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What you are quoting about banks and bubbles is all in hindsight. At that time everyone and their grandmother thought real estate could only go up. So, if you

What you are quoting about banks and bubbles is all in hindsight. At that time everyone and their grandmother thought real estate could only go up. So, if you have data to backup the fact that bitcoin is not in a bubble, please show that. Until then it is just your gut feeling nothing more. > What gives gold its value? It is not that it is used in jewelry. But statistics disagrees with this point: https://www.statista.com/statistics/274684/global-demand-for-gold-by-purpose-quarterly-figures/ https://www.statista.com/statistics/274684/global-demand-for... I haven't calculated but quick eyeballing tells me jewelry beats investment by a far far margin. Additionally, gold for the most part is a risk-off (safe harbor) asset. As in people rush to gold when markets are crashing because it is supposed to be divisible etc. On the other hand people rush (and encouraged no less) to put money in bitcoin when markets are booming. So my gut feeling is that once we hit a rock in these booming times and S&P drops people will still prefer gold. But let's see how bitcoin performs during a market crash before we talk about it's investment potential in the same breath as gold.

craigc 8y ago
All valid points. I personally am very eager to see what happens to Bitcoin and crypto currencies during the next recession.
- tomkarlo 8y ago
  It's an interesting question, but rationally it seems like BTC should decline during a market crash / recession. It's arguably a way to store value as other assets decline, but given that it has no yield, the rational thing to do after that decline is over would be to cash in your BTC and use it to purchase those other assets that have declined, such as real estate, bonds or stocks, and now have either attractive yield or a strong potential for future asset growth. (And you see this kind of rebalancing effect in general when a major asset class declines - eventually it pulls down other, unrelated asset types because as it goes down in price, it becomes a relatively more attractive investment.)
  - craigc 8y ago
    I wrote a bit about my opinion in a reddit thread a while back. It is here if you are interested, but a fair warning it will probably be quite an unpopular opinion with the hacker news crowd: https://www.reddit.com/r/BitcoinMarkets/comments/7xq7mp/comment/dub3kes?st=JIDFH8OM&sh=c810710e https://www.reddit.com/r/BitcoinMarkets/comments/7xq7mp/comm...
    - tomkarlo 8y ago
      The problem isn't that it's unpopular, it doesn't seem (from the post) like you have some kind of underlying economic or financial principle supporting your argument. * why would it have an inverse relationship with other assets? It's not a short. It's still valued based on purchase price vs sale price, adjusted for risk. If risk has risen and nothing has changed about purchase or sale price, why would it rise? * if Bitcoin was at a market-clearing price before a downturn, and other assets are now much cheaper, why would BTC then be comparatively more attractive in terms of expected investment returns?
      - craigc 8y ago
        Well can we at least agree that no one knows with absolute certainty what will happen to Bitcoin and other crypto currencies during the next recession? The reason I believe it will be inversely related is because it is still a relatively new market whose market cap is minuscule compared to other established markets. During a recession people will naturally look for other places to put their money and gold will be the obvious choice. Bitcoin has all the same properties as gold except it is cheaper to acquire (fees), cheaper to store, has a fixed mining rate (with gold more supply is created when the price increases which drives the price back down), and has only 1% of gold’s market cap. The way I see it, it would be silly not to at least hedge a small amount of money into BTC/crypto. The other economics reason is pure supply and demand. The supply of Bitcoin is shrinking every day as more people decide to hold it long term. Many more get lost or stolen. Every couple years the block rewards get cut in half as well. All of that said, the rise and fall in the last year has definitely shaken the public’s confidence so it may take a long time before new money starts flowing into it. All of my timelines are years down the road. (10-20 years)

craigc 8y ago

All valid points. I personally am very eager to see what happens to Bitcoin and crypto currencies during the next recession.

tomkarlo 8y ago
It's an interesting question, but rationally it seems like BTC should decline during a market crash / recession. It's arguably a way to store value as other assets decline, but given that it has no yield, the rational thing to do after that decline is over would be to cash in your BTC and use it to purchase those other assets that have declined, such as real estate, bonds or stocks, and now have either attractive yield or a strong potential for future asset growth. (And you see this kind of rebalancing effect in general when a major asset class declines - eventually it pulls down other, unrelated asset types because as it goes down in price, it becomes a relatively more attractive investment.)
- craigc 8y ago
  I wrote a bit about my opinion in a reddit thread a while back. It is here if you are interested, but a fair warning it will probably be quite an unpopular opinion with the hacker news crowd: https://www.reddit.com/r/BitcoinMarkets/comments/7xq7mp/comment/dub3kes?st=JIDFH8OM&sh=c810710e https://www.reddit.com/r/BitcoinMarkets/comments/7xq7mp/comm...
  - tomkarlo 8y ago
    The problem isn't that it's unpopular, it doesn't seem (from the post) like you have some kind of underlying economic or financial principle supporting your argument. * why would it have an inverse relationship with other assets? It's not a short. It's still valued based on purchase price vs sale price, adjusted for risk. If risk has risen and nothing has changed about purchase or sale price, why would it rise? * if Bitcoin was at a market-clearing price before a downturn, and other assets are now much cheaper, why would BTC then be comparatively more attractive in terms of expected investment returns?
    - craigc 8y ago
      Well can we at least agree that no one knows with absolute certainty what will happen to Bitcoin and other crypto currencies during the next recession? The reason I believe it will be inversely related is because it is still a relatively new market whose market cap is minuscule compared to other established markets. During a recession people will naturally look for other places to put their money and gold will be the obvious choice. Bitcoin has all the same properties as gold except it is cheaper to acquire (fees), cheaper to store, has a fixed mining rate (with gold more supply is created when the price increases which drives the price back down), and has only 1% of gold’s market cap. The way I see it, it would be silly not to at least hedge a small amount of money into BTC/crypto. The other economics reason is pure supply and demand. The supply of Bitcoin is shrinking every day as more people decide to hold it long term. Many more get lost or stolen. Every couple years the block rewards get cut in half as well. All of that said, the rise and fall in the last year has definitely shaken the public’s confidence so it may take a long time before new money starts flowing into it. All of my timelines are years down the road. (10-20 years)