6 ms·

BitCoin is currently capitalized like a mid-sized stock. 11m * 80 = 880 million company.

betterunix 14y ago
Unlike Bitcoin, stock in a company has meaning beyond the stock market, such as voting rights or equity in the company. Bitcoin makes no guarantees at all -- even fiat currencies like USD carry some sort of legal meaning (e.g. that you can use the currency to pay taxes or to settle debts).
- vrotaru 14y ago
  The stock market is a place the stock is traded. A bitcoin exchange is a place where the bitcoin is traded. Obviously this is neither the only actual, nor potential use of bitcoin.
- fnordfnordfnord 14y ago
  >Unlike Bitcoin, stock in a company has meaning beyond the stock market Or at least that's what we like to think.
  - hkmurakami 14y ago
    1 stock represents fractional ownership of the company, which owns physical assets, liabilities, accounts payable, etc. In other words, real life assets. On the other hand BitCoin fundamentally has no tangible asset backing it. Its price is driven purely by supplly/demand, rather than any sort of book value. I don't know enough about macro finance to discern whether this is a good/bad/neutral thing for BitCoin, but it's a worthy distinction to make in comparing stock and Btc.
    - zimbatm 14y ago
      Couldn't the real life costs of mining the coins be a base for the bitcoin value ?
      - dragonwriter 14y ago
        > Couldn't the real life costs of mining the coins be a base for the bitcoin value ? Not really. You can't recover the costs by "melting down" bitcoins, so it doesn't provide a support for the value of bitcoins the way that the use-value of gold might provide a support for the value of gold currency. Clearly, if the cost to mine coins is less than the market value plus the expected transaction fees that can be earned by mining (mining is also transaction verification), there is no economic incentive to mine, but that doesn't operate as a price floor so much as a limit on the viability of the system.
      - DennisP 14y ago
        It's more like the value determines the mining cost. The coins are created at a fixed rate, and the difficulty of creating them adjusts to the total computation being spent on the task. As the value of the created coins go up, miners can afford to spend more on the effort in an attempt to capture a bigger share.
      - philwelch 14y ago
        Putting cost into something doesn't generate value. I have an acre of land. If I hired a team of workers to repeatedly dig a hole in my land and then refill it with the dirt they dug up, my land wouldn't become worth a million dollars just because I expended a million dollars of labor doing something pointless. Likewise, bitcoins don't have value just because you expend valuable computing and energy resources mining them.
      - consz 14y ago
        If I spend $500 in energy to cook mac and cheese, is that mac and cheese worth $500? More precisely: Does the cost of making something have anything to do with the price it is sold at?
        dllthomas 14y ago
        "Anything"? Yes. People aren't going to make new things at cost X with the goal of selling them at cost Y. If they did, the price would fall further, faster. Therefore, there's some relationship. That said, it's by no means a floor, particularly on goods that stick around a while, since the things already in existence can more than meet the demand, which can drive the price arbitrarily low.
    - DennisP 14y ago
      I'd say in a stable market the real value of bitcoins would be the value of goods exchanged for bitcoins in a given time divided by the velocity of money. But since the market is expanding, it makes sense for investors to be forward-thinking, so the value depends on your projection of the growth of that market.
    - esrauch 14y ago
      It seems that the primary reason for owning stock is almost never the voting rifbts or the dividends (obvious considering there are nonvoting stocks and nondividend stocks which are still valued).
      - dllthomas 14y ago
        The primary reason for owning stock is voting rights only when you're talking about owning enough of the stock that your vote makes a significant difference, which in a publicly traded stock is difficult-to-impossible for a small investor, which is most investors. The primary reason for owning stock is absolutely voting rights during hostile takeover where the acquiring company buys enough of the stock to vote out the current management in favor of management that will approve the merger. On the other hand, dividends are actually quite often the primary reason for owning stocks, just not typically the stocks we talk about a lot here. Stocks in large, well established companies are often pretty stable, growing only with the market at large, to the point that the dividend can certainly be the bulk of the payout for owning the stock.
    - mattm 14y ago
      I suggest anyone read "Barbarians at the Gate" about the fall of RJR Nabisco if you believe that stock ownership actually means you have an influence on the company.
- ekianjo 14y ago
  voting rights? most stock holders don't get any in case you did not notice.
  - dllthomas 14y ago
    [citation needed] It is my understanding that common stock typically does have voting rights.
    - ttrreeww 14y ago
      You can vote, but you can't change anything. If voting could actually change anything, they'd make it illegal.
smsm42 14y ago
Mid-sized company usually has real assets and financials that can be used to evaluate its fundamental value. BitCoin valuation now is nothing more than shared dream, having no fundamentals whatsoever behind it.
- 9k9 14y ago
  The fact it can be used to quickly do safe micropayments online is a fundamental value.
- BrianEatWorld 14y ago
  I understand your point, but as a currency, it does have fundamentals. The price of a currency is determined by supply and demand. The supply side of bitcoin is fairly well understood and aside form the periodic adjustments, its pretty easy to forecast. The demand side is far murkier and, like a currency, based on several uses. You have store of value, which may explain part of the recent spike due to failing currencies in Europe. Transactional uses, which have also been increasing as more retailers have begun accepting bitcoin. Unit of account, which is, due to a lack of stability right now, the worst use of bitcoin. So, if you view bitcoins as a stock, you are right, the fundamentals aren't there, but its not a stock. As a currency, the fundamentals are there, but until you can quant the demand for alternatives to gov based currencies and the transacitonal demand, it will be tough assigning a "correct" price for bitcoins and thus the market will be volatile.
  - smsm42 14y ago
    Currency and company's shares are two very different things. Currency is meant to be a shared dream, since it is no more than means of exchange and means of bringing values of many things to one common measure. However, when you start treating currency as investment, the picture becomes much more complicated. Especially with bitcoin, because the value right now has long detached from any supply or demand considerations and is driven by pure speculation. As such, it is heaven for speculators, but entirely unsuitable for use as a means of exchange, since it is unpredictable and impossible to use in business which values predictability. Let's say you want to build a business that accepts bitcoins. Unless your whole supply chain is also paid in bitcoins, how can you price your products if one day bitcoin costs 45 USD, next day it's 250 USD and next day it's 80 USD? How can you predict your profits, give forecasts to investors, make long-term plans, basing your business on such huge volatility? Of course, there are ways to deal with it, and there are even ways to profit from it. But for average users of currency - used as currency, not as means of gambling - bitcoin right now is absolutely wrong. I would go even further and say any business that accepts it and doesn't do it for the tax/law enforcement evasion reasons is doing it for PR reasons only. >>>> As a currency, the fundamentals are there I don't understand what you mean by this. Currency as such needs no fundamentals as long as there are people willing to accept it. But currency as money is different from currency treated as an investment commodity. Confusing the two is a dangerous mistake IMO. And I see no fundamental reasons driving recent rally in bitcoins - could you name one? Please don't talk about weakening USD - if that would be the reason we'd see rallies in all traditional physical commodities used as hedge against fiat currency - such as noble metals, and we'd see other commodities raise at least in similar manner, and we'd see it in relation to other currencies too. While modest raise in bitcoin could be explained by weakening dollar, it's no way even near what we see here. So any other ideas?

