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They're most similar to a commodity, like gold, or lumber. There's a supply, a demand, and price. Unlike stocks, there's no underlying asset, you just own the c

by tharne 6y ago

They're most similar to a commodity, like gold, or lumber. There's a supply, a demand, and price. Unlike stocks, there's no underlying asset, you just own the crypto currency and that IS the asset.

eloff 6y ago
Except those other commodities have intrinsic value, while cryptocurrency has no intrinsic value or legal practical applications after nearly a decade. At this point I don't see that changing. They're the tulips of our age, sold from speculator to speculator until the music stops and someone is left holding the bag.
- erikpukinskis 6y ago
  Tulips have intrinsic value, so there’s something wrong with your metaphor. But you are right to realize Bitcoin has no intrinsic value. That makes it very similar to something like a dollar bill. That said, intrinsic value isn’t really what makes currency valuable. It’s a nice feature... if the bottom drops out of the market and your currency is cigarettes... at least you can smoke them! And trade them for some other currency at the price of smokes. But that’s a very special circumstance. Intrinsic value only matters under one very special circumstance: Total market collapse. Under normal circumstances, what matters is use value. And Bitcoin has some very unique use value. For example, it is a thing that can be exchanged for gold that can be stored in your head. That’s a very unique use. I think those kinds of uses, if you can add up their utility, are the best way to calculate Bitcoin’s long term value.
  - eloff 6y ago
    I feel like I shouldn't have to explain this one: "Tulip mania was a period in the Dutch Golden Age during which contract prices for some bulbs of the recently introduced and fashionable tulip reached extraordinarily high levels and then dramatically collapsed in February 1637. It is generally considered the first recorded speculative bubble in history." - Wikipedia Yes tulips have intrinsic value, but not the value speculators were paying for them during the Dutch tulip bubble leading up to 1637. Cryptocurrencies are very similar to that.
    - erikpukinskis 6y ago
      > Yes tulips have intrinsic value, but not the value speculators were paying for them Like gold?
- tharne 6y ago
  No commodity has "intrinsic value". It's worth whatever someone else is willing to pay for it. There's nothing intrinsically valuable about gold, for instance. It's worth what it's worth because people believe it will be worth something in the future and are willing to pay a price for it.
  - thaumasiotes 6y ago
    > No commodity has "intrinsic value". Anything you can use directly has intrinsic value. Intrinsic value is a negligible part of the total value of gold. But it's a significant part of the total value of e.g. cereal grain, which is historically a common monetary commodity.
  - eloff 6y ago
    Gold has practical applications. At minimum people are willing to pay considerable sums for it for use in personal adornments. It's also an instrument used as a hedge and traded by speculators, but there's a fundamental underlying value, that is a demand for it apart from speculation. If all the speculation stopped, the price would drop but not to zero. Other commodities like timber have much more intrinsic value because they are mostly used, not speculated on. If people stopped speculating in the timber market there would be less liquidity but the price wouldn't change much, people still want to build things with it. Cryptocurrency has no fundamental value, it's a digital good without practical applications and no fundamental demand. if the speculation stopped, the price would go to zero.
    - ClumsyPilot 6y ago
      >"[for gold] there's a fundamental underlying value" The fundamental value for it's technical applications is probably < 1/10 of it's real value. If people wake up tomorrow and stop using it as reserves/ investment /savings, you would loose virtually all your money, down to a few percent. So yeah, that 5% or whatever of value is secure, but how nuch does that help? Timber is obviously not a usefull store of value because it does not last, it is not fungiable, is expensive to store - imagine 100 million dollars worth of timber, and you would store that.
- zalkota 6y ago
  You’re wrong buddy. Look into decentralized finance on Ethereum. Keep believing it’s a tulip and you’ll be left in the dust! It’s a completely new asset class.
- CydeWeys 6y ago
  So what? I feel like these objections about "intrinsic value" are missing the point. There are lots of things out there that have little to no intrinsic value (like currency) that are nevertheless very useful. You are acting like there is some inviolable law of the world where things without intrinsic value will inevitably become worthless, but there isn't. There's lots of things with fundamentally no intrinsic value that have nevertheless commanded a very high market price for many centuries now. I'm not saying Bitcoin is necessarily on that path, but there's also no reason it couldn't be, and whether it is or isn't isn't related to any intrinsic value it might or might not have. And lots of things that do have intrinsic value, like grain, are terrible investments because they're easy to make more of and because they don't store indefinitely. "Intrinsic value" is just an orthogonal concern.
