Nice read about ICO bubbles and market cap indicators

[Niek]

Interesting read on SIA blog about ICO bubbles and market cap indicators: 

https://blog.sia.tech/want-to...t-cap-indicator-d50f7f1e1ec4

[Guest]

wow, great read -- cheers for sharing 

[Niek]

Another great read if you've got some time on your hands, the book "Extraordinary Popular Delusions and the Madness of Crowds", very entertaining. The title says it all. It describes the tulip mania, but also the South Sea Company Mania and the Mississippy Company Mania for example. Also things like the witch mania and alchemists . The book gives great insight in human psychology. You can read it for free here https://vantagepointtrading.com/wp-content/uploads/2010/05/Charles_Mackay-Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds.pdf 

[Niek]

@zerpdigger you're welcome

[Niek]

Just the first paragraph of the book

"We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first. We see one nation suddenly seized, from its highest to its lowest members, with a fierce desire of military glory; another as suddenly becoming crazed upon a religious scruple, and neither of them recovering its senses until it has shed rivers of blood and sowed a harvest of groans and tears, to be reaped by its posterity. At an early age in the annals of Europe its population lost their wits about the Sepulchre of Jesus, and crowded in frenzied multitudes to the Holy Land: another age went mad for fear of the Devil, and offered up hundreds of thousands of victims to the delusion of witchcraft. At another time, the many became crazed on the subject of the Philosopher's Stone, and committed follies till then unheard of in the pursuit."

Quite interesting right?

[coinjester]

4 hours ago, Niek said:

Just the first paragraph of the book

"We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first. We see one nation suddenly seized, from its highest to its lowest members, with a fierce desire of military glory; another as suddenly becoming crazed upon a religious scruple, and neither of them recovering its senses until it has shed rivers of blood and sowed a harvest of groans and tears, to be reaped by its posterity. At an early age in the annals of Europe its population lost their wits about the Sepulchre of Jesus, and crowded in frenzied multitudes to the Holy Land: another age went mad for fear of the Devil, and offered up hundreds of thousands of victims to the delusion of witchcraft. At another time, the many became crazed on the subject of the Philosopher's Stone, and committed follies till then unheard of in the pursuit."

Quite interesting right?

I guess. But then again, we have more access to make informed decisions wildly than ever before. The reason marketing exists is to bring it back to this font of mass hysterics. I mean, just look at some of wording, "Buy now", "Call now", "Don't miss out", "While supplies last", "Limited supplies", "Exclusive Access".

Gone are the days of hoodwinking with an extremely terrible product idea/trend when the reviews sections exist.

Yes, hype still exists, but it's much harder to achieve such a context of virality today. 

[coinjester]

I honestly hated reading this because I was just pacing around, thinking about this today and came to similar conclusions. The question is, is there anyone out there who is ridiculously profiting off of misunderstandings of other people's misvaluations. If this is the case, and they are in one of these exchanges, it's likely that there may be push back to present these tidbits of information, much less how to use them. It's likely that they would not want this article out there. There'd have to be a total revamp of everyone's understanding which might not happen right away. 

I guess time will tell what this means for Ripple's case, over time. Seems pretty malodorous if only 1/3 of the supply is trading.

[Niek]

@coinjester Ripple has an actual use case, is backed by Google (who wants to keep their reputation intact) and is planning a lockup of the non-distributed Ripples. So, Ripple is humming along just fine. The article and book more reflects the attitude towards some ICO's and especially Gnosis right now. It's market cap in shares outstanding is higher then that of Litecoin right now; very high for an unproven platform.

[cmbartley]

1 hour ago, coinjester said:

I guess. But then again, we have more access to make informed decisions wildly than ever before. The reason marketing exists is to bring it back to this font of mass hysterics. I mean, just look at some of wording, "Buy now", "Call now", "Don't miss out", "While supplies last", "Limited supplies", "Exclusive Access".

Gone are the days of hoodwinking with an extremely terrible product idea/trend when the reviews sections exist.

Yes, hype still exists, but it's much harder to achieve such a context of virality today. 

Just because we have access to more information doesn't mean we use it. Also doesn't mean that the information is any good. It might actually be easier for ideas to go viral than ever before because of how our society is linked and interconnected...

Edited May 3, 2017 by cmbartley

[coinjester]

16 minutes ago, cmbartley said:

Just because we have access to more information doesn't mean we use it. Also doesn't mean that the information is any good. It might actually be easier for ideas to go viral than ever before because of how our society is linked and interconnected...

 

That was my point in a further post about the concept of use. Having something available is better than an absolute lack regardless if whether or not we use it. Someone will. As for virality, not quite. The internet is quite loud—too loud. Word of mouth is the key player in the kickoff of network effects in virality today.

[MBi]

The author's proposed inflation factor is a good idea, but there are even better ratios regularly used in corporate finance and investing today. 

The two metrics, in the context of digital assets, are as follows:

• Overhang:  (Total Supply - Outstanding Supply) / Outstanding Supply = Total Potential Dilution 
  • Lets assume* 40b XRP are currently outstanding and 100b XRP are the total supply, overhang for XRP  = (100 - 40) / 40 = 150%
• Burn Rate:  New Coins issued during measurement period / Existing Supply at beginning if measurement period = Run Rate
  • Run Rate is usually looked at on an annual basis, but it the context of digital assets, looking at shorter periods of time, perhaps daily or quarterly,  may be more useful.
  • Let's assume* the outstanding supply of XRP increased from 38b to 40b in Q1 2017. Burn rate for XRP = 2 / 38 = 5.3%

These ratios alone are not all that meaningful. Investors in digital assets need to look at overhang and burn rate relative to that of other digital assets and make informed decisions based on potential dilution and its impact on prices. Efficient markets, such as today's capital markets, reflect all publicly available information and in theory overhang and burn rate should be reflected in assets price. The author of the article believes it to not be the case for digital assets due to a lack of information and transparency.

 

*These numbers are illustrative and do not reflect actual overhang and burn rate for XRP. 

Edited May 3, 2017 by MBi