Unlike Bitcoin, stock in a company has meaning beyond the stock market, such as voting rights or equity in the company. Bitcoin makes no guarantees at all -- even fiat currencies like USD carry some sort of legal meaning (e.g. that you can use the currency to pay taxes or to settle debts).

vrotaru 14y ago
The stock market is a place the stock is traded. A bitcoin exchange is a place where the bitcoin is traded. Obviously this is neither the only actual, nor potential use of bitcoin.
fnordfnordfnord 14y ago
>Unlike Bitcoin, stock in a company has meaning beyond the stock market Or at least that's what we like to think.
- hkmurakami 14y ago
  1 stock represents fractional ownership of the company, which owns physical assets, liabilities, accounts payable, etc. In other words, real life assets. On the other hand BitCoin fundamentally has no tangible asset backing it. Its price is driven purely by supplly/demand, rather than any sort of book value. I don't know enough about macro finance to discern whether this is a good/bad/neutral thing for BitCoin, but it's a worthy distinction to make in comparing stock and Btc.
  - zimbatm 14y ago
    Couldn't the real life costs of mining the coins be a base for the bitcoin value ?
    - dragonwriter 14y ago
      > Couldn't the real life costs of mining the coins be a base for the bitcoin value ? Not really. You can't recover the costs by "melting down" bitcoins, so it doesn't provide a support for the value of bitcoins the way that the use-value of gold might provide a support for the value of gold currency. Clearly, if the cost to mine coins is less than the market value plus the expected transaction fees that can be earned by mining (mining is also transaction verification), there is no economic incentive to mine, but that doesn't operate as a price floor so much as a limit on the viability of the system.
    - DennisP 14y ago
      It's more like the value determines the mining cost. The coins are created at a fixed rate, and the difficulty of creating them adjusts to the total computation being spent on the task. As the value of the created coins go up, miners can afford to spend more on the effort in an attempt to capture a bigger share.
    - philwelch 14y ago
      Putting cost into something doesn't generate value. I have an acre of land. If I hired a team of workers to repeatedly dig a hole in my land and then refill it with the dirt they dug up, my land wouldn't become worth a million dollars just because I expended a million dollars of labor doing something pointless. Likewise, bitcoins don't have value just because you expend valuable computing and energy resources mining them.
    - consz 14y ago
      If I spend $500 in energy to cook mac and cheese, is that mac and cheese worth $500? More precisely: Does the cost of making something have anything to do with the price it is sold at?
      - dllthomas 14y ago
        "Anything"? Yes. People aren't going to make new things at cost X with the goal of selling them at cost Y. If they did, the price would fall further, faster. Therefore, there's some relationship. That said, it's by no means a floor, particularly on goods that stick around a while, since the things already in existence can more than meet the demand, which can drive the price arbitrarily low.
  - DennisP 14y ago
    I'd say in a stable market the real value of bitcoins would be the value of goods exchanged for bitcoins in a given time divided by the velocity of money. But since the market is expanding, it makes sense for investors to be forward-thinking, so the value depends on your projection of the growth of that market.
  - esrauch 14y ago
    It seems that the primary reason for owning stock is almost never the voting rifbts or the dividends (obvious considering there are nonvoting stocks and nondividend stocks which are still valued).
    - dllthomas 14y ago
      The primary reason for owning stock is voting rights only when you're talking about owning enough of the stock that your vote makes a significant difference, which in a publicly traded stock is difficult-to-impossible for a small investor, which is most investors. The primary reason for owning stock is absolutely voting rights during hostile takeover where the acquiring company buys enough of the stock to vote out the current management in favor of management that will approve the merger. On the other hand, dividends are actually quite often the primary reason for owning stocks, just not typically the stocks we talk about a lot here. Stocks in large, well established companies are often pretty stable, growing only with the market at large, to the point that the dividend can certainly be the bulk of the payout for owning the stock.
  - mattm 14y ago
    I suggest anyone read "Barbarians at the Gate" about the fall of RJR Nabisco if you believe that stock ownership actually means you have an influence on the company.
ekianjo 14y ago
voting rights? most stock holders don't get any in case you did not notice.
- dllthomas 14y ago
  [citation needed] It is my understanding that common stock typically does have voting rights.
  - ttrreeww 14y ago
    You can vote, but you can't change anything. If voting could actually change anything, they'd make it illegal.