  - eloff 6y ago
    You're right. Fiat currency has no intrinsic value itself, but it can be exchanged for things that do. As long as people treat it like it has value, then it does have value. The same can be sort of be said for crytocurrency. But it's a lot less liquid, mostly the only thing you can do with it is trade it for other cryptocurrencies or sell it. It's on much shakier ground that people will continue to view it as having value. My advice, for what it's worth, until people find a practical application for it, stay away from it.
    - ilammy 6y ago
      > Fiat currency has no intrinsic value itself Fiat currency emitted by governments has intrinsic value: you can pay taxes to the emitting government with it. That's its ultimate value. In the same vein, some cryptocurrencies have value: you pay with Ether for distributed computations performed by Ethereum network, you way with Bitcoin for your data being permanently recorded on the Bitcoin chain.
      - CydeWeys 6y ago
        "Intrinsic value" is a phrase that has a specific meaning in economics, and you are not using it according to that definition. The current ability to pay taxes with a currency is not intrinsic value by the standard definition of the term. That currency could drop to worthless tomorrow and would be worth nothing. Go ask holders of Weimar Republic marks how much intrinsic value their currency ended up having. None! The value was hyper-inflated out of existence and the country that accepted it as tax payment no longer even exists! But if that currency had been made out of actual gold, then it would've had intrinsic value, and it would still be valuable today. Guess what ... your dollars today are not made out of gold. They have no intrinsic value.
- jonkho 6y ago
  Money is a social construct. This social construct is valuable. Why? Because this construct solves the problems associated with bartering by allowing us to frictionlessly keep track of who owes what and how much to whom (claims on goods and services). This social construct can use tokens such as dollar bills or gold, for example, as the abstraction for the ledger of record. There are problems using dollars and gold as the abstraction. Dollars (or fiat) violates our common sensibilities as a record on claims on goods and services. The problem is it can be printed without regard and used to extract goods and labor from you (if you choose to accept it). Some people would consider this fundamentally unfair because they are trading their product of their efforts for something that is created infinitely without effort by the privileged few (i.e. something for nothing). Gold is better in this regard but as a money abstraction it is also leaky because it takes up physical space and has transportation and storage inconveniences. Bitcoin is better by having none of these issues which makes it more relatively suitable for the social construct of money (again, it is the social construct of money that is valuable - for which bitcoin happens to be better suited than the current alternatives).
  - qppo 6y ago
    The ability of fiat currency to enter the money supply at the discretion of a central authority is a feature, not a bug.
    - jonkho 6y ago
      Says you. Like all interventions, there are winners AND losers from this type of intervention.
      - qppo 6y ago
        says the lack of bank panics, sustained inflation, and reduction of recessions to speculative bubbles, of which decentralized currency doesn't fix.
        jonkho 6y ago
        Right. Your's a textbook answer to the textbook question. What are the causes of bank panics? Who are the winners and losers of this inflationary intervention/"reduction" of recessions? If the winners of these policies continue to keep winning, is this good for society at large? You don't seem to see the big picture. Product of one-step thinking. But my contributions to this thread ends here.
- Udik 6y ago
  The very notion of "intrinsic value" is nonsense. There is no such thing. The "intrinsic value" of a bucket of rice can be enormous if you're starving, and yet it's practically null now. The "intrinsic value" of gold is dependent on one of its extrinsic qualities, rarity (plus another, convention). Value is just the measure of the willingness of people to give you something in exchange for something else. It's not in the objects themselves, but in the head of the people.
imsd 6y ago
> you just own the crypto currency and that IS the asset. This is beginning to change. In the DeFi space, the token often provides voting rights and a share in generated revenues.
appleflaxen 6y ago
commodities have intrinsic value. crypto does not.

