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Remember Tulip-mania? All of a sudden tulip-bulbs became hugely valuable. You could trade them and park you money in them. Why did they become so valuable? Be

Remember Tulip-mania? All of a sudden tulip-bulbs became hugely valuable. You could trade them and park you money in them. Why did they become so valuable? Because people believed in the bigger-fool theory, somebody would be paying even more for the tulip-bulbs you just bought. Or if not more, at least the same price. So you could keep your wealth in a very liquid inflation-protected financial instrument called tulip-bulbs. Isn't that much what has happened with Bitcoin?

olalonde 5y ago
Pretty much, yes (and I'm surprised you haven't heard the analogy before, it is as old as Bitcoin). Another example is the US dollar, whose value is entirely dependent on what a "greater fool" will give it. Without that "greater fool", it is just worth the piece of paper it's printed on. It is the same for Bitcoin and it is the same for tulips. That being said, I'd argue the US dollar and Bitcoin both have properties which make them much more desirable than tulips as a store of value or currency (tulips arguably have the greatest intrinsic value though!).
- mgh2 5y ago
  You need to back up US dollars with actual labor/production, not hypothetical bit "work"
  - olalonde 5y ago
    I am confused by what you mean here. My best interpretation is that your are comparing the US dollar creation process with Bitcoin's? The processes are different indeed but I don't see how it contradicts my original point. Also, the federal reserve creates money out of thin air, there is no labor or production involved (more efficient than Bitcoin mining for sure). If your meaning instead was that the US dollar is backed by something (e.g. "labor/production"), then I'd argue this is incorrect. In economics, when X is backed by Y, it means that there is a guarantee that X can be converted for some known amount of Y. This is not the case for the US dollar although it's true that in practice, it does behave a lot as if.
    - mgh2 5y ago
      It is not a guarantee. I think it as a promise - a loan for the American public to repay it back with real work, thus to heal and grow the economy. The American work ethic has so far backed this up, but yeah there is always a risk that this will not be fulfilled - ex: "The great resignation" So bitcoin's "promise" is their marketing? "The next internet, currency, etc."? I will be careful with this, since the last 2 crises (dotcom and mortgage securities) were similar empty promises hyped by the rich - i.e. lies.
      - olalonde 5y ago
        Bitcoin is just a software/protocol, it doesn't have a marketing team. Personally, I think Bitcoin's biggest appeal is that it's decentralized. No one has control over the money supply. It's pseudonymous. Anyone can use it and participate. That is not the case of the US dollar, not even close. Of course, if you don't believe those are desirable properties, Bitcoin is not going to appeal to you. Regarding price, I won't comment about that since it's quite unpredictable and I have no idea.
        somewhereoutth 5y ago
        It is a Ponzi scheme. It serves only as a transparent, immutable, and complete ledger of the fraud that took place.
        olalonde 5y ago
        A Ponzi scheme is an investment scam. How is that related to Bitcoin, a distributed protocol? Who are the victims? Who are the fraudsters? What is the deception? Which element of the scam applies to Bitcoin but not to gold or the US dollar?
        somewhereoutth 5y ago
        Gold is a tangible commodity. USD can be used to pay your taxes. The victims are the last people to put USD into the crypto system, the fraudsters the ones who set it all up and collect the USD. The deception is that BTC is a currency, or an asset, or a technology, or indeed anything other than a complicated way to pay early entrants with money from later players.
  - somewhereoutth 5y ago
    Taxes is the answer you are looking for - you can pay your taxes in USD. That is what underwrites its value.
    - deleted 5y ago
      [deleted]
    - olalonde 5y ago
      See https://news.ycombinator.com/item?id=30051813 https://news.ycombinator.com/item?id=30051813
- somewhereoutth 5y ago
  You can pay your taxes to the US government with dollars. In fact you can't pay your taxes with anything else - not even tulip bulbs. So you are completely wrong, USD has value because of the US government, not because of the 'greater fool'.
  - olalonde 5y ago
    Having USD can indeed keep you out of jail for tax evasion in some countries. This is also the case for Bitcoin, in at least one country now. That being said, while it could be considered as a "floor" to their value, I don't think it accounts for much of it. I'm sure both USD and Bitcoin would be fine even if taxes were gone.
tenuousemphasis 5y ago
The Dutch tulip bubble lasted a few years, really the height was only 6 months or so. Bitcoin has been on an upward trend for the past 12+ years, when does the comparison to tulips break down, in your mind?
- galaxyLogic 5y ago
  They are similar financial instruments, so I think it is a good comparison. Of course the value of one can go up or down much faster than the value of the other. Value of tulips COULD have gone up for six years instead of six months. Similarly the value of gold can go up or down much faster or slower than the value of oil for instance. But with gold or oil there is much more "intrinsic value" than with Bitcoin. It seems to me that Bitcoin has zero intrinsic value. You need a bigger or as big a fool to get your money back. Not saying that Bitcoin might not be a good investment, but currently it is down 31.65% in a month. It is not a good "store for money". Fool me once, shame on you. Fool me twice shame on me :-) https://www.google.com/search?q=bitcoin+rate&rlz=1C1CHBF_enUS875US875&oq=Bitcoin+rate&aqs=chrome.0.0i131i433i512j0i131i433i457i512j0i512l8.4631j1j15&sourceid=chrome&ie=UTF-8 https://www.google.com/search?q=bitcoin+rate&rlz=1C1CHBF_enU...

