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What justifies Bitcoin being valued at 30k vs 20k? The answer is nothing. And same applies to 10k. Since there's no measurable intrinsic value, there's zero fu

What justifies Bitcoin being valued at 30k vs 20k? The answer is nothing. And same applies to 10k. Since there's no measurable intrinsic value, there's zero fundamental factor limiting the downside

deebosong 4y ago
To reiterate, you're basically saying it's just speculation and greater fool theory, correct? Because that's to me what it looks like functionally, while some people I know seem to deny this is what they're doing and telling themselves "it's the future of everything" for no other reason than that's what they want it to be (so they can make bank off of their speculative bet).
- adam_arthur 4y ago
  Yes. If you can't point to any math to justify a given price, there is no intrinsic value. Thus price is only driven by speculative factors. With stocks there are earnings that can be distributed back to shareholders. This is a measurable and explainable fundamental factor. Real estate has rents... Bonds have coupon payments. Crypto has nothing. Though some will pay you "yield" by diverting money from newer entrants... Aka pyramid-esque structure
  - politician 4y ago
    Does your argument exclude foreign currency holdings?
    - adam_arthur 4y ago
      Currency value is relatively stable through actual use as a medium of exchange, salaries paid in the currency, government backing to maintain relatively stable pricing. Crypto has none of these. And if it's a good investment, then it's definitely not a good currency
      - eurasiantiger 4y ago
        >if it's a good investment, then it's definitely not a good currency The Bank of England would like a word with you.
        nradov 4y ago
        That's kind of the point. Currencies which are pegged to other currencies at fixed exchange rates aren't good currencies at all. They're subject to sudden catastrophic revaluation. Fortunately most of the major fiat currencies now have floating exchange rates so that's generally no longer a problem.
  - lostcolony 4y ago
    One of the major problems with Bitcoin is that it is being treated as both a currency, and an investment vehicle. As an investment vehicle, it's exactly as you say; there is no fundamental value it represents. As a currency, it has no governmental backing, and while it's possible to trade in currencies, the profit lies in the trade, and the various differing rates of exchange, NOT in the underlying currencies themselves. No one holds currency expecting deflation to make them better off.
- bhouston 4y ago
  Yes, Bitcoin is worth nothing but it is a "consensual reality" among a large group of people that it is worth something and thus it is. It is incredibly hard to predict if such a consensual reality will collapse -- but it can collapse if there is a strong "vibe shift" towards something else that competes effectively with the current "consensus." It is like fashion. What is considered stylish and not is just a group consensus. And it can shift relatively quickly, but it is hard to predict and certain people in key nexus have a lot more influence than the ramble.
  - politician 4y ago
    Collective mythologies underpin most of modern life. Does the Turkish Lira have more or less intrinsic value than Bitcoin?
    - ryanbrunner 4y ago
      I think a key difference with traditional currencies is that the countries that issue that currency will do anything in their power to maintain at least some of the value of that currency. I'm not sure how true that is for crypto investors. It's likelier they'll cut their losses and run.
    - jahnu 4y ago
      Getting too hung up on the precise philosophical definition of intrinsic misses the point, imo. Things that make Lira less mythological and more intrinsicly valuable include: - It is a more stable store of value - It holds a more stable relationship to the value of everything else in the Turkish economy - It is more widely accepted for buying and selling good and services These three things are real world practical differences.
      - deleted 4y ago
        [deleted]
    - bhouston 4y ago
      To say that state-backed currencies are equivalent to private currencies is to greatly misunderstand how things work in finance. Traditional state-based currencies mostly exist because the government pays its obligations in that currency and also collects taxes in that currency. The state's population is forced to use that currency as a result for these behaviors. This is the main difference between a state-backed currency and "private currencies." This isn't to say that state-backed currencies can be a mess just like "private currencies." But these state-backed currencies fail with the governments based on balance of payments and debt and money printing, etc and it is very infrequent.
- zhte415 4y ago
  I was introduced to Bitcoin in 2011 by a friend. I'd never heard of it before, and it sounded like something I'd not be interested in. I didn't go all-in with him renting an apartment where the cost of electricity was paid by the landlord, it's basically free, but he 'gave' me some in lieu of his bar bill, just a handful, with the proviso I hang on to it and spread the word that there was use for it. In that long conversation, the most compelling 'use' was it's 'non use'. That it is intrinsically rare and so as long as it's achieved a sufficient momentum to continue to exist (aside from transactions, we went over various uses for the blockchain that I was struggling to understand), just having some is itself a diversification and thus valuable for that. Diversification like having some precious metal is too. 