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You can convince yourself that price discovery is what's causing the rise of the value of BTC. But it's not. It's rampant speculation. Why? Because there is

by steven2012 13y ago

You can convince yourself that price discovery is what's causing the rise of the value of BTC. But it's not. It's rampant speculation. Why? Because there is no substantial use of BTC to buy and sell goods. And even if there were (which there isn't), the fact that the currency has doubled in the last 2 weeks suggests that there is massive hoarding going on now, and people would rather own the currency rather than exchange them for goods or services. Why would you spend 1 BTC when the price of the good or service could halve in BTC in a week? It's better to just dig out your old fiat currency and pay for it with that, since the price is much more stable.

saosebastiao 13y ago
There is an incredibly suitable use for bitcoin: as an exchange currency. Its decentralized nature makes it extremely attractive to smaller nations as a way of maintaining liquidity, enabling trade, all while not propping up another nation with competing interests by making their currency arbitrarily valuable. Its digital nature makes it attractive to currency trading markets for purely logistical reasons. You are probably right about the median case, but I say there is a small chance of a >$10M value for this reason alone.
Aqueous 13y ago
All speculation is based on the likely future value of something. If millions of people start believing BitCoin will eventually be a world currency, then it will be. I agree that it is price speculation. Is speculation always based on a delusion?
- steven2012 13y ago
  Rampant price speculation where the price encounters the incredible volatility that BTC has experienced is ALWAYS based on delusion. If you know of any counter examples, I would be interested in learning about them. And remember, I have no problems with speculation and people making money off of this. And this speculation can go on for years. But in the end BTC will be worthless, because there is no inherent value to a BTC. Even the fundamental promise of Bitcoin being anonymous is inherently flawed! Sure, you can money launder it, but the US government will make quick work of that in due time. At least with tulip bulbs, you can grown them into flowers, and gold can be turned into jewelery and has industrial uses. BTC has literally zero inherent or fundamental uses for it. My guess is that it will keep rising until the US government starts cracking down hard on it, like they did with poker sites, etc. They've already put it on their radar screen, and a lot of these companies that deal with BTC don't understand the ramifications of money transmission. Once the US government starts shutting down in earnest, people will dump their BTC and it will be over.
  - Aqueous 13y ago
    BTC does have inherent value. It is valuable to vendors because it is frictionless money transfer without regard to borders or regulation and very small transaction fees, making it very inexpensive to accept payments from anywhere in the world. It is valuable to authorities because of the public ledger and because it neutralizes the threat of foreign control over money supply. It is valuable to consumers because of its easy divisibility (it is far more divisible than gold) and the ability to spend it quickly and anonymously. Think of the BitCoin network as a financial superconductor - the resistance to movement is so small that its negligible. Is that not inherently valuable to our economy as a whole?
    - steven2012 13y ago
      Doesn't it take a while for a BTC transaction to get confirmation? If so, that doesn't seem very frictionless. As well, since those transactions can be tracked, I don't think it will take very long for governments to start cracking down on them, and taxing them. They might force you to register your wallet, they will try to break up people who allow for anonymization/laundering of transactions, etc. It doesn't take a lot for real-life friction to make this pretty hard to use unless you just want to meet face-to-face and transfer BTC offline.
      - dllthomas 13y ago
        It's way frictionless compared to any of the other current methods of accepting payment electronically[1] . For many cases, where things have to go through a provisioning process that can be halted before the client has any benefit, you can confirm the order and let things progress and only check that there was no double-spend later (at which point you of course halt provisioning). I have no doubt that governments will find ways of taxing it that are at least as effective as those used to tax cash businesses presently. edited to add footnote: [1] ... as a relatively small player. My understanding is that payments between huge, well established institutions can approximate bitcoin in lack-of-friction.
        13y ago

saosebastiao 13y ago

There is an incredibly suitable use for bitcoin: as an exchange currency. Its decentralized nature makes it extremely attractive to smaller nations as a way of maintaining liquidity, enabling trade, all while not propping up another nation with competing interests by making their currency arbitrarily valuable. Its digital nature makes it attractive to currency trading markets for purely logistical reasons. You are probably right about the median case, but I say there is a small chance of a >$10M value for this reason alone.

Aqueous 13y ago

All speculation is based on the likely future value of something. If millions of people start believing BitCoin will eventually be a world currency, then it will be. I agree that it is price speculation. Is speculation always based on a delusion?

steven2012 13y ago
Rampant price speculation where the price encounters the incredible volatility that BTC has experienced is ALWAYS based on delusion. If you know of any counter examples, I would be interested in learning about them. And remember, I have no problems with speculation and people making money off of this. And this speculation can go on for years. But in the end BTC will be worthless, because there is no inherent value to a BTC. Even the fundamental promise of Bitcoin being anonymous is inherently flawed! Sure, you can money launder it, but the US government will make quick work of that in due time. At least with tulip bulbs, you can grown them into flowers, and gold can be turned into jewelery and has industrial uses. BTC has literally zero inherent or fundamental uses for it. My guess is that it will keep rising until the US government starts cracking down hard on it, like they did with poker sites, etc. They've already put it on their radar screen, and a lot of these companies that deal with BTC don't understand the ramifications of money transmission. Once the US government starts shutting down in earnest, people will dump their BTC and it will be over.
- Aqueous 13y ago
  BTC does have inherent value. It is valuable to vendors because it is frictionless money transfer without regard to borders or regulation and very small transaction fees, making it very inexpensive to accept payments from anywhere in the world. It is valuable to authorities because of the public ledger and because it neutralizes the threat of foreign control over money supply. It is valuable to consumers because of its easy divisibility (it is far more divisible than gold) and the ability to spend it quickly and anonymously. Think of the BitCoin network as a financial superconductor - the resistance to movement is so small that its negligible. Is that not inherently valuable to our economy as a whole?
  - steven2012 13y ago
    Doesn't it take a while for a BTC transaction to get confirmation? If so, that doesn't seem very frictionless. As well, since those transactions can be tracked, I don't think it will take very long for governments to start cracking down on them, and taxing them. They might force you to register your wallet, they will try to break up people who allow for anonymization/laundering of transactions, etc. It doesn't take a lot for real-life friction to make this pretty hard to use unless you just want to meet face-to-face and transfer BTC offline.
    - dllthomas 13y ago
      It's way frictionless compared to any of the other current methods of accepting payment electronically[1] . For many cases, where things have to go through a provisioning process that can be halted before the client has any benefit, you can confirm the order and let things progress and only check that there was no double-spend later (at which point you of course halt provisioning). I have no doubt that governments will find ways of taxing it that are at least as effective as those used to tax cash businesses presently. edited to add footnote: [1] ... as a relatively small player. My understanding is that payments between huge, well established institutions can approximate bitcoin in lack-of-friction.
      - 13y ago