Financiers would never invest in bitcoin?

[as.exchange]

Recently read a post/opinion of one analyst, which seams pretty interesting. Curious about what the Community here thinks about that.

BELOW IS THE TRANSLATED POST

Why financiers would never invest in bitcoin or in any other asset at all, including much less risky assets.

For that you have to understand that financiers are in the business of financing and investors are in the business of investing.

- The bank's instrument is a spread between how much money they acquired and for how much and for how long they sold that money to others.
- The tool of the investor is a profitable asset.

The above are completely different kinds of business, what is often forgotten. For the bank (I'll call it so broadly everyone and all businesses who work with money) in the first place is security, namely shifting the risk of funding on someone else's shoulders. In this case, on the shoulders of investors who get the money to work, but pledge the asset to the bank at a discount. The bank's risk is minimal, because LTV (loan-to-value) could be 65 or 50%, i.e. the money is given less than the market price of the collateral. All the risks are borne by the investor, and the bank finances them safely (for itself). In that sense, neither the Bank of New York, nor the Maker DAO, much less NEXO is any different. The business is to take money for the longest possible period, immobilize (make it unmovable) it as much as possible, and lend the same money at a discount to the risk. All risk is shifted to the borrower who decides to buy something as an asset. The investor is left with the asset but no money. The bank uses the money to make more money, including by refinancing the asset further to get even more money. Think of the resale of mortgage bonds through CDOs and other variations of repeatedly selling the same asset or risk on it. Who is safer in this process should be obvious.

That is the nature of the financial business. Banks and financial institutions are in the money business, investors are in the asset business. For a bank or financier, investing in an asset is dead money, in jargon, it's just not their business. For the money business, the most important thing is turnover, money velocity, not return on the asset. The bank is looking for yield, the investor is looking for ROI. What's more, you need to attract as much money as possible to immobilize it for the one who gave it to the bank, in order to get the maximum turnover of the liability. The bank simply shifts the risk of ownership and the market value of the asset to the investor. And it makes money regardless of whether the asset rises or falls in value. What cannot be said about a typical buy & hold investor.

Once I saw a table of institutional investors in Bitcoin as a proof that "institutionals are coming now and we will prosper now". Financiers will prosper indeed, but not all investors, because investing is still a zero sum game. The market is not in the business of creating added value, but of redistributing money among its participants. Some investors will lose money 100%, you have to understand that. But the financiers will never. The infamous Grayscale earns 2% on trust assets, but owns nothing itself. Galaxy Digital probably didn't take a performance fee when it was making 70% loss, but it took a management fee anyways which all investors were paying them.

Everyone is screaming that institutional players came into the Bitcoin now. Who came are the few players who could push a new asset to the investors, even though to the low quality ones, while they themselves will be sitting on commissions and transactional revenues. You must agree there's a big difference between the two businesses. Institutional investors are not gods pooping butterflies and rainbow-coloured unicorns. Many of them sit on unprofitable assets for many many years. Just look at the return statistics of most hedge funds. Especially it's interesting to look not at annualised returns, but at specific years (YoY). They also got enough idiots there too, who are driven by the banal greed in addition to diversification. Here you can pump a flat price out of nowhere, and get the absolute income higher. And you don't have to invest anything in the asset itself, - it's too risky! And the risk, as we remember, is what financiers pass on to others. That's their business. If it looks like a duck, walks and quacks like a duck, it probably is a duck.

END OF THE POST

[Oshosondy]

Financiers are institutional investors investors that invested with institutions that will be paid back in profit, or you can correct me if I am wrong about that. I will only focus on them, their numbers have increased in this year because many institutions are investing in bitcoin, this could be the rise of institutions that will invest in bitcoin. 2021 can be the year of more rise of institutions that will be investing in bitcoin. They have later have to know that bitcoin is a new era money and yet an asset that is not inflationary like gold, fiats and many like that, it is real deflationary unlike those. We all know how fiats is so inflationary while gold may not be left out if true value is considered. There will be no option for financiers than to invest in bitcoin because it is better, and the world have being dawning to understand this unlike the olden time.

