Comment by nl | Hacker News Reader

Comment by nl | Hacker News Reader

This shows surprising naivety about what is happening in China.

To generalise massively, Chinese aren't trying to move money out of China.

Instead, they are trying to find any safe store of value, because they don't trust their banks.

Chinese are desperate for any way to save money, because the four-grandparent policy (and no pension) means they need money in old age.

The optimal solution for them is overseas real estate (see the real estate market in Hong Kong, Sydney & Vancouver).

The non-optimal solution used to be domestic real-estate. This solution was less than ideal, because of the huge oversupply in the Chinese domestic market. Chinese investors are aware of that, but "happy" to lose some money, rather than all of it in the case of a bank (and additionally, inflation in China is ~8%, but banks only pay ~1% interest).

It looks like Bitcoin is taking the place of some of that domestic real estate demand.

Note this is only my personal theory, but based on observations from http://brontecapital.blogspot.com.au/2012/06/macroeconomics-...

To add some additional context as to why Chinese don't trust their banks, Bloomberg did a long writeup on the credit bubble problems over there [1]. TLDR: Chinese banks have ~$6.6 Trillion of outstanding loans to Chinese businesses who are increasingly unable to service the loans due to weak demand, which threatens to turn into a banking crisis.

[1]: http://www.bloomberg.com/news/2013-11-18/credit-driven-china...

This doesn't make sense to me.

Bitcoin right now is an incredibly bad long term value store. Right now it's a speculative investment. Either it will succeed and demand for bitcoin will go even higher or it will fail and it will be worth nothing. It's like investing in some risky VC fund. It makes sense for people to have wildly different ideas about potential and risk, but it makes no sense to expect it to just stay where it is.

I don't know. I've held it since I bought it at $13/BTC. Seems like so far I am doing OK.

You are doing more than OK ;)

Risky investment doesn't mean bad investment. Startup equity can be a good investment too. I'm just saying bitcoin is not a safe value store, which is what nl was hypothesizing in his comment.

> Bitcoin right now is an incredibly bad long term value store.

It's a deflationary currency. Sure there may be rises and falls, but in the long term, the trend will only be in one direction.

Only if something else does not supplant it. Right now it's like investing in 1980's baseball cards, sure there not making more but nothing guarantees anyone want's them in 10 years.

That's a problem for a currency, no ? You are in effect rewarded for no spending it, or in other word not using it as a currency.

Seems like Bitcoin is instead becoming a new class of asset rather than a currency.

It was in the past, in less dynamic, less connected, less 'always on' economies. We've never seen what a deflationary currency will do in a modern, wired, 'speed-of-light/electricity' economy though.

It could lead to increased capital formation (savings) and less frivolous spending, eg spending only on necessities and appreciating assets, and less on throwaway, planned obsolete junk, while still maintaining enough velocity not to stall the economy. Leaner but still viable. Of course, getting from here to there will not be painless.

Who knows, jury's still out on it imho, will have to watch and see. Front-row seats to one of the greatest economic experiments of history, for better or worse.

It simply changes how much people are willing to spend. The question becomes "Does buying this thing now have more utility to me than having several times this thing's value in a few years?" The answer is sometimes "yes".

It makes perfect sense -- but only if you look at it objectively. The speculators will trade on the hourly waxing and waning exchange rates, but the savers will look at 52-week moving averages.

If you judge BTC simply by the latter, and have the patience for re-evaluating your BTC finances annually or bi-annually, then you'd be in a pretty good spot.

Sure it fluctuates an uncomfortable amount on a regular basis, but it's a fairly consistent trend otherwise.

I agree. I found myself going through different stages of thinking about bitcoin. I mined early in 2011 and almost sold all of my bitcoin thinking that it would crash any day. Having witnessed three supernova price movements and bitcoin coming quickly back each time settling on a higher value, it does not look like a "penny stock" anymore that would be dead after just one such run. It might be the single simple fact that BTC generation is predictable that creates a pull for people who are willing to bet part of their savings on it. If enough do that, bitcoin becomes a value storage system - self fulfilling prophecy. If that's the case we are just at the beginning.

Not at all, if "...or it will fail and it will be worth nothing" is a possible scenario. If you buy every week, any catastrophic event that makes bitcoin worthless would still wipe out your retirement savings before your bi-annual reevaluation is due.

Its an awesome store of value.

Bitcoin, like gold, is it's own counterparty. If you own bitcoin, you own it irrevocably unless you choose to give it to someone else.

Combine that with the fact that it is globally accessible, globally transferrable, and incredibly low cost to keep secure and you've got something which disrupts 5000 years of financial history.

You own it only while you remember the password. Gold won't just disappear one day though your memory might.

unless you forget where you buried it

Moving everything into bitcoin doesn't make a lot of sense. Diversifying into bitcoin is more likely to - I don't see tremendous reason Chinese housing prices and Chinese bank solvency would be positively correlated to bitcoin price, though I could very well be missing something (simple or complex).

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