with goal to sell them after earning some specific percentage (e.g. 15-20%) - you should be in a much better position than those who don’t have any clear vision where to stop.

I am sure with bitcoin you buy stuff, like online services, and with ether you can buy stakes in new startups in the so called ICO. These ICO’s might as well be scams but some are serious startups with dedicated teams.

In any case what’s the problem of using an exchange service to transact in cryptocurrency? If you come to Europe with USD you would need to exchange them to Euros. If you come from the bitcoin country you would do the same.

Honestly you should read a book on how block chain works, it will drastically change the way you see cryptocurrency. Although i agree Bitcoin price is going to grow until no more mining will be available (21millions bitcoin) and then people will start switching to others crypto.

Hey nothing wrong with tulips.

i have read a article that argued the value for bitcoin value by comparing the fees of transaction to credit card transactions. since bitcoin is cheaper, it should have a bigger value and should replace credit cards. just for shits and giggles, the ev for visa and mastercard is about $400b.

Who wants some GBTC?

Peaked at $1065 08/31, now $565. Ouchie! :grin:

Sounds like you’re talking about bchad.

Hope all is well man! haven’t been on here for the past few months. But I think to answer your question about cryptocurrencies, yes most will fail. However, if we are talking about block chain as the underlying technology? I truly believe after the research that I’ve done, it has the potential to absolutely revolutionize the finance industry (especially when it comes to reducing costs and improving the efficiency of transactions between institutions and consumers, also).

In fact, I would be curious to hear the argument against block chain technology. It seems it is just a matter of time before it is widely adopted and applied across multiple industries. I am personally going to buy quite a bit of XRP soon. a five figure purchase and see what happens over the next couple of years. Let’s say end of 2020. Most do not have this view and attempt to “trade” BTC and other altcoins, which I personally believe is foolish and a recipe for losing a lot of money. But hey, to each their own!