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What the Hell Is Happening To Cryptocurrency Valuations? (techcrunch.com)
The investment category of cryptocurrencies hit a new milestone this week, one that would have been unfathomable just a couple of years ago: $100 billion in combined market capitalization. The break above the 12-digit threshold is largely attributable to bitcoin, which is by far the largest digital currency in the still-nascent category, and which has been on a tear lately. From a TechCrunch article: There is one rational explanation that, if true, would totally justify this rapid increase in price across some of the major cryptocurrencies. And that is, maybe these currencies are actually worth these high prices, and maybe even worth many times more than that at which they are currently trading. But the problem is we have no way to figure out their value. Cryptocurrencies aren't public companies with earnings and expenses and EPS. For example, we can look at Apple's financials and determine its book value -- what the company's assets would be worth if hypothetically liquidated today. Of course, stocks trade at a premium to this, because people are enthusiastic that Apple will continue to perform well and this book value will continue to rise. But we can't do this with cryptocurrencies. We could guess -- and compare it to things like the total money or gold supply in the U.S. For example, if you're someone who thinks of cryptocurrencies as a store of value, the total estimated value of all gold in the world is more than $8 trillion dollars... meaning if bitcoin would ever replace or supplant gold, its current value is pennies on the dollar.
New boom with disaster to whoever is left holding the last "coin".
are the only external buyers - the rest is a crypto circle jerk.
Human greed. When people start selling houses and taking out new mortgages to "invest" in bitcoin, that's when you get the hell out.
Seven puppies were harmed during the making of this post.
Stop ransomware and you kill Bitcoin.
This is how you blow bubbles. The real trick is knowing when to cash out.
“He’s not deformed, he’s just drunk!”
Bitcoin will be the new pets.com or webvan!
There is one rational explanation that, if true, would totally justify this rapid increase in price across some of the major cryptocurrencies. And that is, maybe these currencies are actually worth these high prices, and maybe even worth many times more than that at which they are currently trading
Or more likely its a speculative bubble and like the stock price of Tesla it has far outpaced the current underlying fundamentals. They are basing this on valuations of derivative instruments relating to (mostly) bitcoin. Like a stock there is no cause and effect link between the market price and the actual value of the underlying asset. All it takes to get an absurd "valuation" is one party purchasing an interest in a fund or company dealing in bitcoin for a large amount of money. If I buy 10% of your company for $1 million dollars I am de-facto saying I think your company is worth $10 million. But the problem with that is that there is a winner's curse effect at work. Just because one person overpays doesn't mean everyone else agrees.
Bitcoin is skyrocketing mainly because it's one of the only safe ways for kleptocrats to move their money out of China. For those that don't know, China has exceptionally strict wealth export laws so the paper billionaires there need a way to move their money out and into other markets.
Take a look at a chart of BTC vs Yuan and you'll see an almost perfect inverse relationship.
maybe these currencies are actually worth these high prices
Hahahahahaha
I have nothing useful to say. Just had to point out that it's not every day that see such absolute BS.
SJWs are the new boogeyman. -Me
If nothing else, eBay has taught the world one simple fact:
EVERYTHING is worth what two people are willing to pay for it.
Things that can't be sold on eBay are worth even more than that, because now we're into grey/black market territory with all the attendant markups due to risk.
I thought the blockchain was public. I'm not particularly knowledgeable of the process specifics or the computing power necessary for it, but if "valuation vs actual worth" is so important, I'm sure someone could simply set up a shop that tracks the amounts, type, frequency of transactions, among other stats of the currency simply by polling the blockchain and other publicly available records.
And then, with the simple motto of supply and demand, one could estimate the worth at a very trusty rate, maybe even better than what there is today for companies (which trade based on the stock market, investor relation publications, speculation, government influence such as central banks...). I'd say it's a lot better to track the worth of something so simple, so public, so transparent as Bitcoin than it is to track companies that abuse omission, legal loopholes, in and out of their base nations.
Seriously, get a few Russian hackers using cryptocurrencies for payoffs and everyone thinks a diamond isn't just a compressed chunk of coal.
-- Tigger warning: This post may contain tiggers! --
Financial Expert Peter Shiff made an interesting point in his podcast this week about crypocurrency valuations. As an Austrian Economist he believes the digital currencies will eventually implode and become worthless. The interesting point he made is that while bitcoins may be limited (they will eventually be capped at 21 billion bitcoins) cryptocurrencies ARENT. You can make as many cryptocurrencies as you wish, meaning they can be created in excess and therefore be exposed to inflationary or hyperinflationary effects that could cause a massive crash in the value of all crypto currencies.
That said, i'm still gonna wait for a crash in bitcoin value this year, and then buy some as a purely speculative bet
Lets assume for a moment, that you have two currencies, ByteCoin and FOLLAR (Fiat Dollar).
Lets further assume, that both are at some sort of equilibrium at some point, where ByteCoin and Follar are trade one for one.
The Follar, is controlled by a private bank, under the control of a Government, the ByteCoin is controlled by the worker units put in to process transactions.
The Follar has all sorts of currency controls used to spy on and control the citizens of the Country, where the ByteCoin has non of those restrictions.
I would postulate that over the course of time, without collaborative effort by FIAT currency Countries, the ByteCoin will present a greater flow of goods and services, providing more value over time. Since both are fiat currencies, the one with least restrictions will become the preferred currency.