'Having' being an important point. Another friend was a gold nut (I mean that in a non-pejorative sense, a term he used) that wouldn't touch gold futures or any form of 'contractual gold' and wasn't that keen even on security boxes. In this, Bitcoin did make some sense. Just hanging on to some. Not for investment purposes, and not for speculative purposes, but for, depending on your perception, the value you may find in something 'rare' in your (somewhat) physical possession. This may be for a time of turmoil when 'rare' assets are extremely valuable, especially divisible ones (sufficiently 'rare' cash, for example, is well documented to be valuable at these times). 'How much' depending on your appetite: appetite for an asset _held for this purpose_ (a purpose that isn't investment or from-time-to-time speculation), and this 'how much' (price*quantity) re-balanced not based on a Bitcoin's price (nor gold's price per ounce) - from this perspective the day-to-day 'price' of Bitcoin becomes less relevant, re-balancing better smoothed than marked-to-market daily given it's volatility. [A small aside, but on this 'rarity': I remember clearly the first time I held a gold bar, by no means a common occurrence in my life. It was beautiful. Shaped more like a house brick than something stacked in Fort Knox, it had the portrait a family embossed on it, two parents, three children, the family dog, the chateau in which they lived, and their signatures. It was cast at the time of the French Revolution, and sits, certainly when I handled it and I imagine still today, unclaimed, in London, where it was sent for safe keeping. Sad.]
olalonde 4y ago
It's true but it's also true of fiat currencies (more or less).
- colinmhayes 4y ago
  Fiat currency has intrinsic value. You need it to pay taxes, don't have enough and you go to jail.
  - olalonde 4y ago
    That's why I said more or less. Taxes probably only account for a small portion of this value and it is now possible to pay taxes in crypto (in some countries and cities).
    - Majromax 4y ago
      Even in those jurisdictions, taxes are still assessed in the local currency. Cryptocurrency is just a medium of exchange, so it has value in the same way that Visa the company has value.
      - olalonde 4y ago
        Assessing taxes in currency X does not give it value if those taxes can be paid in currency Y. It does not create any demand for it, unlike in the scenario where the taxes must be paid in it.
        Majromax 4y ago
        Let's go back to the three basic roles of currency. A currency is a medium of exchange, a medium of account, and a store of value. Bitcoin certainly has value as a medium of exchange because it can be (and is) exchanged between people. A government that accepts bitcoin for payment of taxes adds to the exchange-value of the currency, certainly. Bitcoin also has some merit as a store of value, in that people observably hold bitcoin with the expectation that it will remain valuable. Ultimately, however, this role of currency is speculative: it requires belief that people will want the currency in the future at a reasonable price. This is also where crypto bulls and bears most disagree. Bitcoin has a much more ephemeral status as a medium of account, however. Stores aren't pricing their wares primarily in bitcoin; when they accept the currency they price primarily in local currency and perform a spot conversion. This is also what I was referring to above with jurisdictions not assessing taxes in bitcoin even if they accept it. The medium of account is the least flashy but perhaps most fundamental role of a currency; it provides a backstop of price stability. Repricing goods and services is hard. It obsoletes marketing campaigns, it confuses contractual expectations, and it can require literal printing costs re: price tags and the like. That stability, however, lets people think of one currency-unit as worth something real, not just some amount of another, more important currency. Bitcoin does not yet have this status, and this is where lack of tax assessment in bitcoin matters. I can't say that (e.g.) 0.1BTC will definitely pay my property taxes for a year, no matter what else happens to the currency in the meantime.
em1sar 4y ago
- adam_arthur 4y ago
  Everybody who made money in a bubble ended up being justified
- rockbruno 4y ago
  Please avoid using HN like Reddit. I'd be really interested in hearing an argument for why the poster is wrong instead of attacking them like a 12 year old.
danuker 4y ago
It would be a combination of: * supply * demand The supply is well-known in advance, and is an advantage to Bitcoin. US M2 money supply grew 8.04% in the past year [0], while Bitcoin's grew ~1.75% [1]. Demand is very volatile, and suffers from the bandwagon effect (price increase -> buy, price decrease -> sell). [0] - https://ycharts.com/indicators/us_m2_money_supply_yoy https://ycharts.com/indicators/us_m2_money_supply_yoy [1] - https://charts.woobull.com/bitcoin-inflation/ https://charts.woobull.com/bitcoin-inflation/
- FollowingTheDao 4y ago
  Yes, I heard there was a huge demand for Tulips back in the day...
  - danuker 4y ago
    The tulip bubble did not have 80% crashes going to higher and higher floors.
hopefulengineer 4y ago
donkeyd 4y ago
The funny thing to me is that the BTC promoters keep talking about the blockchain being used to pay for stuff, like the occasional Tesla, or bananas in third world countries. However, last time I checked, about 90% of transactions involving BTC happened off the blockchain. It happened in marketplaces where no actual crypto is transacted and it's all in the databases of these marketplaces. The value of BTC has nothing to do with the actual use of the Bitcoin Blockchain. If anything, the ETH blockchain might have more value in the real world, since it's used to transact stupid monkey pictures and stuff like that.
