So it sounds like lemming group think. It seems like someone one should hold “just in case,” but no real valid reason to do so yet (that I’ve heard). We know transactions are slow and expensive, so it’s not a good replacement for ordinary commerce. It can be used to transfer across borders, but there often is asymmetry in capital movement that makes this difficult in the places you need it most (poor countries with rapid inflation, who aren’t buying Bitcoin but rather only selling), and it’s often regulated such that it needs to be fully declared (removing the whole anti-gov part). It also lacks a lot of the controls that traditional banks have for good reasons, so fraud becomes harder to tackle, and things like refunds are just at the mercy of the other side of the transaction (making commerce even harder, as well as basic banking). So then it becomes a digital store of value, one that is only as valued as the market gives it, and typically markets eventually correct when there’s no underlying true value proposition (as we can see with $GME). It also pushes only towards deflation, so it’s terrible as a wide spread value store because it removes an important tool that governments have to handle the economy (dealt with debt via inflation aka printing money, which can be executed “well” (US) and really poorly (Zimbabwe)).
The forefront of the Bitcoin frenzy isn't even on the blockchain, it's at the exchanges.
Hardcore tech people and those who don't (or can't) trust institutions with their Bitcoin will pay the transaction fees to get their money out of exchanges and into their own wallet. The average retail investor, however, doesn't want to be their own bank. They just want in on the price action, while letting the exchange manage their money. Does anyone really think the person buying crypto $100 at a time in their Robinhood account wants to pay $18 (current average transaction fee) every time they want to move that BTC into their wallet? Of course not, which is one reason why Robinhood doesn't even have an option to withdraw Bitcoin.
As with any frenzy, the misinformation being circulated by people who want everyone to buy Bitcoin is getting out of control. How many average people buy Bitcoin because they think Bitcoin is the only way to avoid losing purchasing power? Meanwhile, everyone else has been protecting against inflation by purchasing stocks, real estate, or virtually any other investment long before Bitcoin was even invented. (Yes, I'm aware of the 21 million maximum BTC cap). The current Bitcoin narratives are more like a religion than reality.
That said, Tesla's Bitcoin purchase does make a lot of sense. Elon Musk went on Twitter and called Bitcoin "BS" to drive the price down so they could buy at a discount. They then announced their Bitcoin purchase with fanfare that drove the price up, marking a quick return on their investment. They used Elon's influence to make a quick profit on the frenzy.
> That said, Tesla's Bitcoin purchase does make a lot of sense ... They then announced their Bitcoin purchase with fanfare that drove the price up, marking a quick return on their investment.
Tesla is a car manufacturer! It doesn't make any sense at all! At any company that made sense, a CEO would lose his job for gambling $1B of company money in a casino totally unrelated to the company's business interests.
Tesla is a company that posts to reddit screenshots of tweets about subjects scraped from reddit. With a small side gig collecting government energy subsidies.
Well, it’s not completely unrelated: bitcoin drives energy consumption, which in turn drives demand for batteries of all shapes, which are a massive part of Tesla’s business plan.
How's that energy consumption drives demand for batteries? Does gas consumption drives demand for spare gas canisters?
IMHO rising energy price is totally not good for Tesla's and other electric car manufacturers. It increases TCO of electric vehicles and companies' cost of support for premium models with free charging access.
Higher energy consumption -> higher demand for effective generation from all sources, including renewables -> higher demand for batteries to manage non-continuous supply, which is fairly typical of many renewables (wind, solar, etc).
Energy-prices fluctuations are relatively irrelevant in the long run. Oil will run out, and renewables are the only hope to address energy needs without killing the planet. This message is well-understood by now, the transition has started, it’s just a matter of how fast (or slow) we get to the new normal.
Again with the energy point. The energy is insignificant compared with almost anything else. Wasn't some article that the sum of all standby electronics uses more energy than bitcoin and that's only in US?
What are you, Apple? That gives no charger for "environmental reasons" while packaging its wireless headphones in a crapload of unnecessary plastics.
If you are so energy consciousness then go bark at US military, those are the biggest polluters and energy hungry of the world.
Bitcoin consumes more electricity than entire countries - more than the Czech Republic for example. It consumes a third (or was it a fifth?) of all the electricity of all data centers in the world. It is by no means insignificant.
That's not a counterpoint if those countries also consume an insignificant amount of energy.
Isn't a rebuttal different than a deflection?
Anyway half - 3/4ths of bitcoin mining is using clean energy that wasn't going to be used for anything else, or a sustainability solution for energy that was going to be used as pollution.
because a lot of energy is not utilized if it will be lost in transit. they don't send it and there is extra capacity on site and from the specific source of energy. there are gigawatts of energy that can only be used at the source, which has never had a use until the mining machines showed up.
Then why not stop producing it, instead of using it on Bitcoin? Even 'clean' energy production has environmental costs, from environment destruction for hydro to maintenance/production costs for solar and wind.
Now that we've moved the goal posts, is it still more of an environmental cost than just imagining it was fossil fuels or energy that being pulled away from other use cases?
The answer to your question depends on which power source we are referring to. Where Bitcoin is a sustainability solution, it is reducing waste by products which were already being produced and now are not being produced because they are used for energy.
Bitcoin is a multi-billion industry whether you respect its existence or not, your arguments will simply have to get more nuanced to have a real conversation about what's happening.
Organizations that know better are intentionally omitting the source of energy, in their discussion about the amount of energy. Don't fall for it.
Excess electricity can be a real problem, and is getting worse with renewables. But surplus energy would be better used to desalinate seawater, or produce hydrogen through electrolysis, or storage.
Except the plants are not built at the sea and desalination is not a clean process.
Or with electrolysis or storage you need to generate it and transport it to where it can be used, getting you back to square one because nobody is doing that because it is uneconomical. Whereas mining is not because it can be all done on site in remote locations and doesn't even need great internet. High latency, spotty internet is good enough for crypto mining.
We know what the ideals are: no pollution and infinite energy, or no pollution and less energy use. Thats not going to happen, and crypto wasn’t part of those 50 year old models, yet it is accomplishing a lot of those ideals and people choose not to respect its existence as it alters their worldview.
If bitcoins price continues to rise, miners will be greatly incentivized to further decrease power costs. I hope this leads to innovation in clean power tech, especially in developing nations.
so upwards of ~36% of Bitcoin mining is coal powered. yes, that fits all the estimates that Bitcoin mining is almost a supermajority using renewable energy at some plants and and curbing pollution as a sustainability solution at other plants.
1/ Bitcoin itself might be 100% on renewables. But it's still causing a need for non renewables to be used, to compensate for the fact that you're mining a useless coin. I'd rather have us use this energy in a useful way.
2/ Bitcoin is causing _more_ energy consumption. It's not curbing pollution, in any way. It's just grafting itself where the energy is cheap. Noone's building wind farms for bitcoin.
3/ If I cut off 36% (which is a low bound, other countries are not clean either) of your salary, go ahead and tell me it's okay because you still have the supermajority of it.
2/ at flare gas plants bitcoin is curbing pollution, and this helps the plants and the state meet their climate goals. yes their pursuit of cheap power is what takes them where they are, an economic incentive for sustainability solutions that 50 years of idealists never were able to consider and are now fighting to ignore because this solution doesnt decrease energy use.
3/ I’m not sure what you are saying here? Is this supposed to be an analogy to something? What happens if you get rid of that energy use? The bitcoin network will adapt to a lower difficulty rate... not sure what you think you’re saying here.
>If bitcoins price continues to rise, miners will be greatly
incentivized to further decrease power costs.
That's not how bitcoin works. The price of bitcoin is the budget you can spend on mining a single coin. If the price is higher, you can afford to run more miners. If the cost of electricity goes down, you can afford to run more miners. If the efficiency goes up, you can afford to run more miners. Running more miners increases the mining difficulty and you are back where you started.
If Bitcoin is worth $50k people will destroy $50k of energy to acquire Bitcoin.
If bitcoin is worth $50k, people will destroy MORE than $50k of energy to acquire bitcoin, using resources that are subsidized either intentionally or unintentionally.
Miners are motivated by profit, if your cost of electricity is lower, your profit is higher. I’m not sure why you are trying to obfuscate that simple fact.
Miners are motivated by simple profit calculation, not R&D into energy generation. R&D has an unbounded capital risk, while bitcoin is a (relatively simple) statistical calculation of energy-cost which is a bounded cost (at any given time, within a range). Not a single bitcoin MINER is "greatly incentivized to further decrease power cost".
There are industries in much better positions to revolutionize energy production than bitcoin miners. In fact, there basically a single industry that doesn't have this incentive.
The amount of money for a given amount of energy spent mining you get is effectively Bitcoin price / difficulty.
If Bitcoin price goes up, then the return on energy gets greater. Therefore, it's worth it to spend more energy mining. Then difficulty rises and takes this incentive away, reaching a new equilibrium with more energy spent.
Hedging against what? There are plenty of ways to hedge against inflation risk or currency risk without buying into an asset that can lose 50% or more of its value very quickly (and has, a number of times).
Maybe it's just me, but if we truly see the (global) death of fiat currency, the inability of Elon Musk to sell a Tesla is gonna be among the very least of anyone's problems.
In general yes, but I think Musk's inability to sell Teslas is going to be a major problem for the particular person deciding whether Tesla buys BTC or not.
Nigera is suffering from high inflation and their problem is that they aren't mechanizing their agriculture sector. The end result is that they import a lot of food and fail to export their cash crops. If the government borrowed/printed money and used it to grow the agriculture sector they could actually stave off inflation despite increasing the money supply.
Bitcoin is not a viable hedge against a global economic downturn. Just because people push these narratives doesn’t make them true. There is absolutely no evidence that Bitcoin would not crash just as fast or faster than the economy. There are other viable assets that have well studied and well documented track histories.
Crypto currencies are best compared to pink sheets prior to increased regulation, and no one in their right mind would tell you to buy pink sheets to hedge against economic downturn even if their favorite did show a 10000% increase in value.
God this point doesnt make sense. Bitcoin exists in lands that are governed by men. The governments could make it valueless at the first sign of threat to political currency. BTC is not a hedge, it's just an asset class that is growing fast and gaining attention faster than adoption.
If they were properly hedged then there would be no profit from Bitcoin going up. Global companies should be hedged so that currencies going up or down do not affect performance. Unless you’re betting on a particular currency.
Tesla's stock has never been a car manufacturer stock. That's why it has so much short-selling against it. If you value it as a car manufacturer and compare it's (underlying business numbers):(stock price) to anything else, it's insane.
"at any company that made sense" is true, to a point. But the point of tesla has been, for a not-insignificant number of people, not meant to make sense. It's faith based. It's cult based.
Elon Musk has strong parallels to Trump's appeal. It might not make sense. That's not the point.
I don’t view it as faith at all. I view Tesla as a software and technology company that incidentally makes cars. At least, this perspective can start to explain their valuation and the hype. I think Tesla is doing things no else is (was) doing and they have a massive first mover advantage and mind share. The other manufacturers are struggling to keep up, despite the persistent quality issues with Tesla. Tesla is giving people a product they want as early as possible. It comes with some warts, but Tesla figured out early on what people will accept and what people won’t in terms of quality.
Despite seeming like polar opposites they have a lot of similarities. A great knack for “triggering” their detractors, and a hyperdefensiveness in the face of criticism.
The challenge for Tesla and Elon is that I don't see the exit strategy? If Elon sells off his Tesla shares in any sizable quantity, it seems the stock would drop massively. If Elon steps down his involvement or passed away, same thing. So it seems it needs to keep on the show until Tesla can actually sustain its value somehow through normal business operations.
Execs in any public company routinely sell shares at a pre-determined rate every quarter. Execs besides Elon have been selling as part of the plan, and company employees are free to sell as well.
According to SEC filings, Elon himself hasn't sold any recently, but he owns 20% of Tesla, worth about $10B today. Even if Tesla drops 10x, he would have $100M worth of shares. Not to mention all his other assets, shares in SpaceX etc. He has more money than he will ever need.
Sure, he also probably takes a salary for his role at the companies as well. Still, there's a reason he continues to work I'd assume? It might be he truly wants to get electric car on the road, or it could be he wants more money. In both cases you could ask: "Can Tesla survive his inevitable exit?"
So ignoring Elon's motivations here, as maybe he just has fun running Tesla, who knows, still the question is relevant to other investors into the Tesla stock, and for Tesla's employees.
>Elon Musk has strong parallels to Trump's appeal.
Isn't that the strangest thing? If you watch videos of Elon he is no where near as charismatic as trump.
I think it mostly stems from his success with SpaceX and earning accolades for being, "The Guy who does Impossible things". His having a car manufacturing company with an impossible share price just make sense.
I think the similarity is less their personalities, and more in their use social media for shock value and attention, and the quasi-religious devotion of many of their supporters.
What Elon understands is that if you are interesting you don't have to pay for advertising. Tesla got hundreds of millions in advertising for this and it cost them nothing but a bit of risk on some of their cash position.
I'm just guessing here but they might be hedging against future trade restrictions set by China against US companies like Tesla. If another trade war was to happen, people in China might be able to buy a Tesla using Bitcoin vs having to buy a NIO.
I think there are a couple issues with this idea: firstly, they'd be accepting the Bitcoin, so they wouldn't need any on hand to process the purchases. Secondly, if China wants to prevent or restrict the sale of a physical good, especially one as large as a car, it's far easier to stop it from being imported (or manufactured) than to stop people from paying for it.
Cars are regulated beyond just the point of sale. I believe it would be rather difficult to get said car registered (presuming there's a Chinese equivalent to vehicle registration), if you could even arrange receipt in the first place ;)
> That said, Tesla's Bitcoin purchase does make a lot of sense. Elon Musk went on Twitter and called Bitcoin "BS" to drive the price down so they could buy at a discount. They then announced their Bitcoin purchase with fanfare that drove the price up, marking a quick return on their investment. They used Elon's influence to make a quick profit on the frenzy.
Is that even legal? It sounds like pumping and dumping.
It's technically not pumping and dumping because Elon posts memes that shill his investments but he rarely gives a call to action and if possible avoids naming the cryptocurrency in question.
He's definitively manipulating the market in the sense of the colloquial meaning of the word.
If there are public signals that predict the performance of a stock then those who benefit the most are those who execute their trades as quickly as possible and since Elon knows what he is going to "announce" on his Twitter account he is going to benefit massively.
The 51% attack you are thinking of applies only to transaction ordering and inclusion in blocks and does not apply to consensus rules (like the 21M limit). Anyone (one miner, 5%, 51%, 80%, ...) who decides to change these rules is free to do so and will split off in a new coin.
These splits have already happened multiple times (Bitcoin Gold, SV, ABC, Cash) and most claim to be "the real Bitcoin". They are all either dead or valued <1/100 of BTC.
yup yup yup. we're back in the era where large, hand-wavy criticisms get sent up w/o any understanding of the previous proof of concepts btc has gone through that quite exactly address the claims. it's getting to a similar point as if "the internet, won't work, too slow" criticisms were just thrown around and given credence after ebay was in operations for a few years.
Tinker with that by force of mining power and you will destabilize the currency. Maybe they want that, but it would probably end the currency if it was done by force.
I think it’s more they changes are generally done with some form of consensus. Trying to make a change by flexing your muscle as the biggest holder of mining power could have unpredictable and counterproductive results. I think mostly it would just cause more miners to be brought online though. I basically don’t think you can change Bitcoin this way, and if you could it would more or less change it a lot. I think invested institutions would not let that happen.
> Sounds like you’re saying Bitcoin only has value because the PRC allows it to?
Please learn how the Nakamoto Consensus works and how nodes protect the Bitcoin network while miners are slaves to the network. There's a rich history of this being tested by adversaries.
I once had the idea to run a decentralized (technically federated) crud app. It's just a regular database with a central authority but users can access the database and its indices with IPFS. In theory nothing could take it down.
The practical problem is that users have to download the entire dataset. There are a lot of queries that cannot be done exclusively through an index and require downloading a substantial amount of data. Bitcoin (and any decentralized app) is exactly the same. It's just that they replaced the central server with a proof of work consensus mechanism that makes it truly decentralized.
It's not a practical user experience. Lightning is just a fancy federated paypal. The average user won't care once Paypal and Mastercard support Bitcoin. The inability to scale causes Bitcoin to give more power to established financial institutions. It's ironic. Bitcoin will just be relegated to a settlement layer.
You can still own your value as long as you have private keys. There's layers of abstractions built on top of it to make it comfortable for every day use and these may be owned by local institutions, but you retain the possibility to own your value no matter where you are located or where you move to without having to depend on some single entity.
> It's ironic. Bitcoin will just be relegated to a settlement layer.
Not ironic at all. Bitcoin is supposed to be a robust, decentralised, censorship resistant settlement layer. That's literally the point. It's the base protocol.
We don't, after all, expect users to care about TCP/IP whenever they post to TikTok.
But it's reasonable, based on current trends, to predict that the number of full nodes will continue to increase all over the world.
no, the miners are simply said just timestamping machines (once they got lucky to find a fitting nonce).
If they don't follow the rules as set by the users of the system, their blocks will be automatically ignored by the users software [1] (while users receive blocks from miners following their rules).
[1]: there is one CONDITION to that, and that is that an economic majority of users either do run real bitcoin nodes (can also be light clients on smartphones that connect to own node at home or to external servers that do not belong to miners) or that the services they use do run real bitcoin nodes (and do not collude with miners).
It is about an economic majority of users, and not about a simple majority. There are higher chances that users with more value invested, will run their own nodes, and therefore will not be tricked by malicious miners, and therefore increase the value of the blockchain where the rules are followed (if the forked blockchain with infinite or increase supply were to have some traction by an economic minority, the economic majority could run a second node with these changed rules and sell their coins on that chain, that would make the chain the loosing chain, like what happened with "Bitcoin-cash").
Obviously everyone running their own node would be best, so that those nodes are not run by a small amount of entities who could decide to run software/nodes that do follow their own rules. That is *WHY* bitcoiners are sooo much against raising the blocksize limit, so that running a node is not too resource intensive, so that the number of people running their own nodes (knowingly or even better unknowingly) is as big as possible. Many do think that bitcoin is slow for technical reasons. That is not the case (and lightning could increase the throughput a lot if it achieves it's goal one day). Bitcoin wants to be "slow" to make it easy for as much users as possible to run a node (read: having a maximum amount of users (knowingly and unknowingly) run real nodes, instead of SPV-wallets that do NOT validates the rules and therefore can be tricked by miners!)
By running your own node, you mainly protect yourself, but a tiny bit also the rest of the users (long term aligned incentives, once running a node is computational irrelevant, or one node per family runing on the home router or similar).
That being said, miners, developers, exchanges, ... all can influence what happens, but the biggest power lies in users hands... if the economical majority run (archival or pruned) fully validating nodes.
miners are timestamping machines, which main function is to order (!) the transactions. That's it!
The is the whole point, everyone/every node verifies the rules, but the network has to agree on some ordering, as they could be many possibilities to order the transaction, and the network wouldn't know who to listen (everyone has his own opinion about the best ordering). So the "lucky miner" extends the blockchain effectively ordering the new transactions.
If the miner increases the supply or doesn't follow any other consensus rule, other nodes won't accept it. So the miner has not much power. He orders transactions
Title: Reddit Post Reporting Tesla's Bitcoin Purchase From a Month Ago Was a Hoax
Reportedly, the person claiming to be a Tesla insider with intel on the bitcoin purchase was actually some political science major college student tripping on acid. Crazy how so many people ate this story up.
> Thereafter, we invested an aggregate $1.50 billion in bitcoin under this policy and may acquire and hold digital assets from time to time or long-term. Moreover, we expect to begin accepting bitcoin as a form of payment for our products in the near future, subject to applicable laws and initially on a limited basis, which we may or may not liquidate upon receipt.
>"Does anyone really think the person buying crypto $100 at a time in their Robinhood account wants to pay $18 (current average transaction fee) every time they want to move that BTC into their wallet?"
I'm curious is this the transaction per $100 or is $18 a flat fee regardless of transfer amount?
In general a Bitcoin transfaction fee is a market price to get your transaction included in a block. There is one block mined every 10 minutes and each block has enough capacity for a few thousand transactions. You put your transaction out on the network with a fee specified, and miners trying to create blocks can choose whether to include it in the block they attempt to mine. Naturally, miners trying to maximize profit will choose to include the transactions with the highest fees, occupying the least space in the block.
The size of the transaction (in bytes) is not related to the amount being transferred. It is tied to the number of inputs and outputs. Bitcoin doesn't directly track the "balance" of each address. Instead of a transaction saying "deduct 1000 satoshis from my account and give it to Charlie", it says, "take the 800 satoshis received from Alice in this old transaction, and the 500 satoshis received from Bob in that old transaction, and with that 1300 total give 1000 to Charlie and 300 back to me". 2 inputs and 2 outputs in that example, but you can imagine how both the # of inputs and the # of outputs can vary in practical usage. Therefore, a transaction that moves Bitcoins accumulated from many small transactions will be somewhat larger and have a more expensive fee than one that moves Bitcoins that were acquired all at once.
However, don't take this to mean that has an impact on the cost of withdrawing from an exchange: since the exchange doesn't make on-chain transactions for each buy/sell, it doesn't matter whether you bought your Bitcoins a little at a time or all at once for calculating your withdrawal fee. It'll pretty much be a flat fee.
The average transaction fee is a bit disingenuous. Many people are not even using segwit and thats on them. You can also use lightning at this point in time but people dont know how to do it and wallets have not implemented yet. High fees usually prod people and services to adapt to the current tech to get costs down. I expect this to happen soon as high fees are somewhat recent. Also you can send a 50 cent tx fee and it will make it through but not be the fastest.
One other thing - you cant even move BTC in or out of Robinhood. Robinhood for crypto is a complete scam right now.
> Also you can send a 50 cent tx fee and it will make it through but not be the fastest.
This has tended to be true (that it’d go through within a few days), but right now it’s probably largely false.
Assume a small 226 byte transaction (one input and two outputs); at $50,000 per bitcoin, 50¢ is 1000 satoshi, which is about 4.4 satoshi per byte.
Per https://jochen-hoenicke.de/queue/#0,30d, transactions with fees under 5 satoshi per byte were last cleared on February 8 (~8 days ago), and before that last on January 28 (~11 days). (Before that, such transactions stalled for about 12 days in October/November; other than that, it looks like such transactions never stalled for even a week back to the January 2018 craze, to say nothing of 50¢ being more satoshi per byte back then anyway.)
This response is just insignificant and ignores everything I said. Segwit adoption is at 50% and again, as I said in my comment, Lightning will be further adopted over time for people who want lower fees. The options are here its up to people and services to use them. And they will as their customers get angry.
People with whole Bitcoin don't necessarily care about a $50 transaction fee. They still drive the transaction fees up by wasting space and thus cause people who decide to use segwit to pay more.
You (or your wallet, or both... depending of your wallet and your settings) choose the fees you like (the wallet could guesstimate based on the current congestion and your time preference).
The miners then choose the transactions they want to include in a way, as to maximize their gains. As a block can only hold a certain amount of transactions and the limit being set by the weight-units [1], miners will want to prioritize the transactions that offer them bigger fees per weight unit, or usually expressed as sats/vbyte (satoshis per virtual bytes).
