Bitcoin Drops Back Below $6,000 as 2018 Loss Approaches 60%
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My biggest issue with BTC is that it's subject to how the market feels about it. There's no cash flow. When I buy USD, I can by 2yr treasuries yielding ~2.5%.
It's obviously an assumption, not a sure thing. But the only thing that needs to happen is people sharing the belief that it is and/or can become digital gold, which is quite peculiar.
If large stable investors buy in (pension funds, endowments, etc) that will help massively to support price levels, after a period of value growth.
Gold also has non-monetary use (i.e. jewellery) which I imagine is a substantial portion of demand.
5+ years ago, I used to be really into gold when I used to read Zerohedge. I feel like I'm hearing similar arguments for crypto currencies vs. fiat as back then when I read up on gold vs. fiat. People were fanatical about gold (me included) and weren't objective.
I owned shares in gold miners. I got burnt and lost a whole bunch of money. So personally I'm sticking to investments which produce cash flow.
As they say, "History doesn't repeat itself, but it does rhyme." I had better learn from my mistakes.
The giant saddle does seem to support the idea that gold is hard to value.
Then the next search phrase to look up is "inflation adjusted price of gold since 2011". It's not a pretty chart. I would not use the words "steady upward trend" to describe it. "Steady downward trend", maybe.
Fundamentals supporting cryptocurrencies: 1. Criminals need a way to do business online. Of course it works for normal people too, but with the transaction fees and inconveniences inherent in current systems, cryptocurrencies are most attractive for people who can't do business through traditional channels. 2. But Blockchain is the future...
You can see a lot of parallels here, but note the differences: 1. Industry may use more gold plating as prices fall, but falling bitcoin prices won't make criminals switch from cash to crypto, so the price cushion is weaker. 2. People have been attracted to shiny objects for all of human history, so this is likely a part of human nature. (Regular) people have been attracted to blockchain for like 10 months, so this is probably a fad. Additionally, while bitcoin may be scarce within its own ecosystem, cryptocurrencies are not scarce in a global sense...a new crapcoin is minted everday. Unless BTC is the one true coin (and it can't support the transaction load), there is no real scarcity here.
By the way, if the fundamentals I listed for gold sound a little shaky, it's because they are. A responsible financial adviser might tell you to put 80% of your money in stocks, but he'd never tell you to hold 80% in gold.
One BTC is exactly as useful as one "MyBTC" as a store of value. You can fork infinitely. Can't do that with gold.
The main question is: are people ready for a digital store of wealth? If yes, it'll likely be Bitcoin. If not, it'll falter. I don't know the correct answer.
It is like calling people idiot because they bought btc @ 1000$ and then it dropped @ 360$. I really don't think those who bought at 1k are idiots but that's just my opinion and it's OK if other people have different opinion than mine.
Warm vibes.
Do you have a valuation methodology?
My biggest issue with BTC is that it's subject to how the market feels about it. There's no cash flow. When I buy USD, I can by 2yr treasuries yielding ~2.5%.
The way I see it, cryptocurrency gets a lot of its "value" from emotion--it signifies what people want to be true. Cryptocurrency is, in some ways, a dream incarnate. It's backed by nothing except the dreams of those who believe in it--and energy expenditure (if one believes that).
It's like a religion: Challenge the faith and you will be burned as a heretic, so-to-speak. I think that has a lot to do with why rational comments are down-voted so much on HN. You're assuming the discourse is rational when it is actually quite emotional. Cognitive dissonance abounds.
The market determines the price of anything based on supply and demand (which includes a risk calculation).
An investor might determine what they would be willing to pay for an asset (i.e. a fair valuation) and compare it to the market price. If it's selling for less than what they believe to be fair market value then it's a buy. The same methodology can be applied to sell decisions.
If I buy a house to let, I can create a model to project future cash flows derived from rent, costs, taxes etc. I can then discount the cash flows (DCF) with my target rate of return to get a valuation. Yes there are variables that are difficult to take into account i.e. likelihood of government default. It's not possible to apply a cash flow valuation to BTC.
