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Bitcoins are valuable only because people are hoarding it. It's a classic case of bubble. In the end, they're just bits, and that doesn't have much value.

gbaygon 14y ago
Paper currency is valuable only because people agree on it. In the end, they're just green pieces of paper, and that doesn't have much value.
Klinky 14y ago
Paper doesn't have much value either, and precious metal values are also inflated thanks to hoarding/speculation.
- damian2000 14y ago
  Exactly OPs point. I think they meant that in the event of a crash, you won't be left with much. Same as for the case of hyper-inflation of a currency, or a devaluation in precious metals.
  - zanny 14y ago
    Go figure : when you are using a trust relationship between parties to negotiate value instead of just trading in raw goods, you are vulnerable to the destruction of that exchange-trust system. It is why all the people aruging gold is such a better investment than BTC are nuts. If gold dropped its market value overnight by 90%, you would still lose 90% of your potential fiat exchanged currency as if BTC dropped 90%. All gold has going for it is less volitility. If gold ever stopped being a reserve resource rather than a useful metal, you would not get a fraction of what you spent on your gold selling it to industrial plants to make conductive cable out of.
foxylad 14y ago
Your (traditional currency) bank balance is "just bits". The only reason that a number stored on a bank's computer has value is that we have all agreed to trust the bank not to mess with that number. They are allowed to add and subtract from it in very limited circumstances, usually only when they modify another bank balance by the same amount (unless it's a bank in Cyprus!). Bitcoin replaces that trust in banks with fancy cryptography. Assuming the cryptography is up to snuff, there is no reason why people won't come to accept it's value in time, just as we now accept that the "bits" that represent our bank balance denote value.
- nhaehnle 14y ago
  Thought experiment: I set up my own "bank", which is really just a little website that maintains accounts and a transaction ledger. I somehow manage to convince a large fraction of the population that I will follow certain rules and not mess with those numbers. Assuming that I do manage this, do you think those numbers on my website would become valuable? If yes, why? If no, why do you believe that trust is the reason that fiat currency is valuable? Consider the following alternative explanation: Fiat currency is valuable because there is demand for it. The prime source of demand for fiat currency is for taxes. The secondary source is from all sorts of contracts (in particular, mortgage and other debt service) that require lots of people to obtain it. Trust comes in only as a tertiary source, at best.

gbaygon 14y ago

Paper currency is valuable only because people agree on it. In the end, they're just green pieces of paper, and that doesn't have much value.

Klinky 14y ago

Paper doesn't have much value either, and precious metal values are also inflated thanks to hoarding/speculation.

damian2000 14y ago
Exactly OPs point. I think they meant that in the event of a crash, you won't be left with much. Same as for the case of hyper-inflation of a currency, or a devaluation in precious metals.
- zanny 14y ago
  Go figure : when you are using a trust relationship between parties to negotiate value instead of just trading in raw goods, you are vulnerable to the destruction of that exchange-trust system. It is why all the people aruging gold is such a better investment than BTC are nuts. If gold dropped its market value overnight by 90%, you would still lose 90% of your potential fiat exchanged currency as if BTC dropped 90%. All gold has going for it is less volitility. If gold ever stopped being a reserve resource rather than a useful metal, you would not get a fraction of what you spent on your gold selling it to industrial plants to make conductive cable out of.

foxylad 14y ago

Your (traditional currency) bank balance is "just bits". The only reason that a number stored on a bank's computer has value is that we have all agreed to trust the bank not to mess with that number. They are allowed to add and subtract from it in very limited circumstances, usually only when they modify another bank balance by the same amount (unless it's a bank in Cyprus!). Bitcoin replaces that trust in banks with fancy cryptography. Assuming the cryptography is up to snuff, there is no reason why people won't come to accept it's value in time, just as we now accept that the "bits" that represent our bank balance denote value.

nhaehnle 14y ago
Thought experiment: I set up my own "bank", which is really just a little website that maintains accounts and a transaction ledger. I somehow manage to convince a large fraction of the population that I will follow certain rules and not mess with those numbers. Assuming that I do manage this, do you think those numbers on my website would become valuable? If yes, why? If no, why do you believe that trust is the reason that fiat currency is valuable? Consider the following alternative explanation: Fiat currency is valuable because there is demand for it. The prime source of demand for fiat currency is for taxes. The secondary source is from all sorts of contracts (in particular, mortgage and other debt service) that require lots of people to obtain it. Trust comes in only as a tertiary source, at best.