So if you don't need a transaction to arrive in the next 1-2 hours, you can lower your fees, and the transaction might pass in the night (although BTC is international, congestion is less on US night time and especially week-ends) or if not, probably in the week-end. If it doesn't clear fast enough, or as fast as hoped, then RBF (replace-by-fee) or CPFP (child-pays-for-parent) might help (manually or an increase of the fee could be automated by the wallet every set amount of time).
TL;DR: there is a free market for transactions, but the price is not dictated by the market (and there is no real bidding system), instead you suggest a fee, and see if any miner around the world wants to include it in a block (and you can adjust if the outcome isn't achieved, which has similar results to a bidding system... but is more like natural supply/demand mechanism, as miner do not guarantee to include a transaction).
Helpful to see current unconfirmed transactions (and sats/vbyte):
https://jochen-hoenicke.de/queue/#0,30d
[info: the legend is clickable, and makes it easier to view how many higher paying transactions there are]
> One other thing - you cant even move BTC in or out of Robinhood. Robinhood for crypto is a complete scam right now.
If you buy an option for a barrel of oil, Robinhood doesn't even deliver it to you. Same for wheat and gold. What a scam!
In all seriousness, if you want to speculate on the price of Bitcoin, Robinhood may be better than using some of these more sketchy exchanges that offer decent amounts of leverage.
If you want to actually purchase Bitcoin, there's regulated exchanges where you can do so, though that'll probably land you on some FBI watch list.
In a way, putting your transactions on a public ledger is like voluntarily adding yourself to a watch list. The government (and everyone else) can then come and inspect your financial history at their leisure in the future.
Its a settlement layer. Who cares. And you think they already cant access your transactions through the traditional system? Thats how they catch criminals every year.
I'm skeptical that you couldn't. Anonymous data is often not quite as anonymous as we think, and identities can be deanonymized by cross-referencing with other public info. If even one of your on-chain transactions leaks identity, your entire history with that wallet is compromised.
Many/most people go through online exchanges to buy their bitcoin instead of meeting with people locally. These online exchanges perform KYC and will readily provide the government with which addresses you sent your bitcoin to.
Even if the government didn't have that, they might still be able to deanonymize you via your transactions. Pseudonymity is not anonymity. If a single merchant identifies you as the buyer in a transaction, the government might be able to figure out the rest of your transactions in that chain.
Tech rollout takes time. Because paying for your coffee is insignificant and you dont need nuclear level security to protect it. But nevertheless it should be very secure.
It's only a scam if you're trying to own actual bitcoin instead of simply using it as an investment vehicle.
Besides, if you really want to own a given amount of bitcoins that you have in your robinhood account, you just liquidate your position in RH and use those funds to purchase bitcoins directly.
It's a flat fee. The $18 may be the average currently, but it's on the high end. You'll probably be fine with $5. It all depends on how much you want the transaction to be in the next block. If you're sending $50,000 in BTC then you don't care about $18.
If you're transferring smaller amounts, why are you using Bitcoin? Use Bitcoin Cash or Litecoin or one of these newfangled proof-of-stake currencies. Then it'll be a couple of cents flat.
In my entire life, the largest transfer of cash I have ever done between institutions was I think $30,000 and it was between a bank account I owned and my brokerage. I'd wager that the majority of people have never transmitted more than $5,000 in their life.
BTC's price story is based on the idea that a huge portion of people will use it. Berksire A is expensive for an entirely different reason.
The story seems to rapidly shift between "BTC will save Venezuelans from an oppressive government" and "we never said it mattered if people could use BTC for transfers of non-huge amounts of money".
There's many stories on why Bitcoin should have value. Most of them don't make sense. Nevertheless, Bitcoin clearly is valuable, despite being used by few.
Of course people have trouble pricing Bitcoin, but the same is true for many other assets. If literally the only use for Bitcoin would be to speculate on all the cryptocurrencies, that would be enough to make it valuable.
This is stunning to me.
Wire transfers are free and fast in my country. I mean maybe some banks charge some people like 10c per transfer but they are mostly free.
They are also very common way to transfer money to friends, paying someone, moving money around accounts etc.
The standard in the UK is "Faster Payments" for domestic transfers and are near instant up to £10K ($14K). For higher amounts you can use BACs (the automatic fallback for FP) which is typically next day.
I am pretty sure you don't own Bitcoin if it is not in your own wallet regardless of what T&C may be saying. They can always find a way to snatch your coins under any made up reason. They cannot do that if you have all the keys.
> Elon Musk went on Twitter and called Bitcoin "BS" to drive the price down so they could buy at a discount. They then announced their Bitcoin purchase with fanfare that drove the price up, marking a quick return on their investment. They used Elon's influence to make a quick profit on the frenzy.
I don't see an inherent problem with this. People who were too gullible to believe influencer crap and caused bitcoin's price to go down by panic selling are now gone from the market, and the believers stayed in and made money. That's a good thing, and weeds out gullible people from the system. This isn't the stock market where fundamentals matter.
> I don't see an inherent problem with this. People who were too gullible to believe influencer crap and caused bitcoin's price to go down by panic selling are now gone from the market, and the believers stayed in and made money. That's a good thing, and weeds out gullible people from the system.
So when the price goes down due to influencers, people are dumb for selling.
But when the price goes up due to the very same influencers, people are smart for buying?
> This isn't the stock market where fundamentals matter.
> But when the price goes up due to the very same influencers, people are smart for buying?
The way I see it, Bitcoin is all about hype and modelling hype, so if you can correctly model a particular influencer's effect on a bunch of sheep, I think it's fine to reward that modelling prowess.
As for the sheep themselves, they might win or lose, it's a coin toss, but at the end of the day, they're just sheep.
> People who were too gullible to believe influencer crap and caused bitcoin's price to go down are now gone from the market
That's a part of the crowd. Another part is in for speculation and sold on negative message then bought in the dip. We don't know the proportions. The first part could be close to 0.
>So it sounds like lemming group think. It seems like someone one should hold “just in case,” but no real valid reason to do so yet (that I’ve heard).
Honestly what more do most people have? You could work your entire life but even all the earnings and scrimping and saving isn't even be a tiny fraction to what you would have if you had been the one to fulfil the order for the bitcoin pizza and just held.
Think a lot of people misunderstand just how hopeless the world is for most people.
GME and Doge are just the start, get used to hearing people are sinking their entire savings into far flung gambles multiple times a year from here on out. Especially in a post pandemic world where people are been completely downtrodden to their limit. Property is so exorbitant, pay is so low we're now entering a world where just gambling seems the smarter option than living within your means because anyone who has tried that can tell you it gets you nowhere. Pay just hasn't increased enough in line with property and your dollars are worth less and less every day.
We used to call them Ponzi schemes. This is the same but in slow motion. People are going to start taking their profits at some point and whoever takes them last will be holding the bag.
It's weird because last time I joined a conversation about BTC on this very website pro BTC posters were insisting on the fact that nobody ever said BTC would replace dollars.
When you tell them BTC is slow and expensive they tell you BTC will never replace dollars so it's not a real issue, when you tell them BTC is a ponzi scheme they tell you that it will replace dollars. Even in the pro BTC group nobody agrees what it is, what it should be and what it should become.
As Keynes said: "In the long run, we're all dead". USD has intrinsic value as the reserve currency of the largest economy in the world and is actively managed by the Fed. Which is a thing most people like despite what you may read online. Dollars will eventually be worthless but not in our lifetime.
CPI inflation is extremely low. This should be worrying to anyone who thinks that the value of a dollar is going down as much as the housing, stock and cryptocurrency market imply. No, this is an indicator for a large scale bubble in the financial system. Once interest rates go up again there will be a correction.
I personally think that the huge increase in the money supply and all of the stimulus money that has went out to people is the primary fuel to speculative investing (like GME and Crypto). Savings rates in the pandemic have never been higher.
I see it less as desperation and more of 'whoa, i have more money now, i want to put it into things that go up in value!'. I haven't seen the data (so do correct me), but I would suspect that less sophisticated retail investing is on the rise over the last year, correlating with increased savings.
But that’s not even remotely true. People’s standard of living is better than ever before and their chances of success higher than ever.
The narratives we craft define how we move in this world. This is a toxic way of thinking. It takes about $500/month throughout a working life to retire comfortably investing in just VTSAX.
I know you don't control who upvotes your comment, but I find it funny this is the top rated comment.
It has become a total HN cliché that the top comment is a negative takedown of the tech or startup in question. From Dropbox, to Coinbase, to Ethereum, and now to Bitcoin at 50k.
Not refuting anything you're saying here. Just find it amusing to have seen this pattern play out so many times here on HN.
entrepreneur works in blockchain sector and makes millions with no VCs: exists
engineer working at morally dubious ad-retargeting analytics company: "this has no utility whatsoever ($30), I could do that with a database ($7,500)! I'm going to ignore this for entire decades! ($50,000)"
Isn't it pure survivorship bias ? The dropbox thing keeps on being mentioned but for 1 wrong comment about dropbox there are thousands negative valid comments about stupid and failed startups/ideas.
When "the market" does something that somebody considers to be irrational, the explanation is almost certainly that they either simply don't understand it, or that they do understand it and they're just being judgemental about the motives at play.
The reason it has value is because people have demand for it. People have demand for it for a variety of reasons. I think it's reasonable to presume that a non-trivial portion of that demand is driven by the features that make it a rather good black market currency. It's also obviously quite appealing to certain groups of privacy conscious individuals. I've heard it's somewhat popular for international remittances, which makes sense given the economic stability issues various places have around the world. On top of those fundamentals, demand is further inflated by speculators.
Your biggest criticism seems to be that it would be a bad national currency because you can't implement a bitcoin monetary policy. But none of the demand for bitcoin is driven by that factor, so the observation is simply irrelevant.
Because they self evidently are, markets are so self evidently irrational the concept of "animal spirits" is one of the first thing we learned in econ 101, almost every post about the stock market will have someone saying the market can stay irrational longer than you can stay solvent
unless you want to explain how what happened with gme reflected a rational valuation of the company
Markets are just collections of individual decision makers, making resource allocation decisions. If you want to understand "market rationale" you have to make some attempt to understand the why those individuals are making those decisions. When you do this, you tend discover perfectly rationale decision making. If you still want to call it irrational because you disagree with the motives of those decision makers, or you think they've made mistaken assumptions, or because their risk appetite exceeds your risk appetite, or because you simply think they're dumb, then all you're doing is using the word "irrational" wrong.
For instance your comment about GME seems to involve an intentional misrepresentation of what occurred, for the purpose of supporting a judgemental comment. All of the decision making involved was perfectly rational. The decision to short the stock is a perfectly rational risk to take based on the short sellers analysis of the business fundamentals. The decision to squeeze the stock is also a perfectly rational risk to take based on the knowledge that the short sellers would eventually have to close their positions. Your statement that the price of GME should have (in a rational world) reflected the value of the business is simple a misrepresentation of how the system works. The price of GME represents the demand for GME, and for a set of perfectly rational reasons, that price was temporarily misaligned with the value of the underlying business. I get the feeling you're trying to make some criticism about how the mechanics of the system work, but to do so under the pretence of irrationality is simply wrong.
> The question to ask is, do the fundamentals you mentioned justify the valuation?
Your mistake is to think that it should. The valuation is exclusively a result of the demand for the shares. Under typical circumstances that valuation will reflect "the market's" sentiment on the underlying business, in the context of the broader economy. But there are situations where the demand for shares can be temporarily influenced by factors other than the nature of the underlying business. The short sellers had contractually committed to having a certain level of demand in the future, and other market participants exploited this fact for their own benefit.
For that reason the price was temporarily misaligned with the underlying value. These temporary price fluctuations are a perfectly ordinary feature of any market, and can be caused by any number of different inefficiencies exerting a temporary influence on price before the market has time to correct itself. There's not much insight in commenting that a market is not perfectly efficient, because no market is. Events like this are remarkable because of their scale, but also because of how infrequently they occur. You could count all short squeezes of this scale on one hand. So what is the point of your comment? That massively inefficient pricing, while possible, almost never occurs?
> it’s terrible as a wide spread value store because it removes an important tool that governments have to handle the economy (dealt with debt via inflation aka printing money
How does a static rather than unconstrained supply make something a LESS good store of value?
Econ 101: the value of ordinary goods are determined both by supply and demand.
Bitcoin-fanatic-USD-bears claim that Bitcoin is a good store of value because it has constrained supply. But they miss the demand side of the equation. Similarly, they claim that the USD is a bad source of value because it has "unlimited" supply. That also misses the demand side.
The demand for USD is robust because people need USD to pay taxes and to purchase most goods and services offered by US-based organizations. The demand for Bitcoin is based on... how many people Bitcoin-fanatics can get to buy and hodl Bitcoin.
(I don't count organizations that accept Bitcoin as payment because almost all of them exchange received Bitcoin into the local currency, negating the demand effects of the original Bitcoin purchase. In the US, that's usually USD.)
Exactly. Bitcoin proponents tend to tell only half of the story, and pick and choose economic theory that fits the "buy more bitcoin" narrative.
In economic terms, Bitcoin is inflating as an asset. Specifically, it's demand-pull inflation.
Bitcoin isn't even uniquely positioned to protect against inflation, other than the mistaken public belief on that topic. Inflation is an increase in the price of assets, so investors can (and do) escape inflation by investing their money.
Ironically, Bitcoin's limited supply disincentivizes holders from investing their money.
I don't think this is precise. Inflation of an asset means that the asset itself drops in value, relative to the value of other goods. For example: when prices rise, the USD itself would be inflating because would then take more USD to buy goods.
Bitcoin is rising in price compared to the USD. So it's not "inflating." If we treat Bitcoin as a currency, it's deflating because right now it takes fewer Bitcoin to buy goods than one year ago.
This is also why "asset inflation" is not precise. The asset itself is not inflating, it is actually deflating wrt. to other goods.
> Inflation of an asset means that the asset itself drops in value, relative to the value of other goods.
That assumes an asset can be used as a medium of exchange. In its current form, BTC is not a medium of exchange, it's a store of value.
In other words - the word inflation has to do with purchasing power. If the asset isn't used as a way to purchase then comparing the characteristic of inflation is basically pointless. It' be like saying "trees are inflating as an asset". No one makes purchases using trees so the concept is irrelevant.
But you're right that Bitcoin is mostly used as a speculative investment, and not to actually exchange goods. (That's not very convincing to crypto-people, though.)
I have used asset inflation in the past to mean the opposite of CPI inflation. The appreciation of assets without a corresponding increase in CPI inflation. I also refer to Bitcoin as a deflationary currency. The problem is that I needed a simple easy to understand term that cryptocurrency, real estate and stocks so I just referred to the entire class of goods gaining value relative to USD as "asset inflation" because CPI inflation also refers to a class of goods and thus its easier to transfer the concept. I will admit that this is not precise enough.
I think a better term would just be “rise in asset prices/values,” or “asset appreciation.” You can add “in real terms” to clarify after inflation.
It more accurately conveys the fact that 1) the assets are increasing in value, compared to a basket of goods or the USD; and 2) doesn’t imply that the asset is a currency.
When Bitcoiners talk about "inflation" they don't mean inflation of prices. They mean loss of purchasing power.
Demand-pull inflation in fact is exactly what is happening with Bitcoin and bitcoiners would agree. There's huge demand for bitcoin and an ever reduction of circulating supply. What that means is that it can maintain/increase purchasing power incredibly relative to other assets that have unconstrained and erratic supply (fiat).
Demand-pull inflation is not happening with Bitcoin. Again, inflation refers to the devaluation of currency. If the purchasing power of Bitcoin goes up, Bitcoin is deflating, not inflating.
Maybe you are trying to say that the USD is inflating (w/ demand-pull inflation) because USD is becoming less valuable, relative to Bitcoin.
But that theory is still problematic, since you can't measure inflation against just one asset. An asset might appreciate because of a shift in consumer demand -- the currency itself might not have "devalued." Instead, a better way to measure inflation is wrt. a basket of goods, like CPI. CPI has not changed much in the last year, which implies that the USD is not inflating much.
"The demand for USD is robust because people need USD to pay taxes..."
You cite this a priori - but it's so much more complicated than this.
Demand is intimately connected with supply in many cases.
Soemtimes this can be because demand is latent. If production of food goes through the roof - and people were previously starving because the price of food was too high, then that latent demand will be released when supply improves and costs drop.
But currency is different - opposite even. If supply goes through the roof - then demand will respond inversely. People will rush to unload that currency for other assets as they watch their wealth evaporate. It may hit some sort of baseline determined by the daily needs of payroll and tax payments - but other than those moments everyone will try to store there wealth anywhere but that currency.
What is actually happening empirically is that people are coming to see Bitcoin as a reliable store of value over medium to long timeframes. You can continue to believe in your theory a priori, believing that in the even longer term, the lack of goverment mandate in Bitcoin will see its value evaporate... You can even continue to do this when everyone is vested in Bitcoin except you. At which point, you can claim, with 100% theoretical consistency that everyone is a stupid lemming.
But ultimately, it will be the case that the Bitcoin folks had a better explanation of supply and demand than you - and their prediction of reality will be the measure of this.
Citing "latent demand" or "induced demand" as counter-evidence to my original statement shows your (mis)understanding of basic economics. In fact, basic economics predicts "latent demand" for ordinary goods!
> But currency is different - opposite even. If supply goes through the roof - then demand will respond inversely.
This is terrible reasoning. It depends on why that supply is going through the roof. Maybe the supply is increasing because of higher demand? (Hint: increased demand for the USD is why the Fed is increasing the supply -- to keep the price stable.)
The phenomenon you're referring to is that, with all else equal, people will shift away from the USD if supply increases make the USD's value drop. But all else is not equal; demand for USD last year effected all-time high issuings of stocks and bonds.
Or, another way I could interpret this sentence is that you are claiming that the USD is not an ordinary good. Do you have some evidence to back that up?
> What is actually happening empirically is that people are coming to see Bitcoin as a reliable store of value over medium to long timeframes.
"Happening empirically." Have some numbers to back that up?
>Citing "latent demand" or "induced demand" as counter-evidence to my original statement shows your (mis)understanding of basic economics.
Your original statement:
>The demand for USD is robust because people need USD to pay taxes and to purchase most goods
...remains an absurdly simplistic explanation of USD demand. I wasn't citing latent demand as a counter example to this explanation - just an illustration of easy to intuit scenario where demand responds dynamically to supply so that folks can see it happening in another context besides currency.
Clearly I was not referring to latent demand in my actual counter-example - which you even seem to acknowledge later...
> This is terrible reasoning. It depends on why that supply is going through the roof.
I don't disagree. And at least one scenario where USD demand has skyrocketed has been because of its safe haven reserve status... which again speaks to how simplistic your original claim about the robustness of USD demand actually is... and lo - suddenly we have another vector of possible future weakness of USD demand that Bitcoin folk can consider. A vector, mind you, that was completely elided by that simplistic explanation of demand that I contested.
Which is all I really want to achieve here... to remove this veil of simplicity - folks like you repeat ad nauseam these one line, simplistic claims about why Bitcoin demand must be illusory or idiotic... "Because you can't pay taxes with it! Hurrumph!".
But no - there is considerably more complexity and nuance to all this - as you yourself are admitting in your response. That all I wanted / needed to do to demonstrate the obfuscatory contribution to the discussion of your original comment.
> remains an absurdly simplistic explanation of USD demand.
Are you willing to provide a more sophisticated explanation for USD demand? The biggest thing missing from my explanation is demand as an investment, or foreign demand to hedge risk. Which right now isn't huge, given interest rates are at 0.
> just an illustration of easy to intuit scenario where demand responds dynamically to supply
Sorry, I was not correct that you were using this as an "counterexample." My intended point was that you seem to be presenting this as an unexpected phenomenon (like how others present "latent demand"), which signals that you don't understand basic econ. (And if one isn't familiar with basic econ, how are they supposed to understand monetary policy, which is based on a second/third year econ (macro)?)
A person who understands economics would usually write: a rise in supply (with all else equal) causes the price of an ordinary good to drop, which shifts the equilibrium to a point where usually there is more demand. "Supply is intimately linked with demand" misses the mark completely! Supply isn't at all "intimately" linked with demand; it's linked with price, which is linked with demand.
That distinction is critically important. It's the difference between central-bank money printing being inflationary (as you seem to suggest) vs. it being stabilizing (which is what is actually happening). And it affects behavior: people don't start buying food when when they see the news reporting an increase in supply. People start buying food when that supply increase causes the price to fall. If the price doesn't fall, people don't buy the food!
The same happens with USD. People don't swap the USD to another currency because they see the central bank creating money (apart from Bitcoin-fanatics). Normal people start migrating off the USD to other assets when they see its value fall (inflation), which isn't happening at all (as measured by the CPI)!
> "Because you can't pay taxes with it! Hurrumph!".
This is a strawman of my argument. Not only can you not pay taxes with Bitcoin, you also can't use it to buy any goods and services. In fact, the only thing it seems like you can do with Bitcoin is to tell others that how Bitcoin is the future, and if they are a disbeliever, that they will be left behind claiming "with 100% theoretical consistency that everyone is a stupid lemming."
>Are you willing to provide a more sophisticated explanation for USD demand?
I don't particularly feel the onus is on me to provide a full explanation. You are the one providing one in order to show Bitcoin demand is illusory or foolish. All I wanted to do was to point out enough of what yours was missing to show that Bitcoiners are at least not FOOLISH... that there is nuance enough here that if they are wrong, it's likely not because of some 101 mistake.
I did this by pointing out how an explanation of demand of currency must include an account of how supply itself can influence demand. The scenario I painted where supply grossly outstrips initial demand - thus further reducing demand - is possible; it can and has happened - Weimar, Zimbabwe etc... You responded by adding even MORE nuance by pointing out that added supply, rather than representing a hyperinflationary scenario - might itself just be a response to increased demand. And it might indeed! But are we in your scenario or are we heading further and further down the road of over supply? That's a HUGE empirical question... surely. And surely in determining whether or not I want to keep my wealth in USD vs something else, I need to know more about reality than just whether or not I can pay my tax in it, or purchase various things.
Thus I feel I have adequately demonstrated your explanation of currency demand as simplistic - without having to supply a fully rigorous account of my own.
The rest of your reply is worthy and deserving of response - but time is short! :)
>Are you willing to provide a more sophisticated explanation for USD demand? The biggest thing missing from my explanation is demand as an investment, or foreign demand to hedge risk. Which right now isn't huge, given interest rates are at 0.
Not who you're replying to, but I don't think you can have a reasonably complete explanation of USD demand without mentioning the petrodollar system/international dollar trade settlement. And how a number of countries are looking at ways to break out of that. Also, foreign dollar-denominated debt and debt service.
The demand for USD, as with most things, does fluctuate regularly. The value of USD is stable because there is a more-or-less omnipotent central bank that can alter the money supply to match demand and target 2% annual inflation. The way we pay taxes does not matter nearly as much as the Fed. By design, BTC can never have such a central entity that ensures price stability, so its price is practically doomed to swing wildly with speculative booms and busts.
>The way we pay taxes does not matter nearly as much as the Fed.
It matters, in the sense that the government could just adopt a foreign countries' currency and thus the value of that foreign currency would benefit from the power of the USA. The USD would lose its value as a result. I can run my own central bank and mint the hacker news dollar and the currency would still be worthless because of a lack of government adoption.