Yes there is a market which determines the price of something. But that does not necessarily result in a reasonable price.
Maybe, maybe not. For those that have never experienced a financial “lesson in violence” before, investing in Bitcoin is the equivalent of touching some strange shiny object that fell from the sky only to find out that the reason it’s glowing is because it’s bloody hot. Sometimes it takes the burnt flesh hanging off a bloodied stump to learn that maybe strange new objects that fall from the sky are to be avoided in the first instance, no matter how shiny they look.
To be honest, given the world we live in, and the knowledge that exists around basic investing principles I’m surprised that some people are surprised at how much they’ve lost.
For me, this just proves (yet again) that the human desire to get rich quickly is incredibly powerful and easily trumps logic and rational thought.
For the record, and just so people don’t think I’m heartless, I lost $20K of savings back in 1989 In an institution whose interest rates were (on hindsight) obviously too good to be true. I was 23. The company was called Pyramid (yes, really. Australian)
Since then, bitcoin's fallen precipitously and I've personally felt plenty of schadenfreude about it, but... as with nearly every financial scam, it is rarely those who deserve it who suffer the worst consequences.
The chatter is always about the next 'support level', and it always gets broken. I'm expecting it to slide down well into three digits (<= USD$ 999) before any real recovery, if there is one. The real use cases are materializing much slower than expected as the scaling issues and transaction times increase.
Edit: (& BTW, I'm a generally enthusiastic supporter of the cryptocoin concepts, just noticing that it is apparently much harder to really get there than originally thought)
[0] https://news.ycombinator.com/item?id=17302054
[1] http://uk.businessinsider.com/one-or-two-traders-may-have-ca...
Nobody who invested 1+ years ago is down so save your judgements for the future.
Is the face value of Bitcoin higher or lower than its economic utility value?
What is the economic utility of Bitcoin? I think that is the real underlying unresolved question that creates volatility. The market is unclear and so can’t set a price objectively.
It’s significant news, but not really changing any of the fundamentals that I see.
Bitcoin will become a useful currency when it is stable for long periods of time. It doesn’t matter if that consistency is at 6k or 20k or 10.
What's the end goal of Bitcoin? What makes it worth investing in?
I'd be somewhat surprised if it ever goes back to its beginning-of-year heights.
Or the network could collapse to 0 before.
Africa, maybe? South America? I doubt there’s much there, to be honest.
There will be a lot of hurt when the music stops, represented by not finding anymore "investors" to fuel the hype.
In other words: I think you're spot-on!
Nothing like it; the amount of money invested isn't huge. It's nowhere near as scary as the various national mortgage bubbles in the noughties. When it collapses, damage will be limited.
I still believe there will be a lot of hurt for a lot of people. As I saud I may be wrong and virtually slap myself for not having jumped into the fray, when it was "only" 6000$.
(small edit: Typos [damn mobile screens])
I'm not a Bitcoin investor. But I do buy other alt coins. All the points you mentioned are valid but are constantly being improved upon.
Namecheap and FastTech.com being 2 big examples, as well as 2 of 3 of the hosting companies I use accept it.
Not to mention that alternative chains like Eth very well have a practical real world use outside if monetary value.
Edit:// I also order pizza and Chinese with Bitcoin like once a week. Saved me plenty of fees compared to other prepayment methods.
On top of that, international payments are only a PITA because banks are lazy. Banks could easily make the process cheaper and faster if they were so inclined. If BTC ever gains ground in this market, it would not last for long.
I'd rather pay $10 and know $9.80 goes to the company I am buying from (rest to VISA) than paying some random amount of Bitcoin for the $10 purchase which may be worth $11 or $9 or $20 on the day I purchase.
But how many people do this? I've sent like one international transfer in my entire life. I'd wager that the median number of international transfers among the US population is zero. In addition, BTC as a means for international transfer is totally decoupled from its price. If 1 BTC is $1 or $1m it works just as well for temporarily buying some and transferring it. This use case wouldn't really drive the price upwards.
http://activities.aliexpress.com/adcms/help-aliexpress-com/p...
There is no need for that, you can disagree without being impolite.