5 ms·

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

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.]

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.]