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But Bitcoin has "exploded" in the past, crashing 70%+ several times, yet each time it had a higher and higher floor. How do you explain this?

robertlagrant 4y ago
It could be that people are just holding on. The question is: why is it worth anything at all?
- VLM 4y ago
  There's a fundamental floor of value where "in the bad old days" I once bought a specialty swiss army knife (a very custom gift; details utterly irrelevant) and I wanted the knife enough to pay middlemen about 20% overall to turn by USD into ... whatever the swiss were using at the time. It used to cost twice as much money to move money around the world than to move a small consumer good around the world. That's just how the world was. Weird to think it would have been half the cost to mail the swiss a gold coin than to transfer money all legally. Clearly, I didn't think the middlemen provided 20% of value, but I was willing to cough up the cash to perform the overall transaction. If a cheaper money transfer option existed I'd never have used the middlemen, whom provided nothing of value to me for their 20% charge. Cheaper options do exist now... There's a lot of hand waving, but if you trust paypal, which you probably should not, the cost of moving money internationally has dropped to about 5% and the cost of currency conversions has dropped to 4%. I would assume they double dip and converting USD in USA to swiss whatevers in Switzerland would cost about 9%. Then of course there are withdrawal fees and so forth stacked on top. Anyway, lets say you can turn and burn bitcoin in "somewhat less than an hour" so simply divide total international daily transaction volume by twenty five or so and that seems a reasonable starting point for a store of value. If the price gets too high making it cost more to use BTC than paypal, then the BTC transaction volume would seem to drop until prices drop and people start using BTC again. Obviously for various UI and enduser reasons I would not expect all international trade to flow over either BTC or paypal or the legacy banking system, but "enough" should be there to support the BTC price at some level.
  - subradios 4y ago
    Don't forget crime and startup business. I ordered equipment for a company from a European seller , and because I wasn't a VC backed technology startup, instead focused on physical goods- there was no army of people to help me set up an international bank for my company. So what I did was drop them some bitcoin. Just getting the wire approvals would've taken longer.
  - robertlagrant 4y ago
    That's fair. Buying things overseas is much, much simpler. I wonder what the value of that would be if BTC were to only be valued on that basis.
feyes 4y ago
Yea this is what decriers don't explain. I may not view at as a strong currency for which it was intended but it's undeniable it has become a store for speculative value that isn't going away anytime soon. There's a lot of trash in the crypto world but also some valid projects.
- nxmnxm99 4y ago
  I don't know how you equate "speculative value" with "valid projects". Bitcoin has value because people are long on crypto. "Long" has an end date - just because it's 50 years instead of 10 years doesn't mean it's not coming.
  - danuker 4y ago
    If there's less crypto being issued than fiat, and demand were constant as a % of people's wealth (which I admit is a big if), then crypto is bound to go up. There is no end date to government currency debasement.
    - lottin 4y ago
      This is to say that if demand outpaces supply, price is going to go up. However, this is true of any asset. So why mention specifically 'crypto', as if there was something magical about 'crypto' that means it's bound to go up?
      - danuker 4y ago
        My point is yes, it is true of any asset. You might as well own cans of beans. But the purpose is to stave off the effects of monetary expansion while staying liquid. Cryptocurrency is in a special niche in that parameter space. While other assets are bound to provide long-term returns greater than inflation (for example, stocks and bonds [1]), cryptocurrency can not surpass inflation long-term, but it still does so while demand is growing. In addition, even after it reaches a stable demand (which I reckon will be in 5-10 years, with market saturation), it will be a means of diversification (like gold is currently). [1] - https://totalrealreturns.com/ https://totalrealreturns.com/
philliphaydon 4y ago
I actually thought the Russian invasion of Ukraine would result in more Bitcoin usage and the price going up again.
usrusr 4y ago
Just like amongst stamp collectors, a certain group will simply never sell. They'd rather never get a cent for they collectibles than sell at a price lower than what they feel would be "appropriate". Trade activies in irrational markets like that lie somewhere on the spectrum between the extremes of rational trade and belief affirmation ritual.
- jacquesm 4y ago
  And some collectors just collect and don't really care about the money.
jacquesm 4y ago
Lots of people go base jumping. I can't explain it, and yet they do, in spite of multiple terrible crashes.

robertlagrant 4y ago

It could be that people are just holding on. The question is: why is it worth anything at all?

