Bitcoin Forum

Hi there,

Why would I buy an asset?

In this poll, each user has 3 votes for his/her top reasons. Changing your vote later is allowed.

(If you are interested in what an asset is and how it's done, you can find some information in this thread: https://bitcointalk.org/index.php?topic=1006327.0 )


As I am interested myself, but see many confusing things here, I try to make the reasons to buy or not to buy an asset clear for myself and others.

I also think, there are many irrational factors and manipulative things going on in this area and I would like to reduce this for the best of the good ideas.

It's clear that an asset helps the issuer of that asset, but what does the buyer get out of it?

So here are some reasons I can think of. You can help to complete the list if I forgot something important, but I am not always active here.

And don't forget to discuss it. I still have questions, too.

My first question is about the intrinsic value, compared to a fiat money enterprise share/stock: When I own an asset, do I own a part of the enterprise by that? That means, is there some value in the asset beyond the speculation that someone will pay dividends or buy the asset from me? That also means: Do I get a share when the asset issuers sell or liquidate their business? (I guess that currently, there are no such things or guarantees at all in this unregulated market. Is it even legal...?)

Have fun.

:-)

Interesting poll.

This is what I initially selected:

 I want to help the asset issuer (crowdfunding good ideas)
 I expect to sell it at a higher price, I speculate (buy and sell)
 I expect the dividends to return my investment
 I don't have access to fiat shares/stocks/crowdfunding, so I use cryptoassets
 I want to learn about assets and to buy a small amount is the best way

but if I have only three choices I'd go for this:

 I want to help the asset issuer (crowdfunding good ideas)
 I expect to sell it at a higher price, I speculate (buy and sell)
 I expect the dividends to return my investment

Hi altsheets, thank you for your interest and participation  :) ! Would you mind logging in your three chosen answers (I think you haven't) or do you want to keep it like this?

Any suggestions for additional possible answers?

Yes:

( ) I despise banksters who have -legally- stolen from the people for centuries, and undermine democracy, erode social cohesion, accelerate the destruction of nature, and cause wars. Good that cryptos offer an alternative financial market now.

 ;)

Or less emotionally charged:

( ) I like it that cryptos offer an alternative financial market.

 8)

I seems most of ppl choose the "I expect to sell it at a higher price, I speculate (buy and sell) ". Ppl are buying assets for the  profit.

Hi, I added

'I despise banksters, they are doing evil, I believe cryptoassets as alternative will better the world'.

If you read the answers, you may notice that I put some critique into my questions, so I hope the questions are not too manipulative. But I couldn't resist to change your answer a little bit: Because I think the refusal of banks is a contra argument for a fiat share but not a pro argument for a cryptoinvestment. Only if you wanted to invest your money anyway, you will choose the alternative. So I think, the answers were already there in form of the comparison with the fiat shares/stocks.

Just despising banks could also be a reason to not buy any assets at all. Personally, I believe that the cryptomarket will not be very different concerning "good and evil" in the world. It's another financial system, more a parallel one than an opposing system to the older system. Mainly, good and evil in people and in the world will not change very much just because of cryptocurrencies. Even worse, with uncontrolled cryptomarket, the money laundering and market for weapons will be happy, but the people will suffer from those weapons (or drugs). The greed and lies are in the traditional banking system as well as in the crypto system. Well, that's just my humble opinion.

Yes, this will be strongest rational argument, I think. And it might be realistic, even though, of course, speculative.

But I have a question to the people who voted that they expect the dividends to return the investment:

Is this even possible? Do you you know of any asset that pays such high dividends that you win so much that the buying price returns? How long will this take? Could you name a concrete example with an existing asset and how long the ROI (return of investment) will take? Did you buy the asset at an extremly cheap price?

And I repeat my question to the people who believe they own a part of the enterprise. Which asset has such rules? Is there really some "real world" value in the asset? Isn't it just worth something if the people believe it is worth something? Will you get anything if the enterprise is liquidated (by selling their office furniture or machines, for example)? Why isn't the intrinsic value zero, as I believe? Please explain...

People who buy should be looking for an immediate and consistent return. Otherwise they will not hold for long.

