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Comment by craigc | Hacker News Reader

I read someone else who wrote about this before. One question I have is why you think that specifically about Bitcoin and not about other things like gold or stocks?

People who purchase stocks early do so expecting the price to rise when more people buy in later for higher prices. Same thing with gold. People say stocks have value because they provide dividends, but when was the last time anyone made significant income due to dividends? I think most companies do not even pay dividends.

If Bitcoin was actually a pyramid scheme then the early investors would be eager to cash out at the expense of everyone else, but many people involved in Bitcoin truly believe in the technology and the idea of a global currency that exists outside of government/bank control. Those people are not eager to part with their Bitcoins, and I don’t know why that would change all of a sudden.

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>One question I have is why you think that specifically about Bitcoin and not about other things like gold or stocks?

Gold has similar issues. But there is significant non-speculative value in gold. How much, I'm not sure, but it's useful for electronics and for decoration, etc. Also, gold's value is the supposed stability. Bitcoin's value is it's supposed growth, which leads to nasty feedback loops.

I wouldn't invest in gold. I think it's still in a bit of bubble caused by the 08 financial crisis.

Stocks are a different story altogether. You are buying equity in a company that has value. The stock market might be under or overvalued at any given time, but it is still tied to the value of the companies.

Every company goes bankrupt eventually. The idea is to make money, no matter how you want to look at it.

Sure eventually, but most pay out dividends over their lifetime that are greater than their current value or get bought out. Growth companies don't, but that's because they think they'd do a better job reinvesting.

> Stocks are a different story altogether. You are buying equity in a company that has value. The stock market might be under or overvalued at any given time, but it is still tied to the value of the companies.

I would say stocks are valued by the perceived value of the company and/or the potential future value. They are somewhat speculative too. Look at Tesla or Amazon for example. They have insane values despite not even turning a profit for long periods of time.

I get your point though. Bitcoin has no intrinsic value tied to anything specific, but I still don’t think that makes it a pyramid scheme. Bitcoin has A LOT value to people in countries that are on the brink of economic collapse due to inflation. Even in the United States, the FED prints over $200 billion a month. So in theory Bitcoin should hold value over the long term better than the US dollar.

Stocks are definitely speculative, but just not nearly to the same degree. They are speculating on what will happen in the meatspace. Telsa's valued because people are betting they'll become a major car company. And stocks like Tesla are outliers.

Bitcoin speculation is now just speculation based on price alone. Why is bitcoin going up? Because people think it will go up. That is a nasty feedback loop, that right now is causing it to have insane growth. The higher the price the more demand, the more demand, the more price goes up, etc.

But the opposite can (and will) happen. The demand for bitcoin drops because the price drops, the demand drops cause the price to drop further. etc.

Since the stock market is based on meatspace demand, if Tesla started to spiral for no reason, someone would buy it just to make a cash profit from it. People like Warren Buffet buy companies they think are undervalued to capture the profit.

>Bitcoin has A LOT value to people in countries that are on the brink of economic collapse due to inflation. Even in the United States, the FED prints over $200 billion a month. So in theory Bitcoin should hold value over the long term better than the US dollar.

They'd be better off buying property, securities, or even just USDs.

Bitcoin has gone up over 10 times this year. There is a huge risk it'll go back down to 1/10th. I wouldn't put any significant amount of money in such a volitile "asset."

Even stocks that don't pay dividends have a value floor(assuming the company doesn't go bankrupt)- the amount of money you can get by selling off company assets(office buildings, tech, equipment, patents etc.).

Bitcoin, gold, and stocks couldn't be more different. Gold has intrinsic value and stocks give you ownership in a value producing company.

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