People have always loved gambling. Crypto is nothing but a game of musical chairs. Also, smart people fall into cults like everyone else but they tell themselves they are into it for rational reasons (techology).
It has no underlying fundamentals. Its value is 100% speculative. Gold is somewhat similar, in that it's value is mostly speculative, but it does have some inherent utility/value.
Bitcoin has value for the same reason that vintage sneakers or Pokemon cards have value; that is there is a fetish for them and thus some belief that at some later time, someone will want to buy it for personal reasons (either due to their own beliefs or sentimentality).
Actual currency, on the other hand, derives its value from the willingness of the issuing sovereign to accept it back in payment of taxes.
> Fiat currency holds value because it is backed by a sufficiently large group with guns.
Yep that's what I said: payment of taxes.
> Crypto currency holds value because it is backed by a sufficiently large group with encryption.
I disagree. There is no reason for bitcoin to hold its value. Miners expend real resources (which they pay for) to obtain bitcoin because they speculate that someone will pay more for it further down the line.
People buy bitcoin for the same reason.
The price of bitcoin could go to zero without any compromise of the underlying encryption.
The purchasing power of a currency issued by a soevereign can only go to zero as a result of the collapse of sovereignty (ie. no more guns, or being outgunned). This is the very definition of hyper inflation in terms of a currency: when a government cannot provision itself in exchange for that currency.
Now what makes bitcoin special and different from any other coin? Take something like Litecoin, far below previous peaks. Surely it is not worse with encryption than bitcoin?
“Actual currency, on the other hand, derives its value from the willingness of the issuing sovereign to accept it back in payment of taxes.”
And yet the purchasing power of the dollar has fallen by 99.5% since moving off the gold standard. Bitcoin claims to hedge against this steady decline in value which is caused by money printing.
If you believe they will stop printing money and diluting the value of the dollar, the argument for Bitcoin fails. If not, Bitcoin’s hard supply cap and perfectly inelastic supply when faced with changes in demand make it a compelling hedge.
Purchasing bitcoin on any random date in history and holding it for four years or more has outperformed every single index, ETF, stock, commodity, real estate every single time.
Betting on a single index even being around in 100 years is risky. Betting on the dollar lasting 100 years is risky. Betting on Bitcoin lasting 100 years is also risky.
I think looking at 5, 10, or 20 time horizons is more practical and I have high confidence that Bitcoin will continue to be the best performing asset on those time horizons.
The reason I said 100 years is because the US went off the gold standard in 1933 (although it had a weird modified version until the 70s).
There are individual stocks that have been around for over 100 years. The Dow Jones has been around since 1884. Stock exchanges have been around since the 1500s.
Indexes that apply to the averages of top, say, 200 stocks in a given country's econonmy will definitely be there in 100 years, absent a collapse so monumental that money itself has no meaning.
Bitcoin is a freakish sideshow by comparison. Might as well buy baseball cards.