Assets that do not communicate with investors for lengthy periods of time get dumped. They would probably be better off using IndieGoGo than crypto IMO.

Thanks for the hint (I bolded the letters), interesting!

I am lucky: Even though I am very new to assets (a few days only), I got an answer to my question today: I got a payment from the LIQUID asset http://www.liquidtech.info/ today, I think it is their first ever dividend. If my calculation is right, I got about 2.8 NXT per share, which is about 1/60 of the price I paid (I did not research the issuer's original price) - which means, it would take about 60 months (they intend to pay monthly) = 5 years for return of investment!

At least now I have an example and a number to count with! I think it would be OK if ROI would be 5 years. Probably more than some other assets will pay, and with an option for more in future, of course. So I might change my doubtful answer...

Anyone with another example...?

Not quite, no. Compound interest! If you calculated it the way like you did, it would make a big difference if dividends were paid monthly, daily, or yearly. With proper compound interest calculations, that does not really matter.

Let's look at two months first:

If you got back 1/60, the you now have 1 + 1/60 = 1.0166... Reinvest them immediately.
Next month you will get 1/60 again - but this time from a then higher principal!

--> 1.0166 * 1.0166 = 1.0336111... 
so after 2 months already 3.36111 % more ( = 1/29.75.. not 1/30)

after 60 repetitions you would have
(1.0166...)^60 = 2.695970 times more than before (not 2 times)


So the formula is
x^r = m
(1+p)^r = m

with
p your percentage per period
r number of repetitions, or months in this case
m the multiplicator for your starting capital


The other way around - when does it double?

If you want to know r=r_2 the moment when it doubles (m=2), do it this way:

log(x^r) = log(m)
r * log(x) = log (m)
r = log (m) / log(x)

so in your case
r = log(2) / log(1.0166...)
= 41.93

42 months. Here is the 42 again :-)

For SMALL percentages relatively accurate is the rule of thumb:

70 / percentage = number of repetitions.

in your case:

70 / ( 100 / 60 ) = 42  ... which is not very different from 41.93


for higher percentages, it becomes inaccurate

e.g. 20% per year - how many years to double?
rule-of-thumb: 70/20 = 3.5 years
exact calculation: log (2) / log ( 1.2 ) = 3.802 years

e.g. 50% per year - how many years to double?
rule-of-thumb: 70/50 = 1.4 years
exact calculation: log (2) / log ( 1.5 ) = 1.71 years

You can play with compound interest in my "interactive funproject 'YachtCalculator'"
--> see posting #34 https://bitcointalk.org/index.php?topic=981128.msg10856040#msg10856040

Thank you, I know how to calculate compound interest - and it is rather easy to think it's easy to become rich with it. But this is dreaming, not the reality.

Of course you can be lucky and of course one further advantage of the cryptocurrencies is that the trading fees are low - BUT still, it is not always possible to reinvest the small amounts of dividends immediately (if you don't own such a huge amount of assets), because firstly, the price of one single asset is higher than what you get as dividends. And secondly, the price of the asset will vary with time. And if it's a good and successful asset, it will rise. That means, you will get less and lesser shares of the asset when you reinvest it.

Of course, reinvestment is an option, but for me not an automatic one. I prefer to decide each time after I got the dividend. And then I might switch to another, better asset or reinvest (or even spend the money  ;D ).

But this is again speculation. In my calculation, I just wanted to compare assets in terms of how much dividends they pay. I think this is important for an attractive asset and might keep the interest of the investors high, and therefore also the market price of the asset itself.

Cool. I understand that.

Interested to see your way
how you compare across assets and dividends
that are paid in different time intervalls.


Agreed. If you instead keep it in form of the base currency, then
you should calculate the interest that you get on the dividends,
while the clock ticks on during the rest of the year.
E.g. with HZ that is 10% per year, so 0.026098% per day. Plus forging.


Watching this thread, interesting questions.

If you look back, then of course you have to calculate with all values including Dollar or Euro exchange prices of that time point.

