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Bitcoin is the ultimate, purely financial object. It has no revenues or profits. The supply is fixed -- unlike, say, gold, where high prices mean people will ev
by ProjectArcturis 5y ago
Bitcoin is the ultimate, purely financial object. It has no revenues or profits. The supply is fixed -- unlike, say, gold, where high prices mean people will eventually start digging mines, BTC supply is entirely price-inelastic. The only thing that determines BTC price is demand. And over the past 13 years, we've seen reflexivity at work: The price has gone up, so more people want it, so the price goes up further, and on and on.
There's no reason this can't happen in reverse. As in previous crashes, once the price starts going down, more people want to sell.
Really just an interestingly pure experiment in group psychology.
- paulpauper 5y agoThat would only be true if bitcoin technology were protected by IP, which it is not. new coins effectively dilute existing holders of btc
- dogman144 5y agoAs the supply is fixed, this is a very illogical take.
- paulpauper 5y agoalt coins. BTC dominace used to be 90%+. now way lower . BTC holders get no royalties from blockchain being copied
- thebean11 5y agohow can you possibly make the claim that BTC was diluted vs the market cap of other coins being net new value?
- NationalPark 5y agoThe argument is that crypto has little to no intrinsic value and the price is being moved by speculation. In that case, the value comes from how many other speculators are willing to speculate in your currency - more options means fewer dollars buying bitcoin. The fact that pretty much every crypto of non-trivial float trades in lock step with BTC definitely supports the "no intrinsic value" theory.
- thebean11 5y agoSounds like two separate arguments, I don't really see the through line. The value of BTC comes from the mining security, and you cannot mine multiple chains at once with the same hardware. > The fact that pretty much every crypto of non-trivial float trades in lock step with BTC definitely supports the "no intrinsic value" theory. They are highly correlated but certainly not lock step, see the 1 month ETH/BTC chart. Assets on the stock market are also highly correlated to each other, so I don't quite follow.
- NationalPark 5y agoSure, I mean you're just describing the opposite position, that the price of cryptocurrencies is reflecting some intrinsic value and that speculators have a negligible impact on the price. In that case market forces should eventually reveal some stable winners and all the deflationary stuff that lead us down this rabbit hole applies again.
- thebean11 5y agoNo I don't see the relationship. Let's assume no intrinsic value for the sake of argument. How do you get from there to "additional coins steal market cap from existing coins"? Seems easy to craft some counterexample, like "Doge acts as a marketing campaign for crypto as a whole and will lead to net-inflows to the BTC market".
- NationalPark 5y agoI'm just describing the plausible argument that the original commenter said didn't exist - to that end, it should be obvious that a bullish investor, who believes crypto is the future of finance, holding a balanced basket of crypto investments, might invest less in any individual coin as more potential successes appear that must be hedged against.
- thebean11 5y ago
- echelon 5y agoOpportunity cost and choice. Dogecoin means more to me than BTC. Good luck convincing me, or those that share my belief, otherwise If I put $500 into either, it'd be Doge.
- thebean11 5y agoThat's fine, I don't think you have any evidence for your position though. You could easily make the opposite argument that Doge is basically a marketing campaign for BTC and will bring in more investment dollars than it sucks away. It's not zero sum.
- Swenrekcah 5y agoWhy would BTC need a marketing campaign? Isn’t it a value store? Or was it a currency? Or is it perhaps a bubble of nothingness that actually would need a marketing campaign? I have put about $1000 into various cryptos as a hedge, but I fully expect to lose it all and the day can’t come soon enough.
- thebean11 5y agoSaying something acts as a marketing campaign != saying it needs a marketing campaign, I'm not sure how you made that leap.. My point is that Doge doesn't necessarily take cash inflows away from BTC, describing a possible mechanism for the opposite phenomenon, not that anything needs a marketing campaign.
- onemoresoop 5y ago> how can you possibly make the claim that BTC was diluted vs the market cap of other coins being net new value? It makes some sense to me. When BTC was smaller in capitalization it was easier to double your money. Now smaller coins attract dollars that otherwise would have pumped up BTC so growth stagnates. BTC was considered the most stable of them all and I now find those claims somewhat dubious, they're all extremely volatile
- thebean11 5y ago> When BTC was smaller in capitalization it was easier to double your money. Do you mean perceptually, or in actuality?
- onemoresoop 5y agoPerception plays a big part in this. Remember most of this is based on irrational decisions
- thehappypm 5y agoEveryone who is buying Dogecoin right now is not buying BTC. That reduces the value of BTC.
- thebean11 5y agoEveryone who is buying x is not buying y. That reduces the value of y.
- bordercases 5y agoBTC has substitutes in the altcoin sphere which can make similar claims to scarcity. So if BTC ends up being too illiquid and slow - build another coin.
- deleted 5y ago[deleted]
- voldacar 5y agoWhile you have a point regarding fixed supply, I think bitcoin is more than just a KBC. The ability to do uncensorable (or at least uncensorable without truly absurd computing power) global financial transactions is a really amazing thing and I think it definitely has "intrinsic" value, insofar as any value is "intrinsic" and not the result of social interaction. The energy consumption is definitely bothersome but overall I am glad that bitcoin exists.
