What justifies Bitcoin being valued at 30k vs 20k?
The answer is nothing. And same applies to 10k. Since there's no measurable intrinsic value, there's zero fundamental factor limiting the downside
The answer is nothing. And same applies to 10k. Since there's no measurable intrinsic value, there's zero fundamental factor limiting the downside
If anything, the ETH blockchain might have more value in the real world, since it's used to transact stupid monkey pictures and stuff like that.
Plus failed central banks, failed paper currencies, etc
It seems like as time goes on crypto becomes less useful rather than more as a general utility for buying stuff. Most crypto "currencies" are also a not a great store of value currently.
Just for context, the Ukrainian Hryvnia has lost less value since the Russian invasion than bitcoin has lost today. A financial system more volatile than the economy of a country outmatched in a war with a superpower, is perhaps, not a system you want doing things that require stability.
I said: Bitcoin. Not crypto.
(The longer I’m in this space, the more I realize that scammy crypto is one of the biggest enemies of bitcoin adoption.)
It may seem this way to you but you’re clearly not paying enough attention. Adoption curve is up. Many advancements have been and continue to be made on the front of consumer products. Let’s face it, companies like Square will drive mainstream usage. Consumer products will only get better and better and over time will be on par with products that use the dollar under the hood.
So let me amend my argument: It seems like as time goes on, bitcoin specifically, has seen decreased general use as anything but a speculative greater-fool investment. As far as I can tell, the only people that use bitcoin as a currency are 1. trying to prove a point, or 2. doing illegal shit. That used to be less true 5 years ago.
Why would square drive mainstream usage? Square needs people on both sides of the transaction to have already adopted in order to drive business.
I suspect that Apple, Google, visa, MC, and PayPal will continue to build bitcoin into their product.
Bitcoin does not compete at all with these companies. Just like the US dollar is not a competitor to Apple, visa, etc. these are products that incorporate currencies.
ApplePay is not a currency.
I suspect it’s going to be a domino effect that gets much much worse..
Because that's to me what it looks like functionally, while some people I know seem to deny this is what they're doing and telling themselves "it's the future of everything" for no other reason than that's what they want it to be (so they can make bank off of their speculative bet).
If you can't point to any math to justify a given price, there is no intrinsic value. Thus price is only driven by speculative factors.
With stocks there are earnings that can be distributed back to shareholders. This is a measurable and explainable fundamental factor.
Real estate has rents... Bonds have coupon payments. Crypto has nothing. Though some will pay you "yield" by diverting money from newer entrants... Aka pyramid-esque structure
Crypto has none of these. And if it's a good investment, then it's definitely not a good currency
The Bank of England would like a word with you.
As an investment vehicle, it's exactly as you say; there is no fundamental value it represents. As a currency, it has no governmental backing, and while it's possible to trade in currencies, the profit lies in the trade, and the various differing rates of exchange, NOT in the underlying currencies themselves. No one holds currency expecting deflation to make them better off.
It is incredibly hard to predict if such a consensual reality will collapse -- but it can collapse if there is a strong "vibe shift" towards something else that competes effectively with the current "consensus."
It is like fashion. What is considered stylish and not is just a group consensus. And it can shift relatively quickly, but it is hard to predict and certain people in key nexus have a lot more influence than the ramble.
Things that make Lira less mythological and more intrinsicly valuable include:
- It is a more stable store of value
- It holds a more stable relationship to the value of everything else in the Turkish economy
- It is more widely accepted for buying and selling good and services
These three things are real world practical differences.
Traditional state-based currencies mostly exist because the government pays its obligations in that currency and also collects taxes in that currency. The state's population is forced to use that currency as a result for these behaviors.
This is the main difference between a state-backed currency and "private currencies."
This isn't to say that state-backed currencies can be a mess just like "private currencies." But these state-backed currencies fail with the governments based on balance of payments and debt and money printing, etc and it is very infrequent.
