5 ms·

Markets aren't good at finding prices for pseudo-"assets" that have no value. A bitcoin price of $0 is a valid market equilibrium, and a stable one. Your argum

by uvdiv 14y ago

Markets aren't good at finding prices for pseudo-"assets" that have no value. A bitcoin price of $0 is a valid market equilibrium, and a stable one. Your argument is a rationale for a commodity currency. Markets are good at finding prices for high-volume competitive commodities such as wheat [0]. No one will ever turn down a wheat dollar: you can eat it. [0] http://www.google.com/finance?q=WEAT http://www.google.com/finance?q=WEAT.

dmm 14y ago
Gold can't be eaten. Why is it so expensive?
- uvdiv 14y ago
  Psychology. It could crash tomorrow: industrial gold consumption isn't driving the price.
- dualogy 14y ago
  A bitcoin can't be eaten, why is it worth $70? Maybe... BECAUSE it can't be eaten and has "no (economic) use". Think about it. You save your excess production for future consumption (your retirement and/or your offspring) -- in apples and burritos?
  - dmm 14y ago
    ;)
icebraining 14y ago
Bitcoin has value as a cheap and censorship-resistant way of transferring funds.
- uvdiv 14y ago
  When people stop using bitcoin, this value will disappear. It is not intrinsic value. It is value assigned by group psychology, like a bubble.
  - icebraining 14y ago
    When people stop using bitcoin, this value will disappear. That's true for everything. Whale oil was extremely popular for more than a century, now it's barely used. That doesn't mean it wasn't an useful thing at the time. It is not intrinsic value. There's no such thing. Value (market or use) is always relative to someone or some group of people. And even if the item is still useful in itself, the existence of better and/or cheaper alternatives may still drive its market value to zero. It is value assigned by group psychology, like a bubble. I think you're just not seeing Bitcoin with the right point of view. Instead of thinking of the speculators trading it like a commodity, think of it as a service, like Paypal. When I want to send money to someone else online, how can I do it? I have to use it some kind of service (bank transfer, Paypal, etc), and those services can be "convinced" to prevent my transaction (like when the CC companies prevented WIkileaks donations), or it can freeze my funds (see Paypal again), etc. Now, if people are willing to pay Paypal some percentage for that transfer, it means the service has some value. If Bitcoin can do the same, it stands to reason that it must have at the least some value as well. Now, this is different from the (real or not) value one gets by trading and holding Bitcoins, but that's just part of the whole system. For the record, I have zero bitcoins.
    - uvdiv 14y ago
      There's no such thing. Value (market or use) is always relative to someone or some group of people. Yes, but there's an important and qualitative difference between valuing something because it's useful, and only valuing something because a crowd of people value it, only because they know everyone else values it, only because... recursively. This is what I mean by "intrinsic value": it has a utility value independent of pure psychological value. Useful things like oil or wheat won't suddenly become useless. (They could be obsoleted, but that's not sudden or unexpected). But it's not that easy to reason about group psychology. Empirically, we know there have been many bubbles where everyone suddenly "agreed" something was actually worth much less than the going price and crashed it. We know psychologically can do that.
      - icebraining 14y ago

by uvdiv 14y ago

dmm 14y ago

Gold can't be eaten. Why is it so expensive?

uvdiv 14y ago
Psychology. It could crash tomorrow: industrial gold consumption isn't driving the price.
dualogy 14y ago
A bitcoin can't be eaten, why is it worth $70? Maybe... BECAUSE it can't be eaten and has "no (economic) use". Think about it. You save your excess production for future consumption (your retirement and/or your offspring) -- in apples and burritos?
- dmm 14y ago
  ;)

icebraining 14y ago

Bitcoin has value as a cheap and censorship-resistant way of transferring funds.

uvdiv 14y ago
When people stop using bitcoin, this value will disappear. It is not intrinsic value. It is value assigned by group psychology, like a bubble.
- icebraining 14y ago
  When people stop using bitcoin, this value will disappear. That's true for everything. Whale oil was extremely popular for more than a century, now it's barely used. That doesn't mean it wasn't an useful thing at the time. It is not intrinsic value. There's no such thing. Value (market or use) is always relative to someone or some group of people. And even if the item is still useful in itself, the existence of better and/or cheaper alternatives may still drive its market value to zero. It is value assigned by group psychology, like a bubble. I think you're just not seeing Bitcoin with the right point of view. Instead of thinking of the speculators trading it like a commodity, think of it as a service, like Paypal. When I want to send money to someone else online, how can I do it? I have to use it some kind of service (bank transfer, Paypal, etc), and those services can be "convinced" to prevent my transaction (like when the CC companies prevented WIkileaks donations), or it can freeze my funds (see Paypal again), etc. Now, if people are willing to pay Paypal some percentage for that transfer, it means the service has some value. If Bitcoin can do the same, it stands to reason that it must have at the least some value as well. Now, this is different from the (real or not) value one gets by trading and holding Bitcoins, but that's just part of the whole system. For the record, I have zero bitcoins.
  - uvdiv 14y ago
    There's no such thing. Value (market or use) is always relative to someone or some group of people. Yes, but there's an important and qualitative difference between valuing something because it's useful, and only valuing something because a crowd of people value it, only because they know everyone else values it, only because... recursively. This is what I mean by "intrinsic value": it has a utility value independent of pure psychological value. Useful things like oil or wheat won't suddenly become useless. (They could be obsoleted, but that's not sudden or unexpected). But it's not that easy to reason about group psychology. Empirically, we know there have been many bubbles where everyone suddenly "agreed" something was actually worth much less than the going price and crashed it. We know psychologically can do that.
    - icebraining 14y ago