The US government has decided for itself to be dependent on the USD via taxation and thus it will do everything in its power to protect it. It's that simple. So, yes taxation has a huge second order effect that completely dwarfs the first order effect.
Compare that to oil dependent countries that get paid in dollars for their wealth. They tend to protect their USD based economy at the expense of everything else. Their local currency tax base tends to be pathetic in comparison to the oil money and thus they neglect it.
If, say, the government abolished the IRS and demand plummeted for USD, the Fed would respond by taking money out of circulation. The Fed creates an elastic money supply. You cannot reason about the dollar's value by studying demand for USD in isolation.
As for your "HND" hypothetical, it's very plausible that you could mint your own currency and control its value. You would not be able to control the total value of all HND in circulation. In aggregate HND would probably be a relatively worthless currency but so long as you are willing to constrain supply very tightly you will ultimately end up with a market for the few weirdos who are willing to part with $1 to obtain 1 HND. That may be a total of $1000 or less in the end, a laughable sum, but the unit price would still be controlled.
>But currency is different - opposite even. If supply goes through the roof - then demand will respond inversely. People will rush to unload that currency for other assets as they watch their wealth evaporate. It may hit some sort of baseline determined by the daily needs of payroll and tax payments - but other than those moments everyone will try to store there wealth anywhere but that currency.
Whether wealth disappears or not is purely dependent on what the money is spent on. If there is a food shortage you can actually spend government money on producing more food and thus end up with more wealth than before. In this scenario each new unit of currency is backed by additional production capacity that guarantees that you can exchange the same amount of currency for food. Since the price of food is still the same but there is more food you actually do need to increase the supply of money to match the supply of food, otherwise the price of food would be going down and we would get deflation.
Your question is not very meaningful/vacuously true for two reasons.
1. The premise is false. Bitcoin does not have the same demand as the USD.
2. The whole point of my original comment is that value is a result of demand. So your question is circular.
"If Bitcoin had equal demand to the USD, then it would be a better store of value" is as logical a statement as "if my grandmother had wheels, she would be a wagon, if you define a wagon as anything that has wheels."
Value is a product of demand for both USD and BTC. So as I said above, your question was tautologically true: if the demand of Bitcoin will always be high, then yes it will be a store of value, because things that are in high demand have value. But that is true for any good.
I could ask the same question about cow dung, or any scarce good. If the demand for cow dung was as high as the USD, will it be a stable store of value? Yes.
I don't buy this argument, it sounds like you're just convinced that Bitcoin can't be a store of value because X and Y and completely ignore the fact that it is being used as a store of value.
Bitcoin's constrained supply is almost a red herring at this point.
The usual fallacy is when proponents claim that Bitcoin is the only asset able to escape inflation due to fiscal policy interventions. This couldn't be more false. The very definition of inflation is an increases in prices, or a decrease in buying power. However, investors have been buying assets and investments to avoid inflation long before Bitcoin was even invented.
Bitcoin isn't a particularly good store of value because the price is driven purely by demand, which is currently in a state of market mania. It's not even the first market mania around Bitcoin. Past bubbles were also met with a "this time it's different" attitude before the inevitable sharp losses.
Bitcoin has value not because someone coded a 21 million coin limit in the code somewhere. Bitcoin has value because people want Bitcoin. Why do people want Bitcoin? Because the price goes up up. Why does the price go up? Because people want Bitcoin. As soon as something breaks that cycle, it doesn't matter what the maximum number of coins is. Without demand from the belief of future increases due to increasing demand, the price will go down. The purchasing power decreases.
Everyone likes to demonize fiscal intervention, but the reality is that counter-cyclical fiscal intervention tends to benefit the average person. Running inflation too hot is bad, but swinging to a full deflationary currency (Bitcoin) would also be bad for the economy.
"Bitcoin isn't a particularly good store of value because the price is driven purely by demand, which is currently in a state of market mania. It's not even the first market mania around Bitcoin. Past bubbles were also met with a "this time it's different" attitude before the inevitable sharp losses."
This is true, but the bottom at which people value bitcoin continues to rise significantly over time. Yes there are crazy bull cycles and bear markets that make the price highly volatile, but even people who bought at the absolute worst time 3 years ago, at $20k, before the price tanked by 80%, are currently nearly at 150% profit.
The price continues to be volatile yet less and less risky and overall trending upwards.
> The price continues to be volatile yet less and less risky and overall trending upwards.
Please stop telling nocoiners this arcane and forbidden knowledge! Instead, encourage them in their belief that Bitcoin is a scam, a collective delusion, a market mania, a bubble, based on nothing, wastes energy, will go to zero, and so forth.
When, in a decade, 1btc == usd1M, we'll all be grateful that such people stayed out of the market long enough to allow us to buy more bitcoin relatively cheaply.
What they can't see is that Bitcoin is now more likely inevitable than not.
It might be a good store of value (aside from its extreme volatility), but the GP comment would be correct if you substitute "medium of exchange" for "store of value".
Gold is short term volatile as well. Long term average is all that matters to be an effective value store. Its like a more volatile gold right now through price discovery.
Gold is not in price discovery because its been around for so long and already had its ETF moment (which is why its stagnated since that massive run). But gold has always performed cyclically. Long term (very long term) its done quite well. Not my cup of tea but it had its place. Going forward I expect btc will disrupt it and flip its value (JPM making the same call).
Over the last 100 years, you'd have done significantly better by putting your money into an index fund -- and had less volatility. As far as I can tell, gold is just a lousy place to keep your money.
I agree with you in theory. However, over the course of 100yrs you also need to worry about entire countries disappearing. If your index fund is denominated in the wrong currency, held by the wrong custodian, or has too many companies based in falling countries, you might be in trouble. Meanwhile, Gold has survived a thousand generations.
In a hundred years, there can be wars, reparations, and lots of damage to equity.
I think some distinction should be made on store of value (win for gold) vs asset appreciation (win for stocks), especially once you start talking about 100years.
When your country collapses, you tend to find practical matters that make gold a poor store of value, unless you dissolve your gold bars in acid when the war starts.
My impression is gold is largely seen as a low risk inflation hedge rather than a growth investment. A better comparison would be a savings account or maybe municipal bonds.
This is just a technicality however. In practice you have to buy stocks according to the index yourself or invest into a fund that mirrors the index for you. The secret sauce in ETFs is that algorithms do the work of the fund manager and thus reduce costs.
Bitcoin is mostly littered with bubbles and a hidden deflationary trend. Right now the 300% gains are just part of a bubble that is going to pop but Bitcoin will recover to a fraction of that, however that fraction is still higher than it started off. The long term gains per year are much smaller than the bubble gains. I wish people would stop "bubbling" Bitcoin and actually look at the long term trend like people do for stocks. At least I hope people research their stocks and ignore the last 2 years of gains when analyzing a stock or index fund.
> How does a static rather than unconstrained supply make something a LESS good store of value?
Because a healthy capitalist economy needs an incentive to invest. A steady, low, positive inflation rate is essential to encouraging those with capital to rent that capital out to those who need it for productive uses.
You're absolutely correct. USD is a poor store of value, by design, because productive activity is better than unproductive activity.
However, this doesn't say anything about Bitcoin, other than that it fails to be relevant as a currency. The reason why Bitcoin is a poor store of value is that owning Bitcoin doesn't guarantee that there will be an economy in the future that actually provides value equivalent to the value of your Bitcoin. If you invest into stocks or real estate you are making sure that there is a company or house out there that contributes to the economy.
When I read a message like this, I conclude that bitcoin has another 10x to go since gold has a 10 trillion market cap.
(Preemptively I'm going to say that gold market cap has almost nothing to do with its usage as a commodity, google it)
Gold isn't used in jewelry because it's particularly suitable for jewelry. It isn't used because it's pretty, or shiny, or smooth against the skin. It's used because it's expensive. So it's fair to say that jewelry is very much tied to store of value and speculation.
That's a moot point, Gold actual usage has no relation with its usage as a store of value. It's used as a store of value because it's shiny and people associates it with "value".
Maybe I don’t follow you but if more than half of gold use is jewelry then it seems the use has a lot to do with it’s value. People trade gold on top of that but it’s linked to use. If jewelry demand dropped 98% it would surely affect the price of gold.
And the GDP of New Zealand will go up 100x because the USA has a $21T GDP. (Preemtively I’m going to say that US’s market cap has almost nothing to do with its sheep population, google it.)
> but no real valid reason to do so yet (that I’ve heard).
I hold because i expect us to continue approaching the game-theoretic attractor. I've held for years and will keep holding. Every year, i see more and more people coming around to my perspective.
How many years can you watch the price keep going up before you'll eventually consider that you might be missing something?
> We know transactions are slow and expensive,
lightning network obviates this problem
> it’s often regulated such that it needs to be fully declared (removing the whole anti-gov part)
The government still can't print more bitcoin, which is the main appeal for me.
They also cant technically block anyone from recieving coins. They can make doing so a crime, but don't have the technical ability to, say, freeze funds.
> typically markets eventually correct when there’s no underlying true value proposition
Given that bitcoin is over 10 years old, shouldn't its longevity be taken as evidence that there is, indeed, a true value proposition?
> which can be executed “well”
Why is 'well' in quotes here?
Are you open to the hypothesis that money printing exacerbates might cause long term issues in society?
> They can make doing so a crime, but don't have the technical ability to, say, freeze funds.
If the governments of the world made it a crime for miners to include transactions involving certain blacklisted addresses in their blocks that could be a big step towards a freeze.
That would make it profitable to become an outlaw miner who doesn't care where the transactions are coming from. Then they will outcompete the above-board miners, because they will be able to spend more money to buy ASICs while remaining profitable, ensuring that control of the blockchain will be in the hands of criminals. The only way to prevent that is go nuclear and control the production and trade of silicon chips like we do with munitions.
And even this is a very low-probability scenario. The most likely outcome is that the US and a few European countries try to do this, China laughs and does nothing, and Bitcoin belongs to China pretty soon (if it doesn't already).
> So then it becomes a digital store of value, one that is only as valued as the market gives it, and typically markets eventually correct when there’s no underlying true value proposition (as we can see with $GME).
You're not missing anything, you said it yourself it's a store of value. Maybe markets eventually correct, but in the last 10 years Bitcoin has only gone up, so if you had planned to use it to store value for 10 years a decode ago, then it worked pretty well.
> It also pushes only towards deflation, so it’s terrible as a wide spread value store because it removes an important tool that governments have to handle the economy
Well it's a store of value, not a tool for the gov to handle the economy.
Every minute, there are thousands of bitcoin transactions happening at dozens of exchanges, and it's happening instantly with very low cost. Because it's off-chain.
That's what you're missing here, not everything needs to be on-chain to be valuable. Exchanges and businesses and services can aggregate.
The same reason why when you use Venmo you don't think "wait, why use USD at all if it's all a database?"
The truth is, the current financial system is just a large number of databases trying to sync with one another, and one of cryptocurrencies' goal is to decrease this amount of databases.
It’s still backed by the currency. Kind of like how when you make a stock trade the actual trade isn’t cleared for some time. In this way the blockchain of Bitcoin is simply transparent and easy to follow, if slow and expensive.
The whole point of bitcoin was to be decentralized. If bitcoin transactions are loaded up on an app like robinhood, then it’s no different than robinhoodbux
Maybe many under-informed retail investors are chasing 10x growth, sure, but it feels like the larger institutions mentioned here are doing it likely the same reason they invest in any other asset: diversification.
Funnily enough my brother showed me prices for magic cards he sold a few years back. They have surged in value in 2020. The asset price inflation isn’t limited to tech stocks.
Driving a car devalues it, because you're using up the utility and extracting value from it.
If you buy a car and treat it like an investment (don't drive it, store it properly, keep it maintained) it behaves like an investment. Depending on the car and the market, the value goes up substantially.
Bitcoiners like to emphasize Bitcoin's limited supply, but Bitcoin is hardly the only thing in life with a limited supply. There will never be any more 2000 Honda Civics, for example.
This seems like an example of survivorship bias. That Honda is an outlier. Not every car will go up that much if at all. Hondas are known for reliability but it takes time to know if a car model is reliable and not a lemon.
The purchase price of that car would have been $27,320.28 in today's dollars. Also, you still have to store it and do some minor maintenance even though it's not being used. The true cost of ownership for 21 years isn't really known. It's hard to know how much the real profit actually was. Either way, it's a gamble as an investment strategy.
Sure, but it costs money to store it and maintain it in a good shape. Also try sending the equivalent value of 100$ using a Honda Civic. Barter economy is impractical.
Why would you hedge against something like inflation, which is relatively constant over a year, by putting your money into a highly speculative risk asset with absolutely insane volatility over that same timeframe? Like many arguments for Bitcoin, this one just doesn't make sense.
"Relatively constant over a year" seems very loose don't you think? In the past year we've seen an unprecedented injection of money into the system. Presuming you're living in the U.S. have a look south of the border to find out how every national currency is always a few economic policies from throwing inflation targets out of the window.
Even countries that do have hyperinflation experience it at a somewhat predictable pace. With Bitcoin, you don't know if it's down 80% tomorrow, then up 200% the next day, then down 50% the day after. It's a huge tail risk.
In the Weimar republic eggs went from $0.5 to $500 pretty quickly and by 8 months eggs were $1,500,000. Happens quicker than you think and that's a hell of a tail risk.
Bitcoin has been pretty consistently up on any timeline over the last decade. I've been present every crash and my tolerance for keeping a small percentage of net worth in it increases each time.
You don't have to keep 100% of your cash in bitcoin. With the current pace of money printing I think not keeping something in it is basically negligence to your family.
> Happens quicker than you think and that's a hell of a tail risk.
It's not a tail risk. If you see prices increase exponentially over the span of months, you will have had plenty of time to react. Inflation is mostly a problem of the wage earners who don't have cash savings in the first place. Otherwise, if you have significant life savings all in cash, you're financially illiterate and cryptocurrency is the last thing you should put your money into.
> Bitcoin has been pretty consistently up on any timeline over the last decade.
Bitcoin also has been consistently down 50% from the previous high most of the time. It has pump-and-dump penny stock levels of volatility.
Bitcoin is fine as a speculative asset, as an inflation hedge it's just completely asinine. There is virtually no correlation between actual inflation and the value of Bitcoin. There may be some correlation to the level of panic about hyperinflation among the uninformed public. If you want to ride that wave, go for it.
This happened because there wasn't enough eggs or food in general. If there is food shortage in the future people will pay all the bitcoins they have to get a loaf of bread or a few eggs.
I'm fully aware of that, but there's many financial instruments to hedge against inflation. To that end, I'd sooner put my money into Rolex watches or sneakers than cryptocurrency.
I do know how it feels, because I do hold some Bitcoin for "fun". Most of the time, it's down 80% from the previous high. Then it randomly appreciates 10x before cratering again. With any meaningful amount of money, that doesn't feel good at all.
The purchasing power I might lose from a mere $20 is of course irrelevant. If I put it into Bitcoin it might turn into $100 or $200 at an off-chance, but that has nothing to do with inflation. Bitcoin just isn't that correlated with cash. If I wanted to make a $20 bet that the dollar inflates dramatically, I would buy an option to buy gold at $5000.
Because our government just printed a LOT of money. Look into what money supply does to inflation. More supply of money means things cost more. Interest rates go down, and it’s better to not have cash but assets. I just loaded up on gold, platinum, silver, art, crypto, and real estate. Those will all fare better than cash or savings as hyperinflation grips the country.
It's also not really clear how it would. Banks aren't out there giving out loans like candy to everyone for anything. The little bit of helicopter money doesn't even cancel out the lack of spending due to COVID layoffs. You just can't have CPI inflation that way.
> I just loaded up on gold, platinum, silver, art, crypto, and real estate.
One of these is not like the others.
> Those will all fare better than cash or savings as hyperinflation grips the country.
You've probably listened too much to gold/silver salesmen who have been warning about the next crash and hyperinflation for many decades.
In reality, inflation is arguably bullish for all these heavily indebted companies in the stock market. A market crash can be hedged against too, just look at how Universa Investments performed in 2020. How did gold perform though? Unimpressive.
In perspective, yes it is. In a normal year you might expect M2 increase by 5%. Last year was special, of course. People are acting as if hyperinflation was right around the corner because M1 just doubled, ignoring that M1 quadrupled in the ten years before 2020 and that it didn't cause hyperinflation then either.
Is that so? People have lived through pandemics when they were using gold as a medium of exchange. The pandemic is an excuse for printing money. I would prefer that debasing of fiat would not exist, i.e. there is only limited supply which can not be inflated arbitrarily.
FYI they do not print money. The US fed gives banks money in exchange for collateral (US govt debt). The banks cannot spend this money, it has to sit there doing nothing. The banks do make a small amount of money from the assets they swapped for the money. Eventually the swap is reversed, and if the bank does not return the money then the fed keeps the collateral.
The M2 has increased because interest rates are down (on purpose) and more money is being borrowed.
* Cross-border transactions which would take days for Swift are instant
* Expensive: no not really. In the filled mempool days, yes prices shot up, but that was a few years ago. Fees are incredibly low now.
* Non-int transactions are still just about the same speed as a Visa cc/debit swipe. Again, when the mempool is going insane (hasn't happened in some time), yes TXs could take time vs. fees. However, nowadays it's just about as quick to reach a "basically verified" TX as it whatever risk mgmt balancing Visa is doing in the background. This time, instead of Visa's fraud department doing some checks, it's 1 or 2 blocks to very likely confirmed, 6 blocks to definite. Just different ways of skinning the same cat.
You're correct on this
> also lacks a lot of the controls that traditional banks have for good reasons,
But you're blending some arguments that are counterfactual if taken together as something cohesive. It's fast because it doesn't have these controls, for instance.
Do you really want an answer to that question? Feels more like your are taking the temperature of the top minds of HN to decide if it's cool to like bitcoin yet.
Its got momentum as a crypto, in theory it could update itself to whatever would start being more valuable if needed.
Also, I don't know if all investment need to make sense based on economic fundamentals, bitcoin makes sense at a psychological level why it is a good investment for now, as more and more people slowly decide they need to dip their toes in it as well.
Criminal and black market transactions are a sizable fraction of the economy and bitcoin is a major financial innovation for this “sector.” The only problem is the price volatility, you don’t want to collect some money for Fat Tony and have it drop in value by 20% by the time you get it to him.
I'm also still wrapping my head around this just like you, but I think I understand enough to answer some of your questions.
> We know transactions are slow and expensive, so it’s not a good replacement for ordinary commerce.
I don't think that this is obviously true. Digital transfer of the US Dollar is similarly slow and expensive (see: ACH, Wire, SWIFT). The response you'll hear the most frequently is that BTC (and digital currencies) should be compared to the US Dollar, not to Visa and Stripe and Venmo etc. Right now, if you want to send US dollars to somebody and you're unable to do it through PayPal/Venmo/Square/Visa/MasterCard, your best bet is to literally mail cash to the recipient. BTC solves that problem; you now have the option to send someone "cash" in a trust-less way, but that's probably not how the majority of people would use BTC.
The blockchain doesn't have to be used to settle every single transaction in real-time, just like you don't have to use ACH/Wire to send $5 to someone electronically for every transaction. Just like banks today send a batched ACH files of all money movement at the end of the day, they may do the same on the blockchain hourly/daily. The benefit of BTC over USD is that there is a way to "mail someone a briefcase of cash" without having to actually mail them; instead you can "mail" it to them on the blockchain and have it take a few hours rather than 3-5 business days. If you want to send US dollars faster, you can rely on centralized institutions that build financial products on top of the US Dollar, but the same can happen on top of other non-government-backed currencies. Just like you have a bank account where you can see in Dollars or Yen or Pounds what your bank balance is, one ought to be able to open an account and see what their balance is in BTC or ETH or Nano...or so the argument goes.
> It also lacks a lot of the controls that traditional banks have for good reasons, so fraud becomes harder to tackle, and things like refunds are just at the mercy of the other side of the transaction (making commerce even harder, as well as basic banking)
Again, you want to compare BTC/ETH to the actual currencies, rather than the institutions that engage with those currencies. All of what you said is true of any fiat currency: I can physically hand you a $20 bill, and that transaction can happen in a totally un-traceable way already. There’s a common saying that if cash were invented today, it would be illegal, since it’s hard for the government to track and they wouldn’t like it.
> So then it becomes a digital store of value, one that is only as valued as the market gives it, and typically markets eventually correct when there’s no underlying true value proposition (as we can see with $GME).
"We have talked a lot recently about the Reddit-fueled rally in meme stocks like GameStop Corp. One thing I have said about this rally is that it reflected Reddit traders’ correct understanding of a simple market dynamic, which is that if they all bought the same stock at once then it would go up. So they did. Institutional Bitcoin adoption, as we have also discussed, has a somewhat similar dynamic: Each time a big institution says “we like Bitcoin now,” Bitcoin goes up, because widespread mainstream institutional adoption is clearly bullish for Bitcoin at this point. So if you are a big institution or corporation, you can make some free money by (1) buying Bitcoin, (2) announcing “we like Bitcoin now,” (3) watching Bitcoin go up, and (4) selling the Bitcoins you bought for a quick profit. (Or keep them as a bet that other institutions will do the same thing and you’ll make even more profits.)
This dynamic, separate from any particular institutional decision, is good for Bitcoin: If it’s in every big bank’s and corporation’s short-term financial interest to quietly buy some Bitcoins and then noisily make a show of adopting Bitcoin, then a lot of them will, which will have the effect of pushing up the price (both because of their buying and because of their announcements). Unlike meme stocks, there is no underlying business, no cash flows that do or don’t make the price make sense: The price of Bitcoin makes sense or not purely as a social fact; if there are “fundamentals,” they are things like “widespread mainstream adoption,” which you can provide. “The fundamentals of Bitcoin are strong, look, Morgan Stanley is buying some,” Morgan Stanley could plausibly say, after buying some Bitcoins. So it might as well do that.
With the meme stocks the natural thing was to worry about the endgame for that process; you can’t have a stock price that is divorced from fundamental value forever. With Bitcoin, you ... can? Like if the endgame for Bitcoin was “universal adoption by corporations and institutions as a digital store of value,” then that sounds like a good and permanent and somehow fundamental result?"
> so it’s terrible as a wide spread value store because it removes an important tool that governments have to handle the economy (dealt with debt via inflation aka printing money, which can be executed “well” (US) and really poorly (Zimbabwe)).
This is very debatable, and you've more or less illustrated the controversy by pointing to a "good" version and a "bad" version. The political question is whether the possibility of "bad" means that the concept of government-controlled inflationary assets is inherently bad. I won't pretend that there's an objective answer, but neither should you; the fact that it removes the tool you describe can both be described as a feature or a bug, depending on your political leaning.
> Digital transfer of the US Dollar is similarly slow and expensive
And with ACH, wires, swift, the slowness is a feature not a bug. It's one of the ways fraud is combated, for example. I seriously doubt it's fundamentally a technical limitation of the technology used, but rather a choice.
But as you said people aren't doing this with BTC -- and if they're not, then this removes one of the use cases that would warrant it's value, so you're only arguing my point.