[Darker45]

Recently read a post/opinion of one analyst, which seams pretty interesting. Curious about what the Community here thinks about that.

You have to indicate the source of this long post/opinion of someone you call an analyst.

To me, this is not at all interesting. As a matter of fact, it appears to me as if this is simply a play of jargons. Financiers and investors are actually the same bananas more or less. Financing is investing. ROI may somehow be different from yield but they do not actually belong to two different worlds. You can measure your monthly ROI based on your annual yield.

Some investors will lose money 100%, you have to understand that. But the financiers will never.

I don't understand where this is coming from. It's as if what the analyst calls financiers are not facing any risks at all. Which is probably wrong.

[as.exchange]

Financiers are institutional investors investors that invested with institutions that will be paid back in profit, or you can correct me if I am wrong about that. I will only focus on them, their numbers have increased in this year because many institutions are investing in bitcoin, this could be the rise of institutions that will invest in bitcoin. 2021 can be the year of more rise of institutions that will be investing in bitcoin. They have later have to know that bitcoin is a new era money and yet an asset that is not inflationary like gold, fiats and many like that, it is real deflationary unlike those. We all know how fiats is so inflationary while gold may not be left out if true value is considered. There will be no option for financiers than to invest in bitcoin because it is better, and the world have being dawning to understand this unlike the olden time.

From my personal perspective, financiers are also investors. But just like hedge fund invests but rather than entering equity of company / or purchasing asset they do it via debt instruments. Banks and money institutions also collect money from others (depositors), just like hedge funds do so with their LPs. Due to this part I do agree with you. However, if we consider money transmission business as it is (payment processing), or exchanges - they don't necessarily take others' money to make more money. They simply provide infrastructure for investors and don't care that much if the underlying assets go up or down - they just live on transaction fees and revenues.

As for institutions that invested in Bitcoin, yes you are correct, and from my personal perspective, some of them are quite reliable (not MicroStrategy though), but they are all eventually investors, but not financiers (i.e. HSBC, JP Morgan Chase, ICBC, CMB, Sberbank or those guys). Thus, while we do observe entrance of institutional investors, we can't say (yet?) entrance of institionals in the broad term, or financiers specifically.

While banks do deal in assets in the end, they never actually take the actual asset risks, because they (here I agree with the author of that post) eventually just "borrow long-term, lend short term" and if they are not sure they are able to hedge all risks and leave only transaction revenue for themselves - they will not enter the deal.

You have to indicate the source of this long post/opinion of someone you call an analyst.

To me, this is not at all interesting. As a matter of fact, it appears to me as if this is simply a play of jargons. Financiers and investors are actually the same bananas more or less. Financing is investing. ROI may somehow be different from yield but they do not actually belong to two different worlds. You can measure your monthly ROI based on your annual yield.

Some investors will lose money 100%, you have to understand that. But the financiers will never.

I don't understand where this is coming from. It's as if what the analyst calls financiers are not facing any risks at all. Which is probably wrong.

Sure, the source is here (it's in Russian originally): https://t.me/blockbitnews/968 Didn't post initially as didn't want to get the thread removed due to advertisement (it's not).

As for investors and financiers being the same, unfortunately I cannot agree on that. Bank's business is borrow long-term from CB/depositors @ cheap rates, and lend short-term @ high rates. From philosophical perspective - yes, they do both make money from other people's money - that's true, but the business models are different. One is like Uber - connects those with assets with the ones who need assets and earn their margin, but another one is like traditional taxi car - buy the cars hire drivers and wish that can earn money from that.

