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I would like to argue Bitcoin has a fundamental. The number of people using it and making up its value. `Metcalfe's law states that the value of a telecommunic

by acoye 9y ago

I would like to argue Bitcoin has a fundamental. The number of people using it and making up its value. `Metcalfe's law states that the value of a telecommunications network is proportional to the square of the number of connected users of the system (n2)` https://en.wikipedia.org/wiki/Metcalfe%27s_law https://en.wikipedia.org/wiki/Metcalfe%27s_law

XR0CSWV3h3kZWg 9y ago
The air can be thought of as a telecommunications network that everyone is connected to. Sure signal loss is a problem, but that can be fixed by amplification. That doesn't mean that you should invest in air. When I said fundamentals I meant something more on the lines of: cash flow return on assets conservative gearing history of profit retention for funding future growth soundness of capital management for the maximization of shareholder earnings and returns Bitcoin has none of those. Bitcoin does not have cash flow as the protocol doesn't take in or give out cash. There is no return on assets because there is no income. Conservative gearing means nothing here. Taken from https://www.investopedia.com/articles/fundamental/03/022603.asp https://www.investopedia.com/articles/fundamental/03/022603.... I am long on bitcoin, but not because it has any of the properties of a stock.
lamontcg 9y ago
If people start to run for the exits, then that number goes down and there's no floor under that number. The system can unwind in a panic until nobody is using the system and the value of the system becomes zero. Which means that isn't any kind of fundamental value, you're just measuring popularity. Fundamentals are supposed to provide support to value when a security becomes unpopular and untrendy.
- dilap 9y ago
  sure but that's the same as like banks and traditional money, right?
  - empraptor 9y ago
    With stable national currencies like US dollar, there are debts, expenses, taxes, etc. that are denominated in the currency. And there is a national economy producing products and services for which people can pay with US Dollar. And financial infrastructure and laws to support the economy and currency.
    - dilap 9y ago
      lots of examples of currencies getting inflated pretty badly. agreed the US $ has been stable for the last 30 years, and seems like a fairly safe bet. but it also doesn't seem outside the bounds of possibility that something will flip and we enter another period of bad inflation. (to me, gut feeling, zero expertise in any of this -- just some guy on the internet, thinking about it for fun.) are contracts being written in bitcoin yet? if so, that'd be some momentum to help keep the bottom from falling out. and i don't think taxes are really denominated in USD: they are paid in USD, but they are denominated in % of «taxable event», converted to USD, at whatever the conversion rate happens to be. right? i guess a national currency is a little more "real" than something like bitcoin because you have one more-or-less guaranteed believer in it, the nation issuer. but it still doesn't seem that different to me than something like bitcoin. it basically just has value because it's useful for it to have value, and it's made scarce enough that it can serve for that purpose.
      - empraptor 9y ago
        I see the difference as there being a national economy and government closely tied to USD. Usually, central bank tries to manipulate supply and velocity of USD so it doesn't become too scarce. Because short supply of money leads to deflation and stagnation of the economy.

by acoye 9y ago

XR0CSWV3h3kZWg 9y ago

The air can be thought of as a telecommunications network that everyone is connected to. Sure signal loss is a problem, but that can be fixed by amplification. That doesn't mean that you should invest in air. When I said fundamentals I meant something more on the lines of: cash flow return on assets conservative gearing history of profit retention for funding future growth soundness of capital management for the maximization of shareholder earnings and returns Bitcoin has none of those. Bitcoin does not have cash flow as the protocol doesn't take in or give out cash. There is no return on assets because there is no income. Conservative gearing means nothing here. Taken from https://www.investopedia.com/articles/fundamental/03/022603.asp https://www.investopedia.com/articles/fundamental/03/022603.... I am long on bitcoin, but not because it has any of the properties of a stock.

lamontcg 9y ago

If people start to run for the exits, then that number goes down and there's no floor under that number. The system can unwind in a panic until nobody is using the system and the value of the system becomes zero. Which means that isn't any kind of fundamental value, you're just measuring popularity. Fundamentals are supposed to provide support to value when a security becomes unpopular and untrendy.

dilap 9y ago
sure but that's the same as like banks and traditional money, right?
- empraptor 9y ago
  With stable national currencies like US dollar, there are debts, expenses, taxes, etc. that are denominated in the currency. And there is a national economy producing products and services for which people can pay with US Dollar. And financial infrastructure and laws to support the economy and currency.
  - dilap 9y ago
    lots of examples of currencies getting inflated pretty badly. agreed the US $ has been stable for the last 30 years, and seems like a fairly safe bet. but it also doesn't seem outside the bounds of possibility that something will flip and we enter another period of bad inflation. (to me, gut feeling, zero expertise in any of this -- just some guy on the internet, thinking about it for fun.) are contracts being written in bitcoin yet? if so, that'd be some momentum to help keep the bottom from falling out. and i don't think taxes are really denominated in USD: they are paid in USD, but they are denominated in % of «taxable event», converted to USD, at whatever the conversion rate happens to be. right? i guess a national currency is a little more "real" than something like bitcoin because you have one more-or-less guaranteed believer in it, the nation issuer. but it still doesn't seem that different to me than something like bitcoin. it basically just has value because it's useful for it to have value, and it's made scarce enough that it can serve for that purpose.
    - empraptor 9y ago
      I see the difference as there being a national economy and government closely tied to USD. Usually, central bank tries to manipulate supply and velocity of USD so it doesn't become too scarce. Because short supply of money leads to deflation and stagnation of the economy.