> The benefit of BTC over USD is that there is a way to "mail someone a briefcase of cash" without having to actually mail them
You also seem to forget about checks -- no one ever sends bricks of cash in USPS unless you're a drug dealer running a YOLO life. But you also ignore ACH/wires/credit cards and all the ways most money moves today. What is the fundamental issue there that Bitcoin solves?
> Again, you want to compare BTC/ETH to the actual currencies, rather than the institutions that engage with those currencies
You're right, however regulations exist that enforce institutions use USD. Those are largely good things.
> With Bitcoin, you ... can? Like if the endgame for Bitcoin was “universal adoption by corporations and institutions as a digital store of value,” then that sounds like a good and permanent and somehow fundamental result?"
But is/will that happen? These issues that I point to make it a less good option.
> I won't pretend that there's an objective answer, but neither should you; the fact that it removes the tool you describe can both be described as a feature or a bug, depending on your political leaning.
It's a tool that gets removed. Being global means there's no local way to adjust things to current circumstances. Just look at Greece in the EU -- because they went on the Euro, with a totally different economy than Western Europe, they got all of the deflation with a GDP that couldn't keep up, and as they piled on the debt they didn't have any levers to pull. Unifying global currency is a terrible idea when you have very uneven economic realities around the globe.
> But you also ignore ACH/wires/credit cards and all the ways most money moves today. What is the fundamental issue there that Bitcoin solves?
Regarding this point, Bitcoin solves the freedom to move capital. People in the U.S. under-appreciate this freedom. I'm from a country with strict capital control, very very difficult to move money outside the country, it's hard even to convert local currency to USD.
There is the reflexivity of bitcoin's network effect. The more institutions adopt bitcoin, the more stable it is, and hence more institutions will want to adopt it.
Bitcoin won't be a unifying currency. It behaves like a commodity, and commodities prices can swing wildly - remember negative crude oil prices last year?
> It's one of the ways fraud is combated, for example. I seriously doubt it's fundamentally a technical limitation of the technology used, but rather a choice.
I know the payments industry pretty well, and I can assure you that the limitations of ACH are NOT a choice in the least. It’s a system that was designed in the ‘60s that hasn’t changed simply due to institutional inertia.
> But as you said people aren't doing this with BTC -- and if they're not, then this removes one of the use cases that would warrant it's value, so you're only arguing my point.
They’re not doing it yet, but just this week we’ve got MasterCard, Visa, and Morgan Stanley announcing their plans to support cryptocurrencies, especially on the merchant-services side. Supporting this does not remove the existing value, it simply reinforces it. Just like the US dollar, you can either transact with people purely on trust-driven centralized services (and enjoy the convenience that such services allow) or you can “withdraw” some of that “cash” and “mail” it to people in a trustless way (albeit very slightly less conveniently).
> You also seem to forget about checks
Checks only partially solve the problem that I described. First of all, you can't take a check and chop it into pieces and use those pieces as tender; you have to cash the check eventually. In contrast, you can spend the Bitcoin you receive to anyone that willingly accepts it either in full or in part.
Second of all, while checks provide the functionality that "mailing cash via USPS" provides, it's equally cumbersome. If I want to donate $$ to a political dissident that's been canceled off of every platform, it would be quite annoying to find my checkbook, write the check, and then send it to that person. If I wanted this to be a recurring donation, it'd be even worse. That brings me to the next point...
> no one ever sends bricks of cash in USPS unless you're a drug dealer running a YOLO life. But you also ignore ACH/wires/credit cards and all the ways most money moves today. What is the fundamental issue there that Bitcoin solves?
The fundamental issue that this specific use case solves is that it allows one to transact with people even if the traditional rails disallow it. For example, if you want to donate money to your favorite porn star on PornHub or OnlyFans, it's impossible to do that via Visa/MasterCard/Amex/PayPal as these financial institutions have all blocked such services. Or perhaps a somewhat more topical use case: if you want to use and support services like Gab or Parler who are effectively persona non grata in the tech world, there is essentially no way to do this via the traditional payments rails. Crypto solves this problem in a way that's relatively more user friendly than mailing cash or checks.
If you lived your life on cryptocurrencies, you could transact day-to-day using your Visa branded card at your coffee shop (eventually settled on the blockchain), or you can “withdraw” some “cash” into a separate wallet and set up recurring donations on-chain. A few hours of automated asynchronicity is far less cumbersome than manually cutting, writing, and mailing checks every month.
> You're right, however regulations exist that enforce institutions use USD. Those are largely good things.
Correct, and in the worst case, it’s good that we have a fallback legal tender! But it’s also good that there are now more options in addition. With pegged stablecoins, it’s becoming easier to interoperate with USD.
> Being global means there's no local way to adjust things to current circumstances. Just look at Greece in the EU -- because they went on the Euro, with a totally different economy than Western Europe, they got all of the deflation with a GDP that couldn't keep up, and as they piled on the debt they didn't have any levers to pull. Unifying global currency is a terrible idea when you have very uneven economic realities around the globe.
I think that there are several assumptions baked into this argument that won't necessarily hold true. First of all, I don't think anyone believes that there will ever be one and only one global currency. Instead, the paradigm that's being challenged here is that, at a local level, you might no longer be forced to use one and only one currency. In the "new world" you might imagine a market of currencies with the option to use whichever you want to. If you think your government is being callous with its monetary policy, you can seek refuge in other currencies with little difficulty and even coexist with others that use different currencies. A lot of the new decentralized finance applications seem to be focusing on providing interoperability between multiple blockchains (Uniswap, Cosmos) as well as fiat currencies (via pegged stablecoins).
I think you're right that it remains to be seen if any of this will succeed or come to pass, but it's too early to say that it will fail. We're either in the mainframe era of cryptocurrencies, or we’re in the Concorde era of cryptocurrencies. Impossible to know which it is, at this moment.
Gold's differentiator is long term trust. No matter what other people in the world do it will always exist as it is as long as it isn't touched.
With gold I trust the laws of physics and reality (not a human based system), with BTC I trust the consensus of the network participants and that the rules everyone follows will result in trustworthy outcomes, with a bank I trust that bank.
The big threat to BTC trust therefore IMO is if the network participants as a whole or enough of them aren't trustworthy. Marginal cost of mining a block favors cheap electricity countries (i.e. hydro China power) in the long term as the difficulty of the network changes to price out other competitors as they scale up. In that instance do you trust the person with the cheapest electricity to verify your transactions? Given my understanding of crypto that's probably the biggest threat to any long term investment in BTC. For PoS currencies I'm guessing your trusting the stakers by amount put down (i.e the rich people) to verify your transactions.
The counterpoint to that is that gold has an "intrinsic value"; it's a store of value because it happens to have some use outside of merely just being a store of value.
Of course, the counter-counter-point to that is that the Bitcoin network also has "intrinsic value", and it's that it enables trustless/permissionless transactions to people that might be engaging in illegal commerce or are trying to escape the currency of a regime with poor monetary policy (Venezuela, Bolivia, Nigeria, Zimbabwe, etc).
lemming group think? do you have this concept of all crypto proponents as stupid lemmings all following each other not capable of independent, rational thought?
i call a bunch of people serving 1% of the population without question lemmings. to try and falsely frame a legitimate worldwide, grassroots counterculture movement as just a bunch of stupid lemmings betrays your prejudice and makes it hardly surprising that you don't see any value in the space.
i can't believe a bunch of "hackers" shit on the open source, decentralized internet of money. it's a currency created by real hackers for the internet. it is the first of an entirely new asset class that allows any person to be their own bank and has a hard cap on supply. Yes it's slow, but it's also extremely secure and resistant to change.
>it’s often regulated such that it needs to be fully declared (removing the whole anti-gov part)... so fraud becomes harder to tackle
which one is it? cash is the king of fraud and illegal activities anyway: fungible, anonymous, hard to trace. a public immutable database ought to make fraud much easier to weed out in the long run...
>no underlying true value proposition
it has outperformed every other asset in the world over the last decade, maybe you need to look a little closer to understand the value proposition. just because a bunch of bigots decide it has no value proposition doesn't make it true and obviously the market strongly disagrees with this sentiment.
>It also pushes only towards deflation
you mean poor people can have their money appreciate over time instead of having their meager savings robbed by an unseen, man-made market force? you mean people won't be so eager to waste their money on crap that causes pollution and ends up as landfill? i've never really understood the deflation argument, it's a textbook slippery slope.
> removes an important tool that governments have to handle the economy
if the government were truly democratic and benevolent this would be the case. unfortunately we live under a bunch of warmongering kleptocrats who need to be kept in check.
more like an important tool to bail out themselves and their cronies after they fuck up the economy so badly with their corrupt, short-sighted practices.
the people who seem to screech the loudest against cryptos seem to have a massive vested interest in maintaining the status quo. you really can't get how the economy might actually function better for most people if it wasn't serving as a welfare state for the elite?
meanwhile the btc supercomputer keeps producing blocks, just like it has since day one.
By the time you understand Bitcoin/crypto, it will be too late for you to make profit from it. Get in now - lot more smarter people are in there and doing wonders for themselves. Look at your friends. Look at colleagues in your company. A lot of them are in. And here you are trying to make sense of it from your perspective. Even Ray Dalio is opening up and fair to say he knows a lot more things about finance and economics than you. Just get in.
I have been in Bitcoin since 2016 and have enjoyed my riches. The next wave of new users will come from institutions. Hacker News audience is not what will pump the price further.
> Think about it - if you had invested at any point in Bitcoin before today, you would have made money. But keep on resisting.
That's irrelevant to me. It's not all about "getting rich". It's not like everyone can become rich off of bitcoin. The only way you make money is taking it from someone else. At the end of the day, real work needs to be done in the world.
... when people make money off Bitcoin, where does that money come from?
At least when the scam is selling shares of an imaginary gold mine, there is hypothetically somewhere for the profits to come from. With Bitcoin, there is only a $12B/year loss to electricity charges and no where for money to come into the system but absurd transaction fees.
My brain hurts when reading these silly replies. It is like you don't want to learn how things work. BTC has value because people assign to it and there is new money coming in (fiat converted to BTC) which is what makes the existing investors rich.
You all do deserve to stay poor and be labeled as #nocoinists.
No it is not sarcasm. You all are missing out on the train going right in front of you. The point here is that you all are not even trying to understand the advantages of crypto - with innovations such as DeFi, NFT and Store of Value. For you, it comes back to Bitcoin wasting energy and the fact that it is being used by criminals. Keep on believing your theories while the rest of us become rich.
Your argument is just appealing to authority. You also assume I don't even have any bitcoin, and that I've never 'gotten in'. None of this answers my original questions as to why Bitcoin is a shrewd investment with long-term potential versus being a Ponzi scheme.
If you had taken some time to read about it, you would know better vs. putting your detailed uninformed comment. I am making an informed inference given the ignorance of your comment that you don't have any bitcoins or else you would actually take some time to research on it.
This is exactly why there are so many skeptics. Too many people trying to sell it as a "get rich quick" investment without downsides while there are so few concrete use-cases so far.
They were all over in 2017 before the price dropped to 3k,I admit I was a bit of a savage when that happened.
In all seriousness with the scam you re running online, be careful and protect your family for when it goes back from 50k to 3k. A lot of people will have lost a lot of money :(
Pets.com was a business that could actually grow so it could still be considered an investment. Bitcoin is purely based on speculation. Gold is pretty much the same thing except it has some intrinsic value. The value of gold and bitcoin only moves because of peoples' feelings.
The valid reason is that Bitcoin is the best money that has ever emerged in human history. The denationalization of money is inevitable and long predicted. Check out Nobel prize winning economist Hayek's Denationalization of Money https://en.wikipedia.org/wiki/The_Denationalization_of_Money
“Stability in value is presumed to be the decisive factor for acceptance. Hayek makes the assumption that competition will favor currencies with the greatest stability in value since a devalued currency hurts creditors, and an upward-revalued currency hurts debtors.”
It is rather a promise of an "eventual stability". Thinking through that lens, I think USD (and other Fiat currencies) are the ones exhibiting instability.
BTC cannot be stable, even eventually. There is no way to increase the BTC supply so when productivity increases, prices of goods (expressed in BTC) will always go up. Assume that BTC is the only currency and world productivity goes up 6% each year, or 0.5% each month. Then when you go in store to buy apple, you will see price gone up by 0.5% than previous month because there is no way to increase money supply. One of the advantage of fiat currency is that you can control the money supply and try to keep prices stable. For BTC, there is no way out either way. The worse case occurs when some economic disaster strikes like subprime mortgage. In that case there is no way to fix the issue and massive uncontrolled depression will trigger and can stay for decades whether you like it or not. In other words, the same things that makes BTC as good store of value, makes it a extremely weak to guarantee stable economy.
If BTC is the only currency and everyone is transacting in BTC, then people are incentivized to hold BTC. Now that everyone is holding BTC, the value of their holdings are increasing alongside everyone else holding BTC. If you go into the store to buy items you will notice that the price in BTC terms will be decreasing b/c more BTC can't be "printed". (Each BTC is worth a lot now and continually increasing, but at a predictable rate) Each person will continue to pay with less and less BTC over time all the way until the lower unit bound, which is a satoshi (0.00000001 BTC), is reached. If we ever reach that point in our lifetime the code will need to be forked to upgrade the protocol to handle further subdivisions.
> [...] all the way until the lower unit bound, which is a satoshi (0.00000001 BTC), is reached. If we ever reach that point in our lifetime the code will need to be forked to upgrade the protocol to handle further subdivisions.
No fork necessary. We can already use millisatoshis on L2.
That is deflation and is intentionally avoided by central banks because you don't want people to hoard their money. Hoarded money sits there and does nothing while money that is in banks can be lent out, invested, and be useful.
It's only avoided b/c in traditional economies there is no way to subdivide units of a denomination. (e.g. There is no way to split a penny into thousandths) Cryptocurrencies are purely digital and do not have this limitation. The only limitations are self-imposed by the algorithms themselves.
If Bitcoins were the dominate and only currency, people would continue to buy food, clothing, luxury goods etc. b/c they need or really want those things and will be willing to trade bitcoins in exchange for those goods. Practically, Bitcoin is unlikely to be the dominate currency allowed in countries to participate in transactions without incurring significant taxes, so likely people will store wealth in Bitcoins(or other cryptocurrencies) and then convert to fiat currencies as they need to make their purchases.
The pool of valuable stuff and services grows over time, in general. There is a fixed amount of bitcoin to represent the value of all valuable things. Therefore in a world with only bitcoin, a bitcoin grows in value over time and is more like an investment than currency. This is like if interest rates were always stupidly high, because why lend out your precious automatically appreciating asset when it makes you money just by sitting there? If people struggle to get credit (by borrowing) it becomes super hard to buy cars, houses, educations, etc. Imagine paying a mortgage but with credit card rates. It would be very bad.
For the same reason that people don't just leave all their money tied up in ETFs or indexed mutual funds. If you really want or really need something, then you are willing to give up on the opportunity cost of your asset appreciating.
In a pure BTC environment, the borrower is employed and being paid a salary in BTC. Loans would work just like in an inflationary environment, except now the overall deflation rate of BTC would be taken into account during loan origination.
Bitcoin is not a good asset to do loans in right now as it has high volatility, but as ownership of Bitcoin becomes more and more dispersed, then the volatility will reduce. Once the volatility of the asset is stabilized, then the depreciation rate could be factored into loans.
That’s not the only way it’s avoided by fiat currencies. Physical units wear out and are lost (sometimes destroyed deliberately before that point, I don’t know how often); and the banks have rules on the use of fractional reserve banking and similar, which is for practical purposes a time-limited money multiplier, and the multiple of that multiplier depends on the rules: https://en.m.wikipedia.org/wiki/Money_supply
Fiat can, most of the time, grow or shrink the money supply as needed for the most stable economic outcome.
Ahaha, I'm literally listening to a talk by Yanis Varoufakis right now and not 5mins ago he mentioned this as the reason non-fiat money, be it gold standard or BTC, cannot work long-term.
There is no objective measure by which Bitcoin is more stable than USD.
The idea that USD is becoming worthless due to recent monetary policy, however ill-advised, is greatly exaggerated.
The idea that Bitcoin is the only way to protect oneself against inflation is also greatly exaggerated. Investors have been buying assets and investments for a long time before Bitcoin was invented to avoid inflation. Bitcoin didn't magically change that.
That's a nonsensical statement. Use BTC to buy a car today, and then use it to buy the same value car in a year. BTC is, fundamentally, unstable at this point in time. Even when all BTC is mined and it is distributed across the globe to every human being and sentient AI and animal, it will likely continue to be highly unstable as a currency.
Compare to the, relatively, stable USD as a currency. Prices for goods and services in USD fluctuate, but typically only changing once a year or so. Your milk price doesn't, in USD, shoot up by 500% in a week.
It's all a matter of perspective. It's the entire rest of the world that's unstable and undergoing wild price fluctuations, while the value of one Bitcoin stands eternal and unchanging by virtue of it being worth one Bitcoin. /s
And many things are cheaper. Or they aren’t growing with inflation anymore. Most electronics, for instance, and many mechanical devices. Even food stuffs (some) have been more stable in price than inflation suggests they should be.
Except you can't spend it very well and would be crazy to borrow it. Imagine the disaster if there had been a large market for bitcoin loans a few years ago.
Yes, but who's actually paying the $18 transaction fees to move some Bitcoin to Visa so they can spend Bitcoin instead of cash and incur a new taxable sale with every swipe of the credit card?
Has anyone confirmed that Mastercard is even going to support Bitcoin? Previous articles suggested it was stablecoins only.
In no way is spending Bitcoin as easy as spending regular old cash.
Because every transaction on layer 2 is not settled on the blockchain, its simply their cheap and fast ledger keeping track of frequent transactions. Rarely is there settlement.
Many dont understand Bitcoin was designed this way on purpose. L1 is for infrequent important transaction settlement. If it wasnt the chain would grow to a point where it could not be decentralized because the chain would be too big for hard drives and individuals to run nodes. It would naturally expand faster than memory advancement and centralize.
Can you point me to current "layer 1" solutions that you anticipate Bitcoin replacing?
SWIFT and ACH don't seem to be it. Assuming a generous 3,000 transactions per block Bitcoin can do ~158M a year.
ACH does ~25B a year. It's harder to find numbers on SWIFT but it looks like at least 10 million per day, so ~3-4B a year.
Let's say I'm running a business. I have day-to-day transactions going through some higher layer network, but I expect some money "settled" in my account each month. That's 12 transactions a year. The US has around 30M businesses, so that's 360M settlement transactions a year. Already more than double what Bitcoin can do and we're not even talking about, say, having employees paid on the blockchain.
I wouldnt even make that classification. SWIFT and ACH are not akin to L1 Bitcoin. Theres no way tech illiterate masses are going to physically move their btc on chain. For instance 95% of retail doesnt even move their btc off exchange. Their higher level "settlement" will be different from an institutional provider or exchange settlement where L1 is really used. SWIFT and ACH is used liberally (hence the high tx) because its used in many applications (like paychecks and high value purchases). That type of usage will never come to L1 btc. And that same system of SWIFT and ACH (or similar) will support BTC. Can think 3 layers if thats helpful.
I guess my point is, can you describe what activity will take place on-chain? If it's just money moving between a handful of big banks, why should they use Bitcoin rather than a centralized scheme they all agree on?
For the rest of us, the next layers sitting above the Bitcoin blockchain can either be a truly decentralized, trustless layer with on-chain settlement, like Lightning Network, which might incur too many on-chain transactions to be practical. Or it can be a centralized, trusted layer, like Mastercard -- in which case, what's the point of having Bitcoin underneath it?
It goes right back to gold. Sure, we can back currencies with gold, but it's too impractical to move around for individuals and businesses to transact in. So paper currencies developed. They were backed by gold for a while, then ceased to be, and not much fuss was made about it because it changed nothing for the average user.
The on chain activity will be rare nerds and major institutions infrequently moving funds.
"why should they use Bitcoin rather than a centralized scheme they all agree on?" because customers decide what they want to own and they dont seem to like the fed printing non-stop thing they keep doing.
LN will be for the rare nerds actually using the chain as payment and want cheap, instant, frequent transactions but on chain settlement periodically just as an institution would.
So does bitcoin then just become an alternative unit of account in the existing banking system? If so, what's the point? Especially when users have to eventually convert back to their local currency to pay taxes.
Mastercard announced that they will be supporting "crypto" not necessarily bitcoin. Bitcoin itself doesn't have the capacity to support widespread adoption as a medium of exchange.
I think I need to break down how this works. Bitcoin L1 chain is a settlement layer where transactions are pooled per tx (its not 10 tx per second or whatever people think it is). Regardless, its L2 that processes small frequent transactions. That would be providers like Visa, Mastercard, Paypal, Circle, etc. They process the transactions and keep the account, only infrequently is it settled to the actual blockchain ledger. Then you get into the lighting network. Bitcoin can absolutely scale without issue.
"Mastercard says that it's only going to support cryptocurrencies that meet a number of requirements—including stability, privacy, and compliance with money laundering laws".
So, not Bitcoin. And maybe not any existent cryptocurrency.
What helps me sleep at night is that even had I entered all this time ago with BTC I would have exited 100 times by now. There have indeed been many 2x,3x,5x multipliers with BTC but there have been so many instances when it was unclear how everything is going to turn out which would personally prompt me to consider exiting with what I had.
As my friend nicely put it: only way we could have gotten rich from BTC is had we bought it when it was pennies and forgotten about it up until last year
Yup, same. Hell if I put in money now and it did 2x and went to $100k, I'd get out, too.
There's just no way I see myself not getting out at $100k or say $200k. And I'm not risking my money on an investment that can 'only' do 2x or 4x. Bitcoin was cool as it could do 10x or 100x in the span of 1-2 years. But with the numbers where they're at and knowing myself, I'd cash out way before that.
In the end because bitcoin isn't being used by virtually anyone, and is only valuable because of the momentum/hype (i.e., the reason I'd buy it is only because other people buying it solely for the purpose of thinking even more others will buy it only for speculation and not use, and the price rises), it's just not an interesting investment for me long-term. Short-term it could be but I'd be as not surprised if it did -50% as if it did +50% in the next year. Not really interested in that kind of exposure, given that I don't think I'll ever hold enough to enjoy the extreme potential upside.
Interesting to read this, as my instincts are completely different.
Wouldn't a better strategy be to e.g. wait until Bitcoin doubles (which you believe is likely to happen), then sell half (so that you get your money back, sans inflation)... and then for the following twenty years, sell 5% of the remaining Bitcoins each year?
The greatest risk is that maybe Bitcoin never doubles, and maybe you lose all the money you put it. But at the moment the price doubles and you sell half, so you get your money back... why throw away the chance of maybe getting insanely rich in the future?
You're making a mental difference that's not an actual difference.
Suppose you have 100k, invest 20k of it in bitcoin and it doubles. You now have 40k bitcoin and 120k in total.
You could say, sell half the bitcoin, you now still have 100k in other assets and 20k in bitcoin. Even if you lose the entire 20k, you'll never lose more than what you put in.
But what does it matter? Fact is, you still lose 20k if bitcoin goes to zero. The fact you already made 20k on it doesn't change that fact.
