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> What is the fair value of bitcoin? It will never provide dividends or other types of future cashflows, so that aspect of its fair value is zero. The remaining

> What is the fair value of bitcoin? It will never provide dividends or other types of future cashflows, so that aspect of its fair value is zero. The remaining part is purely speculative in that it is based on what other people will pay for it. Do Swiss Franks pay dividends or other types of cashflows? If I have 50,000 CHF in a box in my cupboard, what value is it beyond a small amount of fuel to burn? At some point I will hope someone (perhaps someone in Switzerland) will exchange something I want for those pieces of paper. On the other hand the Swiss Government could decide to make the money almost worthless, practically overnight (India did this with Rupees), by removing the main purpose of having the notes.

albntomat0 6y ago
> Do Swiss Franks pay dividends or other types of cashflows? There is consistent demand by the Swiss government, in the form of tax collection.
dmitriid 6y ago
> If I have 50,000 CHF in a box in my cupboard, what value is it beyond a small amount of fuel to burn? You are so close to understanding the true value of bitcoin.
- deleted 6y ago
  [deleted]
- andresp 6y ago
  A sub optimal way of producing thermal energy (at least in for the miners)?
betterunix2 6y ago
Actually the ultimate reason why a note has value is that it can be used to settle tax bills and other debts, so you do not have to "hope" that someone out there will take it -- the government behind the money will take it from anyone who owes taxes, which is almost everyone who lives or does business in the country.
- iso1210 6y ago
  Except not in the case of India, where the government wiped out the value of 500INR notes practically overnight
- jakear 6y ago
  Hm, so what happens if a country issues some sort of currency in the form of loans/salaries/whatever but does not collect any tax (let’s say they sell natural resources to foreign countries and use that money to maintain their printing presses). Would the currency be worth nothing?
  - sershe 6y ago
    I am not sure if taxes were used by GP for any particular reason; I think the key is that the governments actually forces other to use the currency for transactions. So, as long as the govt itself doesn't drastically change the rules, people wanting to sell their time now will take currency. There is no such mechanism for Bitcoin; it's really not that different from baseball cards, original paintings or smth like that in terms of being a store of value; based entirely on others' assumed future faith of its value (compared to any random cryptocurrency I can start tomorrow, or a print of the same painting/card).
  - betterunix2 6y ago
    A few things: 1. You mentioned loans, and I mentioned debts. Debts matter at least as much as taxes as a source of demand for fiat currency, since the government can "reassign" the ownership of property if debts are not repaid and the government will always determine debt payments in terms of its fiat currency. 2. Suppose the money is only distributed to citizens in the form of salaries. What do they do with it? Why does anyone they do business with -- merchants, landlords, whoever -- want it? One of the reasons why taxes and debt laws work well is that they are immediately relevant to almost everyone in a country (anyone who owns property owes property tax; anyone with a business loan must make their loan payments; etc.). 3. Suppose a country relies on resource wealth to stimulate demand for its currency. That country will compete in the global market for those resources and the demand for its currency, and thus the value of the currency, will fluctuate according to market forces. The price volatility would be a huge problem for the citizens of the country as they tried to use the currency in their daily lives. So while in theory, under very particular circumstances, such a thing would be possible, in practice it would probably not last long. Volatility, weird distortions in demand, and other issues would render the currency hard to use and reduce its value in the local market.
mcguire 6y ago
One hopes that you do not regard 50,000 CHF in a box in your cupboard an investment. I've got about $200 in a drawer in the other room for unexpected events---ones that don't involve any infrastructure at all. My actual investments are in economically productive assets.
UncleMeat 6y ago
And people who hold their wealth in cash are speculating, not investing.
imtringued 6y ago
No, Swiss Franks do not pay dividends, that's why nobody is betting on the fact that Swiss Franks would be worth more in the future. Somehow owners of Bitcoin insist that it doesn't follow this simple rule and that it should net a return. >At some point I will hope someone (perhaps someone in Switzerland) will exchange something I want for those pieces of paper. The amount of businesses accepting Bitcoin as a means of payment is very small. The incentives to do so are almost nonexistent. Everyone is converting it back to a valuable currency, this is why the price of Bitcoin is highly volatile. There is no minimum demand for the currency. There is no economic system that is dependent on Bitcoin being less volatile. The Swiss government creates minimum demand for the currency through taxation. The people living in Switzerland decide to adopt the currency and thus there is an economic system that needs the Swiss Frank to roughly maintain its value. Heck, small amounts of inflation are necessary because a currency that is generating a return is highly undesirable as a means of payment. Since it's losing value over time you are discouraged from using it as a store of value. The existence of an economy that is constantly exchanging currency for goods is thus ensured. >On the other hand the Swiss Government could decide to make the money almost worthless, practically overnight (India did this with Rupees), by removing the main purpose of having the notes. Yes and the beauty is that everyone would consider the currency worthless. With Bitcoin there would be extremists clinging to the belief that it would retain its value.
- iso1210 6y ago
  > No, Swiss Franks do not pay dividends, that's why nobody is betting on the fact that Swiss Franks would be worth more in the future. They are (foreign currency reserves), hence the swiss banks charging to store swiss franks. Indeed Hedge Funds (darlings of HN) make a killing out of currency speculation -- Black Wednesday and Brexit in the UK for example. There's 61 currency funds listed here, I'm sure some are betting on swiss franks. https://www.barclayhedge.com/databases/forex-database https://www.barclayhedge.com/databases/forex-database

albntomat0 6y ago

> Do Swiss Franks pay dividends or other types of cashflows? There is consistent demand by the Swiss government, in the form of tax collection.

