The price is not always right.
In 2018, Dr. Daniel Kim (Ph.D. physics Harvard, MBA Yale) decided to meet the need for a bridge between the separate worlds of “new money” (non-commercial, open-source, grass-roots, cypherpunk crypto projects), and the incumbent “old money” industry of sophisticated trust and estate planning, structural asset protection, and legacy wealth and portfolio management.
As a former head of research at a hedge fund, Dr. Daniel Kim founded Sweetwater Digital Asset Consulting.
During the recent Crypto Vigilante Summit, Dr. Kim, renowned for his expertise, gave a remarkable presentation in which he explained the differences between fungible and non-fungible assets.
Dr. Kim also teaches about behavioral economics. This was the first time he presented this particular talk which is based on award-winning academic research. As a communicator, Daniel is an excellent bridge between the crypto space and traditional finance.
As Daniel explains, assets can be divided into physical or digital, centralized or decentralized, and fungible or non-fungible. A fungible asset has no visible history and is entirely interchangeable. All gold is equally gold, so it’s fungible. However, land is not fungible in the same way. Some land is better than other lands.
Bitcoin is not perfectly fungible because of blockchain analysis. That’s why we call it a transparent surveillance coin, because third parties like the government can trace the transactions, leaving the market with tainted or ‘dirty’ bitcoins.
Watch your back, newbies!— The Crypto Vigilante (@VigilanteCrypto) July 3, 2021
Blockchain analytics corps are tracing your transactions…
Join the best study-group of #cryptocurrency & privacy enthusiasts: https://t.co/bViQmWZWyi pic.twitter.com/YEHCyoN2YX
In turn, Monero (XMR) is the leader of fungible cryptocurrencies today. It is 100% private, customer-centric, and its technology is constantly innovating.
Still, a big question on everyone’s mind is, why is the price and market cap of Monero (XMR) so low? Is there price suppression? Is this natural or artificial? That’s part of what Dr. Kim aimed to answer in the TCV Summit presentation below.
We are aware of the macroeconomic debate of nations between Keynes and Hayek, but what many don’t know about is the microeconomic debate between neoclassical economics and behavioral economics.
Neo-classical economics assumes humans are rational and will always seek to maximize their utility, which is happiness. However, in behavioral economics, the price is not always right, so to speak.
One of the significant components of behavioral economics is prospect theory. Prospect theory, which Dr. Daniel Kim says is one of the most important discoveries in the 20th century, addresses how people make future decisions.
One observation prospect theory has is that people perceive loss much more intensely than equally sized gains. Losing a dollar is much more intensive than gaining a dollar.
Another observation is oversimplifying probabilities. Humans tend to group probability into three buckets — never, maybe, and definitely — rather than a smooth line from zero to one hundred percent probability. This means we tend to round up or down probability. In other words, most people are pretty bad at assessing likelihood, so be very careful when trying to predict the price of cryptocurrencies.
Enjoy the full presentation by Dr. Daniel Kim here:
Learning about behavioral finance is a shield against the media’s crypto FUD: fear, uncertainty, and doubt. Utilizing principles like these, taking into account oversimplified probabilities, emphasis on loss, and understanding biases will go a long way.
In the TCV Summit keynote lecture above, Dr. Daniel Kim weaves together expert research from academic finance with case studies from both the legacy financial and cryptocurrency markets to examine the degree to which crypto markets achieve efficient price discovery.
Right now, crypto is in a time much like the early days of the Internet, a conflict between a free, open, wild west versus a sterilized, corporate, walled garden.
The future is in our hands.
The September 2021 TCV Summit is coming! Learn more: https://tcvsummit.com