The source of your wealth should not indicate whether a loss is good or bad, or bearable or unbearable. At the end of the day, a loss is a loss. All your wealth goes into one big pot, you can't say 'this part is from savings, this part is from bitcoin'. It's just money, and losing it sucks.
Of course there is something to be said about reducing your exposure to bitcoin as you grow richer and need to take less risky bets. But that's only great after the fact that bitcoin keeps going up in price. If bitcoin goes down in price, it's of course a poor idea to sell slowly instead of all at once. Again, a loss of $X is a loss of $X.
At the end of the day, virtually everyone holds bitcoin not for the actual value of e.g. owning a small portion of Apple which sells something hundreds of millions of people use daily, profits, which flows back to you. Instead virtually everyone holds it simply because others are, and by doing so together, it keeps going up in price. You could apply the same to any other (scarce) good. Like a useless but rare metal. Or indeed, a useless copy-paste of the bitcoin software, to start a new crypto. Bitcoin's price isn't because it's valuable, it's because of a common idea to buy it because it'll make us rich. And that idea cannot hold true on anything but faith. Humans are pretty crazy and so I wouldn't be surprised if bitcoin goes to $200k within 2-3 years. But it's still an insane investment proposition to me. (coming from a person who held 100% of his net worth in bitcoin for 3 years or so, btw).
To me, it really depends on one's financial situation. It's much easier to hodl if you have a good-paying job with benefits, a 401K with a healthy amount stocked away, a decent savings reserve, or equity on a house. Also helps if you've played a lot of poker.
I made 30k in ETH this year and cashed out at $1275. "Lost" $13k by not waiting longer. Do I regret? I had no way of knowing. I just pulled the trigger, with my guts telling me "this is probably ripe for a blow up now". There's no way of knowing what the "collective mind" decides once the big players start selling off.
You could have made 10x on Tesla (TSLA) last year from March to December from ~$85 to ~$860 and at least Tesla has a factory, employees, a product, plans for future products and expansion of some kind, exists within a legal system, is on an exchange with some regulation, etc.
That's exactly my attitude towards it too. But this has also given me a strong lesson for the future. If I get in on the ground floor of anything and decide to sell out, always keep a little skin the game that you don't touch.. because you never know if it'll go big.
If the GP had sold 99% of his 3650 coins and kept 1% till now, that would still be $1.8m.
Set yourself a threshold amount that you are okay with a 100% loss on, and a periodic schedule based on your risk-appetite. At each interval if you are above your threshold you sell your excess holdings and if you are below you sit tight.
Alternatively you can set yourself a price threshold. For example, sell half your holdings every time the price doubles. Essentially this acts as a log function on your gains in exchange for lowering risk.
There's a ton of room for fine tuning a set of rules to manage risk, as long as you are willing to stick to them.
Personally I would sell what I'd call the "FOMO holding" once it's worth a "life changing" amount of money. So if I held 100 Bitcoin as such a fund, that might well have been years ago, but then I'd also be retired and not care. The sister comment here is more nuanced and surely a better answer, though.
Same thing here, I made a good profit a while back. To believe that I would be a millionaire today requires ignoring everything I know about my risk tolerance and while Bitcoin worked, it could've gone the Ponzi scheme way and crash to 0$ overnight. There were risks of Chinese miners going for a 51% attack, regulation in the US to downright outlawing mining in Canada.
Well, if you have the power to go back in time and change your decision to buy BTC, you might as well also go back in time and change your decision to then not sell it. :)
That's basically what the "hodl" meme is: just decide to not sell until you need the money or until the money could significantly change your life. Of course, that's not exactly a new "investment" idea: there's always been a big difference between day-trading and just buying stocks (and index funds, etc.) with the intention to hold essentially indefinitely.
Or if you have totally unshakeable faith in it, because you see us heading towards a game-theoretic attractor where bitcoin is the primary global store of value. That's worked for me :)
Haha, yes. In 2011, a guy on my team was all about bitcoin and dogecoin and such. I think bitcoin was like 11 cents a coin, or maybe a dollar by that point. I just plain didn't get it. Still barely do. I could have easily picked up a few hundred dollars of coin or, if I was a believer, a grand or two. Had I held onto it, I would be worth hundreds of millions of dollars. However, if I got in at 10 cents, I would have sold at a dollar. And if I didn't sell there, I would have sold at 10 dollars, 100, 1000, etc. I would never, ever have ridden it to 10k, 20k, 30k. Still not putting money on it.
I know several people personally that did. Among people who have worked in the cryptocurrency industry it's not unusual that they've cashed out small portions of their stash in each bubble but still hold some today.
Yeah, this is the “safe” way to do speculative investing: when the asset price goes up, at one point or another you can take out your original investment, and the rest becomes “pure profit”. At that point the worst case scenario is that you break even.
A similar principle applies to tech stocks too. I know some Tesla and Apple millionaires. After reading The Psychology of Money I’m trying to be a more “buy and hold” investor and “let my winners ride”.
A long long time ago, I mined 3650 coins on a single cpu in a month. Bitcoin was worthless at the time, and I thought the idea was interesting. After a month, I went back to folding at home. A little over a year later bitcoin hit a dollar and I sold it all.
On one hand I made a few thousand from nothing. However if I held it I would have been a pretty rich right now.
I truly believe that bitcoin is something that cannot work, so I have not and will not reinvest in it. But the sting of it doing so much better does bother me at times.
Do you ever think that you losing out on tens of millions of dollars might have affected your desire to challenge your believes that "bitcoin is something that cannot work"? I know I'd probably cope in a similar manner
Sorta it does make me slight more bitter about bitcoin in general, and if I made millions of dollars off of it I would likely thing it's the best thing in the world.
However, I do try to self adjust for that bias. When I mined the coins it was a neat concept, but bitcoin wasn't at all practical then and it isn't at all practical now.
I sold it all back then for a few reasons.
- I believed other tech nerds would come to the same conclusion.
- It would never reach main stream adoption because of how utterly impractical it actually is.
- I thought that governments would crack down on it pretty hard, pushing it further into the fringe communities.
I was definitely wrong about governments cracking down and the novelty of bitcoin has definitely caught the interest of many and that has caused many chain reactions of the price going up.
I still think bitcoin is basically useless, but I severely didn't properly estimate that just it being interesting would make it so valuable.
Bitcoin truly is extremely interesting, and the vast majority don't try to understand it at all. So while it may in fact be useless, that does not actually matter for the price to go up.
In the end the only thing I kick myself for was looking at it objectively. Bitcoin wasting untold amount of energy, low transaction rate, high wait times for confirmation, high transaction fees, ever growing public transaction history, long cryptographic identifiers for receiving and sending, and so on do not actually matter.
Not rebuying is because I still have hope that people will come to their senses. But my stubbornness has not made me rich.
> In the end the only thing I kick myself for was looking at it objectively. Bitcoin wasting untold amount of energy, low transaction rate, high wait times for confirmation, high transaction fees, ever growing public transaction history, long cryptographic identifiers for receiving and sending, and so on do not actually matter.
I feel similar. I bought 1 BTC when they cost tens of pounds because I was interested in it. I spent about 0.2 BTC, some on goods and some I donated to charitable causes. I sold the rest when it was ten thousand. I also tried to buy a second BTC but lost my money on an exchange.
I still believe, as I did then, that Bitcoin is worthless because it's not scalable. I do think if someone can solve the scalability issues then decentralised currency is extremely valuable. But I've tried investing in those and they've all tanked. Crypto is entirely driven by speculation. There is very little real value.
But yeah, it sucks a bit to think if I would've waited until now I'd actually have what amounts to a life-changing amount to me. I just remind myself that I'm rich anyway. I have a warm house, enough food to make me fat, a home cinema, loads of computers and a fast car. So why would I lose sleep over it?
> However if I held it I would have been a pretty rich right now.
Or you'd have lost the hard drive. Maybe you encrypted it, forgot the password, and spend your evenings typing iterations of your birthday, middle name, favorite song, and 69 while you watch Family Guy reruns. There are things worse than not being rich.
I once bought a pair of alpaca wool socks from some alpaca farmers somewhere for 75 BTC, because I liked supporting people who accepted BTC for online payments.
Remember that pizza you bought in 2013? You could have invested that money into TSLA and it would be worth a heck of a lot more now. Opportunities like that exist today also. Does that make you not want to eat pizza?
I bought BTC at $20. I sold at $1000. When I sold I had something like 1.95 BTC (had a bit of it stolen from poorly secured exchanges, lost some trying my hand at bot trading). Still happy with it because what I bought at the time with with it made me happy (Sonos speakers and photo gear). Would it have been nice to hold onto it until it was $50k? Maybe. But I have been enjoying the benefits of what I got for far longer.
Having said that, I think XLM is in a good position to jump up in price and I still have their free initial allotment.
I bought like 200 BTC back when it was $10 and ended up selling half of it when it hit $1000.
I liquidated the remaining ~90 BTC until 2018 when it was approaching $10,000.
I have no positions in crypto anymore. Lot of people are going to be caught holding the bag now. It's not common to hear somebody moving a big chunk of their savings in to this "digital gold". I am worried that this is going to result in a lot of broken dreams. Doubly more worried about people over leveraged in real estate.
Bitcoin is a poor storage of value and the cognitive dissonance is profound-the more they hype it as "digital gold" the more it deviates from that description.
I realized that Bitcoin, cryptocurrency is largely a vehicle for money laundering, in particular moving money out of China, Russia and other similar countries.
But what will TSLA be worth when Elon finally goes to prison for something?
There was buying his cousin's company, the bit with the SEC, selling not-a-flamethrowers. The guy he called "pedo guy" sued him but lost because apparently nothing Elon says is credible. There's a 20% chance he sees prison time by the end of the decade.
It’s a solid and usable cryptocurrency that is developing good strategic partnerships. Currently Ukraine is exploring it as its official cryptocurrency, as I understand. Nano is another good one but seems much more obscure.
I have had this conversation with many a friend, who actually view Bitcoin as a Ponzi, and therefore decide not to play the game (a ponzi ca be lucrative if : a) you know it's a ponzi b) you're smart in your timing and not too greedy but it's still a crapshoot).
The real questions are:
- what if it isn't a Ponzi ?
- how much will your "won't touch it with a 10 feet pole" attidude cost you then ?
It is a ponzi scheme. I think eventually majority of investors will participate in it. At present, total stock + gold market is $100T. If you expect 5% of this diverted to BTC then upper bound on BTC market cap is $5T. This means upper bound on BTC price is $250K. When that price arrives, suddenly things will become stagnant. People will wait for few years in the hope something will happen and then sell out for more appreciating assets. This will eventually cause BTC prices to oscillate between $100K-$200K.
In addition, you have couple of major risks such as feds making it illegal or taxing it heavily or some other coin that Elon Musk starts preaching heavily. At this point, if you do have BTC, you should sell out at $70K-100K range just to be safe. If you keep holding after that then you are taking increasingly bigger risks but much less reward.
Let me preface this by saying I agree bitcoin is like a decentralised Ponzi scheme...but you are wrong in your assumption that maximum price = number dollars in * number of bitcoins.
The trick of bitcoin is that creates the illusion of value in its price in dollar (or other fiat) terms. There is no true underlying value. Note: bitcoin depends on the dollar because there is no independent bitcoin economy. So the price is simply what fools are willing to pay for it recently, what the last bid was. How much money has gone into the bitcoin black hole over time has almost no bearing on its price at any given instance besides hysteresis (i.e. the current instant price is near the last price).
Price is thus simply the dollar amount that people are willing to pay in the present moment for a bitcoin; there is no reason it could not go to $1,000,000 a coin if people are dumb enough to pay that amount.
This is why bitcoin is like a black hole. It is not an equity, since there is no underlying, fungible asset, i.e. ASIC miners can't be used for general purpose computation, bitcoin is not a share of ownership in anything, etc. The market cap of bitcoin is zero at all times regardless the price. The price provides an illusion of market cap or value but is not actually value in of itself. It exerts a pull on real money that can be used to fund productive or legal investment, like a black hole, but pouring money into Bitcoin does not give it value. Money can be destroyed, just like matter into a black hole and this is something cryptoholders will find out when (1) there is no greater fool left or (2) bitcoin soaks up so much real money that it has real economic effects, e.g. deflation, which results in a regulatory social clampdown or (3) there is a regulatory clamp down before that point due to recognition of bitcoins only real use case, illegal activities.
Dividing the total market cap by the total number of BTC relies on an incorrect assumption that BTC are never destroyed. But, in fact, we know that plenty of people have lost BTC keys. It's totally possible that the practical supply of BTC is far lower (e.g. 10%) than the supply of BTC on paper. In an extreme case (e.g. if less than 1% of BTC are actually usable), the paper market cap of BTC could exceed the size of the US economy, even while the true market cap is less than 5% (using your number).
I think the price of BTC will continue trending upwards depending on the economic outcome. It will basically become a hedge against the system every time there's a recession (every 10 years or so).
The same can be said of any investment opportunity. It comes down to the amount you have available to invest, and how much effort you want to put into it.
For those who want a low effort fairly safe hedge against inflation and currency changes an index tracker fund is probably the way to go.
A small percentage on risky investments is probably fine, but then you do have to choose the correct risky ones =)
When everything is going up, you can feel like everyone is winning but you. There's many get-rich-quick-schemes available right now and if you put in the effort to know where to go, you can get "rich" quick too.
Or, you can continue enjoying your life the way you are without worrying what others are doing. Many times, they are only projecting one side of the story.
Kind of. But it's a thing with a lot of investments; if one invested in Apple ten years ago their investment would have been 10x now. If one invested in Tesla ten years ago it would be worth 100x now (I think? there was a split at some point. Yahoo Finance's chart indicates it's gone up 10x in a year).
Jumping in now is a bad idea because it's at peak hype; never buy at peak hype. It MIGHT go up a bit more, but it won't be a 10x increase at this point - you should've bought a year ago in that case.
But a year ago, nobody could have predicted it would go up 10x.
Judging by the sentiment in this thread it is definitely not at peak hype.
That's what everybody said when it was $17k and crashed to $5k. I loaded up on it, now its $50k. I bet there were a lot of similar comments saying that it would never be 10x. I also seem to recall a lot of people 10 years ago saying TSLA was overpriced and they would never hit their production goals. Time will tell.
If everyone agrees with an investment then it no longer has the potential for high returns as everyone is already in. You need to look at what others don’t and decide for yourself. No one can know the future, you need to have personal beliefs, ideals, and investment theses. Not listening to the HN groupthink helps for investment decisions. The people here are super smart about many things but money is not one of them.
I would have slept a lot worse if people thought that I held millions in an asset that can be easily stolen by invading my home and putting my family at risk.
I would only be happy if I was very careful with not revealing who I was, ever (hard to do if a exchange gets compromised).
It helps that I have all my necessities well covered.
Why not just buy a small amount of bitcoins now, something you won't mind losing? If they increase 100 fold you won't feel like you're missing out. And if they don't just think of it as insurance.
I personally hate the idea of bitcoin and avoided it for a long time, but I feel better having a little just to avoid the thought I let my personal feelings get in the way of an opportunity with a good risk/reward ratio.
Yea but that’s what people thought at 100, 1000, and 10000 too.
A lot of people dismiss the possibility of a 10x rise in price and fixate on the 2x reduction. That kind of pessimism is hardwired in: humans have stronger loss aversion.
But if something has a 20% chance at 10x and 80% chance of 1/2x, that’s still positive EV.
This doesn't necessarily mean you're invalid, but if BTC increased 100x, they'd exceed the world's GDP. So... yeah, though maybe you can't say that's impossible, if by some miracle BTC became the dominant currency in a (much richer) future.
> This doesn't necessarily mean you're invalid, but if BTC increased 100x, they'd exceed the world's GDP.
Ahh, but the asteroid 16 Psyche is worth $10 quintillion and one day we'll mine it. That lets the BTC cap go 100,000x further than the world GDP.
[On a more serious note, note that GDPs have a time component and market caps -- or the amount of a currency in circulation -- don't. If each unit of money gets spent every month, you only need GDP/12 units of money in circulation; if each unit of money gets spent every 10 years, you need GDPx10 units of money.]
I'm holding a tiny amount of BTC, but this has been my reason not to invest more. I know that at most I might be comfortable investing $20K in Bitcoin now, but that's literally it. If that amount increased 100x, it'd be $2mm. A good amount of money but by no means life changing to the extent that I will forever regret it.
Luckily I'm absolutely terrible with money. I was talking about bitcoin to everyone in 2011, but didn't invest myself as I thought I didn't have enough to put for it to matter.
Had I invested, I'd have wasted the coins long time ago, and would be just kicking myself daily or on suicide watch.
I was aware of Bitcoin back when it all started and thought it didn't have any tangible value. I still believe it has no real value. While I wish I could foresee playing the market to make some money, at the end of the day "magical internet money" is just smoke and mirrors.
To make meaningful amounts of money on BTC, you'd need to invest a significant amount. My feeling is, yes, maybe it go up 50%, or double, or whatnot, but mostly it can go down to 0 any time. If you want to bet a tiny bit and hope it tentuples, you still won't be rich.
I'm always tempted to make some kind of agent simulation, where all agents know they are in a bubble, but hope they can get out before everyone else. Then eventually the price pops and, pop.
It helps to think that odds for not selling during the first peak are quite close to 0%, at least for me. Other outcome would have meant very stressful last years.
But regardless of your opinion on crypto you haven’t missed your opportunities. Projects still 100x.
Next time it’s off everyone’s mind and not in the news, just pick 3 or 4 newer projects that have a decent sounding team, put $1000 in on each, and forget about it. Check back when everyone is manic again.
That's exactly how I feel. But is there a way to actually cash out? I mean, suppose you had 2 BTC for years. Can you literally get $100K right now in your bank account and can you actually exchange them easily for the fiat currency?
Easily cash out yes, but would have you kept track of that BTC for years is another question. There were plenty of gotchas along the way with BTC before it went completely mainstream. Buggy hardware wallets, scams, exchanges going bankrupt/stealing btc, people's hard drives dying, etc... mean for anyone to have held from $1 to $50k they were prescient and a bit lucky.
Yes, you could easily do this for 10s of millions of dollar right now on a number of exchanges. As you go up, you might need to find OTC desks, etc, but it's still very doable.
Yes and no. I'm sure I wouldn't have hodled, so I didn't really "miss" anything. You also couldn't be too technically inclined because you'd fall in love with blockchain, cash out, but it all in ETH, and go work for a company building a computer architecture that runs at 100 Hz on Etherium for $1 per Hz that pays you a below-market rate, get acquiried when the company fails, and find yourself at FAANG, only to fail the acquihire interview. You also couldn't be too too technically inclined because you realize how inefficient the whole thing is.
Yes on both counts. In roughly 2013, the shared office building I was working in installed a BTC vending machine. It advertised itself with a graph showing BTC rising close to exponentially, with a strong implication that it would keep doing so, which immediately made me think “irrational growth optimism, probably doomed to bubble and burst”.
Had I spent £1k of spare cash then, I would now have enough to buy another house.
EDIT: And I’ve just now remembered that someone gave me £0.50 of BTC as a “thank you” on Twitter, which I sold to a friend for £25 and which is probably now worth £250.
I’ve definitely missed the opportunity to get rich but I still jumped in.
I started putting a small amount into BTC each month on Coinbase. It’s money I can lose and that I would have spent on a vacation this year if not for COVID. I figure I’ll pull it out at the end of the year and if it’s gone up, then next year’s vacation will be a bit better.
I don’t understand BTC at all and consider it gambling. But like Nick the Greek said, the next best thing to gambling and winning is gambling and losing.
Just like when you go to Vegas: put $500 cash in your pocket, leave all other means of payment at home.
You'll either come back with $0 or more than $500.
In both case, you'll definitely have had $500 worth of entertainment.
Bitcoin is like that: only invest money you don't need (assuming you have any) and meantime, just enjoy the feeling of having your stomach crawl up to the back of your throat on the roller coaster.
You're also obviously allowed to enjoy yourself when/if you become rich.
I mined in 2011 and sold at $5500. It was enough for a down payment on a house in a major metropolitan area but had I kept holding I would be a millionaire now. :(
Yeah, which is one of the reasons why I continue to not buy into the whole thing. The only reason there is any temptation at all for me is FOMO from the rising price, and that's a terrible sign. Worse, it comes with a bunch of negatives, slow transaction rate, huge power cost, etc.
Yup. That reminds me, I need to sell the free Stellar Lumens I got from Keybase. If I can work out how to do that without a scam or a disaster, I might consider touching the rest of the ecosystem.
I'm in a similar position - though for various reasons I did a bit of a username landgrab early on, so I have about 10x what most people got 'for free'.
The price fluctuations are wild, and because we're not talking megabucks (a couple of thousand USD equiv) and I'm not actually out of pocket in any real sense, they're fascinating to watch, and incur no great temptation to do anything with.
While Lumens are extremely unlikely to go the way of BTC, watching what's going on with bitcoins the past decade does make me want to just sit on these.
It's a bit worrisome that we are inching towards the scenario where companies may be tempted at an economy wide scale to reduce investment in production in order to hoard cryptocoins instead. It caused the great depression when businesses switched to hoarding gold tied currency instead of producing in the 1930s.
Now I'm not sure that crypto coins without being jacked up by central banks (like gold was during the great depression) are a powerful enough force to cause the type of havoc that gold did.
Then again, the potentially stronger network/memetic effects of cryptocoins, along with the amplification factor from markets being synchronized through instant all-encompassing global communications nowadays might make them dangerous to the economy even without central bank involvement. We saw how much people can get hypnotized by these things during the Gamestop episode. I don't think unsophisticated investors' hoarding is enough to cause big problems but it is a bit unsettling that Tesla and other companies are jumping on the cryptocoin train. If enough businesses follow suit, you get into scary territory (It would also be worrisome if companies widely moved to add billions in gold to their balance sheet but I thought the lesson had been learned in the 1930s with gold).
In theory, if central banks stay stimulative enough through all this, you can have growth in both crypto and businesses. As long as these central banks don't blink at the sight of what may look like crypto bubbles.
> It's a bit worrisome that we are inching towards the scenario where companies may be tempted at an economy wide scale to reduce investment in production
Yes, fully agree. But then ask yourself: aside from COVID, who created the economic conditions that lead corporations to decide that stashing treasury as Bitcoin is better than investing in the "productive" part of the economy.
QE, interests rates at near zero, corporate bonds near worthless, stock market at stratospheric 2000-like levels, real estate easily taxed to death ... how do you protect your treasury other than stashing it in hard assets (crypto, gold, commodities)?
The important thing for the aggregate economy is that when people want "hard assets", that these assets can tangibly support future consumption, not just something everybody hopes to trade later for consumption but real stuff such as businesses, inventory, production capacity etc. When too many people hoard pure financial promises or crypto tokens and all believe that it's true wealth, bad things happens. People indirectly owe each other all their savings.
>QE, interests rates at near zero, corporate bonds near worthless, stock market at stratospheric 2000-like levels...
To be clear, the above is good, if interest rates on government paper were above risk adjusted market returns for new capital this would gridlock the economy. Stock market being high incentivizes creating new capital.
> how do you protect your treasury other than stashing it in hard assets (crypto, gold, commodities)?
The government should not create artificial assets that "protects" wealth from being subject to the real economy because people divesting from the economy destroys the economy.
