Sure, people are using Bitcoin as a store of value, but I think a lot of those people think it will just keep going up.
Which is not a super rational thing to believe about an asset whose value has no relation to anything in the real world, and nothing to prop it up but the people who believe the same thing.
Bitcoin is up something like 800% for the year. It might be up another 800% in six months! Or it might go down to $10000! Or $1000, $100, $10 -- any of these would make exactly as much sense as the ~$60K we see right now.
Taxes aside, that strikes me as a pretty volatile place to be storing your value. Not everybody has the option of USD or CHF but still... it sure does look like a speculative bubble. (For actual "mania" maybe see NFT's instead.)
It's also not rational to believe that a sovereign currency which is backed only by government fiat cannot crash due to inflationary spirals.
After all, if it should happen to be the case for the currencies we all use right now, it would be the first time that this experiment, which has been tried often enough throughout history, hasn't ended in that particular way.
We've put all our eggs in that basket, and it's working... so far!
I'm glad there's a hedge against that outcome though. If the worst happened, and the debt balloon triggers ECB, the Fed, and their Asian cousins, to initiate hyperinflationary money printing, we'll all be grateful that there's an alternative to going back to shipping convoys protecting boats loaded up with gold and silver.
I don't even think the aforementioned hyperinflationary spiral is inevitable, or even more likely than not. But I repeat, it is irrational not to consider it a real risk, given history, and that outcome would lead to immeasurable human suffering, which cryptocurrencies cannot prevent, but can at least ameliorate.
>> Bitcoin is up something like 800% for the year. It might be up another 800% in six months! Or it might go down to $10000!
That was the case in 2017. Not anymore, things have changed.
the fundamentals of bitcoin are based on what people believe it will be worth and this has changed drastically in mid-2020.
Mid 2020 is the year WallStreet "got" bitcoin. this fundamentally changed it's future path. You have all these hedge fund managers and institutions that are willing to pour trillions of dollars into this asset to gain some exposure. And now that, that's begun it's setting off a chain reaction.
You've got to remember, the impetus for all this. It's not that bitcoin is some ideal form of investment. The driver for bitcoin and equity growth is the destruction of an existing asset class: fixed income. That 100 trillion worldwide wealth of fixed income has to go somewhere (not that all of it has to get sold). either it will go into bitcoin or equities or gold. it could go to cash but then it'll get wiped out.
Take a look at what's been happening in US Treasuries. Yields have been dropping for the last 40 years. Investors have still been happy with their returns because they make up for low yields with increasing prices on those bonds (bond prices and yields are inversely relational).
But, now that US treasury prices have reached their peak (yields can not possibly go lower), it's game over for US treasuries. this is playing out in other bond markets as well too. So, everyone is dumping bonds: see article "Why would anyone hold bonds?", it was shared on hacker news a few weeks ago.
Listen to just about any financial professional speak about bonds: they wouldn't "touch it with a 10' pole", is what you hear more often than not. Especially in the inflationary environment we're in now. Governments everywhere across the globe are up to their eyeballs in debt. the only way out is inflation - they've all realized this. you can't raise taxes, you cant decrease spending. you can only inflate your way out of the debt.
so, basically 100T worth of bonds, a very significant percentage of global assets, is being sold off. And it can't go into cash. So where's it going? Well, equities for the most part, hence the relentless rise of equity markets. but also, other places too like bitcoin because people need some diversification, which used to be served by bonds. In the past, investors recommended 60/40 equity bonds mix. in the future, maybe it's 60/40 equity/commodities/crypto.
It’s easy to take this stance and call others crazy, but what would it take for you to believe your current opinion is wrong about Bitcoin, apart from it changing to something which is in spirit and function not equivalent? If the answer is: “nothing would change my mind”, then perhaps you are the crazy one; after all, carbon copies of you have been around for every cycle of bitcoin growth.
Do speculative bubbles have cycles, has any speculative bubble grown as much, crashed as hard, then grown even larger than bitcoin has multiple times? Bubbles only pop once, and bitcoin has fell as hard as any other bubble I know you are tempted to compare it to, only to retake the ground later.
Speculative, obviously, bubble? You might be crazy for thinking so.
If it must pop in order to be (have been) a bubble then yeah, maybe it never pops, and by that definition it would not have been a bubble, but how long do you have to wait for that to be true?
I don't think that a very weird year or two is sufficient.
A bubble, at least as I understand it, can pop more than once, after all we're not talking about a real physical bubble. Was there a real-estate bubble? I think there was, but prices now make it hard to remember that.
I don't see how my current opinion is at odds with Bitcoin going up util I die and it melts the ice caps, hopefully in that order. If you're asking whether I'd stop thinking it's a bubble, I don't know -- I can be crazy (to miss out on the growth) and also right (if it pops some day).
And of course you're right about "carbon copies" -- I ignored/missed/misread every crypto cycle so far. I'm not above buying some BTC at $100K but I probably won't, for reasons having nothing to do with crypto per se.
Which is not a super rational thing to believe about an asset whose value has no relation to anything in the real world, and nothing to prop it up but the people who believe the same thing.
Bitcoin is up something like 800% for the year. It might be up another 800% in six months! Or it might go down to $10000! Or $1000, $100, $10 -- any of these would make exactly as much sense as the ~$60K we see right now.
Taxes aside, that strikes me as a pretty volatile place to be storing your value. Not everybody has the option of USD or CHF but still... it sure does look like a speculative bubble. (For actual "mania" maybe see NFT's instead.)