At all times in unstable monetary conditions, such as hyperinflation, funny-money issued by occupation authorities, unrecognized governments, fiat currency mismanagement, etc, people have flocked to alternative means of exchange. Usually using foreign currencies or other assets (precious metals, whatever). Now there is more choice here. There are reports from places in such conditions of people actually using digital assets for this. Whether it's better to hold Lira or Dash at this particular moment in time though, is a pretty open question.
[1] https://www.ecb.europa.eu/press/key/date/2022/html/ecb.sp220...
I think that most major currencies will have mirror cryptocurrency versions as state-backed entities, replacing USDT and the similar more hand-wavy versions. This is definitely going to happen.
But this isn't "private currency" rather it is just the evolution of state-backed currency.
> At all times in unstable monetary conditions, such as hyperinflation, funny-money issued by occupation authorities, unrecognized governments, fiat currency mismanagement, etc, people have flocked to alternative means of exchange.
Make sense. If your country is in hyperinflation, do not hold its currency.
> There are reports from places in such conditions of people actually using digital assets for this. Whether it's better to hold Lira or Dash at this particular moment in time though, is a pretty open question.
Dash lost most of its value in the last 2 months. I am unsure what your point is. Dash obviously is a speculative asset and it is super hard to predict its future direction.
EDIT: When ECB talks about private money they mean non central bank issued digital assets, among other things. Not their CBDC which would of course be public money.
$DASH meanwhile is a speculative "investment" with no underlying assets that most people has no idea exists.
$DASH could go to 0 tomorrow and it would probably not be reported on outside of crypto sites. Neither of those things is true for the Lira
Ultimately through threat of violence or depriving of liberty. That is, it is the state's monopoly on violence which makes a currency. Bitcoin, being state-less, has no such monopoly and must ultimately fail.
Although Venezula seems to have been making a first pass at it.
The reason is simple: The Turkish Lira has a government (complete with courts, military, bureaucrats, police, banks, etc) that has committed to enforcing transactions in the Lira.
Does that mean the speculative market for Lira must be bigger than bitcoin? No, of course not. But it does mean there's fundamental utility to the Lira that absolutely does not exist for bitcoin.
In that long conversation, the most compelling 'use' was it's 'non use'. That it is intrinsically rare and so as long as it's achieved a sufficient momentum to continue to exist (aside from transactions, we went over various uses for the blockchain that I was struggling to understand), just having some is itself a diversification and thus valuable for that. Diversification like having some precious metal is too. 'Having' being an important point. Another friend was a gold nut (I mean that in a non-pejorative sense, a term he used) that wouldn't touch gold futures or any form of 'contractual gold' and wasn't that keen even on security boxes.
In this, Bitcoin did make some sense. Just hanging on to some. Not for investment purposes, and not for speculative purposes, but for, depending on your perception, the value you may find in something 'rare' in your (somewhat) physical possession. This may be for a time of turmoil when 'rare' assets are extremely valuable, especially divisible ones (sufficiently 'rare' cash, for example, is well documented to be valuable at these times). 'How much' depending on your appetite: appetite for an asset _held for this purpose_ (a purpose that isn't investment or from-time-to-time speculation), and this 'how much' (price*quantity) re-balanced not based on a Bitcoin's price (nor gold's price per ounce) - from this perspective the day-to-day 'price' of Bitcoin becomes less relevant, re-balancing better smoothed than marked-to-market daily given it's volatility.
[A small aside, but on this 'rarity': I remember clearly the first time I held a gold bar, by no means a common occurrence in my life. It was beautiful. Shaped more like a house brick than something stacked in Fort Knox, it had the portrait a family embossed on it, two parents, three children, the family dog, the chateau in which they lived, and their signatures. It was cast at the time of the French Revolution, and sits, certainly when I handled it and I imagine still today, unclaimed, in London, where it was sent for safe keeping. Sad.]