But for predictions you can choose complicated or less complicated ways. I prefer the simpler ones and add a 'human component' by interfering and deciding for my personal taste during the time. If assets are paid in different time intervals, I calculate like you, e.g. 10 % per year is 0.02739726 % (why do we differ here?) daily. But daily payout is better than monthly is better than yearly because of said reinvestment compound interest - if the asset owner really looks at the exact time of purchase. Some asset dividends seem to be paid for a whole month, even if you buy them one day before the end of the month (I don't know exactly, but I think they do). Then there is room for more speculation again...


That's why presently the hurdle for HZ assets is quite high - as long as HZ pays 10 % per year on a daily basis... So be fast and generous with your dividends  ;D !

what kind of asset are we talking about? land? house? or other type of asset?

So-called assets in the cryptocurrency systems, e.g. for NXT coin or Horizon coin (which is built upon the NXT software). Download their wallet, there you will see the category "assets".

In principle, the assets sold there could be assets of any type like you describe them, if somebody wants to share this and creates a cryptocurrency asset*. But in reality, the asset system there is quite at the beginning in my opinion and you cannot be sure you can rely on them. But on the other hand, this problem exists in the classic financial market, too. There can be also fraud or lack of success.

Mainly, imho, the cryptoassets existing so far are about business concepts in the cryptocurrencies themselves. For example dealing with cryptocurrency exchange systems which earn fees, then the fees are distributed to the shareholders of the assets. And the software developers need the capital to fund their developing business (crowdfunding).

* It would be interesting if somebody would share a house with a cryptoasset. Then you would own part of it, but you cannot get a part from the house over the internet... but maybe if the value of the house rises/falls with time, the price of the asset will rise/fall, too. But what happens if the house is sold? In my opinion, the asset issuer should then pay out all asset shareholders and delete the asset. But whether that is possible with the current construction of the cryptoassets, I don't know. I doubt it  :-\ .

Because I have used compound interest:


(0.026098/100 + 1) ^ 365.2425 - 1
= 0.09999821
~ 0.1
= 10%



But with 0.02739726 % daily,
after 1 year you will end up with
(0.02739726/100 + 1) ^ 365.2425 - 1
= 0.105229198
= 10.523 % != 10%.

Please have another look at https://bitcointalk.org/index.php?topic=981128.msg10856040#msg10856040
and https://bitcointalk.org/index.php?topic=1008110.msg10964857#msg10964857

 ;)

OK, your calculation is more accurate, but isn't it interesting that, with these low numbers, compound interest doesn't really matter much? It's all in the lower part of the curve where the slope is very small.

With the current value of 1 HZ and my current capital it really doesn't matter at all...  ;)

...But of course what matters is, if I buy an asset which doesn't pay at least 10 % dividends per year (preferably on a daily basis), because that means I miss the Horizon 10 % reward when buying such an asset.

Yes, I agree with all of that.

Not all assets will be competing with HZ forging payouts of 10% a year, and not all assets have to either. With forging payouts and dividends you made in some dividend-paying assets, you can buy other valuable but not-dividend-paying assets. My 2 cents.

But on a pure financial basis point of view one will always look at the profits, and then - in my opinion - the assets will automatically compete with the Horizon 10 % "distribution reward"/interest. Plus extra profit by forging (the 10 % is not forging, it is for every owner of HZ coins). Don't you think so? This reward will of course end after about 1.5 years, when distribution stage is over. (At least this is how I understand the description of Horizon https://bitcointalk.org/index.php?topic=823785.0 .)

Of course it is possible (but not sure) that you can also profit from a non-dividend-paying asset. But you can calculate the profit (retrospectively only), and if it was less than 10% a year, it would have been better not to buy it and to just having kept your Horizon for the 10 % reward plus forging income.

Alternatively, you could buy an asset in another altcoin currency, e.g. NXT, until HZ distribution stage is over.

So in my opinion, either an asset has to surpass the 10% plus forging, or you buy for non-financial reasons (helping the asset issuer with his development etc.).

