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Comment by DSingularity | Hacker News Reader

Really? Historically the consensus position on HN was that BTC and crypto is a short-term bubble for an asset class with no fundamental value. Seems to me that people becoming rich because the value of BTC has been going up forever is good enough proof that OP is right in swimming against the HN-current.

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BTC going up doesn't mean it has fundamental value. It's a speculative asset with more and more people getting on board.

Hedge fund managers are rich. TV personalities are rich. Many PhD students are poor.

This is not people making the right decisions. This is concentration of money because of economy volatility.

What do you consider fundamental value? Seems to me that people are willing to pay 50,000$ a BTC and companies are willing to hoard it. How is that not evidence that it has value?

Productive capital. Financial speculation is fun and all but it has to remain a sideshow to the real economy, since we fundamentally rely on individuals and companies investing in the creation of more productive capital. If it ever came to pass that hodling Bitcoin was actually the best use of money because it somehow became a universal deflationary currency, then the government would have to step in and deploy its monopoly on violence to abolish Bitcoin to protect the broader economy. Speculative hoarding of deflationary gold caused the great depression and the governments of the world at the time couldn't escape the trap due to gold-backed currencies. These days we have a better understanding of the relationship between inflation/deflation, currencies, investments, and productive capital, and something like the great depression is not going to be allowed to happen again.

https://en.wikipedia.org/wiki/Capital_(economics)

Overall a good answer but I wonder if this direction of thought applies to something like BTC or can even be broadly applied in general. It seems to me that it is difficult to measure the productivity of a decentralized asset like BTC. Maybe it’s even harder to compare it to asset classes which produce physically consumable products as we are talking about a new way to define value in the digital era.

There is some truth to the meme whose idea is that — in the end — you won’t care what the dollar value of BTC is. What happens when .25 BTC becomes a model s? To churn a profit in this trade Tesla needs to acquire the materials an labor for less than .25 BTC. Full stop. This is a paradigm shift because this has never happened before for decentralized, algorithmically sound digital money.

I’m just a lay person but that is, to me, the fundamental value. Who knows, maybe this will have a broad effect across industries the same way that the internet came and effected everything.

> It seems to me that it is difficult to measure the productivity of a decentralized asset like BTC.

It’s actually really easy, because the answer is just 0. Bitcoin is not productive capital in exactly the same way that the USD is not productive capital. “Investing” in Bitcoin is not like investing in an enterprise, it’s financial speculation. This is perfectly demonstrated by the “1 BTC = 1 BTC” meme, at the end of some period of hodling nothing has been produced, no matter how long you hodl for. Now, there are some second-order benefits to financial speculation, it can drive price discovery and provides the liquidity to make markets efficient, but financial speculation on Bitcoin doesn’t have these second-order effects because those second-order effects are only relevant when some amount of non-speculation demand exists for the speculation target. There are other cryptocurrencies that can be used for more than just financial speculation, i.e. that actually have productive uses, and some people are working on finding ways to staple productive use cases to the Bitcoin blockchain, but a Bitcoin is still not productive capital. It’s not good for the economy if too much financial activity gets sucked into financial speculation, since we need financial resources to actually be invested or the economy grinds to a halt.

Now, none of these are issues for a currency. Of course a currency isn’t productive capital, it’s a medium of exchange. But currencies are most useful when they are stable, and Bitcoin is a resounding failure as a currency.

Again, for the upteenth time: there is NO SUCH THING as "fundamental value".

There is just one thing: supply and demand.

The fact that demand might be powered by something some folks might consider "irrational" is completely irrelevant to the conversation.

It is not completely irrelevant: it is how you distinguish productive investment schemes from scammy Ponzi schemes.

>it is how you distinguish productive investment schemes from scammy Ponzi schemes.

That'd be true if economic actors were rational (and had total access to relevant information).

News at 11: they aren't (and they don't).

Please stop calling it Ponzi. A Ponzi scheme is a well defined scam with structural hierarchy. People lower in the hierarchy are obliged to pay the upper level money in order to stay in the game. They also try to recruit others in order to get paid themselves. Bitcoin is traded in the free market just like a stock. You are not calling Apple stock a Ponzi scheme because some people bought at 1$ a piece am I right?

You're referring to a pyramid scheme, not a Ponzi scheme. (Enough people mix the two up that the Wikipedia pages on both articles have sections on the differences between pyramid and Ponzi schemes).

Ponzi schemes are where you pay investors using the contributions of new entrants, so investors only make money so long as new entrants are joining. It's not exactly a new tradition for people to be referring to financial markets and bubbles as Ponzi schemes, although whether or not this appellation is appropriate is somewhat contested.

That is correct, my mistake. Anyway, Bitcoin is neither of them.

As long as the vast majority of Bitcoin owners are HODLing and not using it, it's behaving as a Ponzi. Bitcoin has a few uses, but getting rich speculating on it isn't one.

Bitcoin bubbles burst all the time. Everyone have the opportunity to buy "cheap". Why do you care if some people take the risk to "hodl"? You can still get in (and take the same risk) without buying _their_ coins.

That's not what I meant, and that you're thinking this kinda proves my point. People holding onto Bitcoin hoping to get rich don't contribute to Bitcoin as a technology. They're making Bitcoin a speculative asset.

Bitcoin is supposed to be used as currency. The vast majority of Bitcoin owners don't do that.

Of course they don't contribute to Bitcoin's technology, they are not coders. Using Bitcoin as a speculative asset is part of the adoption process. It is not yet a currency, it will take many years to be completely adopted. It's a natural process, I cannot imagine any other way for a decentralized currency like Bitcoin to become a global reserve currency. Can you?

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