That it's a safeguard (not hedge) against tyrannical money.
This will play out over the next few years as governments will introduce digital currencies (CBDCs) to replace their own failing currencies (simultaneously robbing citizens of their savings). The bait-and-switch of this is that they will give out free money (it costs them nothing to do so) to entice people but not tell them that their money can expire, have its purchases limited to "approved" vendors, and be taken from them instantly without recourse.
Bitcoin is a safeguard against this if you hold it in your custody. This is its ultimate value: it cannot be manipulated or stolen by the state. Something that's never existed in the history of humanity.
There's a reason the genesis block contained this: https://en.bitcoin.it/wiki/File:Jonny1000thetimes.png
So what benefit is it? Everyone has only traded one form of vendor lock in to another (that is deserving of vastly less trust, as evidended by the Wild West of scams, rug pulls and outright frauds)
Money works because I can hand $10 to a 5 or a 95 year old and they know what to do with it. Very few people do anything other than speculate in crypto, and even fewer hold it in their own wallets as opposed to on exchanges. If the friction of getting started in the future of money requires IT support, then it isn’t going to work
It doesn't need to be universal. The need for personal computers wasn't universal when Steve Jobs was running around Silicon Valley selling the Apple I in the 70s. They didn't even understand email in the 90s: https://www.youtube.com/watch?v=UlJku_CSyNg.
Look at us now.
> The vast majority of the general population is nowhere near this level of technical proficiency.
Right. Just like all technology, that's our responsibility as "the nerds." We take something that's complex and distill it down into something that's easily digested by people with limited or no technical aptitude.
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I find it deeply alarming that the supposed technical elite that wander this site are so averse to something that can liberate and help so many people, worldwide. Even if they have the capacity to understand it, it's clear that many here haven't done their homework and are relying on second or third-hand knowledge (or at best, outdated information) to form their opinions.
Despite their hubris and narcissism, they're no better than "the general population" on understanding this.
Then why isn't BTC and other cryptocurrencies skyrocketing right now and seeing widespread adoption by Russian oligarchs looking to move around their money?
After all, if you're on the losing end of it sanctions are "tyrannical money".
There's also an argument to be made that it is precisely the tyranny behind fiat currency to ultimately gives it its value. The United States has a vast array of coercive means (from locking you in prison for forgery to trade weapons that can destroy your economy) to ensure that the USD has value.
There is never a technical solution to realpolitik. We'll increasingly see this in the coming months with crypto as powerful people will get their piece of the pie from the crypto boom, while most average players will be left with nothing.
Because people are and have always been foolish and ego/pride driven.
> The United States has a vast array of coercive means (from locking you in prison for forgery to trade weapons that can destroy your economy) to ensure that the USD has value.
Do you view that as a positive? I sure don't. That's a really depressing reality when you have something like Bitcoin which doesn't necessitate any of that.
> We'll increasingly see this in the coming months with crypto as powerful people will get their piece of the pie from the crypto boom, while most average players will be left with nothing.
"Crypto" isn't Bitcoin. The conflation of the two is, in part, why the market fluctuates as violently as it does.
The implementation works fine, the people are flawed (and this will always be true).
How's that different from the paper notes in a Monopoly game box? The Fed can't steal it or debase its value either. I still need a large group of people that also hold monopoly money and are willing to transact goods and services for it, with the understanding that the monopoly notes have zero fiat cash value.
This is literally what money printing does.
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If you view it as Monopoly money, then don't use it. I don't know what to tell you; Bitcoin's transaction volume clearly shows that people use it. I've been paid with it and I've paid others with it.
> the monopoly notes have zero fiat cash value
Bitcoin is currently trading at $23,678. That's quite a bit of fiat cash value. Like I've said elsewhere in this thread, if that number goes down, I'll just acquire more of it because the properties I care about remain intact irrespective of USD price. Your opinion of what I do or do not view as money is, frankly, irrelevant.