You've got a point, I agree. Forging and gaining 10% is actually a good return in itself even without assets being issued. And it is a sure thing too.

exactly  :)

These comments from https://bitcointalk.org/index.php?topic=823785.msg11012078#msg11012078 show, that obviously, some people believe in assets:


...but it reminds us that these are just opinions which have to be proven yet, everything seems to be about the future and nobody can see it. I would be interested in reports from people about assets which already pay off. And preferably are not scam (because ponzi schemes and bad businesses also pay off, if left at the right time). Moreover, the posts show that we have to understand each asset - so the asset issuers should really explain them well! Maybe this is not always the intention, some prefer secrecy, insider business and being the first. Well, I understand that, but of course we all want to know the secrets (until they are no more secrets :) ). Moreover, cryptic behaviour will not help spreading these systems.

I have tried some assets for some time now (about two-three months) and will add some experiences/facts/opinions here (note that I calculated the dividends per year but have the assets only for some months, so changes might be possible):

NXT assets:

1) I bought the GlideSec asset, and it seemed to have extraordinary dividends (about 250 % per year compared to the price I paid for it) - and it was of course too good to be true, so I received this one and only dividend (for a week of course, not a year!) and then the whole thing was abandoned by the "developer" and turned out to be a scam.

2) Atomic asset: No income with dividends so far, no selling for a higher price possible so far. Maybe later?

3) Coinomat and Coinomat1: At least there is something going on and this project is not about empty promises. Personally, I get around 11-13 % (per year) dividends. But on the other hand, the price sank down much more, so I would not be able to sell it without a bigger loss.

4) Freemarket: Not much going on there so far. No dividends so far. Price declined so far. So: a loss so far.

5) Liquid: One of the best assets so far as the dividend for me personally (taking my buy price) is about 20 % p.a. AND the value of the asset increased.

6) Pangea: No dividends and a price loss for me, so far.

Horizon (HZ) assets:
(As mentioned earlier, all HZ assets currently have the problem that buying an asset means giving up the safe 10 % interest you get when you just store them in your account)

7) AAssetHZ: No dividends so far, asset is still new but never heard of any sales. Still, there seems to be some fantasy in it, as I bought early and could sell for a higher price which still seems stable but shows no movements at all in the last weeks.

8 ) HZxchange: The asset description promises weekly payouts, but no dividends and a price loss so far. But the project is still new and showed at least some progress in that it started.

9) HZChronos: No dividends planned. I could buy early enough and even though there are no results from the project so far, it is still young and I could sell for a higher price and win something. Buying price is still higher than issuing price.

BURST assets:

10) ByteBank: Quite good dividend around 24 % p.a., and the asset issuer placed a re-buy order near the issuing price. Good. But on the other hand, the value of BURST dropped.

11) BdeBank: Almost the same as ByteBank, but available at smaller units and no buy wall, so, a lower sell price.

12) ByteEnt: My best asset so far: Dividend about 30 % p.a. (in relation to my buy price, that would mean ROI in around three years) AND value increased slightly. Unfortunately, there is still this problem with the decreased BURST coin value which annihilates the profits.

The biggest income seems to be possible with buying an asset cheap (in most of the cases this is possible when you buy early, when the asset is new and just issued) and sell it at a high price. The funny thing about that is, that this might not require a long time nor a successful or trusted asset. On the contrary, "serious" assets might keep a "good" price over a longer time, but not necessarily extraordinary profits. I have watched some assets with (so far) reliable dividends of more than 20 % per year without causing a high attention of buyers and therefore with sometimes even declining prices. Instead, for a good buy/sale-return it is more important that you profit from the "hype", even if the asset never proved its functionality and is essentially bullshit or just sleeping for an indefinite time. So don't wait too long and try to sell it while there is some hype and fantasy in the minds of the buyers. Note that this is just my observation, I am not promoting this!

Some/many assets seem to be really just crowdfunding projects where the profits for investors may or may not come very much later. In my opinion, from the investor's point of view there is absolutely no reason to buy them fast and early unless you want to help this crowdfunding or unless you are so early that you can sell the asset soon for a better price again. But they are not worthy of buying and holding in the long term view as there will come later opportunities to buy them (again) when and if they (ever) start realizing their project goals.

One thing to be careful about is also the currency/coin-system where the asset is located: It's of no use if your asset pays e.g. 10 percent dividends and the price also rises to 110 percent, but the coin goes down 50 % at the same time. A realistic example, see above.