by tharne 6y ago

They're most similar to a commodity, like gold, or lumber. There's a supply, a demand, and price. Unlike stocks, there's no underlying asset, you just own the crypto currency and that IS the asset.

eloff 6y ago

Except those other commodities have intrinsic value, while cryptocurrency has no intrinsic value or legal practical applications after nearly a decade. At this point I don't see that changing. They're the tulips of our age, sold from speculator to speculator until the music stops and someone is left holding the bag.

erikpukinskis 6y ago
Tulips have intrinsic value, so there’s something wrong with your metaphor. But you are right to realize Bitcoin has no intrinsic value. That makes it very similar to something like a dollar bill. That said, intrinsic value isn’t really what makes currency valuable. It’s a nice feature... if the bottom drops out of the market and your currency is cigarettes... at least you can smoke them! And trade them for some other currency at the price of smokes. But that’s a very special circumstance. Intrinsic value only matters under one very special circumstance: Total market collapse. Under normal circumstances, what matters is use value. And Bitcoin has some very unique use value. For example, it is a thing that can be exchanged for gold that can be stored in your head. That’s a very unique use. I think those kinds of uses, if you can add up their utility, are the best way to calculate Bitcoin’s long term value.
- eloff 6y ago
  I feel like I shouldn't have to explain this one: "Tulip mania was a period in the Dutch Golden Age during which contract prices for some bulbs of the recently introduced and fashionable tulip reached extraordinarily high levels and then dramatically collapsed in February 1637. It is generally considered the first recorded speculative bubble in history." - Wikipedia Yes tulips have intrinsic value, but not the value speculators were paying for them during the Dutch tulip bubble leading up to 1637. Cryptocurrencies are very similar to that.
  - erikpukinskis 6y ago
    > Yes tulips have intrinsic value, but not the value speculators were paying for them Like gold?
tharne 6y ago
No commodity has "intrinsic value". It's worth whatever someone else is willing to pay for it. There's nothing intrinsically valuable about gold, for instance. It's worth what it's worth because people believe it will be worth something in the future and are willing to pay a price for it.
- thaumasiotes 6y ago
  > No commodity has "intrinsic value". Anything you can use directly has intrinsic value. Intrinsic value is a negligible part of the total value of gold. But it's a significant part of the total value of e.g. cereal grain, which is historically a common monetary commodity.
- eloff 6y ago
  Gold has practical applications. At minimum people are willing to pay considerable sums for it for use in personal adornments. It's also an instrument used as a hedge and traded by speculators, but there's a fundamental underlying value, that is a demand for it apart from speculation. If all the speculation stopped, the price would drop but not to zero. Other commodities like timber have much more intrinsic value because they are mostly used, not speculated on. If people stopped speculating in the timber market there would be less liquidity but the price wouldn't change much, people still want to build things with it. Cryptocurrency has no fundamental value, it's a digital good without practical applications and no fundamental demand. if the speculation stopped, the price would go to zero.
  - ClumsyPilot 6y ago
    >"[for gold] there's a fundamental underlying value" The fundamental value for it's technical applications is probably < 1/10 of it's real value. If people wake up tomorrow and stop using it as reserves/ investment /savings, you would loose virtually all your money, down to a few percent. So yeah, that 5% or whatever of value is secure, but how nuch does that help? Timber is obviously not a usefull store of value because it does not last, it is not fungiable, is expensive to store - imagine 100 million dollars worth of timber, and you would store that.
zalkota 6y ago
You’re wrong buddy. Look into decentralized finance on Ethereum. Keep believing it’s a tulip and you’ll be left in the dust! It’s a completely new asset class.
CydeWeys 6y ago
So what? I feel like these objections about "intrinsic value" are missing the point. There are lots of things out there that have little to no intrinsic value (like currency) that are nevertheless very useful. You are acting like there is some inviolable law of the world where things without intrinsic value will inevitably become worthless, but there isn't. There's lots of things with fundamentally no intrinsic value that have nevertheless commanded a very high market price for many centuries now. I'm not saying Bitcoin is necessarily on that path, but there's also no reason it couldn't be, and whether it is or isn't isn't related to any intrinsic value it might or might not have. And lots of things that do have intrinsic value, like grain, are terrible investments because they're easy to make more of and because they don't store indefinitely. "Intrinsic value" is just an orthogonal concern.