The USA has an elected legislature, independent courts, multiple levels of appeals in the judicial system, a strong system of civil rights, the right to trial for anyone accused of a crime, the right to an attorney, an independent press, and an active civil society made up of tens of thousands of organizations; all of which shapes the political environment which in turn shapes monetary policy. In what sense is the USD tyrannical?
Edit: this is a more long-form articulation of what I'm getting at https://www.youtube.com/watch?v=MtX6AKEO8ok
> as governments will introduce digital currencies
Governments generally don't create money, central banks do. Famously, some central banks are actually private entities, not government (public ones)
> own failing currencies
What exactly currency is failing, and which are the indicators ? USD and EUR are roaring successes in facilitating value exchanges on a global scale.
> simultaneously robbing citizens of their savings
If that's the intention, banks can do that right now by printing money. Oh wait, they do.
> will give out free money (it costs them nothing to do so)
Yes, printing money has a small marginal cost.
> not tell them that their money can expire
Why somebody would expire money when they try to prop the economy on which they base their own support ?
> have its purchases limited to "approved" vendors
Again, why anybody would shoot themselves in the foot by killing the economy that keeps them alive ?
> it cannot be manipulated or stolen by the state
I'm sorry all your post reads some like crypto-prepper thing. If you feel that the state is out to steal you, you'd better start arming too, because if the state is out to get you, they'll not do it via obscure economic means, they will send the state-sponsored-thugs to violence it out - see Russia.
> Something that's never existed in the history of humanity.
Gold?
The USD's value has declined 90+% over the last 100 years. As Charlie Munger suggests, "My [the] working thesis is that the currency goes to zero."
> If that's the intention, banks can do that right now by printing money. Oh wait, they do.
Correct. That's a bad thing. They can't do that on a Bitcoin standard.
> Why somebody would expire money when they try to prop the economy on which they base their own support ?
Because it forces participation in the economy. If it's going to expire, you're forced to spend it, thus boosting the economy. Also, you're guaranteed to keep working because you can't save your money and exit the system so you can repeat this cycle ad nausea.
> Again, why anybody would shoot themselves in the foot by killing the economy that keeps them alive ?
Because the goal is to limit the number of people "kept alive." As for an individual case: fear of the sword. https://twitter.com/PezntJournalist/status/15095444990133739...
> I'm sorry all your post reads some like crypto-prepper thing. If you feel that the state is out to steal you, you'd better start arming too
The floor of my bedroom closet is a small arsenal and yes, I've mentally prepared to die in a shoot out (if it comes to that) with the powers that be. Being prepared does not mean being ignorant/stupid/foolish. I lose nothing by thinking ahead while those who foolishly buy into what they're told—despite persistent evidence to the contrary—potentially lose everything.
> Gold?
That can be confiscated.
And that's a good thing. As currency goes to 0, we'll have an economy of abundance, a Star Trek utopia where you can get anything for free (because currency is 0) from a friendly replicator.
> That's a bad thing.
That's a good thing - as the economy grows the supply of money that represents the value of the economy needs to grow. You can buy together things that would've been utopia 100 years ago (iPhones - the knowledge of the world in your pocket; travel anywhere in the world in under a day) for next to nothing (in the developed world). The value of these new things needs to be represented.
> you're guaranteed to keep working
What makes you think it's fair for you to stop working when other people are working their asses off to feed you, give you shelter, etc ? We all need to contribute to the society, unless you have a leach mentality.
> the goal is to limit the number of people "kept alive." ... my bedroom closet is a small arsenal
I'm not going to discuss conspiracy theory-driven paranoia, except to mention that if the state is "out to get you", unless you have tons of like minded friends, and you all have your own airforce, "they" WILL get you, because you can't fight an F-16 bombing you.
Oh, and bitcoin can be seized, exactly as gold https://www.dlapiper.com/en/us/insights/publications/2022/02....