- eric_cc 4y ago
  This is shortsighted and won’t age well. Consider the world in 2030. Another 8 years of advancements into bitcoin infrastructure, point of sale devices, mobile wallet integrations, etc Plus failed central banks, failed paper currencies, etc
  - dghlsakjg 4y ago
    Bitcoin's first block dates back to January 2009, or 13 years. POS devices have existed since, at least, 2017, or five years. Despite that people are using crypto less as a currency today than they ever have. What are the next 8 years going to bring us that the past 13 haven't? It seems like as time goes on crypto becomes less useful rather than more as a general utility for buying stuff. Most crypto "currencies" are also a not a great store of value currently. Just for context, the Ukrainian Hryvnia has lost less value since the Russian invasion than bitcoin has lost today. A financial system more volatile than the economy of a country outmatched in a war with a superpower, is perhaps, not a system you want doing things that require stability.
    - eric_cc 4y ago
      > It seems like as time goes on crypto becomes less useful rather than more as a general utility for buying stuff. I said: Bitcoin. Not crypto. (The longer I’m in this space, the more I realize that scammy crypto is one of the biggest enemies of bitcoin adoption.) It may seem this way to you but you’re clearly not paying enough attention. Adoption curve is up. Many advancements have been and continue to be made on the front of consumer products. Let’s face it, companies like Square will drive mainstream usage. Consumer products will only get better and better and over time will be on par with products that use the dollar under the hood.
hacknat 4y ago
You've just described money. Is BTC good at being money? No. But your argument isn't the reason.
- czbond 4y ago
  The only things that give money value are leadership (faith in the government) or military (punitive damage).
  - robbiep 4y ago
    You missed freedom of exchange, or that you can readily exchange it with the next person easily, which no crypto has been able to do
  - hacknat 4y ago
    So gold’s day in the sun from the 15th century to the 1970s was what?
- rootusrootus 4y ago
  Generically, perhaps. But specific money like the USD has value backed up at the point of a gun.
  - hacknat 4y ago
    That is not the only thing that has backed the value of money in the history of humanity. It (violence) is arguably the most inferior social mechanism for enforcing value that has been tried.
rglover 4y ago
> What justifies Bitcoin being valued at 30k vs 20k? That it's a safeguard (not hedge) against tyrannical money. This will play out over the next few years as governments will introduce digital currencies (CBDCs) to replace their own failing currencies (simultaneously robbing citizens of their savings). The bait-and-switch of this is that they will give out free money (it costs them nothing to do so) to entice people but not tell them that their money can expire, have its purchases limited to "approved" vendors, and be taken from them instantly without recourse. Bitcoin is a safeguard against this if you hold it in your custody. This is its ultimate value: it cannot be manipulated or stolen by the state. Something that's never existed in the history of humanity. There's a reason the genesis block contained this: https://en.bitcoin.it/wiki/File:Jonny1000thetimes.png https://en.bitcoin.it/wiki/File:Jonny1000thetimes.png
- robbiep 4y ago
  How many, or what percentage, of crypto owners/holders actually have their crypto in their own custody? I would hazard to say somewhere south of 1%. So what benefit is it? Everyone has only traded one form of vendor lock in to another (that is deserving of vastly less trust, as evidended by the Wild West of scams, rug pulls and outright frauds)
  - rglover 4y ago
    That's not a fault of the technology. Many people want to pin the flaw of human behavior on Bitcoin but there's nothing inherent in the technology that forces people to do that. The literal "quickstart" of Bitcoin is to hold it in your own custody (running the Bitcoin software on your computer gives you a wallet you 100% control).
    - robbiep 4y ago
      I know how it works, and I’d argue it is a flaw of the technology. Money works because I can hand $10 to a 5 or a 95 year old and they know what to do with it. Very few people do anything other than speculate in crypto, and even fewer hold it in their own wallets as opposed to on exchanges. If the friction of getting started in the future of money requires IT support, then it isn’t going to work
deleted 4y ago
[deleted]
eric_cc 4y ago
Why does the paper dollar have buying power? What justifies its value? > The answer is nothing. Since there's no measurable intrinsic value, there's zero fundamental factor limiting the downside
- adam_arthur 4y ago
  The fact that it's the mandated unit of exchange for commerce in the US, and the government ensures it maintains a relatively stable value. It doesn't have intrinsic value, but it certainly has value by fiat/authority
  - eric_cc 4y ago
    So USD’s value comes from authority, force and violence. We accept the USD because of the USA’s army, bombs, etc. We accept the fed and central banks and money printing. We accept the rigged point system. And how long is this sustainable before people have had enough? We now have an alternative. There is no bitcoin print button to bail out Washington at the expense of the regular people.
    - deeg 4y ago
      Even if I agreed with all your points (which I don't) why would the US government switch to BTC if that limited what the Fed could do? This is a debilitating flaw of BTC. I suppose if a vast majority of Americans demanded a switch to BTC it could be done but if that was a real possibility it would be much easier to demand laws to stop the Fed instead of switching to a new currency. But the government won't switch to BTC and the people will never demand it because a limited currency would hurt the economy by limiting growth.