VLM 4y ago
There's a fundamental floor of value where "in the bad old days" I once bought a specialty swiss army knife (a very custom gift; details utterly irrelevant) and I wanted the knife enough to pay middlemen about 20% overall to turn by USD into ... whatever the swiss were using at the time. It used to cost twice as much money to move money around the world than to move a small consumer good around the world. That's just how the world was. Weird to think it would have been half the cost to mail the swiss a gold coin than to transfer money all legally. Clearly, I didn't think the middlemen provided 20% of value, but I was willing to cough up the cash to perform the overall transaction. If a cheaper money transfer option existed I'd never have used the middlemen, whom provided nothing of value to me for their 20% charge. Cheaper options do exist now... There's a lot of hand waving, but if you trust paypal, which you probably should not, the cost of moving money internationally has dropped to about 5% and the cost of currency conversions has dropped to 4%. I would assume they double dip and converting USD in USA to swiss whatevers in Switzerland would cost about 9%. Then of course there are withdrawal fees and so forth stacked on top. Anyway, lets say you can turn and burn bitcoin in "somewhat less than an hour" so simply divide total international daily transaction volume by twenty five or so and that seems a reasonable starting point for a store of value. If the price gets too high making it cost more to use BTC than paypal, then the BTC transaction volume would seem to drop until prices drop and people start using BTC again. Obviously for various UI and enduser reasons I would not expect all international trade to flow over either BTC or paypal or the legacy banking system, but "enough" should be there to support the BTC price at some level.
- subradios 4y ago
  Don't forget crime and startup business. I ordered equipment for a company from a European seller , and because I wasn't a VC backed technology startup, instead focused on physical goods- there was no army of people to help me set up an international bank for my company. So what I did was drop them some bitcoin. Just getting the wire approvals would've taken longer.
- robertlagrant 4y ago
  That's fair. Buying things overseas is much, much simpler. I wonder what the value of that would be if BTC were to only be valued on that basis.

feyes 4y ago

Yea this is what decriers don't explain. I may not view at as a strong currency for which it was intended but it's undeniable it has become a store for speculative value that isn't going away anytime soon. There's a lot of trash in the crypto world but also some valid projects.

nxmnxm99 4y ago
I don't know how you equate "speculative value" with "valid projects". Bitcoin has value because people are long on crypto. "Long" has an end date - just because it's 50 years instead of 10 years doesn't mean it's not coming.
- danuker 4y ago
  If there's less crypto being issued than fiat, and demand were constant as a % of people's wealth (which I admit is a big if), then crypto is bound to go up. There is no end date to government currency debasement.
  - lottin 4y ago
    This is to say that if demand outpaces supply, price is going to go up. However, this is true of any asset. So why mention specifically 'crypto', as if there was something magical about 'crypto' that means it's bound to go up?
    - danuker 4y ago
      My point is yes, it is true of any asset. You might as well own cans of beans. But the purpose is to stave off the effects of monetary expansion while staying liquid. Cryptocurrency is in a special niche in that parameter space. While other assets are bound to provide long-term returns greater than inflation (for example, stocks and bonds [1]), cryptocurrency can not surpass inflation long-term, but it still does so while demand is growing. In addition, even after it reaches a stable demand (which I reckon will be in 5-10 years, with market saturation), it will be a means of diversification (like gold is currently). [1] - https://totalrealreturns.com/ https://totalrealreturns.com/

philliphaydon 4y ago

I actually thought the Russian invasion of Ukraine would result in more Bitcoin usage and the price going up again.

usrusr 4y ago

Just like amongst stamp collectors, a certain group will simply never sell. They'd rather never get a cent for they collectibles than sell at a price lower than what they feel would be "appropriate". Trade activies in irrational markets like that lie somewhere on the spectrum between the extremes of rational trade and belief affirmation ritual.

jacquesm 4y ago
And some collectors just collect and don't really care about the money.

jacquesm 4y ago

Lots of people go base jumping. I can't explain it, and yet they do, in spite of multiple terrible crashes.