You don't understand economics.
> as the economy grows the supply of money that represents the value of the economy needs to grow
You really don't understand economics.
> What makes you think it's fair for you to stop working when other people are working their asses off to feed you, give you shelter, etc ?
Where did I say that? If I save money—the result of my labor—and then live off of that, it's not a crime (this is literally the basis for the concept of retirement) or a threat to anyone (they get compensated for their current labor with the proceeds of my past labor). Assuming that it is a threat in some esoteric way, to be honest, is a bit disturbing.
> I'm not going to discuss conspiracy theory-driven paranoia
It's not paranoia, it's awareness. Paranoia implies I think it's going to happen, while awareness implies that I think it could. I don't think the government is actively out to get me—I'm relatively harmless—but I can certainly foresee people like me being sought out if the circumstances necessitate it (in the eyes of the authority).
> Oh, and bitcoin can be seized, exactly as gold
The headline of what you shared proves me right, not wrong: "Aided by cryptocurrency exchanges."
Bitcoin certainly has value as a medium of exchange because it can be (and is) exchanged between people. A government that accepts bitcoin for payment of taxes adds to the exchange-value of the currency, certainly.
Bitcoin also has some merit as a store of value, in that people observably hold bitcoin with the expectation that it will remain valuable. Ultimately, however, this role of currency is speculative: it requires belief that people will want the currency in the future at a reasonable price. This is also where crypto bulls and bears most disagree.
Bitcoin has a much more ephemeral status as a medium of account, however. Stores aren't pricing their wares primarily in bitcoin; when they accept the currency they price primarily in local currency and perform a spot conversion. This is also what I was referring to above with jurisdictions not assessing taxes in bitcoin even if they accept it.
The medium of account is the least flashy but perhaps most fundamental role of a currency; it provides a backstop of price stability. Repricing goods and services is hard. It obsoletes marketing campaigns, it confuses contractual expectations, and it can require literal printing costs re: price tags and the like. That stability, however, lets people think of one currency-unit as worth something real, not just some amount of another, more important currency.
Bitcoin does not yet have this status, and this is where lack of tax assessment in bitcoin matters. I can't say that (e.g.) 0.1BTC will definitely pay my property taxes for a year, no matter what else happens to the currency in the meantime.
But sadly the price increases also attract a different kind of demand, much more volatile (80% crashes now and then).
https://en.wikipedia.org/wiki/United_States_Strategic_Comman...
If you own land in the United States, you pay property tax in USD. That's just one of myriad ways that the dollar is backed by the physical assets of the nation.
Now that velocity is picking back up, we are seeing astronomical inflation.
Just because a govenrnment controls the currency doesn't mean it's in your interest to save long-term in it.
* supply
* demand
The supply is well-known in advance, and is an advantage to Bitcoin. US M2 money supply grew 8.04% in the past year [0], while Bitcoin's grew ~1.75% [1].
Demand is very volatile, and suffers from the bandwagon effect (price increase -> buy, price decrease -> sell).
The answer is the same: nothing.
Except that that's not true for gold and it's not true for Bitcoin. Something has value if people want it.
That's it.
People want Bitcoin, therefore it has value.
Your search for fundamentals is simply inappropriately applied. It's like asking what color is a smell, it's simply the wrong question.
Companies buy gold for use in electronics manufacturing, believe it or not.
But a portion of gold's market value is driven by a speculative spread over the intrinsic value, similar to BTC. Except for BTC the intrinsic portion is close to 0.
Price is a function of both supply/demand, with intrinsic value creating the rationale for the demand. I bet air would sell for a lot more out in Space or at the bottom of the ocean
There is no rationale to the demand for Bitcoin beyond a greater fool, or edge use cases like illicit transactions. It's obvious that 95%+ of people buying Bitcoin are doing it to make USD returns.