      - eric_cc 4y ago
        > I suppose if a vast majority of Americans demanded a switch to BTC it could be done but if that was a real possibility it would be much easier to demand laws to stop the Fed instead of switching to a new currency. Stopping the fed would certainly be a great start. But we still need to switch currencies to one that cannot be created or controlled by the government. Whether bitcoin or something else, currency creation schedule should be damn near immutable, predictable, and the protocol should be ossified. A currency that is unpredictable and can be created whenever the government pleases is unacceptable.
ars 4y ago
And what justifies gold being worth any particular amount of money? The answer is the same: nothing. Except that that's not true for gold and it's not true for Bitcoin. Something has value if people want it. That's it. People want Bitcoin, therefore it has value. Your search for fundamentals is simply inappropriately applied. It's like asking what color is a smell, it's simply the wrong question.
- adam_arthur 4y ago
  Gold's intrinsic value is defined by its chemical properties and value for use in manufacturing. A large percentage of mined gold is used for productive purposes, not simply to sit in a vault. Companies buy gold for use in electronics manufacturing, believe it or not. But a portion of gold's market value is driven by a speculative spread over the intrinsic value, similar to BTC. Except for BTC the intrinsic portion is close to 0.
  - datadata 4y ago
    Air has a extremely high intrinsic value for its use in keeping humans alive. Yet the price of air is zero. Intrinsic value does not determine the price of something, the only determination of price is by a market.
    - adam_arthur 4y ago
      Its price is 0 because there are vast quantities of it. Price is a function of both supply/demand, with intrinsic value creating the rationale for the demand. I bet air would sell for a lot more out in Space or at the bottom of the ocean There is no rationale to the demand for Bitcoin beyond a greater fool, or edge use cases like illicit transactions. It's obvious that 95%+ of people buying Bitcoin are doing it to make USD returns.
      - datadata 4y ago
        In your belief system, what perpetuates for example the price difference between a .com domain and a .net domain? Is there an intrinsic value of .com over .net? Or do you believe that they should be equally priced.
datadata 4y ago
There is actually no upside limit, but there is a fundamental downside limit of zero. What justifies oil being $130 dollars a barrel vs $100? The answer is also nothing.
- rchaud 4y ago
  I wonder if comments like this are representative of the average crypto buyer. "The value of real commodities used in daily productive activity, is also entirely made up".
  - datadata 4y ago
    But it is entirely made up, it entirely depends on someone buying the oil and the price they are willing to pay. The fact that there is in principle a use for oil does not mean that there is a buyer, especially since oil is not truly fungible in that it has storage and transit costs. As an example, oil famously via future contracts traded at negative $37 during the covid crisis, meaning that you would have to pay someone to take oil off your hands. The fact that it is used in daily productive activity might be an argument that oil should in theory have a > 0 price, however the actual price is still made up by a market! There is still not a way to say that the intrinsic value of oil must be X dollars.
- adam_arthur 4y ago
  Yeah, I'm sure supply and demand mechanics around production and consumption of oil don't influence the price. I actually never considered that!
  - datadata 4y ago
    How can you measure the intrinsic value of oil other than with a market? I agree it should have a non zero value in theory, but my point is that the price of anything is determined only by what someone else is willing to pay for it. The fundamental value could be $1000 a barrel or $0.01 a barrel, the only way to find out is to have a market. Also, just because the fundamental value is > 0, it does not mean that the price must be > 0. If there is no buyer or no functional market, the price can be exactly 0.
tboyd47 4y ago
The downside is at least limited at 0. The upside is unlimited.
tim333 4y ago
(Number of people into bitcoin) x (average amount of portfolio they stick in bitcoin) = bitcoin price / number of bitcoins. In practice the bottom will probably be about $10k as people will start thinking that used to be $65k, maybe it'll go back, and buy some. It's all human psychology but so is the value of a lot of things.
- dorgo 4y ago
  Something is wrong with the equation. The right hand side of the equation is: > bitcoin price / number of bitcoins $23,304 / 19,066,500 BTC = $0.001 /BTC If there is one human into bitcoin, then they invested $0.001 ? If there are more people into bitcoin then they invested even less on average? It doesn't make any sense.
- adam_arthur 4y ago
  Price is defined by the most recent trade, nothing else. It doesn't matter how much money is in crypto accounts. When you buy crypto with USD that's a one time transaction that has no bearing on future price. E.g. the ARKK etf has had massive net dollar inflows YTD despite falling over 50% in the same timeframe
- cuteboy19 4y ago
  This is text based Technical Analysis, which is possibly the only thing that has less predictive power than actual TA
whiplash451 4y ago
But it won’t because « it will converge towards the world’s GDP in the end ». LOL.

