Even as a "store of value," anything this volatile is useless. Call a spade a spade: this is nothing short of pure mania and speculation. It will end poorly for the majority of people getting swept up in the hype.
Strictly speaking, speculation is a genuine investment strategy, but it's only appropriate for those with a high risk tolerance.
But the point is defining investment so widely as to include this sort of behavior just devalues the term.
I have no doubt that bitcoin is a good investment in the long run.
Except several vendors have recently started dropping it as a currency primarily because a currency which is deflationary makes a good investment and a terrible currency. Bitcoin has no use-case, or maybe you can disillusion me and tell me what you've done other than hold it?
Besides, what this thread has illustrated to me is that bitcoin is a gamble, same as a penny stock.
1. Takes some of the commodity off the market, saving it for the later spike in demand.
2. Promotes more aggressive investment now to hopefully provide more supply later.
Those benefits offer grounding for the speculation. You can do some calculations to see how well those things might pay off, and make a bid based on that imperfect information.
I don't see how that applies very well to any pure "store of value" like a cryptocurrency. How big the spike in demand will be has no bound on the error.
Maybe when cryptocurrencies become a medium of exchange it would make more sense.
This should be contrasted with 'speculation', which best applies to short-term strategy that merely seeks to skim alpha off the top of fluctuations in value, without regard to long-term health of the instrument.
The degree of volatility has nothing to do with whether it's an investment or not.
The fair evaluation is what the market decides just like any other exchange out there.
Bitcoin might very well fail but financial schemes are also investments.
You’re right, and that wasn’t my assertion. My assertion was that it makes it an absurdly poor “store of value.”
TL;DR - Bitcoin is an energy arbitrage.
Hand-knitting a sweater takes about 30 hours. So if you can readily hire people to knit at $20/hour and sell the sweater for over $600, an arbitrage opportunity exists and we should expect prices to fall as new knitter-hirers appear to reap the free money.
But this does not imply that the price of hand-knit sweaters must always be at, or even near, $600. In fact, with a readily-available cheaper substitute that most people find acceptable, the price can be arbitrarily low. If the demand for hand-knit sweaters at $600 doesn't exist, then the market can simply evaporate.
the biggest factor is energy cost and because of this it's a big energy arbitrage.
Sorry, the laws of physics say No. The electricity that you spend has been dissipated into the universe in the form of heat. It will quickly thermalize with its surrounding and be out of reach for useful work. Gone. You just proved your argument is a load of BS. Nothing is "captured" by each Bitcoin.
> "Using the “what goes into it” valuing method
Stop spewing BS please. There is no "what goes into it" method. No one cares how much something cost you.
If the spot price of a Bitcoin fall's bellow the production price in electricity, the logic thing for the miners to do is to stop mining, if they do this, the blocks will start to take more than 10 minutes and supply will decrease, moving the market price until it reaches equilibrium.
Most of the coins in circulation already exist, and sellers can easily sell for less than it cost to produce today because most of the coins were produced for far far less than today's cost.
Edit: You might as well try to assign a value to gold based on how much you spent on picks and hammers.
http://www.lbma.org.uk/assets/blog/alchemist_articles/Alch75...
Yes it does. For example, venture capitalists are investors, and they engage in high risk speculation.