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What you are quoting about banks and bubbles is all in hindsight. At that time everyone and their grandmother thought real estate could only go up.

So, if you have data to backup the fact that bitcoin is not in a bubble, please show that. Until then it is just your gut feeling nothing more.

> What gives gold its value? It is not that it is used in jewelry.

But statistics disagrees with this point:

https://www.statista.com/statistics/274684/global-demand-for...

I haven't calculated but quick eyeballing tells me jewelry beats investment by a far far margin.

Additionally, gold for the most part is a risk-off (safe harbor) asset. As in people rush to gold when markets are crashing because it is supposed to be divisible etc. On the other hand people rush (and encouraged no less) to put money in bitcoin when markets are booming. So my gut feeling is that once we hit a rock in these booming times and S&P drops people will still prefer gold. But let's see how bitcoin performs during a market crash before we talk about it's investment potential in the same breath as gold.

All valid points. I personally am very eager to see what happens to Bitcoin and crypto currencies during the next recession.

It's an interesting question, but rationally it seems like BTC should decline during a market crash / recession. It's arguably a way to store value as other assets decline, but given that it has no yield, the rational thing to do after that decline is over would be to cash in your BTC and use it to purchase those other assets that have declined, such as real estate, bonds or stocks, and now have either attractive yield or a strong potential for future asset growth.

(And you see this kind of rebalancing effect in general when a major asset class declines - eventually it pulls down other, unrelated asset types because as it goes down in price, it becomes a relatively more attractive investment.)

I wrote a bit about my opinion in a reddit thread a while back. It is here if you are interested, but a fair warning it will probably be quite an unpopular opinion with the hacker news crowd:

https://www.reddit.com/r/BitcoinMarkets/comments/7xq7mp/comm...

The problem isn't that it's unpopular, it doesn't seem (from the post) like you have some kind of underlying economic or financial principle supporting your argument.

* why would it have an inverse relationship with other assets? It's not a short. It's still valued based on purchase price vs sale price, adjusted for risk. If risk has risen and nothing has changed about purchase or sale price, why would it rise?

* if Bitcoin was at a market-clearing price before a downturn, and other assets are now much cheaper, why would BTC then be comparatively more attractive in terms of expected investment returns?

Well can we at least agree that no one knows with absolute certainty what will happen to Bitcoin and other crypto currencies during the next recession?

The reason I believe it will be inversely related is because it is still a relatively new market whose market cap is minuscule compared to other established markets.

During a recession people will naturally look for other places to put their money and gold will be the obvious choice. Bitcoin has all the same properties as gold except it is cheaper to acquire (fees), cheaper to store, has a fixed mining rate (with gold more supply is created when the price increases which drives the price back down), and has only 1% of gold’s market cap. The way I see it, it would be silly not to at least hedge a small amount of money into BTC/crypto.

The other economics reason is pure supply and demand. The supply of Bitcoin is shrinking every day as more people decide to hold it long term. Many more get lost or stolen. Every couple years the block rewards get cut in half as well.

All of that said, the rise and fall in the last year has definitely shaken the public’s confidence so it may take a long time before new money starts flowing into it. All of my timelines are years down the road. (10-20 years)

Obviously, nobody can predict the future, but the whole point of talking about what's likely to happen is to make reasoned guesses based on the best available data and economic models.

The nature of a hedge, in particular, is that you do it before a market downturn, not after. Once the market has dropped, you want to unwind that hedge, which in the case of gold or Bitcoin means selling. If you look at gold's performance during recessions since we unlinked it from the dollar, it's as likely to decline as rise. That makes it a poor hedge against recession.

In terms of supply and demand, it's true that supply is constrained, but that's only half the equation. Demand is extremely volatile, as there's no inherent "consumption" of crypto currencies (aside from lost wallets and other breakage), not is there any production occuring that requires btc to continue. The demand is entirely composed of people buying it with the expectation of a future sale at a higher price... that's speculative demand, and it's not a stable or dependable type of demand.

>The difference is that the housing prices were clearly in a bubble

The above article shows that Bitcoin was at the very least, in a bubble last year, and may still be one.

>and banks were intentionally packaging subprime mortgages that they knew were bad and selling them as a low risk investment.

And nearly every coin has an ICO which is a "sure thing". Everyone is selling their coin like it's a low risk investment.

>This is much much different than Bitcoin.

How?

>I would argue that Bitcoin is the only asset class that is not currently in a bubble.

So, you're living in denial then?

> So, you're living in denial then?

No, I believe that Bitcoin is going through a more general adoption wave.

So yes, it was in a bubble last year, but it is all part of a larger adoption pattern. It is the same way Amazon stock was in a bubble from 1998 to 2000 when its value rose from $3 to over $100 and back down to $5, but where is it today?

> The difference is that the housing prices were clearly in a bubble and banks were intentionally packaging subprime mortgages that they knew were bad and selling them as a low risk investment.

That's exactly what Bitcoin looks like to me. Places like Goldman Sachs are getting involved in selling Bitcoin derivatives. These are akin to subprime mortgage derivatives; the bankers know their current value is inflated with respect to their fundamental value, but for the time being people clearly want to buy them, so they can make lots of money selling them. Once they are making money selling them, it behooves them to downplay the risk. They can point at a BTC graph, talk about it is the future, draw a line up and to the right, and make it seem like a no-brainer.