What justifies Bitcoin being valued at 30k vs 20k? The answer is nothing. And same applies to 10k. Since there's no measurable intrinsic value, there's zero fundamental factor limiting the downside

deebosong 4y ago

To reiterate, you're basically saying it's just speculation and greater fool theory, correct? Because that's to me what it looks like functionally, while some people I know seem to deny this is what they're doing and telling themselves "it's the future of everything" for no other reason than that's what they want it to be (so they can make bank off of their speculative bet).

adam_arthur 4y ago
Yes. If you can't point to any math to justify a given price, there is no intrinsic value. Thus price is only driven by speculative factors. With stocks there are earnings that can be distributed back to shareholders. This is a measurable and explainable fundamental factor. Real estate has rents... Bonds have coupon payments. Crypto has nothing. Though some will pay you "yield" by diverting money from newer entrants... Aka pyramid-esque structure
- politician 4y ago
  Does your argument exclude foreign currency holdings?
  - adam_arthur 4y ago
    Currency value is relatively stable through actual use as a medium of exchange, salaries paid in the currency, government backing to maintain relatively stable pricing. Crypto has none of these. And if it's a good investment, then it's definitely not a good currency
    - eurasiantiger 4y ago
      >if it's a good investment, then it's definitely not a good currency The Bank of England would like a word with you.
      - nradov 4y ago
        That's kind of the point. Currencies which are pegged to other currencies at fixed exchange rates aren't good currencies at all. They're subject to sudden catastrophic revaluation. Fortunately most of the major fiat currencies now have floating exchange rates so that's generally no longer a problem.
- lostcolony 4y ago
  One of the major problems with Bitcoin is that it is being treated as both a currency, and an investment vehicle. As an investment vehicle, it's exactly as you say; there is no fundamental value it represents. As a currency, it has no governmental backing, and while it's possible to trade in currencies, the profit lies in the trade, and the various differing rates of exchange, NOT in the underlying currencies themselves. No one holds currency expecting deflation to make them better off.
bhouston 4y ago
Yes, Bitcoin is worth nothing but it is a "consensual reality" among a large group of people that it is worth something and thus it is. It is incredibly hard to predict if such a consensual reality will collapse -- but it can collapse if there is a strong "vibe shift" towards something else that competes effectively with the current "consensus." It is like fashion. What is considered stylish and not is just a group consensus. And it can shift relatively quickly, but it is hard to predict and certain people in key nexus have a lot more influence than the ramble.
- politician 4y ago
  Collective mythologies underpin most of modern life. Does the Turkish Lira have more or less intrinsic value than Bitcoin?
  - ryanbrunner 4y ago
    I think a key difference with traditional currencies is that the countries that issue that currency will do anything in their power to maintain at least some of the value of that currency. I'm not sure how true that is for crypto investors. It's likelier they'll cut their losses and run.
  - jahnu 4y ago
    Getting too hung up on the precise philosophical definition of intrinsic misses the point, imo. Things that make Lira less mythological and more intrinsicly valuable include: - It is a more stable store of value - It holds a more stable relationship to the value of everything else in the Turkish economy - It is more widely accepted for buying and selling good and services These three things are real world practical differences.
    - deleted 4y ago
      [deleted]
  - bhouston 4y ago
    To say that state-backed currencies are equivalent to private currencies is to greatly misunderstand how things work in finance. Traditional state-based currencies mostly exist because the government pays its obligations in that currency and also collects taxes in that currency. The state's population is forced to use that currency as a result for these behaviors. This is the main difference between a state-backed currency and "private currencies." This isn't to say that state-backed currencies can be a mess just like "private currencies." But these state-backed currencies fail with the governments based on balance of payments and debt and money printing, etc and it is very infrequent.
zhte415 4y ago
I was introduced to Bitcoin in 2011 by a friend. I'd never heard of it before, and it sounded like something I'd not be interested in. I didn't go all-in with him renting an apartment where the cost of electricity was paid by the landlord, it's basically free, but he 'gave' me some in lieu of his bar bill, just a handful, with the proviso I hang on to it and spread the word that there was use for it. In that long conversation, the most compelling 'use' was it's 'non use'. That it is intrinsically rare and so as long as it's achieved a sufficient momentum to continue to exist (aside from transactions, we went over various uses for the blockchain that I was struggling to understand), just having some is itself a diversification and thus valuable for that. Diversification like having some precious metal is too. 'Having' being an important point. Another friend was a gold nut (I mean that in a non-pejorative sense, a term he used) that wouldn't touch gold futures or any form of 'contractual gold' and wasn't that keen even on security boxes. In this, Bitcoin did make some sense. Just hanging on to some. Not for investment purposes, and not for speculative purposes, but for, depending on your perception, the value you may find in something 'rare' in your (somewhat) physical possession. This may be for a time of turmoil when 'rare' assets are extremely valuable, especially divisible ones (sufficiently 'rare' cash, for example, is well documented to be valuable at these times). 'How much' depending on your appetite: appetite for an asset _held for this purpose_ (a purpose that isn't investment or from-time-to-time speculation), and this 'how much' (price*quantity) re-balanced not based on a Bitcoin's price (nor gold's price per ounce) - from this perspective the day-to-day 'price' of Bitcoin becomes less relevant, re-balancing better smoothed than marked-to-market daily given it's volatility. [A small aside, but on this 'rarity': I remember clearly the first time I held a gold bar, by no means a common occurrence in my life. It was beautiful. Shaped more like a house brick than something stacked in Fort Knox, it had the portrait a family embossed on it, two parents, three children, the family dog, the chateau in which they lived, and their signatures. It was cast at the time of the French Revolution, and sits, certainly when I handled it and I imagine still today, unclaimed, in London, where it was sent for safe keeping. Sad.]

