The Crypto Telegram Group in Hong Kong – 2

Does Cryptocurrency have value? Can traditional charting skills apply to Crypto? 加密幣有價值嘛？技術分析可以在加密幣市場應用嘛？

大約一星期前，在聊天群組看見以上的意見，想理性地和大家分享一下我的見解。

About 1 week ago, someone commented below:

"What? Trade with (stock) Chart? You treat Crypto like Stock? Use TA (Technical Analysis)??? I am scared! How can you (guys) treat Virtual Currency that has no value (at all) the same as asset like Future and Stocks that have values?"

The group is in fact more like a chatroom than a reddit-like message board. The reaction of other group-mates was huge. Their reaction is not the main focus because this is more of a story I want to share my own views. So, here we go.

Value

We need a clear definition on what Value is. Although I have my own definition, here is what I got from Wikipedia: Value (economics):

"Economic value is a measure of the benefit provided by a good or service to an economic agent. It is generally measured relative to units of currency, and the interpretation is therefore "what is the maximum amount of money a specific actor is willing and able to pay for the good or service"?"

The page contains information beyond my interest, they are not entirely correct from what I know, but you can have a better idea on what value generally means on the internet.

Value – my interpretation

Something that has value because of 2 important criteria:

1. Does it give you utility?
2. Does it let you exchange for other things? like good, services, or more importantly, the fiat MONEY?

Utility proposition is easy to understand, an item that is valuable because it helps you to perform economics activities, thus it is a capital good. And clearly, this proposition lead to the 2nd criteria that somebody who wants to perform the same economic activities would like to exchange with you the item with other valuable items.

If I replace the phrase "valuable items" with the word "asset", it is very easy to understand the concept.

有價值的物品就是指那些能為你增加財富的物品，包括替你生財的、及能換取財富的。

Value of Cryptocurrency

According to at least 1 economic professor that showed up in an interview on television (I saw that on Youtube), she believed cryptocurrency has values that enable criminals to conduct economic activities because of its anonymity. So, I can assure you it is not just me an average joe who claim cryptocurrency has values – it is somebody academics that recently explained publicly.

I of course do not agree with her because I disagree that only criminals use cryptocurrency. According to IRS of United States, cryptocurrency is an asset. When you trade this asset in an exchange, you will need to pay taxes. When you obtains cryptocurrency by providing services, it is counted as income. On top of that, there is a lot of places that accept cryptocurrency as a form of payment in exchanging for goods and services. (Japan) So, I can concluded that Cryptocurrency is an asset that has values.

很明顯，加密幣能換取財富吧！最少你是能夠拿加密幣換取有價值的物品，在某些國家也需要為加密幣收取稅款。

Technical Analysis

For people who are not familiar with trading, technical analysis is a technique in traditional markets that helps traders to determined what to do, what to expect and in simple terms, how to trade to gain money.

Why technical analysis works on Crypto market? If you understand what is technical analysis, you will know why it also applies to Crypto.

I learnt my technical analysis definition long time ago – it is an interpretation of human behaviors in the markets in trading. As long as the trading is in the public markets that are participated by human, the technique should work. Are Crypto trading an activity participated by human? I think so!

Please note that trading bot is still regarded as human because the bot is just a rule set executed by computers. The rule set has to be defined by human.

技術分析簡單來說是用來分析人的行為。既然加密幣是人的市場，技術分析當然合用。

Future and Stock have values?

Yes, they have values. But future and stock is not a lot different from Cryptocurrency.

A future is a contract that assure you in the defined time in the future, you can buy an asset in a specific price. It is just a contract, not the asset itself for most of the time. The value is you secured the availability of the underlining asset in a predefined date and price.

Stock is the representation of the ownership. You own something and have the right to enjoy the benefit derived from the ownership.

期貨的價值是保證了在特定時間特定價格能買到特定資產。股票是擁有資產的憑證，保證你能響受資產所產生的利益。

The most interesting part!!

After the boring explanations on the terms involved in the comment, here comes MY comment.

First, I don't believe that guy understands (even until now) what he said. He doesn't know he can lose ALL his money if he is holding a future contract or stocks ANYTIME he is still holding. In the stock market of Hong Kong, future is primarily used in stock or index future. The value of the future contract can become zero at anytime before the execution. The company that the stock represents can default anytime. Do they have advantages over Crypto? Maybe, more money is in the traditional market. But here is what he needs to know:

Stock, Future, or other investment instruments has NO FUNDAMENTAL DIFFERENCE to Crypto. If he believe Crypto has NO VALUE, Stock and Future has NO VALUE as well.

About the charting skills, he obviously don’t understand why people can use chart in traditional trading environment. What a joke.

很明顯，圖中那人並不知道他自己在說甚麼。像期貨及股票，其代表的資產失去價值的時候，你所持有的期貨跟股票都即時變得沒價值，賣不到錢的。

所以，加密幣、期貨及股票本質上是沒有任何分別。相信加密幣沒價值，就必須相信期貨及股票也沒價值。顯然不是吧！

他大概也不明白技術分析的真義。很可笑。（還是可悲？）

Intrinsic Value

After finished the original version of the story, I saw a report saying that "because those altcoins does not have intrinsic value..." Many of the reports from Wall Street says Crypto has no intrinsic value. They might be right, but only under their analysis framework.

Intrinsic value is an estimated value from established analysis metrics for use with traditional assets. These estimated values varies a lot based on how the analysis was made.

To properly access the intrinsic value of Crypto, analysts have to understand in details what Crypto can do for the economy, what metrics works on Crypto and what is not, and more importantly to convince their bosses to accept these results using these new metrics and publish them under the name of their financial institutions - this is extremely difficult.

Here is an analogy to the situation: An electric car is designed to protect our environment to ensure less harmful substances are emitted to the air. The metrics to evaluate its value is a lot different from those for traditional cars. To buy an electric car, you need to understand how fast it charges the battery, how far it can last on a single charge, and how often you will need to replace the battery with a new one. For a traditional car, you are looking at how large the gas tank is, how many miles per gallon, etc. You will not say an electric car has NO VALUE as a car because it does NOT have the gas tank.

When the assumption of the analysis does not apply to Crypto, the no value conclusion is not useful at all.

內在價值是有一種建基於特定標準而得出的價值推算結論。用傳統標準是不能正確推算出新資產的內在價值的。

例如，你不會因為電動車沒有油缸及油缸數據而說電動車不是車吧？（題外話，中文「汽車」又真的是指電油車，「電油」的英文Gas，就是那「汽」字的由來，大概需要新的名字了。新名字：「車」 ^0^ ）

This is boring, I am sorry

After I finished my typing, it is already 3 pages long. Not a single interesting material is added. The only interesting thing is I am so stupid to use my time to tackle the misconception of a casual comment from an anonymous guy.

The only interesting thing to wrap up this story is, the conversation image you see in this post can now be called up by the command #novalue

I still think this can give you some interesting insight on the issue. Will try to make things more interesting next time. Enjoy your day ;-)

原本，我只是想拋個小書包，但結果打了這麼多，不好意思呢。英文版是比較詳盡的，建議你看看英文版。

P.S. I might be wrong with all these concepts. Please leave a comment below if you think otherwise such that we can grow together. Thanks.