- eloff 6y ago
  You're right. Fiat currency has no intrinsic value itself, but it can be exchanged for things that do. As long as people treat it like it has value, then it does have value. The same can be sort of be said for crytocurrency. But it's a lot less liquid, mostly the only thing you can do with it is trade it for other cryptocurrencies or sell it. It's on much shakier ground that people will continue to view it as having value. My advice, for what it's worth, until people find a practical application for it, stay away from it.
  - ilammy 6y ago
    > Fiat currency has no intrinsic value itself Fiat currency emitted by governments has intrinsic value: you can pay taxes to the emitting government with it. That's its ultimate value. In the same vein, some cryptocurrencies have value: you pay with Ether for distributed computations performed by Ethereum network, you way with Bitcoin for your data being permanently recorded on the Bitcoin chain.
    - CydeWeys 6y ago
      "Intrinsic value" is a phrase that has a specific meaning in economics, and you are not using it according to that definition. The current ability to pay taxes with a currency is not intrinsic value by the standard definition of the term. That currency could drop to worthless tomorrow and would be worth nothing. Go ask holders of Weimar Republic marks how much intrinsic value their currency ended up having. None! The value was hyper-inflated out of existence and the country that accepted it as tax payment no longer even exists! But if that currency had been made out of actual gold, then it would've had intrinsic value, and it would still be valuable today. Guess what ... your dollars today are not made out of gold. They have no intrinsic value.
jonkho 6y ago
Money is a social construct. This social construct is valuable. Why? Because this construct solves the problems associated with bartering by allowing us to frictionlessly keep track of who owes what and how much to whom (claims on goods and services). This social construct can use tokens such as dollar bills or gold, for example, as the abstraction for the ledger of record. There are problems using dollars and gold as the abstraction. Dollars (or fiat) violates our common sensibilities as a record on claims on goods and services. The problem is it can be printed without regard and used to extract goods and labor from you (if you choose to accept it). Some people would consider this fundamentally unfair because they are trading their product of their efforts for something that is created infinitely without effort by the privileged few (i.e. something for nothing). Gold is better in this regard but as a money abstraction it is also leaky because it takes up physical space and has transportation and storage inconveniences. Bitcoin is better by having none of these issues which makes it more relatively suitable for the social construct of money (again, it is the social construct of money that is valuable - for which bitcoin happens to be better suited than the current alternatives).
- qppo 6y ago
  The ability of fiat currency to enter the money supply at the discretion of a central authority is a feature, not a bug.
  - jonkho 6y ago
    Says you. Like all interventions, there are winners AND losers from this type of intervention.
    - qppo 6y ago
      says the lack of bank panics, sustained inflation, and reduction of recessions to speculative bubbles, of which decentralized currency doesn't fix.
      - jonkho 6y ago
        Right. Your's a textbook answer to the textbook question. What are the causes of bank panics? Who are the winners and losers of this inflationary intervention/"reduction" of recessions? If the winners of these policies continue to keep winning, is this good for society at large? You don't seem to see the big picture. Product of one-step thinking. But my contributions to this thread ends here.
Udik 6y ago
The very notion of "intrinsic value" is nonsense. There is no such thing. The "intrinsic value" of a bucket of rice can be enormous if you're starving, and yet it's practically null now. The "intrinsic value" of gold is dependent on one of its extrinsic qualities, rarity (plus another, convention). Value is just the measure of the willingness of people to give you something in exchange for something else. It's not in the objects themselves, but in the head of the people.

imsd 6y ago

> you just own the crypto currency and that IS the asset. This is beginning to change. In the DeFi space, the token often provides voting rights and a share in generated revenues.

appleflaxen 6y ago

commodities have intrinsic value. crypto does not.