If .com is culturally considered higher quality and thus will drive more business to you, then it carries a higher value than .net
But perceptions of value can change over time. This is not my belief system by the way, this is how the intrinsic value of something is determined.
> But a portion of gold's market value is driven by a speculative spread over the intrinsic value, similar to BTC.
What is the definition of intrinsic value that allows both of these interpretations to be true?
Buying gold and storing it in your basement is just speculation. It doesn't provide any value on its own. You aren't using the gold for any immediate purpose, but just hoping that value increases beyond the market value in use for production.
Gold could have some intrinsic value as a signaling tool via jewelry etc, and this could conceivably drive value.
But you can't wear bitcoin
It's also true that intrinsic value can be different for different people, depending on how subjective it is. Gas may be worth up to $10/gallon for me, because without it I can't make any money. If I work from home, I may only be willing to pay $1/gallon for gas. Thus intrinsic value is usually a function rather than a static property, and inputs change over time. A consumer who is a billionaire may also be willing to pay a far higher amount for a good than somebody who's middle class. This could push market price higher, despite the core value of the good being unchanged. The value function is always there though, and it likely has millions or more parameters with different weightings.
So TLDR; price is a market determined value, intrinsic value provides justification for demand, which feeds into price.
A bubble is usually a result of price running far ahead of any justifiable intrinsic value. When price is far ahead of intrinsic value, it usually means it's being driven by "speculative value". Pokemon Cards, Fine Art, Wine, Beanie Babies. The actual use value of these is minimal, but people buy on the expectation that people in the future will value it even higher. You can make a lot of money via speculation on things like this, but there's also nothing supporting the price.
For an alternative example, if I buy a stock that yields a safe 10% dividend, then I can easily quantify the worth. I put $1m into it, and I get $100k a year forever. Can it fall 50% in value to a 20% yield? It's pretty much impossible, assuming the market believes the yield is safe. This is why fundamentals and intrinsic value matters a lot in investing
> The answer is nothing. Since there's no measurable intrinsic value, there's zero fundamental factor limiting the downside
It doesn't have intrinsic value, but it certainly has value by fiat/authority
We accept the fed and central banks and money printing. We accept the rigged point system.
And how long is this sustainable before people have had enough? We now have an alternative. There is no bitcoin print button to bail out Washington at the expense of the regular people.
I suppose if a vast majority of Americans demanded a switch to BTC it could be done but if that was a real possibility it would be much easier to demand laws to stop the Fed instead of switching to a new currency.
But the government won't switch to BTC and the people will never demand it because a limited currency would hurt the economy by limiting growth.
Stopping the fed would certainly be a great start. But we still need to switch currencies to one that cannot be created or controlled by the government.
Whether bitcoin or something else, currency creation schedule should be damn near immutable, predictable, and the protocol should be ossified.
A currency that is unpredictable and can be created whenever the government pleases is unacceptable.
In practice the bottom will probably be about $10k as people will start thinking that used to be $65k, maybe it'll go back, and buy some.
It's all human psychology but so is the value of a lot of things.
> bitcoin price / number of bitcoins
$23,304 / 19,066,500 BTC = $0.001 /BTC
If there is one human into bitcoin, then they invested $0.001 ? If there are more people into bitcoin then they invested even less on average?
It doesn't make any sense.
When you buy crypto with USD that's a one time transaction that has no bearing on future price.
E.g. the ARKK etf has had massive net dollar inflows YTD despite falling over 50% in the same timeframe
What justifies oil being $130 dollars a barrel vs $100? The answer is also nothing.
The fact that it is used in daily productive activity might be an argument that oil should in theory have a > 0 price, however the actual price is still made up by a market! There is still not a way to say that the intrinsic value of oil must be X dollars.
I actually never considered that!
If I can make $10/hour running a generator, then I'm willing to pay up to $10 in fuel to operate it
Note: I completely agree with you on the concept of an equilibrium price being a real thing, I just don't think equilibrium is determined by intrinsic value.