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I'd agree with this sentiment. Stocks have tangible assets that generate earnings to justify their investment. Bitcoin, however, generates no real returns beyo

by alehul 9y ago

I'd agree with this sentiment. Stocks have tangible assets that generate earnings to justify their investment. Bitcoin, however, generates no real returns beyond its exploding popularity resulting in a higher price. While that doesn't automatically doom its fate (see: traditional currency pairs), Bitcoin is different in that its only real use so far is as an alternative bank account. It will likely remain this way until people can live their lives on Bitcoin in the way people live their lives on a traditional, centralized currency. Many people who simply use it as a bank account may deposit their money for a long period of time, resulting in a sustainable price; for simplicity's sake, we can give the benefit of the doubt and assume that 100% of those looking for an alternative bank rather than an investment will hold it indefinitely. The question is: Of those pushing the price from ~$750 to ~$10,000 in one year, after several years of stability in the ~$500 area, how many are looking to hold it as a bank account alternative, and how many are looking at it as an investment to eventually sell for a profit? Given the trajectory, it's hard to believe individuals are adopting it this rapidly for purposes other than investment; it seems like this 'mainstream adoption' is really just primarily mainstream investment. Is it sustainable when the majority of people are just buying in expectation of others buying? With companies like TSLA it can be sustainable, as investors believe that future earnings will justify the valuation. Here, there's nothing but a hope that others will buy because the price keeps going up. The only way this bubble doesn't pop is if the money being pumped into Bitcoin results in commercial adoption as a viable currency, however that seems unlikely in the meantime.

bertjk 9y ago
For every case where you used the word "investment", I think it would be more correct to use the term "speculation".
- cbuq 9y ago
  When is an investment not speculation?
umanwizard 9y ago
Counterpoint: it is difficult and expensive to buy or sell gold, and it can't easily be used as a currency (at least not in the modern world). However, it has held its value remarkably well.
- jerkstate 9y ago
  You usually pay a 3-5% premium over spot to a reputable coin dealer to buy gold coins, and you are paid spot when you sell them. With Bitcoin, you usually pay 2-4% transaction fees to get your fiat into an exchange, 0.25% fees per trade, and 2-4% transaction fees to get your fiat out of an exchange. I'm actually a little surprised that local coin shops haven't gotten into the cryptocurrency market.
- alehul 9y ago
  True, and the illiquidity of gold is part of what makes it a great store of value. Bitcoin will certainly survive, at least, as a niche alternative for short-term storage (easy transactions) and/or those in physical danger (decentralized and without a physical existence).
- searine 9y ago
  Counter counterpoint : When the panic comes and everyone runs for the door, crypto hits a bottleneck of conversion to fiat. Gold is easily exchanged for any kind of goods, service or fiat money (WE BUY GOLD!).
guardiangod 9y ago
Disclaimer: Most of my cypto money are in bitcoins. My biggest problem with Bitcoin these days is the developers pushing Bitcoin to become 'store of value'. Originally Bitcoin became popular because it simply let people transact over the internet quickly with low cost. This was what gave Bitcoin its utility, and thus value. Now that the Core team has decided that ease-of-use is not important, they are literally trying to hype Bitcoin as something intrinsically worthless except for people's perception of it. Bitcoin is now coasting on its reputation it accumulated in its first 5 years of life. So what makes Bitcoin _not_ a pyramid scheme? Other cyptocurrencies have their own uses- Litecoin - Buy stuff over internet cheaply and quickly Ethereum - ICO and contracts Ripple/Steem - Pseudo-decentralization allows for huge number of transactions. Monero/ZCash - Privacy Gold - People have liked shiny and non-degradable stuff since the stone age Stocks/Bonds - Dividend/Interests Tulips bulbs - Grow tulip flowers Bitcoin in 2017 - ??? Store of value The first 4 example cryptos actually have real world usage that could potentially justify their prices. What use does Bitcoin have right now? Every transaction costs >$1 and takes hours to process. What could Bitcoin do that other cryptocurrencies couldn't do better?
- CameronBanga 9y ago
  I think the biggest benefit though, is name recognition. When people think of crypto, they think Bitcoin. That's the biggest issues Litecoin and Ethereum have now.
  - guardiangod 9y ago
    Exactly, that's why I mentioned that Bitcoin is coasting on its reputation. IMO a technology cannot survive with name recognition alone. Myspace vs Facebook comes to mind. Everyone knew Myspace, but they made no improvement and at the end, Facebook (via superior features) stole its lunch. I chose this example because both financial markets and Web 2.0 depends on network of scale to be efficient. At the same time, just because most people use your product today, doesn't mean they will remain to do so tomorrow. Constant improvement is the key, and Bitcoin is actually regressing in its utility.
  - matwood 9y ago
imhoguy 9y ago
Botcoin value is dependent on and pumped by exchanges. In case of larger sale run they will cease to payout with cash or other cryptocurrencies because they are out of money to cover most payouts. I think at most 1% is available in US$ cash -- the rest is gone in tax heavens. There is no law control over these entities and their financial fitness. So as the value is going to collapse and with low value the cost of transactions will explode to an extent that exhanging is going to stale and mining will become worthless. I agree the block-chain and smart contract technology is interesting, but this pioneer execution is simply a Ponzi scheme. Newcomers are funding payouts and nobody asks where the real cash goes. Scared merchants can pull a "cryptocurrency payment" plug overnight, and there is no goverment to call bailout to save this financial system. This will be epic bail-in.
ringaroundthetx 9y ago
> Bitcoin is different in that its only real use so far is as an alternative bank account. Only? Thats not true though. > With companies like TSLA it can be sustainable, as investors believe that future earnings will justify the valuation. Why do you keep using stock and equity analogies when talking about a completely different asset class that behaves more like a commodity? So so strange. What does a "pop" and "doom" mean to you? Bitcoin has swung 90% downwards multiple times and all tearful holders at any point in history have a profit right now. The people that are using bitcoin for more than an alternative bank account will still have uses for bitcoin. limited supply cryptographic hashes have utility for a variety of reasons at any price to various market participants, just like oil and gold has utility for a variety of reasons at any price. but yes I can see why that might be confusing when your only valuation model requires revenues and earnings.