- afavour 5y agoIsn't Bitcoin absolutely terrible at transactions, though? It's too slow to ever be used as a cash alternative. Why wouldn't an alternative cryptocurrency fill that void then leave Bitcoin with no actual value at all?
- voldacar 5y agoMy comment was more referring to cryptocurrency and the blockchain concept in general, I probably should have been more clear. You are right that BTC isn't that useful as cash. I don't think BTC will be dominant forever, there are already superior cryptocurrencies for use as actual normal currency. If/when another crypto really does fill that void and achieves major adoption, I think BTC will probably retain some value, for speculative reasons and also just because it has the oldest chain.
- singularity2001 5y agoThe supply is infinite if you take the whole crypto space: You can create as many BTC#3 EGold-plus ... as you wish, and future generations will.
- aabbcc1241 5y agoAnd that's how dogecoin was "born"
- Hamuko 5y agoYeah, the only magic sauce behind Bitcoin seems to be that it was the first one and has the most valuable brand.
- aabbcc1241 5y agoThe later-created coins are similar to bitcoin but they're not "the bitcoin". In this way, the supply of bitcoin is still limited
- sashimi-houdini 5y agoThis is also why Skepticoin cannot be cloned: the clones (cynicalcoin, sarcastocoin etc) are simililar, but they're not "the skepticoin". In this way, the supply of skepticoin is still limited.
- gruez 5y agoThat's like saying uber shares are infinite because you can start your own ridesharing startup and issue more shares.
- allendoerfer 5y agoExcept you cannot just start your own global ridesharing service, can you?
- gruez 5y agoCan't you say the same for bitcoin? Anyone can make a bitcoin clone, just like anyone can code a ridesharing app in a hackathon, but your clone isn't going to be the one recognized by everyone.
- johnwheeler 5y agoTo me, the argument that fixed supply is a good thing has always been worrisome. People just parrot that viewpoint without asking whether some amount of Keynesian economics is useful, because you know, government is evil. It got us out of the Great Recession and it’s been 12 years. Maybe the consequences haven’t fully manifest, but another Great Depression would have been guaranteed hell.
- deleted 5y ago[deleted]
- icyfox 5y agoKeynesian economics got us out of the actual Great Depression as well, if you consider FDR's decision to get off the gold standard and start trading dollars as a floating currency on the market. Fixed monetary supply might be one thing in theory, but fixed credit supply is the death knell to an economy. And the two are usually complimentary. Monetary supply can fill in the potholes of weakening credit supply when the latter contracts - and it inevitably will when the private issuers that generate those debt contracts pull back in a recession. If you have your hands tied to some constrained supply like gold or bitcoin, like what happened to the central banks after World War I and into the Great Depression, you end up backed up against a wall. That said there is certainly something that's personally appealing about an asset that's guaranteed to maintain the supply side of the equilibrium. As an investor you only have to consider demand. But for any kind of widely used currency that backs an economy it's going to be problematic.
- imtringued 5y ago>That said there is certainly something that's personally appealing about an asset that's guaranteed to maintain the supply side of the equilibrium. It's appealing because it keeps politicians honest, but if you have honest politicians it is just a thought experiment.
- icyfox 5y agoBlessing and a curse. With a flexible monetary supply, politicians can help ease the pains of boom bust cycles. They also can print currency and inflate their debt away. With a static monetary supply, they can't dampen the pain. But they also can't leverage the financial system for their short-term gains. The last 60 years on a macro level have largely proved the Keynesian model. I think we're right to put faith in politicians in general. The solution might just be holding currency from another nation instead of your own.
- anewaccount2021 5y agoHow is BTC any different than gold? The difficulty ratchet in BTC mining means extracting new coins is rising in difficulty, just like the difficulty in extracting better-hidden gold. The supply of gold is indeed fixed unless you can pull it out of an asteroid. The major difference is that BTC is trivial to destroy, gold not so. There is no economic way to actually destroy gold.
- max_ 5y agoEveryone trying to exit a burning building through a tiny door.
- lend000 5y agoAgree. For studying pure markets and financial psychology, there is no better case study.
- mam3 5y ago1/ a lot of people really DO believe in decentralized currency 2/ a lot of people are acutally using it as a store of value / currency: from drug dealers to people in states with failed economy such as venezuela or turkey, to chinese people wnating to somehow escape the system. 3/ btc is a gateway currency to other more useful currencies surch as eth / monero / zcash 4/ How is the "no profits / revenue" makes any sense for pricing a financial object in 2021 where amazon for example literally never ever gave a dividend to the shareholder, meaning, whatever you say, that people holding amazon stock are doing it ONLY for speculation of the "perceived value" of the price ? In the end, btc is not that much more a "baseless asset" than most of the stock market currently.
- thehappypm 5y agoThe drug dealer argument is the only actual use for bitcoin out there. How exactly does a dirt-poor Venezuelan acquire BTC to trade?
- mam3 5y agoWith internet.. The use is store of value. There are been a lot of cases where btc has been more stable than national currencies.
- rednerrus 5y agoTether is the only thing driving the price of BTC. When it came out that Tether is only 3% backed by actual USD, the prices dropped dramatically.
- kwyjobojoe 5y agoIt also has massive costs