Now there is a question whether the market will choose to go into crypto and divest from the real economy anyways. The reason this is a question is that people have been known to pile into bubbles in the past, and this is the tricky part, on some level they are not totally irrational in doing so. To the individual, being early in a long running bubble is advantageous. When you do it, and do it first, you gain. Everybody doing it however, may cost you and your friends, family's and everybody's careers.
It's a prisoner's dilemma, a bad Nash equilibrium. It's Moloch.
I think the second order effect will be from companies that accumulate too much cryptocurrency - only to see its value vaporize. Impact could be systemic if companies start to essentially gamble with their treasure chests.
Example: what happens if other companies followed the likes of Tesla and MicroStrategy? Sure the $1.5B Tesla invested is pittance in the context of their market capitalization, but if Bitcoin price crashes 80% then they've lost $1.2B. Even Microstrategy, with its alleged 85% of its cash reserves in Bitcoin, might well go under if the Bitcoin price drops even 50%.
A "run on Bitcoin" could become a real thing and as impacted companies are forced to cut production and expenses to offset the losses, it creates a domino effect across the economy.
Note that in a way, this is a best case scenario, at least if it happens early.
Extra volatility in the crypto coin market disincentivizes hoarding. So while it might hurt specific companies that over do it, it may prevent an economy wide gridlock where all companies are hoarding coins instead of investing in real production.
In a way, volatility caused by corrections is a natural cure for the bad Nash equilibrium. It's when the correction mechanism stops happening that things can build up into dangerous situations. That's why when governments tried to stabilize gold in the 1930s, preventing it from naturally correcting into a volatile asset, it caused the great depression.
I had been looking recently for a way to invest in companies doing interesting things with the blockchain. I came across the ETF called BLOK. It’s largest holding is with Microstrategy .... because they hold a lot of Bitcoin. It’s really unfortunate to see something like that. They aren’t doing anything with the blockchain (that I know of), yet are the largest holding in a blockchain ETF because they have a bunch of Bitcoin. Hopefully we don’t start seeing more and more companies hodling in hopes of making their balance sheets look better.
Well, I don't know about where you are, but over in the UK the Government isn't doing us any favours on this front.
We've just been through a year of businesses being forced to close whilst their landlords continue to collect rent, and everyone seems to think the latter is just an amusing oversight.
In that sort of environment, it's far more logical for me to just buy hard assets and sit on them; it's been made very clear that we're going to just force that to be the winning side of the trade via legislation.
They are just moving non-productive cash sitting around doing nothing and swapping it for an asset. It's just diversification, not diverting from production.
Bitcoin has been around for a while now and it has been down talked quite a bit on HN whenever it comes up. It now has a larger market cap as Facebook - so the market sees more value in Bitcoin than Facebook.
The sentiment on HN seem still be mostly against it whenever it comes up. I wonder why that is? I'd imagine 10 years from now Bitcoin will still be around and likely much larger than today - I'm less positive about Facebook outlook and posture in 10 years actually.
I wonder what will change the opinion of the skeptics?
My opinion of Bitcoin will change when it stops using more electricity than entire countries, for something Visa can do for comparatively nothing. I would hold the same opinion of any technology which used so much energy when there was a less wasteful alternative.
I also happen to be skeptical of Bitcoin's long-term outlook, but that's not why I'm actively against it as a technology. If it wasn't for the planet, I'd say people could put their money wherever they wanted. Actually, I still think they can—as long as they're willing to pay for the negative externalities they create. But then no one would actually use Bitcoin...
>My opinion of Bitcoin will change when it stops using more electricity than entire countries, for something Visa can do for comparatively nothing.
To be fair, Bitcoin does not do what Visa does. Visa uses trust in existing institutions to accomplish transactions. Bitcoin mining creates trust out of electricity. And trust is a valuable resource, no different than any other form of value creation.
There are plenty of other stores of trust. You could buy index funds or government bonds or any number of other things, and the price will be less volatile than Bitcoin to boot. I know a lot of Bitcoin enthusiasts are skeptical of traditional institutions, but really, if all the world's governments go bankrupt you're going to have bigger problems. Heck, if you must use a cryptocurrency, at least pick one of the newer ones which aren't as inefficient as Bitcoin!
> You could buy index funds or government bonds or any number of other things, and the price will be less volatile than Bitcoin to boot.
That's not trust, that's security in the value of your money. BTC can never be taken from you unless someone either breaks crypto or steals your wallet secret key. The U.S. dollar is backed by the federal reserve, so while I don't think the U.S. is going to have a revolution that destroys or inflates the dollar anytime soon, there's a possibility of such a thing happening. BTC has an actual limited amount that can be distributed (like gold) so it'll always have value.
> There are plenty of other stores of trust. You could buy index funds or government bonds or any number of other things, and the price will be less volatile than Bitcoin to boot
The point is Bitcoin created a store of trust sans institutions, one which is capable of being transacted across the internet without trusted third parties.
Do you remember the pictures from the early Covid lockdowns — of the Himalayas becoming visible in parts of India for the first time in decades? City streets deathly quiet everywhere. This is what actually saves the environment: less human economic activity.
Bitcoin contains the built-in incentive to keep you put in place, without engaging in any economic activity. It does so on a massive scale, without sickening people, voluntarily and by design.
Everyone likes to focus on Bitcoin’s cost to the environment, without considering the upsides of Bitcoin adoption, chief of which is a pronounced decline in consumerism.
Consider what would happen if we saw continuously falling asset prices, and dramatically lowered capital investment globally. Consider what would happen if government scrip became worthless, disallowing governments to fund war machines and large public works projects. Bitcoin throttles humanity. This is a big benefit to the planet’s natural ecosystems. Meanwhile the environmental damage Bitcoin can do is capped by the maximum productive output of humanity, which puts a ceiling on the value of one bitcoin.
We’d go to a barter system and BTC would be useless. Are you able to envision a scenario where all governments at banklkrupt but internet is still there to process BTC txns?
I've read that most mining pools are consolidating now, and if they control a majority of computing power it leaves Bitcoin vulnerable to attack. Or what about the hard fork ? My skepticism is not w/ the tech (which is great) its with Bitcoin adoption by non-tech people who have no protection via regulation.
Yes, mining pools are aggregating. None are at 51%. But, the risk is bad actors, not the mining pools. Hypothetically, if a mining pool had 51% hash rate, why in the world would they tank the price of the asset their entire business is based on - They would lose hundreds of millions, if not Billions of value.
The ransomware thing is a red herring. The trust is not related to the counterparty- the trust is in the ledger itself. Once you have the tokens, you know you have them, and as long as your keys are secure, that fact remains true.
That's not the case with any other monetary or payment system or store of value.
You can trust that your balance in your account is what the blockchain says it is, and that nobody but someone in possession of those keys can use it.
is there some widespread issue with trusting the ledgers of banks currently? I wasn't aware that this is a pressing issue, or really an issue at all.
>You can trust that your balance in your account is what the blockchain says it is, and that nobody but someone in possession of those keys can use it.
And there are definite risks around that too.
This really feels like a solution in search of a problem to me.
There are also many restrictions on how, why, when, and where transfers from those accounts can be made. There is no trust in an institution required, because you know the blockchain will carry out your wishes regardless of any other factors.
A carbon price wouldn't damage Bitcoin. Electricity costs for some miners would go up, some would drop out, hash rate goes down, difficulty adjusts to keep blocks coming out every ten minutes, and everything continues as before.
(Still think proof-of-stake is big improvement though.)
Wouldn't the bulk of mining just move to the one part of the world without a carbon tax? I know that's a danger with carbon taxes in general, but it strikes me as far easier to do with Bitcoin than anything else.
Yes, it'd probably need to be some kind of global system to prevent that. Countries doing their own carbon taxes normally add carbon tariffs to imports, but of course that wouldn't help for bitcoin.
Visa is no medium of exchange - only a payment network. CO2 emissions are bad for sure. CO2 tax would help with the migration to green energy. Energy consumption however also has a reason -> security. I don't think there is a secure alternative and I don't think anyone wants to continue staying in central banking hell.
there is a lot of fuss about bitcoin energy needs, but plenty of proof that it's not well founded.
You compare it to Visa, but actually visa does only part of what bitcoin does (transactions), and does it using _other_ systems themselves also using energy (security, banking, etc).
Nowadays bitcoin is mostly seen as a store of value, to which it should then be compared to gold. Gold has a much higher carbon footprint than bitcoin, both for mining, storing, transactions, etc.
Many people on HN who talk down against Bitcoin are indoctrinated into the current ideology. Anything that goes against the current ideology is refuted, ignored, dismissed as fads, bubbles, scams..etc Ideology is a powerful thing and it's hard to break out of it.
If you want to learn more about this concept, you should research about Slavoj Zizek's work on ideology. Bitcoin is not just technology, but a multi-faceted ideology founded around cypherpunks ideas, liberty, sovereignty, austrian economic system, free markets.
Even the way Bitcoin is developed (slow, methodical) and Bitcoin apps are built is different to SV way which is move fast, break things, iterate.
>Bitcoin is not just technology, but a multi-faceted ideology founded around cypherpunks ideas, liberty, sovereignty, austrian economic system, free markets.
This is the narrative that people use to make it seem more savory. But it's just about the money. No one cares enough about any of those ideals for them to be a meaningful part of what Bitcoin is. Those ideas have existed forever in the back channels of the web, and are memorialized in the endless plethora of abandoned decentralized technologies that were never profitable. It's money, plain and simple. There's nothing wrong with that, but for whatever reason the crypto community has some kind of chip on their shoulder about hiding the fact that it is just about profit.
It’s about money to me in-so-far it is an enormously profitable way to earn a living given we are at the earliest of days in a ground breaking technology. That’s the same logic as internet entrepreneurs in the 90s.
The main difference between myself and HN groupthink is I believe crypto and blockchain have inherent value and revolutionary potential. There is a loud group here that says all of blockchain is a scam, refuse to look into it deeply, parrot the same bullshit, and when they are proven wrong by the market they just say “Well wait 5 more years and you’ll see!” which is impossible to prove as the crash can always be in the future. It’s so exhausting and the only thing that makes me feel better is the fact I was super right they were super wrong and I’m rich and don’t need to spend my life building some stupid middleware that powers the middleware that powers the privacy-violation pipeline for some SV dweeb or megacorp. I just keep delivering value that frees people from the corrupt state and earn insane money because few talented people know how to do it or grasp how useful it is.
Bitcoin _is_ money though. It's only logical that buying into the concept will have returns.
Yes people speculate on it, does it mean no one really believes in it's value propositions? This argument has very little weight when you compare it to anything else. Is the majority of the stock market all about profit? There's very little of the traditional stock pricing going on anymore.
I invested, work in, and continue to believe in bitcoin / Ethereum / crypto ecosystem because of my beliefs in exactly those things. Austrian economics made so much sense to me the first time I sat down and properly studied it. Keynesian / mainstream economics was always shoved down my throat but it came down to “there is a man with a money printer and when shit gets bad he will print money” which made no sense to me logically. I think many of society’s problems come down to easy money which has caused enormous malinvestment and warped incentives.
I didn’t buy crypto as a Ponzi. I bought it because it makes perfect sense if you have a libertarian / Austrian / free market / individualist / free people mindset. Which I do!
Shares of Facebook for sure. Bitcoin's value is in the network effect, you can easily create a bitcoin clone but it's worth nothing if you are the only one hogging all the coins.
I agree that Bitcoin is here to stay and has utility. The issues that I have are
1) It is volatile and impossible to value; any price is as reasonable as any other. What is my benchmark here? The amount of USD in circulation? The value of outstanding U.S. Government debt? (if it is indeed going to replace Treasuries as reserve currency / safe haven asset). Can someone more knowledgable than me chime in?
2) Its utility as a currency is inversely proportional to its utility as a speculative instrument. And speculation appears to be 99% of the interest and discussion.
All currencies are volatile against other currencies.
Volatility of currency goes away (or rather, gets abstracted) within the context of locales where that currency is used as a unit of account and goods and services are directly priced in it. So far, this hasn't happened yet for bitcoin, because there is no central authority forcing it upon people.
Nobody knows if, when, where, or how this unit of account transition will happen. Maybe Tesla prices the new roadster or cybertruck in bitcoin as a publicity stunt that starts a cascade. Maybe some country with a failing currency decides to issue a new currency backed with bitcoin, or their people start using it without permission and pricing emerges organically. Maybe Iran, Turkey, Venezuela, North Korea, Syria, and Cuba start using it as their currency for international trade.
Or maybe it never will become a unit of account, and bitcoin will just find a role as an inflation hedge and long term store of value like gold, which is currently 10x as valuable as bitcoin.
Facebook has been down talked plenty here too so I’m not sure it’s a good comparator.
A lot of the proponents of Bitcoin are pushing it in the same way people push MLM and ponzi schemes and for the same reasons, which is unfortunate.
For many, including me, it seems a great shame to be consuming so much computing power (and energy) to solve increasingly difficult mathematical problems for no human benefit when the same effort might be used for better ends.
People waste their entire lives working for the govt to print away everything they have saved for - wasted energy. I think its worth it and still a noble cause.
There are often arguments (with merit) over Bitcoins wasteful use of energy, but I expect a lot of it is from hindight of 'why the hell did I not buy some'.
Just virtue signaling. If bitcoin replaces gold it would be a net win for the environment. And btc uses mostly renewables and excess energy. Also there are many other random applications that use more energy than btc like HFT, gaming, video rendering, but we dont persecute individual liberty, expression, or advancement. A society moving forward simply takes more energy. The solution is to tackle the entire energy space, not persecute energy users which is a band-aid "solution" and counter to a progressive society.
... All being equal, it probably isn't good to build a system of distributed ledger whose entire trustworthiness and participation depends upon "proof of energy usage".
Pushing one transaction through Bitcoin effectively uses about half the electricity that a typical US household uses in a month.
I was skeptical too, but approached it from this end:
At the moment, one Bitcoin transaction costs me about $10 in network fees. The party pushing it through gets, say, another $90 or so in reward for mining it (6.25 BTC reward per block ÷ 3500 transactions per block × $50000 per BTC).
It's factually a horrific waste of energy. People pointing that out are not looking back in "hindsight", but are actually concerned with the damages it is doing to our planet.
I already listed those reasons in my comment also in this thread. Maybe dont jump to conclusions. Just pointing out different people have different opinions but the frantic people seem to be shortsighted in my opinion and those of brightest on such issues. I think Jack Dorsey knows how it works as well but is not startled. Perhaps people yelling at the sky are missing a thing or 2.
Very true. Just about every North American city would do a LOT more upgrading their transit systems a la Japan or China. Probably for a lower amount than Tesla’s market cap too.
The world needs to move to lifestyles that use less energy, not more, even if that means giving up things some people consider important. I thought that was the purpose of Tesla. Sure, maybe waiting for an electric car to charge isn't as convenient as filling up at a gas station, but it's worth doing for the planet.
Personally, I have purposefully chosen to live in a tiny apartment, in one of the few parts of the US where I'm not required to own a car at all. My iPhone 6S is six years old and I have no plans to replace it, and just yesterday I wrote an email to my building imploring them to turn down our heat, because opening windows in the middle of winter to stay cool is a terrible waste of energy.
I'm not perfect. I'm not a vegetarian, I don't buy carbon offsets, and I make use of Amazon's inefficient two-day shipping. And I'm not asking anyone else to go sell their cars. But would giving up Bitcoin really decrease your quality of life so much?
"The world needs to move to lifestyles that use less energy, not more"
That is literally never going to happen through the nature of technological and human advancement. The solution is where you source your energy from, not reverting to the stone age or jogging in place as a society.
Being forced to save in a currency the central banks treat as toilette paper would indeed decrease my life quality specifically through the purchasing power decrease of my lifetime labor.
One can think both that it's a shame they aren't rich because of Bitcoin and that it's a horrific waste of energy, I don't think one really takes away from the other.
The energy usage (and its side effects to the environment) seems like a problematic and valid aspect, and it seems that is the price to pay to have truly permissionless, decentralized system (proof of work).
But I imagine there is also a lot of opportunity for innovation in that realm to move to clean solutions for instance.
For anything you want to do with btc|fb, there is something else that does it better. But not enough people use those other things, they aren't trustworthy, they're more difficult to use, too fragmented, I already use x why would I use y, nobody knows about them, etc.
> I'd imagine 10 years from now Bitcoin will still be around and likely much larger than today
I agree it will be around in 10 years, but think it will always be highly volatile. Between now and then, I could see it being worth much more and worth much less than today's price.
Hopefully we will see some stabilisation but the current rally will definitely come crashing down. Everyone comparing gold to BTC should take a look at long term gold price charts. Spikey.
I don't know if Bitcoin will outperform Facebook, but can explain why they're fundamentally different assets. Facebook is a "productive asset". It's a business that sells to customers and generated 29 billion in profit in 2020.
One can argue that Facebook is detrimental to society, so it's worse than an unproductive asset. It's strange seeing people take an environmental stance against Bitcoin, and then blindly defending unethical money making schemes, as long as it's a traditional company.
I'm a skeptic, as I would certainly prefer to hold $10,000 of FB shares than $10,000 worth of Bitcoin.
The problem is that Bitcoin is not productive, so it only makes sense to own it if someone will pay more for it in future. But how do I estimate that without any long-term price history? I can see that the demand for gold increased in, say, 7 of the last 10 decades so that would give me some confidence about demand over the next decade.
So to answer your question: the only thing I can see that will change my opinion of Bitcoin is if demand generally increases over many decades.
Bitcoin itself has its value, but the current price surge is a bubble, it can be easily explained why the growth is exponential:
1. BTC price increases
4. There is media attention about the price raise
5. More people buy BTC, because FOMO
6. Back to point 1, but now a bigger group
This loop is a pump, increasing the price as long as the loop isn't broken.
The same pump can reverse, very quickly. Once the loop is pumping there is no way out.
1. BTC price drops
2. There is news out that that the price drops
3. More people sell bitcoin
4. Back to point 2, but now a bigger group
The fact that there is a limited supply will ensure the prices keeps raising, because nobody can "make more bitcoin"..
But this part of the BTC system causes it volatility, it's inherently baked into the system.
It's not the underlying performance of bitcoin, or the profit the system is making. Its pure viral loops logic that cause pumps and dumps.
You can impact it, if you hold a lot of assets. Just PUMP or DUMP a lot. It triggers a pump in the direction of your choosing.
Next to that, ETH is a factor better in design and utility, and still the price is lower. Why? Cause there is less news about it. Not because BTC is a better product.
> The fact that there is a limited supply will ensure the prices keeps raising, because nobody can "make more bitcoin"..
This is a common claim, but nothing is ensured here.
Almost everything else we put a value to has a more real underlying value that's also growing. Gold has uses in technology, with stocks most companies have real assets that could be sold off, even with art I think most people would be willing to buy an art-piece for the right price. The value of a Monet for me might be a tiny fraction of its valuation, but it's there. But nobody has any underlying interest in a Bitcoin. Its value as a currency for paying for products and services seems to be diminishing as well.
You can't make more Bitcoin, but you can easily make more cryptocurrencies, all with the same limited supply (which according to some people means the value MUST increase). And they're all equally interesting. The one exception with Bitcoin is that it was first. You could say it has a tiny bit of underlying historical value.
To me, I think it implies that it's inevitable that Bitcoin will have a crash that's very deep and very long lasting. It's impossible to predict when though. In the very long term it'll probably increase due to hits historical value. But by that point I doubt it'll significantly outperform other investments.
I also think there's a very high likelihood that many governments will regulate cryptocurrency exchanges to death at some point. A rally against Bitcoin specifically can easily be justified as part of the fight against climate change, since it wastes so much energy.
The "price" of two coins in terms of fiat currency is not comparable. It depends on the total supply. The current total supply of ETH is ~120M vs BTC's 21M. If ETH was limited to, say, a total supply of 1000 coins the price would be astronomical.
Also ETH doesn't have an upper limit to the total supply, therefore its scarcity is not the same as BTC.
If you can get people to buy/use it (like BTC, ETH, and countless others did), yes it would be.
The number of coins is just a definition. Bitcoin has satoshis (similar to cents) that represent one millionth of a Bitcoin. You could have defined it such that Bitcoin is actually a single coin worth $1T, and BTC is 1/21,000,000th of it.
It can get worse. When the price is going up, up, up, people borrow money to buy. That makes the bubble blow even faster - it's not limited to peoples' cash on hand. But when the price dips, and people bought with borrowed money, they sprint for the exit. The crash is much faster than it would be if "I could lose some of my gains" is the motivation.
Even worse: If people can't get out fast enough, and the banks didn't judge the risk properly, it can threaten banks - see 2008 for how this works.
Exactly. Like in 2017, it's mostly fueled by hype. All big companies that invest in BTC are NOT "hodlers", after a threshold they sell everything or a majority. I don't believe tesla will keep bitcoin if goes below 30%-50% of what they bought at.
When the panic selling starts is game over.
The limited supply logic has meaning if people hold, if they don't, nobody will care it's limited in supply because there's no demand for it.
This time could end up being a bubble, but it is very different for many reasons.
The first is that Bitcoin is thriving as a store of value. It hasn't seen much adoption as a payments system and is unlikely to do so in the future, but 2020 saw many notable people using adopting Bitcoin as a store of value. See MassMutual, Paul Tudor Jones, Stan Druckenmiller, Tesla, among many other examples.
The second reason is that defi protocols grew in usage by an insane amount in 2020. Decentralized exchanges like Uniswap are beating centralized exchanges in volume and lending protocols like Aave have billions deposited in them. These defi protocols are generating huge cash flows. This is real people using decentralized technologies built on blockchains like Ethereum.
Even if the 2021 bull run ends up like a bubble, 2021 will be different in that a lot of the price rises will be based on fundamentals, not pure speculation like in 2017. One thing to note though is that a Bubble is not necessarily a bad thing. In every past Bitcoin "bubble" (2011, 2014, 2017 etc) the price Bitcoin crashed to has always been higher than the price it started the run up at.
> Decentralized exchanges like Uniswap are beating centralized exchanges in volume and lending protocols like Aave have billions deposited in them. These defi protocols are generating huge cash flows. This is real people using decentralized technologies built on blockchains like Ethereum.
What are people doing on these systems? Usually to say “generating cashflows” means some kind of productive business activity.
Are people actually touching the real economy or just trading coins amongst other people in the crypto world?
> These defi protocols are generating huge cash flows. This is real people using decentralized technologies built on blockchains like Ethereum.
I'm fairly new to Crypto so I don't understand this: it's looking like all cool new things are built on Ethereum (which, itself has grown quite a lot) so why is Bitcoin rising? How are Bitcoin & advances in Ethereum-based techonologies correlated?
Bitcoin was the first and is still the most famous cryptocurrency. So good news for any cryptocurrency is good news for bitcoin. Most people at this point know that btc exist, they probably don't know what eth is.
Bitcoin as collateral. Given many people got extremely rich off of bitcoin, they can use bitcoin as collateral for altcoins.
Wrapped bitcoin. Bitcoin can be wrapped in a ERC-20 ETH token backed be an actual bitcoin, similar to stablecoins (USDT, USDC, etc.) and traded using smart contracts
This definitely seems like bubble territory, but on the other hand will the next crash follow the "this time it's different" line? Bitcoin has seen extreme price crashes many times and far exceeded the price later on. I doubt the likely next crash is somehow special.