And about the investors losing money vs financiers not losing money, I guess the author of the initial article didn't state that clearly, but yes, investors will lose due to market price risks, financiers - will never! Financiers will lose due to risk mismanagement, due to failed operations, or liquidity mismatch, and there are million other risks, but not the price risks purposely taken by investors. If you see a bank failing, that's very unlikely due to taking price risk (unlike investors), but due to poor risk management and/or failed risk transfer as this is the only and core business line of all financiers - transfer risks from one party to another one, earn the spread for doing so, and with the earned spread cover own operational costs.

[Mauser]

I think this wrong. Financiers are the most abstract people I have met. They only look at money and everything else is converted into money. For a financier it doesn't matter if its oil, gold, corn or electricity, they will buy it all as long as there is money being made. So for them bitcoins is just another commodity they can buy and trade.

[as.exchange]

I think this wrong. Financiers are the most abstract people I have met. They only look at money and everything else is converted into money. For a financier it doesn't matter if its oil, gold, corn or electricity, they will buy it all as long as there is money being made. So for them bitcoins is just another commodity they can buy and trade.

You are very correct, but they usually don't like to take risk which they cannot estimate and carefully manage. As you correctly said - very calculative people, who take well accounted-for risks to earn profits (mostly arbitrage). But yes, if BTC can be de-risked (typically done via derivatives), then they might start using it too.

Trading in bitcoins is complicated and you have to spend a lot of time and mind with 100% consecrate. I personally think that financiers are not sufficiently free to glance in bitcoins and put away their cash on it. Bitcoins help just for the individuals who need to twofold their cash Why would they put their asset when they're already making benefit ?. Same with the Millionaire they'll never attempt to twofold their cash.

I don't think trading in Bitcoins is harder than trading swaps or structured products, or even planes (I used to know one person from Deutsche Bank who literally was trading planes like we trade Bitcoins:D). But you made a great point - for the top ones, it's too small to care about. People who scream that BTC is impossible to ignore, just fail to realize the size of capital markets and the relative size of BTC for now. Once it grows to the big enough cap - they will enter, until then - VCs and speculators, or the small ones will try to take advantage.

[Gozie51]

BELOW IS THE TRANSLATED POST

Then consider your post to be backed up with a source to your information.

Anyway, IMO I think that financier is generally someone who has seen some better advantage than they can do and can sponsor, encourage or advise that a financial obligation is taken up and in this extent relating to trade and cryptocurrency, they can be banks, cooperate institutions. To another point in that, the government can also be financier in there project and they sell out bonds and security to individuals or institutions for investment in different areas of government sectors.
A financier has strong believe that invested money is going to bring better profit than they are able to generate.

[darewaller]

This is sort of right but also a bit wrong at the same time. What they are trying to explain here is that if a bank buys bitcoin for example, instead of loaning to others, they would put themselves into much more risk and would be a lot worse, it would hurt them because people may withdraw their money at anytime, and if bitcoin is lower at that point the bank would lose money.

Instead they put the money to use, and give it as a loan and get money back each month as payment, and that would guarantee an income for them, think of it like you putting your money into savings account for a good interest rate. However investors are called financiers as well, they do not put a name tag different just because they do different task, which means investors, companies like grayscale or microstrategy would also call themselves the same thing as the banks when it comes to buying bitcoin.

[as.exchange]

BELOW IS THE TRANSLATED POST

Then consider your post to be backed up with a source to your information.

Anyway, IMO I think that financier is generally someone who has seen some better advantage than they can do and can sponsor, encourage or advise that a financial obligation is taken up and in this extent relating to trade and cryptocurrency, they can be banks, cooperate institutions. To another point in that, the government can also be financier in there project and they sell out bonds and security to individuals or institutions for investment in different areas of government sectors.
A financier has strong believe that invested money is going to bring better profit than they are able to generate.

I believe you are referring to the specific group of financiers - investors. Just like PayPal, Visa, or NASDAQ cannot be called investors (apart from their dedicated VC teams), overall they are in different business, which is not the same with Black Stone, or Sequoia Capital. Same could apply to HSBC, Citi or ICBC. Some are moving funds/capital/money and processing them by earning their transaction revenue irrespective of currency/asset market price, while others intentionally make bets that what they buy-in is currently underpriced and they can earn their risk premium in the future when the currency/asset will be fairly priced.

