Bitcoin as an Investment (2018) [pdf]
sec.gov
sec.gov
Edit: Here is a rebuttal letter to this comment: https://www.sec.gov/comments/sr-batsbzx-2016-30/batsbzx20163...
The person clearly has an axe to grind with Bitcoin.
- Bitcoin will collapse at x and will never recover
- The institutional adoption will not happen
- It can not be used for day-to-day payments
- It will never become a legal tender
We all know what happened to these predictions over the years.
Bitcoin on the day this was published was trading around $7,500. It's now trading at $37,000. I'd say these guys got it wrong. *at least so far*.
Are you claiming that this sentence is false?
This observation isn't really in support of Bitcoin, it's more of a depressing thought that our stock markets are closer to a Keynesian beauty contest. (GME, AMC, etc).
I don't personally own stocks or real estate for cash flow purposes. I own them with the expectation that I can sell them for more money down the line.
Pension funds.
Dividends are just one of the many ways that companies accrue value. Companies use revenues to invest in the business, to repurchase shares and also to issue dividends. This net welfare accretion must be considered in its totality.
Just because a company doesn't issue dividends doesn't make it a Ponzi scheme, and it doesn't make it a zero sum investment (like precious metals) or an negative sum investment (like PoW coins and to a lesser extent, most (all?) other coins).
“In the short run, the market is a voting machine, but in the long run, it is a weighing machine”
"At any point in time - past, present, or future - the people who have ever bought Euros [with real currency, aka every other fiat], considered as a whole, have put into the game more money than they have got back."
Now the Euro is heavily traded in forex markets, and surely the price fluctuates. Is this statement true? I'd suspect yes, though there are many other factors at play. Has the value of Euro increased relative to the other currencies it trades against? If so, this is probably due to large amounts of money pouring into it as a more lucrative asset than the quote currency.
I think this question really only makes sense using another currency as a reference. So let's consider the Zimbabwe dollar during its period of hyperinflation (2007-2009). In this case, citizens of Zimbabwe who bought Euros very likely got back more of whatever currency they eventually converted it to than they would have if they had kept their money in Zimbabwe dollars.
But what does this even mean. There is no 'stable' currency to use as a true reference, the value of each in the global market is constantly fluctuating. 'Getting less or more money back' becomes hard to evaluate.
So let's talk about purchasing power instead. I suspect the people who have ever bought into bitcoins as a whole, have increased their purchasing power (the number of coca-cola's they can theoretically buy on any given day).
It is not true, because currencies aren't assets. Currencies are a medium of exchange. Their job is to hold value for only as long as it takes you use them to buy necessities or invest them in assets. That's it. Any longer is a non-goal. Goals include low transaction costs, high transaction speed, fungibility, stability and predictability.
As for the FOREX market, that's a highly leveraged speculative trade on the relative purchasing power of a pair of currencies. That's not an investment and it's certainly not an asset.
With that in mind FOREX is widely regarded as a zero-sum market in the same way options and futures are. Money from the winners goes to pay off the losers.
> In this case, citizens of Zimbabwe who bought Euros very likely got back more of whatever currency they eventually converted it to than they would have if they had kept their money in Zimbabwe dollars.
This would have been a zero sum trade, not negative sum. Zero sum doesn't mean reversible or that there aren't winners and losers, just that considered as a whole, between all participants, no money left the system and no money entered - what was there was simply redistributed.
Bitcoin being negative sum has nothing to do with its title and everything to do with its intrinsic characteristics. I believe a study showed its PoW model extracts as much welfare from the system as a ~55% rate of inflation.
Personally I'm hoping the shift comes soon for proof of stake currencies with low transaction fees.
> "Since there is no source of revenue that would repay investments in bitcoin, there is no way to make a rational estimate for its value (above zero). There is no explanation for why the price is now 7300 USD/BTC rather than 0.73 or 73,000,000" (section 1.3)
The actual numerical value is irrelevant.
You can't assign a fundamental value to the purchasing power of a bitcoin when treating it as a currency because there's nowhere in the world that bitcoin is used to denominate the sticker price of goods. If there was you could regress its value based on how much one bitcoin would buy you in terms of goods priced in it.
However, without that, you can only treat it as a purely speculative asset as jstolfi did. If that ever changes, our model will have to change. It has not, and IMO will not, even with El Salvador because its wildly fluctuating notional value determined predominantly by global speculators precludes it from being used to actually price things in a meaningful and consistent way.
[edit] Either way, the title of the write-up was 'Bitcoin as an investment' - currencies aren't an investment, so the analysis models it as an asset.
And that is not the case, in general.
PS: good example was recent HDD token Chia. Before the token become listed on exchanges people hypothesized that it's price would be hundreds or thousands of dollars, and they were right eventually. But why really? Why not 0.0001$ per token or 1 million per token? How did this price fixation happened?