olalonde 4y ago

It's true but it's also true of fiat currencies (more or less).

colinmhayes 4y ago
Fiat currency has intrinsic value. You need it to pay taxes, don't have enough and you go to jail.
- olalonde 4y ago
  That's why I said more or less. Taxes probably only account for a small portion of this value and it is now possible to pay taxes in crypto (in some countries and cities).
  - Majromax 4y ago
    Even in those jurisdictions, taxes are still assessed in the local currency. Cryptocurrency is just a medium of exchange, so it has value in the same way that Visa the company has value.
    - olalonde 4y ago
      Assessing taxes in currency X does not give it value if those taxes can be paid in currency Y. It does not create any demand for it, unlike in the scenario where the taxes must be paid in it.
      - Majromax 4y ago
        Let's go back to the three basic roles of currency. A currency is a medium of exchange, a medium of account, and a store of value. Bitcoin certainly has value as a medium of exchange because it can be (and is) exchanged between people. A government that accepts bitcoin for payment of taxes adds to the exchange-value of the currency, certainly. Bitcoin also has some merit as a store of value, in that people observably hold bitcoin with the expectation that it will remain valuable. Ultimately, however, this role of currency is speculative: it requires belief that people will want the currency in the future at a reasonable price. This is also where crypto bulls and bears most disagree. Bitcoin has a much more ephemeral status as a medium of account, however. Stores aren't pricing their wares primarily in bitcoin; when they accept the currency they price primarily in local currency and perform a spot conversion. This is also what I was referring to above with jurisdictions not assessing taxes in bitcoin even if they accept it. The medium of account is the least flashy but perhaps most fundamental role of a currency; it provides a backstop of price stability. Repricing goods and services is hard. It obsoletes marketing campaigns, it confuses contractual expectations, and it can require literal printing costs re: price tags and the like. That stability, however, lets people think of one currency-unit as worth something real, not just some amount of another, more important currency. Bitcoin does not yet have this status, and this is where lack of tax assessment in bitcoin matters. I can't say that (e.g.) 0.1BTC will definitely pay my property taxes for a year, no matter what else happens to the currency in the meantime.

em1sar 4y ago

adam_arthur 4y ago
Everybody who made money in a bubble ended up being justified
rockbruno 4y ago
Please avoid using HN like Reddit. I'd be really interested in hearing an argument for why the poster is wrong instead of attacking them like a 12 year old.

danuker 4y ago

It would be a combination of: * supply * demand The supply is well-known in advance, and is an advantage to Bitcoin. US M2 money supply grew 8.04% in the past year [0], while Bitcoin's grew ~1.75% [1]. Demand is very volatile, and suffers from the bandwagon effect (price increase -> buy, price decrease -> sell). [0] - https://ycharts.com/indicators/us_m2_money_supply_yoy https://ycharts.com/indicators/us_m2_money_supply_yoy [1] - https://charts.woobull.com/bitcoin-inflation/ https://charts.woobull.com/bitcoin-inflation/

FollowingTheDao 4y ago
Yes, I heard there was a huge demand for Tulips back in the day...
- danuker 4y ago
  The tulip bubble did not have 80% crashes going to higher and higher floors.

hopefulengineer 4y ago

donkeyd 4y ago

The funny thing to me is that the BTC promoters keep talking about the blockchain being used to pay for stuff, like the occasional Tesla, or bananas in third world countries. However, last time I checked, about 90% of transactions involving BTC happened off the blockchain. It happened in marketplaces where no actual crypto is transacted and it's all in the databases of these marketplaces. The value of BTC has nothing to do with the actual use of the Bitcoin Blockchain. If anything, the ETH blockchain might have more value in the real world, since it's used to transact stupid monkey pictures and stuff like that.