smsm42 14y ago

Mid-sized company usually has real assets and financials that can be used to evaluate its fundamental value. BitCoin valuation now is nothing more than shared dream, having no fundamentals whatsoever behind it.

9k9 14y ago
The fact it can be used to quickly do safe micropayments online is a fundamental value.
BrianEatWorld 14y ago
I understand your point, but as a currency, it does have fundamentals. The price of a currency is determined by supply and demand. The supply side of bitcoin is fairly well understood and aside form the periodic adjustments, its pretty easy to forecast. The demand side is far murkier and, like a currency, based on several uses. You have store of value, which may explain part of the recent spike due to failing currencies in Europe. Transactional uses, which have also been increasing as more retailers have begun accepting bitcoin. Unit of account, which is, due to a lack of stability right now, the worst use of bitcoin. So, if you view bitcoins as a stock, you are right, the fundamentals aren't there, but its not a stock. As a currency, the fundamentals are there, but until you can quant the demand for alternatives to gov based currencies and the transacitonal demand, it will be tough assigning a "correct" price for bitcoins and thus the market will be volatile.
- smsm42 14y ago
  Currency and company's shares are two very different things. Currency is meant to be a shared dream, since it is no more than means of exchange and means of bringing values of many things to one common measure. However, when you start treating currency as investment, the picture becomes much more complicated. Especially with bitcoin, because the value right now has long detached from any supply or demand considerations and is driven by pure speculation. As such, it is heaven for speculators, but entirely unsuitable for use as a means of exchange, since it is unpredictable and impossible to use in business which values predictability. Let's say you want to build a business that accepts bitcoins. Unless your whole supply chain is also paid in bitcoins, how can you price your products if one day bitcoin costs 45 USD, next day it's 250 USD and next day it's 80 USD? How can you predict your profits, give forecasts to investors, make long-term plans, basing your business on such huge volatility? Of course, there are ways to deal with it, and there are even ways to profit from it. But for average users of currency - used as currency, not as means of gambling - bitcoin right now is absolutely wrong. I would go even further and say any business that accepts it and doesn't do it for the tax/law enforcement evasion reasons is doing it for PR reasons only. >>>> As a currency, the fundamentals are there I don't understand what you mean by this. Currency as such needs no fundamentals as long as there are people willing to accept it. But currency as money is different from currency treated as an investment commodity. Confusing the two is a dangerous mistake IMO. And I see no fundamental reasons driving recent rally in bitcoins - could you name one? Please don't talk about weakening USD - if that would be the reason we'd see rallies in all traditional physical commodities used as hedge against fiat currency - such as noble metals, and we'd see other commodities raise at least in similar manner, and we'd see it in relation to other currencies too. While modest raise in bitcoin could be explained by weakening dollar, it's no way even near what we see here. So any other ideas?