Fundamental value of Bitcoin

[Pekelo]

1. Isn't that assuming that Bitcoin will be the only crypto? How will it be noninflationary when you can find more and more cryptos that can do the same thing?

2. Once mining coins slows down or comes to completion, why will miners not want to move on to mining incentives from other coins? Especially after they've invested so much money into their rigs..

Yes and yes. About half of Lovethetrade's 16 points were simply not true...

 

[lovethetrade]

1. Isn't that assuming that Bitcoin will be the only crypto? How will it be noninflationary when you can find more and more cryptos that can do the same thing?

Each coin is affected by its own scarcity. You can have 50 coins with a limited supply of 21 million and each coins price can still be affected by its own scarcity. Its the synergy of factors that contribute to a coins appeal.

2. Once mining coins slows down or comes to completion, why will miners not want to move on to mining incentives from other coins? Especially after they've invested so much money into their rigs..

They will move to mining more profitable coins. Again, its the combination of factors that makes a coin appealing and gives it value.

 

[peilthetraveler]

Whether something or anything has intrinsic value or not is philosophical, a matter of opinion and has been debated for centuries.
https://plato.stanford.edu/entries/value-intrinsic-extrinsic/#WhaHasIntVal

With regards to Bitcoin, I don't think one can differentiate between its intrinsic or market value to determine if it's trading at a premium or discount. Technical analysis would probably be the next best option due to the speculative nature of the asset.

With regards to market value, I think there's a synergy of factors that contribute towards it. These include:

1. Its use as a non-inflationary store of value and better alternative to gold.
2. Scarcity and difficulty in creation.
3. The ability to control it, move it around freely and trade it without third party intervention and with minimal delays and transaction fees.
4. Expected price appreciation. The market expects ts value to keep rising due to its increasing scarcity and evolution so it represents a better investment alternative to storing fiat money in a savings account or fund earning low interest.
5. Its new technology, millennials and an ever increasing amount of early adopters immediately embrace new technology that gives them more control and convenience over their lives.
6. Anti-government and institutional sentiment post GFC.
7. It's decentralized, secure and more private (debatable for Bitcoin) than other forms of payment.
8. It's easily accessible and supported by all the exchanges so can be easily traded with other currencies and with minimal delay. There's none of the excessive red tape you get with regulated markets.
9. Barriers to entry are almost non-existent, doesn't require significant capital
10. One can quickly and easily build a portfolio without paying the excessive fees usually associated with share purchases. You don't need to purchase equipment or a platform licence to actively trade it.
11. When trading it, there's no intermediaries, brokers or market maker and no conflict of interest.
12. It has the largest market capitalization and highest daily trading volume. More exposure seems to translate into a higher value. This was seen with Monera just recently.
13. It's viewed as the most stable cryptocurrency making it the most trusted by counterparties.
14. It has the largest number of miners and hash power directed towards mining it.
15. It's becoming more accepted in online retailing as a form of payment e.g newegg.
16. Strong brand name and public perception.

In a nutshell, there's a competitive market for it now, volume and interest has increased exponentially which is driving its market value and promoting its evolution towards becoming a standard form of online payment, store of value and unit of account. You could probably argue there's bit of self-fulfilling prophecy going on because the market wants the technology to succeed whether it currently offers actual, quantifiable value in an economics sense or not.



It worth 4500 USD because that's its market value based on market capitalization and number of coins in circulation.

1. It's not better than gold. A 51% attack on bitcoin would destroy everything.

2. The scarcity is pretty subjective. There is 1.6 quadrillion satoshis(the smallest unit of bitcoin) out there right now.

3. Without 3rd party intervention? Really? You need 4 partys. 1 to buy it from, then you transfer to whoever and then that person has to find a party to sell it to and when trading for cash, nobody pays/sells at spot.(and even if they do, the fluctuation could cost you 10%.

4. Expected price appreciation? The bigger fool theory? really?

5. It's been 8 years. Bitcoin missed that window.

6. I'll give you this one, but gold and silver are also alternatives.

7. Secure? I've seen tons of people lose 1000s of bitcoins, and once they are gone, there is not tracking the person. At least if someone steals your gold, they have to leave fingerprints or evidence. Someone in China can steal your bitcoins.

8. Wrong. Takes days to get set up with coinbase and they charge 1%

9. Requires knowledge. People want to know how bitcoin works...nobody will buy it if they don't know what it is and how it works.

10. Wrong. Exchanges charge fees excessively higher than stock trading platforms. From 1/8th to 1/4th of 1% Trading $50k of bitcoin can cost $125.

11. Pretty much the same with any product...if you're trading something person to person, you don't need a 3rd person in the deal.

12. This statement is a little bit like saying coke has the biggest market cap of all the beverage makers....yeah, because they were first to market. This statement means nothing in terms of bitcoins actual value.

13. Can't argue this.

14. This means nothing. It's like saying a company is good because it employs a lot of people. Bear Sterns employed 15,000+ people.

15. Dell stopped accepting bitcoin. Fiverr stopped accepting bitcoin and newegg in canada stopped accepting bitcoin just this year. This is just to name a few of the people that are stopping using bitcoin so it's not growing.

16. Many people outside the bitcoin universe still associate it with criminal behavior.


You failed to mention also that bitcoin is worthless without power/internet access.

If a SHTF scenario really took place, like global nuclear war or all currencies collapsed overnight, I promise you, the survivors are not going to be trading stuff for bitcoin. They're going straight to gold/silver.