dmitriid 6y ago

> If I have 50,000 CHF in a box in my cupboard, what value is it beyond a small amount of fuel to burn? You are so close to understanding the true value of bitcoin.

deleted 6y ago
[deleted]
andresp 6y ago
A sub optimal way of producing thermal energy (at least in for the miners)?

betterunix2 6y ago

Actually the ultimate reason why a note has value is that it can be used to settle tax bills and other debts, so you do not have to "hope" that someone out there will take it -- the government behind the money will take it from anyone who owes taxes, which is almost everyone who lives or does business in the country.

iso1210 6y ago
Except not in the case of India, where the government wiped out the value of 500INR notes practically overnight
jakear 6y ago
Hm, so what happens if a country issues some sort of currency in the form of loans/salaries/whatever but does not collect any tax (let’s say they sell natural resources to foreign countries and use that money to maintain their printing presses). Would the currency be worth nothing?
- sershe 6y ago
  I am not sure if taxes were used by GP for any particular reason; I think the key is that the governments actually forces other to use the currency for transactions. So, as long as the govt itself doesn't drastically change the rules, people wanting to sell their time now will take currency. There is no such mechanism for Bitcoin; it's really not that different from baseball cards, original paintings or smth like that in terms of being a store of value; based entirely on others' assumed future faith of its value (compared to any random cryptocurrency I can start tomorrow, or a print of the same painting/card).
- betterunix2 6y ago
  A few things: 1. You mentioned loans, and I mentioned debts. Debts matter at least as much as taxes as a source of demand for fiat currency, since the government can "reassign" the ownership of property if debts are not repaid and the government will always determine debt payments in terms of its fiat currency. 2. Suppose the money is only distributed to citizens in the form of salaries. What do they do with it? Why does anyone they do business with -- merchants, landlords, whoever -- want it? One of the reasons why taxes and debt laws work well is that they are immediately relevant to almost everyone in a country (anyone who owns property owes property tax; anyone with a business loan must make their loan payments; etc.). 3. Suppose a country relies on resource wealth to stimulate demand for its currency. That country will compete in the global market for those resources and the demand for its currency, and thus the value of the currency, will fluctuate according to market forces. The price volatility would be a huge problem for the citizens of the country as they tried to use the currency in their daily lives. So while in theory, under very particular circumstances, such a thing would be possible, in practice it would probably not last long. Volatility, weird distortions in demand, and other issues would render the currency hard to use and reduce its value in the local market.

mcguire 6y ago

One hopes that you do not regard 50,000 CHF in a box in your cupboard an investment. I've got about $200 in a drawer in the other room for unexpected events---ones that don't involve any infrastructure at all. My actual investments are in economically productive assets.

UncleMeat 6y ago

And people who hold their wealth in cash are speculating, not investing.

imtringued 6y ago

No, Swiss Franks do not pay dividends, that's why nobody is betting on the fact that Swiss Franks would be worth more in the future. Somehow owners of Bitcoin insist that it doesn't follow this simple rule and that it should net a return. >At some point I will hope someone (perhaps someone in Switzerland) will exchange something I want for those pieces of paper. The amount of businesses accepting Bitcoin as a means of payment is very small. The incentives to do so are almost nonexistent. Everyone is converting it back to a valuable currency, this is why the price of Bitcoin is highly volatile. There is no minimum demand for the currency. There is no economic system that is dependent on Bitcoin being less volatile. The Swiss government creates minimum demand for the currency through taxation. The people living in Switzerland decide to adopt the currency and thus there is an economic system that needs the Swiss Frank to roughly maintain its value. Heck, small amounts of inflation are necessary because a currency that is generating a return is highly undesirable as a means of payment. Since it's losing value over time you are discouraged from using it as a store of value. The existence of an economy that is constantly exchanging currency for goods is thus ensured. >On the other hand the Swiss Government could decide to make the money almost worthless, practically overnight (India did this with Rupees), by removing the main purpose of having the notes. Yes and the beauty is that everyone would consider the currency worthless. With Bitcoin there would be extremists clinging to the belief that it would retain its value.

iso1210 6y ago
> No, Swiss Franks do not pay dividends, that's why nobody is betting on the fact that Swiss Franks would be worth more in the future. They are (foreign currency reserves), hence the swiss banks charging to store swiss franks. Indeed Hedge Funds (darlings of HN) make a killing out of currency speculation -- Black Wednesday and Brexit in the UK for example. There's 61 currency funds listed here, I'm sure some are betting on swiss franks. https://www.barclayhedge.com/databases/forex-database https://www.barclayhedge.com/databases/forex-database