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The truth of the matter is that Bitcoin isn't at a price even a fraction of what it will ultimately be worth if it becomes a currency in wide use. If it becomes

by Aqueous 13y ago

The truth of the matter is that Bitcoin isn't at a price even a fraction of what it will ultimately be worth if it becomes a currency in wide use. If it becomes a currency in wide use its market cap will start to resemble those of national currencies, and since there will only ever be a limited number of BitCoins, that means that if this happens a single BitCoin will be worth thousands, and it won't be meaningful any more to talk about a single BitCoin as a denomination of casual expenditures. Just because something is highly valued doesn't mean it is in a bubble. It just means it is in demand. A single share of Berkshire Hathaway is worth $173,201 at the moment. Is that company in a bubble? Most people would say no - it is worth so much because the market bears that price, because Berkshire Hathaway has generated an enormous amount of value for its shareholders by investing in companies that are themselves inherently valuable. If BitCoin is capable of being traded for valuable goods and services, that means it is exactly as valuable as the market says it is. The real problem we have to contend with is the fact that it makes more sense to hold on to BitCoins than it does to spend them. And this will be the case until the BitCoin reaches some kind of plateau of value.

gamblor956 13y ago
Bitcoin will no monger become a means of financial exchange than wire transfer, which has been around for more than a hundred years. That is--Bitcoin may become one of many potential exchange mechanisms for transactions in which irreversibility is desirable (such as cross-border transactions) but will otherwise remain a second-class mechanism for most other transactions. Also...Berkshire Hathaway is worth $170k+ because it owns actual, valuable, real-world assets, most of which produce income. The BH stock price reflects the value of those assets, plus the expected future value of the income that those assets will produce. Bitcoin does not own assets, nor does it otherwise generate income. Thus, a comparison to BH is entirely misplaced.
- drcode 13y ago
  Just like the internet will be nothing more than a fancy fax machine. http://en.wikiquote.org/wiki/Paul_Krugman http://en.wikiquote.org/wiki/Paul_Krugman
  - gwern 13y ago
    Ahem: https://en.wikipedia.org/wiki/Productivity_paradox https://en.wikipedia.org/wiki/Productivity_paradox
    - drcode 13y ago
      Interesting line of thought, I agree, but I don't think many Economists nowadays would seriously argue that we'd be more productive if the internet had never happened (this is mainly an idea from the 80s and 90s, pre-internet) ...but I find the section on how credit card overhead is a big factor in lost technological productivity very ironic in a bitcoin thread.
mahranch 13y ago
"since there will only ever be a limited number of BitCoins" While it's true that there is a limited number of bitcoins, it's a misleading claim since they can continue to add decimal points. According to FAQ on the bitcoin website, they can do this as needed, infinitely.
- XorNot 13y ago
  Which doesn't matter because everytime you add a decimal point, no one gets any richer. No value is produced for people actually transacting bitcoin, whereas those doing nothing and hoarding it are granted more purchasing power for doing absolutely nothing. BTC simply sits at a greed cross-section: it appealed to a certain group in terms of technology, and greed to convince people to buy in with real money - but the same properties which get those people in fundamentally kill it as a currency, since no one's who's out has any reason to accept a currency where they will be permanently impoverished, and there's no external reason for them to do so (i.e. you don't pay taxes in BTC).
  - jerguismi 13y ago
    Well, there might be certain value in being able to transact in smaller fractions. I don't see how accepting bitcoin impoverishes the accepting party (an permanently, wtf?). In fact, I guess most merchants who have accepted btc and hold it to date have probably gained some pretty good value from that to date. Of course that might change.
- jimktrains2 13y ago
  No, you can break them into 10e8 Satoshi per BTC. Still a large number, though.
- modeless 13y ago
  It's not misleading. Adding decimal points doesn't change the value of current bitcoins. A bitcoin you buy today is still a bitcoin 10 years from now even if more decimal points are added. Furthermore, I don't think it's as easy as implied there. The protocol could be modified fairly easily, but then every piece of Bitcoin-related software in the world would have to be updated to handle the extra decimal points. By the time we need extra decimal points, Bitcoin would have to be so widespread that the difficulty would be comparable to fixing all software that uses 32-bit Unix timestamps, or switching everybody from IPv4 to IPv6.

by Aqueous 13y ago

gamblor956 13y ago

Bitcoin will no monger become a means of financial exchange than wire transfer, which has been around for more than a hundred years. That is--Bitcoin may become one of many potential exchange mechanisms for transactions in which irreversibility is desirable (such as cross-border transactions) but will otherwise remain a second-class mechanism for most other transactions. Also...Berkshire Hathaway is worth $170k+ because it owns actual, valuable, real-world assets, most of which produce income. The BH stock price reflects the value of those assets, plus the expected future value of the income that those assets will produce. Bitcoin does not own assets, nor does it otherwise generate income. Thus, a comparison to BH is entirely misplaced.

drcode 13y ago
Just like the internet will be nothing more than a fancy fax machine. http://en.wikiquote.org/wiki/Paul_Krugman http://en.wikiquote.org/wiki/Paul_Krugman
- gwern 13y ago
  Ahem: https://en.wikipedia.org/wiki/Productivity_paradox https://en.wikipedia.org/wiki/Productivity_paradox
  - drcode 13y ago
    Interesting line of thought, I agree, but I don't think many Economists nowadays would seriously argue that we'd be more productive if the internet had never happened (this is mainly an idea from the 80s and 90s, pre-internet) ...but I find the section on how credit card overhead is a big factor in lost technological productivity very ironic in a bitcoin thread.

mahranch 13y ago

"since there will only ever be a limited number of BitCoins" While it's true that there is a limited number of bitcoins, it's a misleading claim since they can continue to add decimal points. According to FAQ on the bitcoin website, they can do this as needed, infinitely.

XorNot 13y ago
Which doesn't matter because everytime you add a decimal point, no one gets any richer. No value is produced for people actually transacting bitcoin, whereas those doing nothing and hoarding it are granted more purchasing power for doing absolutely nothing. BTC simply sits at a greed cross-section: it appealed to a certain group in terms of technology, and greed to convince people to buy in with real money - but the same properties which get those people in fundamentally kill it as a currency, since no one's who's out has any reason to accept a currency where they will be permanently impoverished, and there's no external reason for them to do so (i.e. you don't pay taxes in BTC).
- jerguismi 13y ago
  Well, there might be certain value in being able to transact in smaller fractions. I don't see how accepting bitcoin impoverishes the accepting party (an permanently, wtf?). In fact, I guess most merchants who have accepted btc and hold it to date have probably gained some pretty good value from that to date. Of course that might change.
jimktrains2 13y ago
No, you can break them into 10e8 Satoshi per BTC. Still a large number, though.
modeless 13y ago
It's not misleading. Adding decimal points doesn't change the value of current bitcoins. A bitcoin you buy today is still a bitcoin 10 years from now even if more decimal points are added. Furthermore, I don't think it's as easy as implied there. The protocol could be modified fairly easily, but then every piece of Bitcoin-related software in the world would have to be updated to handle the extra decimal points. By the time we need extra decimal points, Bitcoin would have to be so widespread that the difficulty would be comparable to fixing all software that uses 32-bit Unix timestamps, or switching everybody from IPv4 to IPv6.