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Given that bitcoin only has notional value: if it's not used as a currency, with prices denominated in it, then what supports its value? If nothing does then yo

Given that bitcoin only has notional value: if it's not used as a currency, with prices denominated in it, then what supports its value? If nothing does then you have the recipe for a speculative bubble, and crash, and little else. At least gold can be made into pretty jewelry and electronics.

bigiain 13y ago
It's pretty much the same as post-fund-raising stock market "value". Snapchat is "worth" 4 billion dollars in exactly the same way as a bitcoin is worth $1000 - enough people _believe_ it's "worth" that much that you can buy and sell some form of notional ownership of them - at least in small amounts – based on that value. If everybody stops believing in bitcoin or Snapchat, that value will plummet and perhaps disappear. The government will try to prevent that happening to USD, but ask a Greek or Zimbabwe person how their fiat currency has gone as a "reliable store of wealth". So long as people keep believing in BTC it _might_ maintain a real value - it does provide some real-world convenience to some people, so it's not impossible that it'll maintain long-tern value I guess. I can't help but think though, that there's way more people "talking it up" because they have enough BTC stashed that another order of magnitude increase in BTC conversion rates will have many of them jumping to exit with "fuck you" amounts of money - with the inevitable deflation as their BTC all hits the market in a big rush…
- InclinedPlane 13y ago
  Hardly. Those companies make things. The provide services to people. That's real, concrete value. Companies can be over valued, but certainly there is some value even in snapchat. There is zero non-notional value in bitcoin. It's just a currency. But if it's only used as an investment and not a currency then it's unlikely to retain value indefinitely. Fiat currencies certainly have some similar problems, but because they are used heavily as currencies much of those problems are mitigated. Everyone around me is getting paid in dollars, everything at the store is denominated in dollars. Taxes are in dollars. Etc. Because of economic activities there is a tremendous amount of inertia to the value of the dollar. The only inertia inherent in bitcoin is the market valuation, and that is dependent on, effectively, a pyramid scheme. Once the value of bitcoin starts falling everyone will want to divest from it as quickly as possible, merely accelerating the collapse. This is economics 101, we've seen countless speculative bubbles before, if you don't believe that speculation is a risk in the BTC market then you're just unaccountably naive. If the BTC market started falling at the same rate it is going up right now, and persisted in doing so for 6 months what would you do with your BTCs?

bigiain 13y ago

It's pretty much the same as post-fund-raising stock market "value". Snapchat is "worth" 4 billion dollars in exactly the same way as a bitcoin is worth $1000 - enough people _believe_ it's "worth" that much that you can buy and sell some form of notional ownership of them - at least in small amounts – based on that value. If everybody stops believing in bitcoin or Snapchat, that value will plummet and perhaps disappear. The government will try to prevent that happening to USD, but ask a Greek or Zimbabwe person how their fiat currency has gone as a "reliable store of wealth". So long as people keep believing in BTC it _might_ maintain a real value - it does provide some real-world convenience to some people, so it's not impossible that it'll maintain long-tern value I guess. I can't help but think though, that there's way more people "talking it up" because they have enough BTC stashed that another order of magnitude increase in BTC conversion rates will have many of them jumping to exit with "fuck you" amounts of money - with the inevitable deflation as their BTC all hits the market in a big rush…

InclinedPlane 13y ago
Hardly. Those companies make things. The provide services to people. That's real, concrete value. Companies can be over valued, but certainly there is some value even in snapchat. There is zero non-notional value in bitcoin. It's just a currency. But if it's only used as an investment and not a currency then it's unlikely to retain value indefinitely. Fiat currencies certainly have some similar problems, but because they are used heavily as currencies much of those problems are mitigated. Everyone around me is getting paid in dollars, everything at the store is denominated in dollars. Taxes are in dollars. Etc. Because of economic activities there is a tremendous amount of inertia to the value of the dollar. The only inertia inherent in bitcoin is the market valuation, and that is dependent on, effectively, a pyramid scheme. Once the value of bitcoin starts falling everyone will want to divest from it as quickly as possible, merely accelerating the collapse. This is economics 101, we've seen countless speculative bubbles before, if you don't believe that speculation is a risk in the BTC market then you're just unaccountably naive. If the BTC market started falling at the same rate it is going up right now, and persisted in doing so for 6 months what would you do with your BTCs?