This is sort of right but also a bit wrong at the same time. What they are trying to explain here is that if a bank buys bitcoin for example, instead of loaning to others, they would put themselves into much more risk and would be a lot worse, it would hurt them because people may withdraw their money at anytime, and if bitcoin is lower at that point the bank would lose money.

Instead they put the money to use, and give it as a loan and get money back each month as payment, and that would guarantee an income for them, think of it like you putting your money into savings account for a good interest rate.

Absolutely correct point. Banks need to handle deposits which are fixed in USD/whatever currency, while BTC can go up/down any moment by 10-20-30% which will be an unbearable risk for them and will result in bank run. Of course they can hedge the risk away, but there will be such issues as: 1) when fully hedged - you don't earn any profit at all, 2) with BTC current market size, they might be not able to hedge to the extend they would want to.

However investors are called financiers as well, they do not put a name tag different just because they do different task, which means investors, companies like grayscale or microstrategy would also call themselves the same thing as the banks when it comes to buying bitcoin.

Yes, with this I fully agree. From common understanding perspective and more of "philosophical" perspective, the word "financier" typically refers literally to anyone who is working with money, be it asset manager, hedge fund, bank, FX broker, stock broker, local exchange down the street, Treasury department, VISA processing the payments, or literally anyone - just a very general term. From another perspective, there are subdivisions in the world of financiers, and "financier" (who earns processing/transaction/maturity/liquidity fees) is another subdivision of the general "financier" (which does include investors, exchanges, lenders, brokers, including Grayscale, MicroStrategy's treasury dep., etc.).

[mu_enrico]

"Never" is a strong word, and this world is full of uncertainty.
What if Bitcoin becomes widely used money?
Bank also has many types; what about Investment Bank?

But sure, commercial banks (that deal with fiat loans) would not buy/use Bitcoin in its current state because most transactions use fiat.

[as.exchange]

"Never" is a strong word, and this world is full of uncertainty.
What if Bitcoin becomes widely used money?
Bank also has many types; what about Investment Bank?

But sure, commercial banks (that deal with fiat loans) would not buy/use Bitcoin in its current state because most transactions use fiat.

Well, of course we can say that anything is possible in this world. Some time ago people couldn't also imagine using mobile phones or driving cars as well. But do you objectively believe that Fed, ECB, PBC, BOJ, etc. would give up their power of money control to something they don't control and cannot print as much as needed / when needed?

As for Investment Banks (GS, MS, JPM, etc.) sure, same applies to Merchant Banks - that's entirely different business model. They are investors (sometimes), and advisors to others mostly. Their end goal of business is to "sell" - whether it's a corporation in M&A deal, stocks in IPO, or something else (and also collect the fee irrespective of the success , but it's not money processing like commercial banks).

[Broly46]

Financier is lowest form of human scumbag, people like Rothschild funding for World War One and two for profit, Jamie Dimon funding market crashes and bailout and glass steagall to protect themselves, now enjoying fat pay check bailout for doing nothing, thing that would disrupt their finance empire something like bitcoin is their greatest fear, they would like to destroy bitcoin, but to invest into it, which is contradicting with their narrative, nope they would never advocate thing that accelerate their demise let’s alone invest into it.

[as.exchange]

Financier is lowest form of human scumbag, people like Rothschild funding for World War One and two for profit, Jamie Dimon funding market crashes and bailout and glass steagall to protect themselves, now enjoying fat pay check bailout for doing nothing, thing that would disrupt their finance empire something like bitcoin is their greatest fear, they would like to destroy bitcoin, but to invest into it, which is contradicting with their narrative, nope they would never advocate thing that accelerate their demise let’s alone invest into it.