eric_cc 4y ago
This is shortsighted and won’t age well. Consider the world in 2030. Another 8 years of advancements into bitcoin infrastructure, point of sale devices, mobile wallet integrations, etc Plus failed central banks, failed paper currencies, etc
- dghlsakjg 4y ago
  Bitcoin's first block dates back to January 2009, or 13 years. POS devices have existed since, at least, 2017, or five years. Despite that people are using crypto less as a currency today than they ever have. What are the next 8 years going to bring us that the past 13 haven't? It seems like as time goes on crypto becomes less useful rather than more as a general utility for buying stuff. Most crypto "currencies" are also a not a great store of value currently. Just for context, the Ukrainian Hryvnia has lost less value since the Russian invasion than bitcoin has lost today. A financial system more volatile than the economy of a country outmatched in a war with a superpower, is perhaps, not a system you want doing things that require stability.
  - eric_cc 4y ago
    > It seems like as time goes on crypto becomes less useful rather than more as a general utility for buying stuff. I said: Bitcoin. Not crypto. (The longer I’m in this space, the more I realize that scammy crypto is one of the biggest enemies of bitcoin adoption.) It may seem this way to you but you’re clearly not paying enough attention. Adoption curve is up. Many advancements have been and continue to be made on the front of consumer products. Let’s face it, companies like Square will drive mainstream usage. Consumer products will only get better and better and over time will be on par with products that use the dollar under the hood.

hacknat 4y ago

You've just described money. Is BTC good at being money? No. But your argument isn't the reason.

czbond 4y ago
The only things that give money value are leadership (faith in the government) or military (punitive damage).
- robbiep 4y ago
  You missed freedom of exchange, or that you can readily exchange it with the next person easily, which no crypto has been able to do
- hacknat 4y ago
  So gold’s day in the sun from the 15th century to the 1970s was what?
rootusrootus 4y ago
Generically, perhaps. But specific money like the USD has value backed up at the point of a gun.
- hacknat 4y ago
  That is not the only thing that has backed the value of money in the history of humanity. It (violence) is arguably the most inferior social mechanism for enforcing value that has been tried.

rglover 4y ago

> What justifies Bitcoin being valued at 30k vs 20k? That it's a safeguard (not hedge) against tyrannical money. This will play out over the next few years as governments will introduce digital currencies (CBDCs) to replace their own failing currencies (simultaneously robbing citizens of their savings). The bait-and-switch of this is that they will give out free money (it costs them nothing to do so) to entice people but not tell them that their money can expire, have its purchases limited to "approved" vendors, and be taken from them instantly without recourse. Bitcoin is a safeguard against this if you hold it in your custody. This is its ultimate value: it cannot be manipulated or stolen by the state. Something that's never existed in the history of humanity. There's a reason the genesis block contained this: https://en.bitcoin.it/wiki/File:Jonny1000thetimes.png https://en.bitcoin.it/wiki/File:Jonny1000thetimes.png

robbiep 4y ago
How many, or what percentage, of crypto owners/holders actually have their crypto in their own custody? I would hazard to say somewhere south of 1%. So what benefit is it? Everyone has only traded one form of vendor lock in to another (that is deserving of vastly less trust, as evidended by the Wild West of scams, rug pulls and outright frauds)
- rglover 4y ago
  That's not a fault of the technology. Many people want to pin the flaw of human behavior on Bitcoin but there's nothing inherent in the technology that forces people to do that. The literal "quickstart" of Bitcoin is to hold it in your own custody (running the Bitcoin software on your computer gives you a wallet you 100% control).
  - robbiep 4y ago
    I know how it works, and I’d argue it is a flaw of the technology. Money works because I can hand $10 to a 5 or a 95 year old and they know what to do with it. Very few people do anything other than speculate in crypto, and even fewer hold it in their own wallets as opposed to on exchanges. If the friction of getting started in the future of money requires IT support, then it isn’t going to work

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eric_cc 4y ago

Why does the paper dollar have buying power? What justifies its value? > The answer is nothing. Since there's no measurable intrinsic value, there's zero fundamental factor limiting the downside

adam_arthur 4y ago
The fact that it's the mandated unit of exchange for commerce in the US, and the government ensures it maintains a relatively stable value. It doesn't have intrinsic value, but it certainly has value by fiat/authority
- eric_cc 4y ago
  So USD’s value comes from authority, force and violence. We accept the USD because of the USA’s army, bombs, etc. We accept the fed and central banks and money printing. We accept the rigged point system. And how long is this sustainable before people have had enough? We now have an alternative. There is no bitcoin print button to bail out Washington at the expense of the regular people.
  - deeg 4y ago
    Even if I agreed with all your points (which I don't) why would the US government switch to BTC if that limited what the Fed could do? This is a debilitating flaw of BTC. I suppose if a vast majority of Americans demanded a switch to BTC it could be done but if that was a real possibility it would be much easier to demand laws to stop the Fed instead of switching to a new currency. But the government won't switch to BTC and the people will never demand it because a limited currency would hurt the economy by limiting growth.
    - eric_cc 4y ago
      > I suppose if a vast majority of Americans demanded a switch to BTC it could be done but if that was a real possibility it would be much easier to demand laws to stop the Fed instead of switching to a new currency. Stopping the fed would certainly be a great start. But we still need to switch currencies to one that cannot be created or controlled by the government. Whether bitcoin or something else, currency creation schedule should be damn near immutable, predictable, and the protocol should be ossified. A currency that is unpredictable and can be created whenever the government pleases is unacceptable.