It's pretty obvious that the only reason to own bitcoin is to sell it later at a higher price. Everyone that proselytizes for bitcoin are only doing it to get more money into it so they can sell at a higher price later. Bitcoin is the most advanced ponzi scheme ever created. Instead of people getting paid for everyone they recruit, they get paid in higher bitcoin price for everyone that actually gets recruited anywhere. It's a pretty ingenious socialist type ponzi and when it fails, people will not understand why so many smart people fell for it.

 

[JackRab]

Wow... so nobody is even attempting to put a number on it... except me, kinda...

Just because it's there doesn't give it value. Like @Pekelo said, usability gives it value. Trading it on an exchange doesn't really give it a purpose, except maybe for the exchanges. What's the purpose of Bitcoin? Store of value...? Really? Don't make me laugh...

The purpose is exchange medium. The storage comes from holding back on spending it... same with normal money... you save it for future spending or you spend it now.

All the rest is pushing it in speculation and therefore a bubble. True value of any exchange medium is related to goods... purchasing power. One dollar buys x. That's it.... and because of that, you can put a value on anything.

Bitcoin isn't tangible either, maybe some find it a cool story to say "I own x Bitcoins"... but it's just ones and zeros. And like @peilthetraveler mentions, without the internet there's no bitcoin and it will have no value at all... unlike something tangible like livestock, land, goods. So store of value sounds like a pretty meager meaning to me, because it doesn't actually create anything. Same like gold/paper money... but they are at least tangible.

Also, Bitcoin is a deflationary system. Because it has a limited output (I'm conveniently forgetting about the other coins now), it has limited reach. Are you really going to use it to buy a loaf of bread and 2 bananas? That will be 0.001 BTC please... and when it's used as the only currency, it will be something like 0.00000000001 BTC. And that will create problems. It will be massively deflationary, meaning if you have 1 BTC now, you could spend it but tomorrow it will be worth 10x in goods.. so you stop buying. You will even hold off buying essentials...

Money needs to grow with GDP... fact... if it never does, in the end it will be collapse economies.

So, does anyone know how much in real goods/services on a monthly basis is being bought with bitcoins? Then I'm happy to give it a number...

 

[lovethetrade]

Apologies if i came across as very pro-Bitcoin, I'm not. I've just been making so much money from cryptos lately that I'm becoming a little bit biased.

 

[JackRab]

Apologies if i came across as very pro-Bitcoin, I'm not. I've just been making so much money from cryptos lately that I'm becoming a little bit biased.

Good on you.. but that means you only trade it? Have you used it at all?
If not, or hardly... I would put you in the group who is playing the game of "who holds the hot potato".

 

[lovethetrade]

Good on you.. but that means you only trade it? Have you used it at all?
If not, or hardly... I would put you in the group who is playing the game of "who holds the hot potato".

I will counter that with

Do you need to be able use it when you can quickly exchange it for fiat money?
http://www.zerohedge.com/news/2017-05-28/who-accepts-bitcoins-payment-list-companies-stores-shops

Why does currency have to be centralized and controlled by governments?

I'd be cautious comparing this to things you understand in history or with other asset classes. Cryptocurrencies are a totally new phenomena and difficult for many to understand so saying it has to have certain attributes otherwise its a bubble ready to burst, may be misguided.

Just because it's there doesn't give it value. Like @Pekelo said, usability gives it value. Trading it on an exchange doesn't really give it a purpose, except maybe for the exchanges. What's the purpose of Bitcoin? Store of value...? Really? Don't make me laugh...

http://nakamotoinstitute.org/mempoo...value-unit-of-account-and-medium-of-exchange/

 

[JackRab]

I will counter that with

Do you need to be able use it when you can quickly exchange it for fiat money?
http://www.zerohedge.com/news/2017-05-28/who-accepts-bitcoins-payment-list-companies-stores-shops

Then you're just in it for the gains right? You expect it to go up relative to your fiat money. That to me sounds like it's for speculative reasons...

I get it that some people want to hold something other than money in a savings account. That used to be gold... maybe now it's also bitcoin. But both gold and bitcoin don't actually have returns except for capital gains. There's no value creation. You just expect it to go up and be higher when you need to swap it back for USD.

Similar with people piling into investment properties at levels where any income generated by it (rent) is not sufficient to cover costs. Those people all hold property, usually massively leveraged with mortgages, because they 'know' it will go up. But not always... and when you need money the most, you tend to be forced to sell and possibly at major losses.

That's getting close to bubble territory IMO. Everybody assumes it will just go up. Whether it's gold... houses... internet stocks or BTC.

To create value, BTC needs to be adopted by the general public... if that's not happening, because there's no usability... it doesn't create value. And then, since it's not even a tangible item... you've got something that's somewhere in the cloud.

Let me ask you this... if you didn't have any BTC... would you buy it now? What if the price was 8k... would you buy it? Why?

 

[lovethetrade]

To create value, BTC needs to be adopted by the general public... if that's not happening, because there's no usability... it doesn't create value. And then, since it's not even a tangible item... you've got something that's somewhere in the cloud.

Like anything new, it takes time and as long as things continue to head in the right direction, the so-called bubble wont burst.

That's my final post in this thread, its been fun as always.

 

[SoesWasBetter]

Yawwwnnn. Ponzi, scam. Been saying all that since day 1.

Doesn't matter. Timing is everything.

Buggy whips were a ponzi too. Get it?
I Knew that you wood.