by alehul 9y ago

bertjk 9y ago

For every case where you used the word "investment", I think it would be more correct to use the term "speculation".

cbuq 9y ago
When is an investment not speculation?

umanwizard 9y ago

Counterpoint: it is difficult and expensive to buy or sell gold, and it can't easily be used as a currency (at least not in the modern world). However, it has held its value remarkably well.

jerkstate 9y ago
You usually pay a 3-5% premium over spot to a reputable coin dealer to buy gold coins, and you are paid spot when you sell them. With Bitcoin, you usually pay 2-4% transaction fees to get your fiat into an exchange, 0.25% fees per trade, and 2-4% transaction fees to get your fiat out of an exchange. I'm actually a little surprised that local coin shops haven't gotten into the cryptocurrency market.
alehul 9y ago
True, and the illiquidity of gold is part of what makes it a great store of value. Bitcoin will certainly survive, at least, as a niche alternative for short-term storage (easy transactions) and/or those in physical danger (decentralized and without a physical existence).
searine 9y ago
Counter counterpoint : When the panic comes and everyone runs for the door, crypto hits a bottleneck of conversion to fiat. Gold is easily exchanged for any kind of goods, service or fiat money (WE BUY GOLD!).

guardiangod 9y ago

Disclaimer: Most of my cypto money are in bitcoins. My biggest problem with Bitcoin these days is the developers pushing Bitcoin to become 'store of value'. Originally Bitcoin became popular because it simply let people transact over the internet quickly with low cost. This was what gave Bitcoin its utility, and thus value. Now that the Core team has decided that ease-of-use is not important, they are literally trying to hype Bitcoin as something intrinsically worthless except for people's perception of it. Bitcoin is now coasting on its reputation it accumulated in its first 5 years of life. So what makes Bitcoin _not_ a pyramid scheme? Other cyptocurrencies have their own uses- Litecoin - Buy stuff over internet cheaply and quickly Ethereum - ICO and contracts Ripple/Steem - Pseudo-decentralization allows for huge number of transactions. Monero/ZCash - Privacy Gold - People have liked shiny and non-degradable stuff since the stone age Stocks/Bonds - Dividend/Interests Tulips bulbs - Grow tulip flowers Bitcoin in 2017 - ??? Store of value The first 4 example cryptos actually have real world usage that could potentially justify their prices. What use does Bitcoin have right now? Every transaction costs >$1 and takes hours to process. What could Bitcoin do that other cryptocurrencies couldn't do better?

CameronBanga 9y ago
I think the biggest benefit though, is name recognition. When people think of crypto, they think Bitcoin. That's the biggest issues Litecoin and Ethereum have now.
- guardiangod 9y ago
  Exactly, that's why I mentioned that Bitcoin is coasting on its reputation. IMO a technology cannot survive with name recognition alone. Myspace vs Facebook comes to mind. Everyone knew Myspace, but they made no improvement and at the end, Facebook (via superior features) stole its lunch. I chose this example because both financial markets and Web 2.0 depends on network of scale to be efficient. At the same time, just because most people use your product today, doesn't mean they will remain to do so tomorrow. Constant improvement is the key, and Bitcoin is actually regressing in its utility.
- matwood 9y ago

imhoguy 9y ago

Botcoin value is dependent on and pumped by exchanges. In case of larger sale run they will cease to payout with cash or other cryptocurrencies because they are out of money to cover most payouts. I think at most 1% is available in US$ cash -- the rest is gone in tax heavens. There is no law control over these entities and their financial fitness. So as the value is going to collapse and with low value the cost of transactions will explode to an extent that exhanging is going to stale and mining will become worthless. I agree the block-chain and smart contract technology is interesting, but this pioneer execution is simply a Ponzi scheme. Newcomers are funding payouts and nobody asks where the real cash goes. Scared merchants can pull a "cryptocurrency payment" plug overnight, and there is no goverment to call bailout to save this financial system. This will be epic bail-in.

ringaroundthetx 9y ago

> Bitcoin is different in that its only real use so far is as an alternative bank account. Only? Thats not true though. > With companies like TSLA it can be sustainable, as investors believe that future earnings will justify the valuation. Why do you keep using stock and equity analogies when talking about a completely different asset class that behaves more like a commodity? So so strange. What does a "pop" and "doom" mean to you? Bitcoin has swung 90% downwards multiple times and all tearful holders at any point in history have a profit right now. The people that are using bitcoin for more than an alternative bank account will still have uses for bitcoin. limited supply cryptographic hashes have utility for a variety of reasons at any price to various market participants, just like oil and gold has utility for a variety of reasons at any price. but yes I can see why that might be confusing when your only valuation model requires revenues and earnings.