ars 4y ago

And what justifies gold being worth any particular amount of money? The answer is the same: nothing. Except that that's not true for gold and it's not true for Bitcoin. Something has value if people want it. That's it. People want Bitcoin, therefore it has value. Your search for fundamentals is simply inappropriately applied. It's like asking what color is a smell, it's simply the wrong question.

adam_arthur 4y ago
Gold's intrinsic value is defined by its chemical properties and value for use in manufacturing. A large percentage of mined gold is used for productive purposes, not simply to sit in a vault. Companies buy gold for use in electronics manufacturing, believe it or not. But a portion of gold's market value is driven by a speculative spread over the intrinsic value, similar to BTC. Except for BTC the intrinsic portion is close to 0.
- datadata 4y ago
  Air has a extremely high intrinsic value for its use in keeping humans alive. Yet the price of air is zero. Intrinsic value does not determine the price of something, the only determination of price is by a market.
  - adam_arthur 4y ago
    Its price is 0 because there are vast quantities of it. Price is a function of both supply/demand, with intrinsic value creating the rationale for the demand. I bet air would sell for a lot more out in Space or at the bottom of the ocean There is no rationale to the demand for Bitcoin beyond a greater fool, or edge use cases like illicit transactions. It's obvious that 95%+ of people buying Bitcoin are doing it to make USD returns.
    - datadata 4y ago
      In your belief system, what perpetuates for example the price difference between a .com domain and a .net domain? Is there an intrinsic value of .com over .net? Or do you believe that they should be equally priced.

datadata 4y ago

There is actually no upside limit, but there is a fundamental downside limit of zero. What justifies oil being $130 dollars a barrel vs $100? The answer is also nothing.

rchaud 4y ago
I wonder if comments like this are representative of the average crypto buyer. "The value of real commodities used in daily productive activity, is also entirely made up".
- datadata 4y ago
  But it is entirely made up, it entirely depends on someone buying the oil and the price they are willing to pay. The fact that there is in principle a use for oil does not mean that there is a buyer, especially since oil is not truly fungible in that it has storage and transit costs. As an example, oil famously via future contracts traded at negative $37 during the covid crisis, meaning that you would have to pay someone to take oil off your hands. The fact that it is used in daily productive activity might be an argument that oil should in theory have a > 0 price, however the actual price is still made up by a market! There is still not a way to say that the intrinsic value of oil must be X dollars.
adam_arthur 4y ago
Yeah, I'm sure supply and demand mechanics around production and consumption of oil don't influence the price. I actually never considered that!
- datadata 4y ago
  How can you measure the intrinsic value of oil other than with a market? I agree it should have a non zero value in theory, but my point is that the price of anything is determined only by what someone else is willing to pay for it. The fundamental value could be $1000 a barrel or $0.01 a barrel, the only way to find out is to have a market. Also, just because the fundamental value is > 0, it does not mean that the price must be > 0. If there is no buyer or no functional market, the price can be exactly 0.

tboyd47 4y ago

The downside is at least limited at 0. The upside is unlimited.

tim333 4y ago

(Number of people into bitcoin) x (average amount of portfolio they stick in bitcoin) = bitcoin price / number of bitcoins. In practice the bottom will probably be about $10k as people will start thinking that used to be $65k, maybe it'll go back, and buy some. It's all human psychology but so is the value of a lot of things.

dorgo 4y ago
Something is wrong with the equation. The right hand side of the equation is: > bitcoin price / number of bitcoins $23,304 / 19,066,500 BTC = $0.001 /BTC If there is one human into bitcoin, then they invested $0.001 ? If there are more people into bitcoin then they invested even less on average? It doesn't make any sense.
adam_arthur 4y ago
Price is defined by the most recent trade, nothing else. It doesn't matter how much money is in crypto accounts. When you buy crypto with USD that's a one time transaction that has no bearing on future price. E.g. the ARKK etf has had massive net dollar inflows YTD despite falling over 50% in the same timeframe
cuteboy19 4y ago
This is text based Technical Analysis, which is possibly the only thing that has less predictive power than actual TA

whiplash451 4y ago

But it won’t because « it will converge towards the world’s GDP in the end ». LOL.