For 12 years, just bubbles? First it was over 1 cent, then over $1, over $1000, now over $50k.... when will you consider the possibility you may have been wrong? At $100k? At $1M? (which most models indicate as a plausible target price in 10 years)
Let me give you my favorite quote, pulled from another HNer comment: "I enjoy reading comments about Bitcoin here because even without any venture backing, it achieved a bigger valuation than all of the Y Combinator companies COMBINED, yet people still think it is unstable and has no future."
Another good example, one of the the then top HN users by karma:
2015: "Most advantages of Bitcoin which matter are captured by, and improved upon by, a LAMP app which simply holds account balances."
2019: "I acknowledge that when Bitcoin was $17 I said it had no use case, should be worthless, and likely would be at some point in the future. No evidence has come up which would make me change my view. (Though my is it taking a while.)"
All the Y Combinator companies combined have created value.
What has Bitcoin created?
I struggle to come up with an answer which isn't overwhelmingly just a way to fund illicit activities, for which sure there's always been a market, but it's a far cry of it's origins. Who actually uses bitcoin for transactions today other than extortionists hackers and drug dealers? Everyone who owns is just planning to HODL and hope that it will become equivalent to an infinitely high fiat equivalent. Had bitcoin succeeded we wouldn't be talking about insane valuations. We would be using it every day no different from a credit card.
The biggest impact on the world from bitcoin's creation was not a democratization of finance, it was a widespread mechanism to facilitate payment of blackmail.
> when will you consider the possibility you may have been wrong? At $100k? At $1M?
Personally I think Bitcoin has at least two bubbles left before it pops permanently. So $1M price could be achievable.
The real question is what happens when it does reach a ceiling. At some point there's not going to much more potential interest for Bitcoin, and what then? Are people gonna start moving their pension funds to Bitcoin? I think the governments will crack hard down on that, because you really want investments in building the economy, not in a pure investment/gambling scheme.
If most people start thinking there's no one else interested in buying their Bitcoin down the line, it'll crash hard, and the crash will likely be permanent. Because there's no real value behind Bitcoin. The money you invested is already spent by someone on something else.
The reason why it's interesting that Bitcoin keeps having bubbles is that there's not much reason to think that will stop. Yeah, the value keeps growing over longer time periods, but eventually a bubble will be so large that it'll seriously disrupt the economy, and that's when you'll start to see governments and peoples attitudes change.
> I enjoy reading comments about Bitcoin here because even without any venture backing, it achieved a bigger valuation than all of the Y Combinator companies COMBINED, yet people still think it is unstable and has no future.
The problem is that the valuation is more imaginary than the valuation of any company except for those that are just Ponzi-schemes.
Most money put into Bitcoin has been cashed out or used for mining expenses. If everyone tried to cash out, the price would very quickly race back down to zero. If the same happened with a stocks in a corporation, at some price level someone would just buy up a controlling stake of the shares and liquidate all the assets for a profit.
> Are people gonna start moving their pension funds to Bitcoin? I think the governments will crack hard down on that, because you really want investments in building the economy, not in a pure investment/gambling scheme
By that logic, do you support government prohibiting pension funds from investing in Gold?
You post was very interesting (what happens to Bitcoin when it becomes so big it's capable of tilting G7 type economies) up to the argument above, which is:
a) wrong because Bitcoin does have some actual utility
b) wrong because "value" is only something that carries any kind of meaning in a supply and demand framework
c) parroting an argument that has been trumpeted on HN almost as much as "oooh, bad for the environment" and has also been thoroughly debunked.
My crypto friends have raised millions outside of VC and then became very rich once their projects launched basically over night. Liquid immediately and never paid a lawyer.
Truly is a paradigm shift and I think a big problem on HN is that VC can’t see they are being disrupted and have no way of avoiding it, plus they think they are untouchable geniuses, so being wrong this hard isn’t pleasant for them.
> Truly is a paradigm shift and I think a big problem on HN is that VC can’t see they are being disrupted and have no way of avoiding it,
On the contrary, VCs are making bank on cryptocurrency. Retail investors are just along for the ride.
> plus they think they are untouchable geniuses, so being wrong this hard isn’t pleasant for them.
Again, VCs were all over cryptocurrency investments in recent years. They're ecstatic when the price goes up, because retail investors are pumping an investment they were in long ago.
I don't know how we arrived at this narrative that crypto was a win for the little guys at the expense of institutions.
You're missing the forest for the trees. Transaction fees aren't important. In this case, it's the ability to raise funds for a project outside of an elite class of investors, and not have to wait 5-10 years for a liquidation event.
Traditional VC is a red flag for me to avoid a project given they are dumb money. Crypto VC is a different story though, they can be very helpful. And they are 100% nothing alike so if you are reading this thing crypto VC is just like traditional VC “except crypto!” you are very mistaken.
Which models? The only thing I can find to support your claim is random people tweeting that they think it will be worth 1M. I guess when enough people say something it becomes a "fact"
That model appears to be nonsense. There’s no “stock to flow” price relationship in economics or investing. The author made it up for their piece, looked at gold, and extrapolated.
They say in the piece:
> Now contrast Bitcoin's dynamic stock-to-flow with Gold's, who's stock-to-flow of 62 is not likely in increase. As a thought experiment, try to imagine what would happen to the price of gold if were to be halved one day?
That did happen, in 1940! Gold production fell in half for years. And the gold price subsequently fell.
However, your first source indicates a drop substantially less than half, so perhaps the chart I looked at is not correct?
For the price I was looking at an inflation adjusted chart. In constant dollars the price seems to have stayed the same. Typing this out I now realized this must have been the gold standard and my comment was completely incorrect on this point re: gold. The price fell in real terms as it was pegged.
Definition of snarky: critical or mocking in an indirect or sarcastic way.
What you said. The 3rd sentence in particular: I guess when enough people say something it becomes a "fact"
So that was just simply asking a question? No mocking or sarcasm? Without the last sentence you would have just been asking a question. With it, you are being snarky.
(I don't think WeWork was YC, but it does drive home that achieving a valuation is primarily a reflection of your ability to convince investors to give you money)
> First it was over 1 cent, then over $1, over $1000, now over $50k.... when will you consider the possibility you may have been wrong? At $100k? At $1M? (which most models indicate as a plausible target price in 10 years)
This is the wrong metric. A million dollar market cap bubble is not hard to sustain, even a billion dollar market cap is a footnote to the rest of the economy. The entire worth of Bitcoin is still less than half of the worth of the market cap of one company such as Apple. At some point it becomes large enough that its real value has to be considered, which in my opinion is zero.
Stocks like pets.com had long runs in 2000, subprime mortgages had long runs in 2008 and people were saying then what you are saying.
Stocks and real estate are frothy now so Bitcoin and Dogecoin have company. I would rather own a house than 10 bitcoins though.
I am as skeptical of TSLA as the next fellow, but at least the company can capitalize on its rising stock price to convert it into physical infrastructure that provides a certain floor to the company value.
TSLA is high now, it might go higher but it's past peak hype at this point so even if you jump in now, you might end up with 2x your investment if it keeps going, but not 10 or 100x.
I believe Bitcoin is the experimental precursor to proper distributed money.
For some reason, even though BTC was meant to be "money", it is now being treated as an asset (at a basic level, an asset is something you hold onto, as it produces additional value, unlike money, which tends to devalue if not put to work).
It's almost as if the next big idea in distributed money will be around disincentivising "asset" like behaviour.
Assets are terrible things to use for everyday transactions, which is why I don't quite consider Bitcoin "money" just yet.
If we're just passing money around, why do we need a separate currency at all? Stablecoins already exist, but they're not popular because all of the speculative value has been removed.
Bitcoin's real invention was censorship resistance, by incentivizing distributed miners to arrive at consensus about transactions in a way that no single miner could control. Sadly, that same distributed incentive is responsible for Bitcoin's ever-increasing energy usage.
Stable coins are incredible for cashing gains when you are unsure of future movements. All without having to transact back into fiat. You can then earn generous interest rates on your stable coins (Uniswap, etc.), far higher than any bank currently offers.
The eventual distributed money could be bitcoin-associated without being bitcoin itself. For example, DAI[1] is (AFAICT) a derivative of Ethereum, but pinned to USD. It relies on the underlying store of value that Ethereum represents, but isn't tied to the value.
DAI isn't so much a derivative of Ethereum, rather it is a dApp (decentralised app) that runs on the Ethereum smart contract technology.
ERC-20 tokens are the magic that enable second-layer "currencies" such as DAI and others to work on top of Ethereum. There are other tokens, even WBTC (Wrapped Bitcoin).
DAI itself is backed by a basket of token-based assets such as WBTC, WETH, USDC, USDT etc.
The Ethereum dApps are definitely a fun rabbit-hole to dive into, e.g. UniSwap, Synthetix and other DeFi applications.
The main problem as I see it is the transaction costs are very high (I looked into using UniSwap but it was going to cost > $50 to transact what I wanted). However, in the next few years the Eth2 improvements will help scale the network and hopefully see transaction prices fall.
I think the way to discourage hoarding behavior is inflation. Cryptocurrency follows similar models of scarcity like Bitcoin. Some cryptos have tail emission. None of them has any meaningful inflation.
I designed Bitflate. It's a cryptocurrency with 7% inflation. The rate is moderately high to make it the opposite of Bitcoin. But it's not too high to cause hyperinflation. Bitflate is a Bitcoin software fork. So there are possibilities to create hybrid cryptos that have inflation rates between 0 and 7%.
I designed the reward schedule with 4 halvings. The schedule benefits early adopters. It is as follows:
Era Reward
0 50 (10 million coins)
1 25
2 12.5
3 6.25 (21 million coins)
4 6.56
...
10 9.85 (31 million coins)
...
30 38.11 (122 million coins)
Even though the supply inflates at 7%, it is still limited. There can be short-term speculation. If short-term adoption rises faster than 7%, the coin can gain value.
We're still in the early phases of mining. The reward schedule creates scarcity to allow the coins to gain value.
Bitcoin has shifted in the mind of investors from a currency to an “asset class”. What this means is that to investors it is more like gold than dollars.
Gold’s value is not linked with its usage in the industry or jewelry. Holding gold doesn’t yield interest. its value comes mostly from people scared of devaluation.
While the interest rates are still low and the economy is not doing great, it makes sense to diversify one’s cash in various “refuge” values.
That Bitcoin is becoming a refuge value while its volatility is still insanely high is somewhat weird. It mostly indicates that there are many cash-rich people/companies out there who dont really know what to do with it.
This. There is a wide wealth inequality gap and a lot of excess savings that even at close to zero interest rates people don't know how to invest it. IMO this says a lot about our technological progress rate; which despite what many here might believe has been declining and bar a few outliers has been mostly evolutionary barely keeping pace with the world's increased population growth.
Its like the low hanging fruit of engineering has been picked, or we are waiting for the next big technological breakthrough to come about. I look at even the lifestyle 30-40 years ago, and despite more efficient engines in cars (which isn't a problem with cheaper fuel anyway), the mobile phone and the internet (which isn't all good news IMO) not much has changed lifestyle wise. In some measures such as food prices, house prices, deep social connections, and other more base needs its gotten worse for the average middle class worker in a typical Western country.
IMO it feels like we've hit a stagnation which is reflected in investor preference to hoard value.
Yeah, that's what bitcoin should have been. Too bad it also consumes an insane amount of energy and isn't able to process a lot of transactions per second. Hope that a good cryptocurrency gets more traction and will be the next decentralized "paypal / digital currency".
You still need one slow and/or expensive Bitcoin transaction to start using it, while having enough funds for a justice transaction. You can't use it trustlessly on your phone and it's also not scalable (no decentralized route finding that scales exists and is an intractable problem).
Just use another crypto if you want to pay for things. 0-conf are just as instant as credit card payments are.
Nano is fast and free because it is not used much. How many transactions per seconds did they achieve? I think it was in the ballpark of a 100, much too low for a global currency. Let's say 10% of the earth population want to use nano once a week. Then you need 0.1×8e9/(7×24×60×60)~1000tps. Then it might replace paypal, but not cash or card, and the microtransaction usecase is even farther away.
Indeed it seems better than bitcoin, but that's a low bar by now. I do like nano's idea of voting weight delegation, it seems like an elegant solution to keep the power over the system in the hand of the user/owners.
At the moment I feel a centralized privacy coin would work best for me. Centralization brings performance and the private part avoids excluding participants.
This is the only one I'm still interested in, and the only one I hold. When you transfer it around between your wallets and exchange it feels like "Yes, this is what I thought BTC would be". It's significantly more eco-friendly and actually a really interesting concept in how it works: https://docs.nano.org/whitepaper/english/
Needs more adoption from the mainstream crypto payment providers though. Honestly I suspect half the reason support is lacking is because nobody actually understands how it works (because it is quite different).
I looked into nano because it kept getting mentioned. Seems like the only way to acquire it is to buy it from someone who already has it. Somehow, that isn't very motivating.
I'm not sure what other options work out better though. BTC is now only mineable by large groups with tons of hardware, which seems less fair to me. At least with the faucet approach everyone was equal in terms of what they could acquire.
Personally I didn't use it anyway, I just traded for the coin like anything else.
* In the future sidechains are going to be used in a big way on Ethereum. Lower cost, higher transaction processing. All the cool shit is being developed on Ethereum right now because of a robust toolchain. Also, there are many infrastructure startups that are filling in technology gaps.
* Basic Attention Token (BAT) is another "internet money" contender because the user can earn it through viewing ads. No fiat onramp needed.
I haven't researched Nano but I would be interested to hear the trade-offs compared to Ethereum and Bitcoin.
I'm patiently waiting for the dismissals (it's just a fad like tulips or beanie babies), the negative permabulls (it's evil because people can use it to buy drugs / not pay taxes, it can't do as many TPS as Visa, it's bad for the environment...) while laughing all the way to the bank.
Crypto is the HN equivalent of what the ipod was to Slashdot: "lame" to the people who think they are the typical user, who declare there is no product-market fit. Maybe after 12 years of being constantly proven wrong, it's time for the old guard to stop being luddites and concede it has been very wrong?
I actually tremendously enjoy hearing a well constructed negative argument against Bitcoin/Crypto that presents a perspective I haven't heard a 100 times before and/or hasn't been debunked in depth.
These are actually necessary given how new and different the whole shebang is.
But that hasn't happened in a rather long time on HN, or if it has, it's buried 10 level of indent deep amongst HN randos parroting lame climate change arguments they've heard on reddit of FB.
I'm interested in what you find lame about the climate change arguments?
They seem fairly appealing to me, cryptocurrency is a fraction of the size of current payment processors and is already consuming a small country's worth of power. How much more power will it consume if scaled further? How will power efficiency strategies affect the utility of the network?
I think there are some reasonable arguments for mining farms that draw from excess power during periods of low utilisation, but even that power seems like it could be put to more productive use.
The energy is used to provide security for the value the network stores. The energy consumed by the actual transaction processing is incidental. If bitcoin used a traditional database to store value it would need physical security (people with guns and/or lawyers) to ensure its integrity. To decide if bitcoin is actually wasteful you'd have to compare it to the energy consumption of the physical security that would be required to protect an equivalent amount of value (getting close to $1T).
The Fed building isn't all that well protected, and "stores" essentially an arbitrarily large amount of USD. It helps that it's impossible to steal, since if you somehow "robbed" the Fed all it would take is a court order to retroactively clarify that your robbery never happened.
I'm happy to call Bitcoin wasteful because we already know what's going to replace it. Proof of work is a dead end and with it all coins that are anchored on PoW and aren't working on migrating to proof of stake. The writing is on the wall that proof of stake is the future.
> I actually tremendously enjoy hearing a well constructed negative argument against Bitcoin/Crypto that presents a perspective I haven't heard a 100 times before and/or hasn't been debunked in depth.
Me too! /r/Buttcoin is a nice place for that, but you must already know (as your nick looks familiar to me)
My personal favorite well constructed new negative argument: like India and Nigeria, governments will try to ban crypto since it endangers their total control.
It will come as a coordinated attack by OECD countries, who will need to inflate big time after Covid: they will ban all transactions to fiat accounts, and all exchanges on their territory.
Counter argument: politicians (and the 1%) need to protect against inflation/taxations, so they may not all be in favor, and will leak the plan. It will cause a huge Streisand effect, as "there is no such thing as negative publicity": random Joes will buy crypto, making the plan politically undefensible.
> Counter argument: politicians (and the 1%) need to protect against inflation/taxations, so they may not all be in favor, and will leak the plan. It will cause a huge Streisand effect, as "there is no such thing as negative publicity": random Joes will buy crypto, making the plan politically undefensible.
Uh, what? This makes zero sense. There is absolutely such a thing as negative publicity, especially if major governments threaten to effectively wipe out the value of Bitcoin.
You could just as easily see a large fraction of the holders of Bitcoin try to cash out, to put into more safe investments while the situation stabilizes. This will probably create a crash, as Bitcoin is so prone to. More people will cash out. This will probably increase support for regulating or banning crypto exchanges. Some will already have cashed out, they're happy. Some of the ones that haven't will direct their anger against Bitcoin and support regulations. Some of the ones still holding will try to fight it, but they'll be in the minority. Most people who never invested will probably support bans ("I don't want to risk unwittingly getting hit by a crash like that in the future"). You'll probably have lots of emotional stories about grandpa losing all his savings in the media. I mean, we've seen this story over and over before in the stock markets. Someone figures out "get-rich-quick" schemes, they crash, people demand regulation. What makes anyone think that it'll be any different with cryptocurrencies once they become big enough?
I think it'd be absolutely reasonable to require exchanges to guarantee that there's X% of reserves behind any cryptocurrency it trades. That'll probably kill Bitcoin, since you'd probably want to build such a requirement into the implementation of the currency. And it'll probably put a big damper on the growth of the conforming cryptocurrencies.
Personally, I'm neutral to slightly bullish on crypto. It's reached mainstream and it looks like many companies are going to put a portion of their cash in BTC as an inflation hedge. The price will definitely fluctuate, but it does seem like a floor is being put in because of this move to the mainstream.
So my advice on owing crypto, is own enough that if it goes parabolic you aren't kicking yourself later, but not so much that it breaks you if it goes to zero.
Best advice in this entire thread: balanced, rational, apolitical.
But unfortunately fails to take into account the anti-crypto fanaticism that seems to be a common ailment on HN.
Put another away: some folks here would not be able to sleep at night if they followed your advice, because it'd be too much of a blow to either their moral system or to their ego because it'd be admitting they were wrong on 200 past HN posts.
Why does that in any way make criticisms of environmental impact less legitimate? Loads of people have gotten rich off of systems that have unpriced negative externalities. You aren't the first.
I hope that you use some of your newfound wealth to give to effective charities and help the world.
Yes. I have to confess, I have been patiently waiting since 2013 for the US government to effectively shut this shindig down in one way or another. After all this time, I have begun to reconsider my position. Tulip mania only lasted 2 years, and both the dotcom bubble and the US housing bubble only lasted 5 years. Honestly, there has to be some legs to this whole thing if it's managed to last 12 years. Might be a legitimate new store of value.
I hold some amount of cryptocurrency. I am living in a country where some of the premise for cryptocurrency makes sense (strong capital control, banking and financial sector is ... questionable). And my intution likes the idea of cryptocurrency.
But by far and large, there is no product-market fit still. And people are rational in being against it for various reason, please don't call them luddite.
Personally, I'd still support crypto in the same way I'd support FSF (though much less of a support, just for clarification!). Because I think there is something there with the idea, and I like the principles. But there is a high chance the detractors are correct in their assessment.
That enough people have bought into the idea doesn't change the merits or issues that lead people to take their position on it in the first place. I didn't like the original iPod, I still don't, a lot of people did and do. I don't think either group is "wrong", just that we each value things differently.
The same applies to Bitcoin. It doesn't offer me any tangible benefits over traditional currency and it has some major drawbacks in areas that I value. The only reason I would purchase is if I felt like gambling on speculation.
Whilst I think bitcoin will be around long term, it will be in somewhat of a precarious position once the proof of stake and high TPS blockchains start gathering steam.
Sticking with PoW long term is my only concern about Bitcoins ability to remain relevant.
I'm more bullish on Ethereum, pending successful transition to V2. Also bullish on some of the emerging competitors to Ethereum; heterogeneity provides a healthier ecosystem.
Both nocoiners and coiners are locked into their positions so hard it’s “I’ll go down with the ship” at this point. At least one side gets to be rich though!
There is also my generation where we have only recently started earning money and thinking about these things, desperately leveraging FOMO and all the other factors, trying to enter the market a bit too late but still before the next crash, wondering whether we are already too late. You could say crypto is similar to GME, but with GME anyone knowledgeable could see that it's a pump and dump because the 300$ only made sense for a very short period of time because of the shorts, while the crypto future is unclear but very promising in many regards
It's never late to enter the market. It seems like a lot of people aren't happy investing in tech companies and doubling their money over the next 5-10 years. They want to take big risks and double their money now!
Being impatient will likely kill your returns in the long-term. The interviews with Charlie Munger videos on YT are really good if you're interested in a sensible approach to investing.
I know. I'm retired thanks to crypto. I'm glad I eventually saw how HN was wrong and learned from my mistakes. It did cost me bit of time-opportunity, but there's a point where you have "enough" and it's not worth chasing more money anymore.
Really? Historically the consensus position on HN was that BTC and crypto is a short-term bubble for an asset class with no fundamental value. Seems to me that people becoming rich because the value of BTC has been going up forever is good enough proof that OP is right in swimming against the HN-current.
Please stop calling it Ponzi. A Ponzi scheme is a well defined scam with structural hierarchy. People lower in the hierarchy are obliged to pay the upper level money in order to stay in the game. They also try to recruit others in order to get paid themselves.
Bitcoin is traded in the free market just like a stock. You are not calling Apple stock a Ponzi scheme because some people bought at 1$ a piece am I right?
You're referring to a pyramid scheme, not a Ponzi scheme. (Enough people mix the two up that the Wikipedia pages on both articles have sections on the differences between pyramid and Ponzi schemes).
Ponzi schemes are where you pay investors using the contributions of new entrants, so investors only make money so long as new entrants are joining. It's not exactly a new tradition for people to be referring to financial markets and bubbles as Ponzi schemes, although whether or not this appellation is appropriate is somewhat contested.
As long as the vast majority of Bitcoin owners are HODLing and not using it, it's behaving as a Ponzi. Bitcoin has a few uses, but getting rich speculating on it isn't one.
Bitcoin bubbles burst all the time. Everyone have the opportunity to buy "cheap". Why do you care if some people take the risk to "hodl"? You can still get in (and take the same risk) without buying _their_ coins.
That's not what I meant, and that you're thinking this kinda proves my point. People holding onto Bitcoin hoping to get rich don't contribute to Bitcoin as a technology. They're making Bitcoin a speculative asset.
Bitcoin is supposed to be used as currency. The vast majority of Bitcoin owners don't do that.
Of course they don't contribute to Bitcoin's technology, they are not coders. Using Bitcoin as a speculative asset is part of the adoption process. It is not yet a currency, it will take many years to be completely adopted. It's a natural process, I cannot imagine any other way for a decentralized currency like Bitcoin to become a global reserve currency. Can you?