True and not. It might seam so from the external actions which we all can observe and judge it based on our own limited understanding. However, we will never know the full story or the full motives & reasons. We might be failing to see the bigger picture, or might be thinking too much and most of those things were accidental and not on purpose. Therefore, I, personally never judge people before I can be sure that I really understand every single part of them. Otherwise, whatever we assume is just an assumption based on the news that we were fed with by the public media, and nothing more.

[davis196]

The quoted article was a boring to read wall of text.
Financiers,bankers and accountants are NOT investors.They work for a monthly paycheck+bonuses,or they get a commission for every new customer they acquire.
Investors are investing their capital and getting a return-interest rate or profit.
Financiers,bankers and accountants don't risk anything in their daily jobs.All the risk goes to their customers.
They(financiers,bankers and accountants) can invest their savings everywhere they want.
If they don't want to invest in Bitcoin,that's fine.

[as.exchange]

The quoted article was a boring to read wall of text.
Financiers,bankers and accountants are NOT investors.They work for a monthly paycheck+bonuses,or they get a commission for every new customer they acquire.
Investors are investing their capital and getting a return-interest rate or profit.
Financiers,bankers and accountants don't risk anything in their daily jobs.All the risk goes to their customers.
They(financiers,bankers and accountants) can invest their savings everywhere they want.
If they don't want to invest in Bitcoin,that's fine.

Yes, you are pretty correct with defining the financiers (I would exclude accountants though). But I guess the article was more about the common misconception among people that financiers (banks, etc.) would soon enter the market. Which as you correctly noted too - unlikely to happen, unless they would have customers who want to take that risk, and they could simply transfer the risk from markets to customers, and lock themselves into the risk-free spreads.

[amishmanish]

 I think that institutions jumping on the bitcoin bandwagon is resulting in an interesting scenario. The exchanges have a ljmited supply of bitcoins. Amongst the biggest hodlers, the ideas are about bringing changes to the way the world functions, not just to sell at 100K and retire as billionaires. That may well be the goal of plenty of latecomers but those who have been here from the beginning, most probably have better plans than selling it to the traditional investors.

There are interesting days ahead. I hope those demigods have a plan and the little guys like me can just stack Satoshi by Satoshi and hope better financial condition than would have been possible otherwise.

[as.exchange]

I think that institutions jumping on the bitcoin bandwagon is resulting in an interesting scenario. The exchanges have a ljmited supply of bitcoins. Amongst the biggest hodlers, the ideas are about bringing changes to the way the world functions, not just to sell at 100K and retire as billionaires. That may well be the goal of plenty of latecomers but those who have been here from the beginning, most probably have better plans than selling it to the traditional investors.

There are interesting days ahead. I hope those demigods have a plan and the little guys like me can just stack Satoshi by Satoshi and hope better financial condition than would have been possible otherwise.

You are right, and with the limited BTC supply the price will have to keep raising, until someone decides that it's too high and the final price could clear the market demand/supply. I think those days you are referring to will come pretty soon 

[GeorgeJohn]

Why financiers would never invest in bitcoin or in any other asset at all, including much less risky assets.

For that you have to understand that financiers are in the business of financing and investors are in the business of investing.

I don't think so, I noticed that it's based on choice, it's obvious that financiers have the ability to invest in bitcoin if really wishes to invest, financiers only managed a government finance and that does not warrantee their not eligible to invest their finance.

[dothebeats]

They’d love to get their hands on something that will yield them more money with the right risks, so you’ll never know what they really want at the moment. Financiers mostly care about results and profits, and if they see something that performs really well even with risks involved, they’d still get it. They do not restrict themselves on financial and debt instruments that are within their knowledge—I’m pretty sure there are some that have already tried crypto and stuck with it since.

[create_crypto]

There a lot of officialy working funds, that investing in bitcoin and crypto.
They investing money of their clients, it is around 1000 already all over the world.
Also some instruments like ETF, is the instruments of a traditional financial system, that now also sometimes using to help people legally invest their money in bitcoin.