olalonde 5y ago

Pretty much, yes (and I'm surprised you haven't heard the analogy before, it is as old as Bitcoin). Another example is the US dollar, whose value is entirely dependent on what a "greater fool" will give it. Without that "greater fool", it is just worth the piece of paper it's printed on. It is the same for Bitcoin and it is the same for tulips. That being said, I'd argue the US dollar and Bitcoin both have properties which make them much more desirable than tulips as a store of value or currency (tulips arguably have the greatest intrinsic value though!).

mgh2 5y ago
You need to back up US dollars with actual labor/production, not hypothetical bit "work"
- olalonde 5y ago
  I am confused by what you mean here. My best interpretation is that your are comparing the US dollar creation process with Bitcoin's? The processes are different indeed but I don't see how it contradicts my original point. Also, the federal reserve creates money out of thin air, there is no labor or production involved (more efficient than Bitcoin mining for sure). If your meaning instead was that the US dollar is backed by something (e.g. "labor/production"), then I'd argue this is incorrect. In economics, when X is backed by Y, it means that there is a guarantee that X can be converted for some known amount of Y. This is not the case for the US dollar although it's true that in practice, it does behave a lot as if.
  - mgh2 5y ago
    It is not a guarantee. I think it as a promise - a loan for the American public to repay it back with real work, thus to heal and grow the economy. The American work ethic has so far backed this up, but yeah there is always a risk that this will not be fulfilled - ex: "The great resignation" So bitcoin's "promise" is their marketing? "The next internet, currency, etc."? I will be careful with this, since the last 2 crises (dotcom and mortgage securities) were similar empty promises hyped by the rich - i.e. lies.
    - olalonde 5y ago
      Bitcoin is just a software/protocol, it doesn't have a marketing team. Personally, I think Bitcoin's biggest appeal is that it's decentralized. No one has control over the money supply. It's pseudonymous. Anyone can use it and participate. That is not the case of the US dollar, not even close. Of course, if you don't believe those are desirable properties, Bitcoin is not going to appeal to you. Regarding price, I won't comment about that since it's quite unpredictable and I have no idea.
      - somewhereoutth 5y ago
        It is a Ponzi scheme. It serves only as a transparent, immutable, and complete ledger of the fraud that took place.
        olalonde 5y ago
        A Ponzi scheme is an investment scam. How is that related to Bitcoin, a distributed protocol? Who are the victims? Who are the fraudsters? What is the deception? Which element of the scam applies to Bitcoin but not to gold or the US dollar?
        somewhereoutth 5y ago
        Gold is a tangible commodity. USD can be used to pay your taxes. The victims are the last people to put USD into the crypto system, the fraudsters the ones who set it all up and collect the USD. The deception is that BTC is a currency, or an asset, or a technology, or indeed anything other than a complicated way to pay early entrants with money from later players.
- somewhereoutth 5y ago
  Taxes is the answer you are looking for - you can pay your taxes in USD. That is what underwrites its value.
  - deleted 5y ago
    [deleted]
  - olalonde 5y ago
    See https://news.ycombinator.com/item?id=30051813 https://news.ycombinator.com/item?id=30051813
somewhereoutth 5y ago
You can pay your taxes to the US government with dollars. In fact you can't pay your taxes with anything else - not even tulip bulbs. So you are completely wrong, USD has value because of the US government, not because of the 'greater fool'.
- olalonde 5y ago
  Having USD can indeed keep you out of jail for tax evasion in some countries. This is also the case for Bitcoin, in at least one country now. That being said, while it could be considered as a "floor" to their value, I don't think it accounts for much of it. I'm sure both USD and Bitcoin would be fine even if taxes were gone.

tenuousemphasis 5y ago

The Dutch tulip bubble lasted a few years, really the height was only 6 months or so. Bitcoin has been on an upward trend for the past 12+ years, when does the comparison to tulips break down, in your mind?

galaxyLogic 5y ago
They are similar financial instruments, so I think it is a good comparison. Of course the value of one can go up or down much faster than the value of the other. Value of tulips COULD have gone up for six years instead of six months. Similarly the value of gold can go up or down much faster or slower than the value of oil for instance. But with gold or oil there is much more "intrinsic value" than with Bitcoin. It seems to me that Bitcoin has zero intrinsic value. You need a bigger or as big a fool to get your money back. Not saying that Bitcoin might not be a good investment, but currently it is down 31.65% in a month. It is not a good "store for money". Fool me once, shame on you. Fool me twice shame on me :-) https://www.google.com/search?q=bitcoin+rate&rlz=1C1CHBF_enUS875US875&oq=Bitcoin+rate&aqs=chrome.0.0i131i433i512j0i131i433i457i512j0i512l8.4631j1j15&sourceid=chrome&ie=UTF-8 https://www.google.com/search?q=bitcoin+rate&rlz=1C1CHBF_enU...