What do you consider fundamental value? Seems to me that people are willing to pay 50,000$ a BTC and companies are willing to hoard it. How is that not evidence that it has value?
Productive capital. Financial speculation is fun and all but it has to remain a sideshow to the real economy, since we fundamentally rely on individuals and companies investing in the creation of more productive capital. If it ever came to pass that hodling Bitcoin was actually the best use of money because it somehow became a universal deflationary currency, then the government would have to step in and deploy its monopoly on violence to abolish Bitcoin to protect the broader economy. Speculative hoarding of deflationary gold caused the great depression and the governments of the world at the time couldn't escape the trap due to gold-backed currencies. These days we have a better understanding of the relationship between inflation/deflation, currencies, investments, and productive capital, and something like the great depression is not going to be allowed to happen again.
Overall a good answer but I wonder if this direction of thought applies to something like BTC or can even be broadly applied in general. It seems to me that it is difficult to measure the productivity of a decentralized asset like BTC. Maybe it’s even harder to compare it to asset classes which produce physically consumable products as we are talking about a new way to define value in the digital era.
There is some truth to the meme whose idea is that — in the end — you won’t care what the dollar value of BTC is. What happens when .25 BTC becomes a model s? To churn a profit in this trade Tesla needs to acquire the materials an labor for less than .25 BTC. Full stop. This is a paradigm shift because this has never happened before for decentralized, algorithmically sound digital money.
I’m just a lay person but that is, to me, the fundamental value. Who knows, maybe this will have a broad effect across industries the same way that the internet came and effected everything.
> It seems to me that it is difficult to measure the productivity of a decentralized asset like BTC.
It’s actually really easy, because the answer is just 0. Bitcoin is not productive capital in exactly the same way that the USD is not productive capital. “Investing” in Bitcoin is not like investing in an enterprise, it’s financial speculation. This is perfectly demonstrated by the “1 BTC = 1 BTC” meme, at the end of some period of hodling nothing has been produced, no matter how long you hodl for. Now, there are some second-order benefits to financial speculation, it can drive price discovery and provides the liquidity to make markets efficient, but financial speculation on Bitcoin doesn’t have these second-order effects because those second-order effects are only relevant when some amount of non-speculation demand exists for the speculation target. There are other cryptocurrencies that can be used for more than just financial speculation, i.e. that actually have productive uses, and some people are working on finding ways to staple productive use cases to the Bitcoin blockchain, but a Bitcoin is still not productive capital. It’s not good for the economy if too much financial activity gets sucked into financial speculation, since we need financial resources to actually be invested or the economy grinds to a halt.
Now, none of these are issues for a currency. Of course a currency isn’t productive capital, it’s a medium of exchange. But currencies are most useful when they are stable, and Bitcoin is a resounding failure as a currency.
I considered retiring but it’s too boring so I just keep working in crypto. I’m a workaholic by nature. Not having a boss is great though as it allows me true freedom and the ability to work strange hours.
I kick myself over not putting more effort into getting bitcoins when I was first reading up on it. While I don't think I would retire, it would be nice to have the financial security to work on more meaningful but unprofitable projects rather than grinding my daily job.
Same thing here: I don't have to work anymore but I chose to, with a bit of VC on the side. There are many interesting projects, and having full freedom is priceless!
I try to favor project that only take crypto, not fiat, and price their products in crypto. I see that as an indicator of "understanding" the new wave.
Regardless of whether you agree with all the evil stuff, the fact is that Bitcoin is generating a lot of noise, speculation, and wasting a bunch of energy for practically nothing.
I know practically no one around me who has ever used Bitcoin for actual purchases other than buying drugs once. And I know literally no one who uses it in daily life. However I have a few dozen friends who bought Bitcoin because it's going to go to the moon or something.
99% of all news stories in major outlets written about BTC lead with "this is the price of BTC". Nothing about its use. BTC functions precisely as well if it is $10 per coin or $100,000 per coin. Popular interest in BTC is almost entirely based on "I can get rich". That is certainly a thing. People have gotten rich and likely people will continue to get rich. But that's no paradigm shift.
I've only just begun to wrap my head around all of this, and I tried playing with some of the DeFi lending platforms built on top of Ethereum.
It has its kinks, but I think on the net it's a remarkably cool thing. I was able to lend $50 (overcollateralized) at 12% APY without any central institution. The only real wrinkle has been the insane transaction fees: it cost me about $80 to execute the "smart contract" for the $50 12% APY loan. That said, this is a flat cost, and I can very much see the value in paying $80 in transaction costs to be able to lend $50,000 or $500,000 at 12% APY. It also very much feels like "mainframe" days of computing where everything was expensive and impractical, but it was just the beginning.
For the time being, I continue to keep my money safely parked in index funds, but one can get a first hand look at the potential for Eth/DeFi by testing small(ish) transactions out.
Yeah it's "overcollateralized". The borrower has to put 150% of the principal into escrow (this is enforced by the smart contract). If the borrower decides to flake, the lender gets to take the collateral.
And doesn’t this defeat the point of most loans? People use houses as collateral for mortgages, but other than that aren’t most loans given with substantially less collateral, all the way to zero collateral?
Even mortgages are usually less than 100% collateral. And the house isn’t in escrow! You use it.
Am I missing something fundamental? How does it make sense to borrow $100 and lock up $150 for the lifetime of the loan?
Just curious, from the perspective of the borrower, what is the purpose of an overcollateralized loan? If their collateral is just as liquid as their loan, why even take the loan at all?
Super good question, I was perplexed by this myself.
Basically what this financial instrument allows the borrower to do is maintain exposure to appreciating crypto assets while still leveraging its value for day to day spending.
For example, suppose you owned $1500 worth of BTC. Suppose you’re also bullish on BTC and expect it to appreciate, say 2x in a year. If you liquidated the $1500 to buy a MacBook or something, you’d lose out on that appreciation. Instead, I can lend you $1000 in cash, and you can put your $1500 as collateral (150%). A year later, you pay me back $1120, and then take back your BTC collateral; except by then it may have doubled in value to $3000 (let’s say). In fact, as long as BTC appreciates by at least 12%, the loan pays for itself.
As the lender, I am essentially enabling HODLers by providing them liquidity (in the form of stablecoins). Of course downside for the lender is that the buyer could bail AND the collateral could plunge in value.
Right now, no other use case. Though I think your question bakes into it a premise which is itself debatable: that speculation doesn't serve some function in the real economy.
Today, most rich people are able to collateralize their ownership in valuable assets to defer capital gains tax (guaranteed long term capital gain) and enjoy asset appreciation while still engaging in consumption and even levered investments in the real economy. Most billionaires live their lives like this: they take loans collateralized on their corporate ownership, and eventually pay them back while still enjoying value appreciation.
These DeFi platforms essentially unlock the same for everybody else: if you have your entire savings in a deflationary asset like Gold (or perhaps even the S&P500), you might want to be able to collateralize that for daily spending while still enjoying its appreciation for the future. Cryptocurrencies (especially Bitcoin) are more or less equivalent to digital gold. And with the advent of pegged coins, you can now represent really anything as a cryptocurrency, even equities and derivatives. You could extrapolate this further and imagine a world where even equities and derivatives can be purchased as a tokenized coin on some blockchain; and you'd then be able to take collateralized loans for spending off of your index-fund-backed savings account. You'd eventually pay them back while still enjoying value appreciation.
Asset speculation arguably serves a second order function to the real economy. Today, cryptocurrency is only one asset with very limited scope, but one might argue that it's just a start.
That sounds enormously risky for most people. So basically:
* Someone has $30,000 in S and P shares
* With a smart contract they might put these in escrow for a $20,000 loan
* If they pay back the loan they can get the shares back. If they fail to pay back the loan the shares are confiscated, no matter the value the shares are now at.
What’s the advantage over traditional finance? You can already get an asset backed loan at a bank for which you pay interest.
> If they pay back the loan they can get the shares back. If they fail to pay back the loan the shares are confiscated, no matter the value the shares are now at.
You need to make a slight tweak to this statement. Currently, the smart contract enforces a "collateral ratio" of at least 150%. This means that if the underlying collateral appreciates, you can skim off and take whatever appreciation even before repaying. The only invariant that the contract enforces is that the value of the collateral has to be equal to 150% of the remaining principal.
And yes, if they fail to pay back the loan, the shares are confiscated; but the borrower isn't left with "nothing"; rather they're left with 2/3 of their original collateral in cash + any appreciation from the original collateral (minus the principal, of course). For a lot of people, this is a manageable worst-case scenario.
> That sounds enormously risky for most people. So basically:
It's enormously risky for people that are in grinding poverty. This should obviously not be used as a pay-day loan of sorts. But for people that are in the middle or upper-middle class, this has the potential to be a solid financial instrument that can be used as one of many tools we have at our disposal in financial markets.
> What’s the advantage over traditional finance? You can already get an asset backed loan at a bank for which you pay interest.
Have you tried to do this? It requires a lot of time, process, and paperwork. The interest rates vary depending on the risk rules of the bank, and banks often charge a percentage of principal just for this service, sort of like what happens when you refinance a home loan. With DeFi, I was literally able to lend and borrow at the click of a button, and that transaction was processed by a network of robots where the transaction fee was flat/fixed. There's a lot of room for improvement to bring down that transaction fee, but it's too early to throw our hands up in concede that we are forever doomed to $80 transaction fees to process these kinds of contracts.
Now, does this mean that everyone should move off of traditional finance? Absolutely not, traditional finance can still work out to be better for some people. But the key phrase there is "some people". With DeFi, you now have more options on the market, and that strikes me as a good thing.
Oh wait perhaps I misunderstood. If you have $15,000 in shares pledged as collateral, and they appreciate, and the loan is not repaid, the lender gets the shares, or the shares are sold and the lender gets $15,000 out of the sale proceeds and the rest reverts to the owner?
The latter; the lender doesn't get to enjoy the appreciation of the underlying collateral. The underlying collateral is simply meant to de-risk an anonymous loan with 0 credit check.
How does the sale work. My impression is smart contracts execute automatically. But if I have say apple stock to sell the market price differs moment by moment. An exchange would be specified, and trade type, and the whole collateral sold then proceeds divided?
I haven't read the full contract yet, but I think it just automatically converts the collateral to the right amount of the coin that's being lent.
If you open the markets, you'll see that you earn the highest APY by lending USD-pegged stablecoins like DAI, USDT, etc: https://compound.finance/markets
It's possible to use Uniswap (or some other decentralized exchange) to convert X amount of ETH to Y amount of DAI. The smart contract has access to Uniswap as well as knowledge of Y.
Honestly, if you have like $100 to play with, I recommend messing around with it on your own. My $50 loan that cost me $80 was effectively $130 of personal hands-on R&D. If you already invested a little bit into BTC/ETH over the last few years, you might also have "house money" to play with.
Even if you said Bitcoin hasn't affected your personal life you'd be in a vast majority, and Bitcoin has got a few years on Ethereum.
It really is nascent; embryonic.
Personally, I think it's future-defining technology that's being created, but it's a decade at least from reaching common acceptance and use. Cultural change is long and slow, it's one of those things that doesn't change until the status quo generations die off and are replaced, and there's a good couple of generations that don't even know of / care about / understand bitcoin nevermind smart contracts and decentralised finance. I don't understand the absolute fundamentals, but I understand the implications.
What are some use cases? Someone downthread mentioned loaning money where 150% of the money is put in escrow as collateral. This didn’t make any sense to me.
But some of the smartest people I follow are hyped about Defi. So....what can you do with it? Or could you do if adopted.
This. Cryptocurrencies in general seem to have potential for being used in day-to-day transactions in the future, but Bitcoin itself mostly seem to be used to store value.
The planned limit on the total amount of Bitcoin in circulation, transaction fees and long transaction times seem to be quite a blocker for using it to buy a cup of coffee.
Money has to be first established as a store of value, before it can be used as a medium of exchange. As Bitcoin finds a more stable price point, it will become more interesting as a medium of exchange and an unit of account.
You think people will use something with $28 transaction fees as a medium of exchange? Any other crypto currency would work just as well and not have that problem.
Rubbish. This is a misreading of Jevons being passed around as myth in the bitcoin world. There is no “four stages of value of currency adoption” and in Jevons’ framing gold was an exception in that it was a store of value first.
Still, transaction times longer than a few seconds, and fees larger than a few cents puts Bitcoin in a worse position than regular Visa transactions/Bank transfers.
You could be excited about the purchasing power of 1 BTC being 100x what it was a few years ago. No fiat currency has ever deflated more than a tiny percentage in our lifetimes.
I'm thinking if the bitcoin's future is wire transfers between countries. In that case all 21M btc will be comparable with 100T of the world gdp and 1 btc will be worth 50M. Also, it will be illegal for peons to touch real btcs.
I agree with the sentiment, but wouldn’t say its so simple as just wire transfer. Its very possible Bitcoin will become a reserve currency/asset for macroeconomic exchange. If its not controlled by any one country or bank, it removes the effects of currency hegemony we have seen across the centuries.
Countries will still maintain their own currencies for legal tender/monetary policy purposes, but they will likely be in the form of CBDCs and have interoperability with public and private blockchains.
I only keep half an eye on bitcoin, so I'm a bit out of the loop.
Was there some thing (or things) that happend in October/November that started the most recent growth in price? It seems to have bounced around $5-10k for over a year and then in early october just started to take off and is now 4-5x that and not showing any signs of stopping. I heard about the Tesla thing, but that was very recent. What did I miss?
There was halving event last spring, when the Bitcoin supply was cut in half, which happens every 4 years. Historically, Bitcoin price has been following the stock-to-flow model https://digitalik.net/btc/
In the fall, Paypal adopted Bitcoin in their payment network.
I'm confused about the scaling issue. It's not like every time I buy a cup of coffee, I initiate a wire transfer to Starbucks. I buy these things on credit and the issuer of that credit charges me and Starbucks a fee for the service. Then I settle up at the end of the month. Looking at my bank account, I only have a few transactions per month (salary, mortgage, credit cards etc).
Why couldn't something similar work for Bitcoin? I recognize that it's not a completely decentralized system anymore at that point, but it's still much less reliant on banks and the fed than our current system. It seems like something like this would be the obvious solution to the scaling issue.
Basically, if we think of Bitcoin as a replacement for cash, then why is there so much discussion of what effectively is the credit market?
That scenario makes no sense in the real world because the US government would just regulate/ban it before it got to that point. Once BTC even starts to threaten the sovereignty and power of the USD, it's game over for Bitcoin and the laissez-faire environment that helped it grow.
At that time it will be impossible to ban because a large percentage of the US population will be exposed to it. If in spite of that they do decide to ban it there is not much they can do except ban the exchanges. The Bitcoin network is impossible to ban without heavily censoring the internet.
Also what the US is going to do about the other countries of the world, invade them in order to ban the BTC?
Banning the exchanges is about all it would take. Besides, the current chorus is that large companies moving a share of their cash holdings into Bitcoin will drive the price way up. If the government bans Bitcoin then that's not going to happen.
Most probably a US ban will crash the price, but it will recover in time. Also it will establish a black market in the US which is the worst possible scenario for the authorities as they would have absolutely no control over it.
There already is a black market in for Bitcoin in the United States, that's basically all Bitcoin is used for these days aside from speculation. The fact that it would become a black market for Bitcoin itself doesn't change much. Almost all Bitcoin purchases these days are done through exchanges and held on exchanges, managing Bitcoin wallets is enough of a technical challenge that it will never be in any way widespread without the support of exchanges.
I believe it's still selling a major discount from it's true value, so you definitely didn't miss out. It makes sense to put a small % of your portfolio in as part of risky bets you should consider taking.
Put in some money you'd use for Netflix, Amazon prime and a few other extras you can happily do without.
Mark the amount you paid and its BTC value on the calendar and completely forget about it for one year until some out of the loop person (i.e. uncle at Thanksgiving) asks you if it's a good time to put some money into it.
You probably missed it, since the hype around it has been going on for a while now.
If the cycle continues like it has a few times now, there will be a big crash / correction, things will be very quiet around BTC / Crypto again for a few years, and then the next surge will happen.
Not financial advice, but if you have BTC, sell now - or sell half, whatever. At least make sure you have your investment back. If you don't have BTC, don't expect to earn 10x your investment. I'd wait for things to settle again, buy, and hold for a few years. Then if things go crazy again, sell off a part.
And of course, don't be hard on yourself if the price keeps going up; you cannot know if it will. Take what you can. Greed is what makes people lose all their money.
It's never too late, because it's an deflationary asset. You are early if you invest now. The top of the current cycle is predicted to be about $250k. However, the long term value is much higher.
I am not an investor myself but in the long run you would probably still win. In the short run people expect it to pull back a bit from the current (~$50K) value.
Banks in 2017-18: speculative frenzy, dangerous, don't buy, it's heavily manipulated. BTC from high of 20K down to below 10 as regulators in the US make noises about investigations and crack down on exchanges. Bloomberg opinion pieces destroying it as tulips.
Banks in 2021: amnesia. Maybe it's worth it as a hedge. Our clients want it. Mainstream adoption. Regulatory interest to make it easier. Price goes to 50K. New funds being set up by hedge funds and banks. Bloomberg talking about it daily.
I never owned any BTC. But that sequence of events makes me very angry.
Transaction fees are horrendous right now. I wanted to transfer about $30 to a friend, but the cost of the transaction would be ~$20. Its sad to see the intended use not be practical anymore.
It’s going to crash again, just like it always does. My guess is that it will sit around 30 for a while, dip to the low 20s, and fluctuate around that range for a couple of years until the next bubble.
I’d be checking which companies (e.g. TSLA) and ETFs (e.g. ARKK, given their TSLA holding) are exposed to BTC risk and putting your money elsewhere.
Yeah, one of the problems with the BTC model. You either get convenience or security but not both. I had a similar problem where bter disappeared with 137k of doge[0] in my account.
That's nonsense. It's incredibly easy and convenient to move BTC out of an exchange account to something you control (hardware or software wallet). Hell, some hardware wallet GUIs even have the ability to buy crypto baked right into the app (trezor suite for example).
> Yeah, one of the problems with the BTC model. You either get convenience or security but not both.
No, it's not what OP says... He's saying security and convenience are mutually exclusive in BTC. I'm saying that is not the case... You can use an exchange and transfer or use a hardware wallet with built in exchange capabilities. Making it seem like there is some inherent issue with the design/architecture that makes this impossible is extremely misleading.
I don't think I follow. The point is a hardware wallet is not as convenient as an exchange as you can always recover your account if you forget your password. It's not as secure though, as the private keys are hold by someone else.
There are 1.2 trillion US Dollars in circulation right now. Meanwhile, the "market cap" of BTC is more than $900 billion, yet it's still entirely a vehicle for speculation.
would it be valid to state that Apple is 1% of United States total wealth? Are the lines blurred because of multinationalism? Am I looking at apples and oranges?
Bitcoin at this stage in all practical purposes is functionally is like a stock. It may go up to 10 trillion dollars? Which is 10x. A lot of stock have that potential in the long run.
~ish. I imagine it would be probably quite a struggle for them to even get a billion back to fiat given how impactful selling that many coins would be to the current price, combined with the fact that I suspect if coins in their wallet start to move in any capacity, that will likely cause some reaction by other people.
(I have limited cryptocurrency knowledge so that may be all hogwash)
You are completely right: Bitcoin is an absurd piece of technology and its value is based completely on speculation by people who want to make you buy it and then pull the rug.
Congratulations for the incredible insight. Now you can short Bitcoin in a futures market and make a huge amount of money with your brilliant observations.
What about the 51% attack problem? Why doesn’t this matter? Can someone explain how this currency is a good bet when there is this seemly huge gaping hole in the system. Honest question!
If I understand correctly, at the moment if someone would want to do the 51% attack, they would need to spend energy for proof of work that would overpower the rest of btc the network, which is equal to expenditure of Argentina in kWh. A lot of people complain about this expenditure.
If you have enough hash power to 51% attack Bitcoin at all, your potential for rewards by instead mining honestly are significantly higher, at least that's how the game theory generally plays out
It would be extremely costly and if you were to already invest all that money, your incentive is to make money from it, not cause a very short term disruption.
At current energy prices, assuming you need half of the energy needed to do mining to perform a 51% attack and you have access to the needed hardware. You need to burn ~12 million usd daily to take over the network
Worse, bitcoin's massive electricity usage results in data center consolidation.
If a nation state just simply wanted to impair bitcoin, they could chop off electricity to a few warehouses. If they cut off 25% of miners, blocks would take 25% longer, and difficulty retargeting would take about three weeks. At 50%, blocks take twice as long and retargeting would take a month.
Worse, there's the "time travel attack". Say a nation state quietly amassed 51% of mining power. They could quietly mine blocks and release them all at once, reversing transactions for however long they were mining. This is not a double spend mind you, just simply release empty blocks. Mined for 2 weeks? Reverse 2 weeks of transactions. Then rinse and repeat.
that's right i wonder the same. a motivated state actor with access to hydroelectric dams, nuclear power and large datacentres can still easily take over the network.
the saddest thing is people see it as a success because its price has gone up.
But the entire idea behind it was to be a decentralized currency. Its absolutely failed at that. What its succeeded at is being a speculative gambling instrument like beanie babies or tulips.
So yes, it's "successful" currently in that its price is going up, but no, no one actually uses or cares about using it as a currency or buys it for any other reason than they think they can sell it to a greater fool sometime later.
it’s not a successful store of value. it’s volatility is way too high. the gold price changes but it’s actually not very volatile at all intraday. the volatility of btc isn’t decreasing as the price goes up either.
it’s just a succesful speculation instrument as of the current date because it’s at all times high. we’ll see if it stays that way perpetually but that’s not a good store of value.
That would require transferring the renewable energy to the areas where non-renewable energy is consumed.
Energy transmission is expensive, and this would only be economically feasible within certain geographic limits. Otherwise they are both independent economies; a rural hydroelectric dam that serves miners isn't taking anything away from population centers, given the appropriate distance.
Are you suggesting that all miners with renewable energy resources are located in the middle of a desert?
Even then, we could have used the equipment (solar panels, wind turbines, etc) for something else. Unless the world is running on 100% renewable energy it doesn't make sense to say that something that requires energy doesn't cost (the world) anything because it's running on renewables.
Historically energy production has always been near population centers, because transmitting is across large distances in infeasible.
Mining and future energy production is not constrained by these needs. Miners can use satellite internet and be isolated in the Siberian tundra if they needed.
What I'm saying is renewable energy is both cheap and becoming abundant. There is no need to fear mining consumption of energy.
Bitcoin still isn’t worth $1 trillion, which is the value of one large tech company. I think bitcoin is useful and important enough to be worth several large tech companies. Therefore, not selling! Onward to 100k.
> I think bitcoin is useful and important enough to be worth several large tech companies.
My thought experiment to verify this is simple: Tomorrow bitcoin disappears. What happens? Tomorrow FAANG disappears, what happens?
I don't think it is controversial to say that Bitcoin is NOT as impactful as you are stating. Of course lots of money will be lost, but practically no industry is dependent on Bitcoin so the rest of the world will not notice.
So then I am not sure how you can say Bitcoin is so valuable.
What am I missing?