The greatest liberty generator is that where anyone can be or do anything they want, without restriction.
Agent K: A *person* is smart. People are dumb, stupid, panicky animals, and you know it.
Yeah but you can use gold for things, even post-apocalypse. Paper money is at least paper... Bitcoin is even more ephemeral than my electronic dollars at the bank.
Why are proponents of gold standard also proponents of Bitcoin? You can't get any more fiat than Bitcoin. Nothing at all backs it up, even less than government promise backing up real money.
I'm a good cook. I'm a fantastic eater. - Steven Brust
Of course gold is volatile, in terms of relative value to everyday goods, both up and down. The largest Fiat currencies tend to be stable realitve to everyday goods.
XML is like violence. If it doesn't solve the problem, use more.
The *theory* is that there is some hard upper limit that cannot be manipulated on a whim by humans in control, one by physical reality and one by math.
In practice, it's not so clean, and contrary to how preppers feel, in general the economy is much better now than it was in the gold standard days.
XML is like violence. If it doesn't solve the problem, use more.
Look up how local currencies work and how they are valued between peers.
That will tell you both why and how Bitcoin is where it is.
Cryptocurrencies are local currencies taken global, but without whatever fucking retarded thing happened to make the current global economy the mess it is now.
If you are lazy, tl;dr: the value is agreed upon between those that trade. There is no standard price for anything.
Even companies that trade from fiat to CC don't agree on prices some times.
There are some local currencies with a max cap on how much of the currency you can obtain to prevent hoarding and encourage work. These generally do better than the ones with no cap.
The intrinsic value of 1 unit isn't defined. A person could cut anothers grass and get 5 units whereas another could get 15. It depends on the two parties involved.
This is what cryptocurrencies are.
Will they go anywhere? Fuck knows. But they certainly are gaining momentum and there IS money to be made on them whether you like it or not.
ANY single thing that has value to a group of people has a chance for money-making to happen.
In the case of CC, it is heavy speculation and trolling others in to pump and dumps. A single tweet was enough to shave off several hundred dollars off Bitcoins worth a while back. And this is because all of the people using the "not-local" currency are open to seeing transactions.
It really interests me seeing how it evolves with time.
Which is exactly what distinguishes gold from BitCoin, which is not a stable store of value. It may be one in the future, but this kind of volatility does not bode well.
Those who advocate genocide deserve every protection afforded by law, and none afforded by common human decency.
It's basically "hey guys, let's all of the sudden agree that this currency I made up and hold a lot of is a viable one!"
Unbelievably high values for something that doesn't actually have any intrinsic value are generally followed by crashes.
This is obviously a conspiracy theory, and I have no evidence, but the shady origin of Bitcoin (nobody really knows who Satoshi Nakamoto is) could mean that it was engineered by a national actor to crash national economies. It is, after all, a caricature of fiat currency.
Bruce Perens.
The first people in to a pyramid scheme usually do well. It's everybody else...
Bruce Perens.
I say cryptocurrencies are fun!
First is that gold bugs hate inflation. They see it as the ultimate evil. They like deflation. Well gold can lead to deflation, and likely would in the long run due to its limited supply, but bitcoin is guaranteed to have deflation given its design. So they like it because if it is used it would guarantee deflation.
The second is something you might have guessed from the first, it is because they don't know shit about money. They don't really have an understanding of what makes money what it is, or what makes a given currency good or bad. They see big amounts = good, big gains = good. Since both gold and bitcoin have been on a run as of late, that makes them good.
There are mechanisms for estimating the "value" of currencies, hence accusations that the Chinese were undervaluing their currency that have been expressed the last few years. I'm not an economist, so I'm not going to try and explain them. The question here isn't can a currency be valued, it's is Bitcoin a true currency, an asset, a store of value, or something else? What it is will determine how you value it, and at this point it may be the case that we don't really know how to value it.
Yeah but you can use gold for things, even post-apocalypse
While technically true, the very post-apocalypse utility of gold does not explain its current valuation. Based on that logic, you'd expect stainless steel to have a higher value than gold, because it's more useful. Same with paper in paper money. A $100 bill has the same paper as a $20 bill, so this does not help explain the value either.
Bitcoin is even more ephemeral than my electronic dollars at the bank
Your electronic dollars at the bank are just ones and zeroes, just like bitcoin. The only real difference is the central vs distributed transaction model.
Does anyone know if Venezuelans are all using some kind of crypto-coin instead of their own, nearly worthless, national currency?
The fees are actually worth at least $50 now. Some people are spending $255,000 worth of Bitcoin for transaction fees now.
Change is certain; progress is not obligatory.
Is there any reason why, when posing a question about currency, you would not ask ANY macroeconomists?
You're close.
Bitcoin could be the next HTTP.
Your accountants have just told you that the risk of offshore bank accounts is too high, thanks to those schmucks at Mossack Fonseca.
The only solution left to hide your assets is the First International Bank of Blockchain.
Lots of cash pouring in, with an inherently deflating asset, the price has to climb.
Mission: To provide products that consume time and energy as entertainingly as permitted by the laws of thermodynamics.
This (high fees) is definitely a problem at the current time. It is the result of a huge, polarized fight between two major factions of the Bitcoin community. It is a political fight that may well be what kills Bitcoin.
But.
If Bitcoin can survive this (and when it does, the technical reasons for the current high fees will go away) it will have proved that it can survive through a major crisis over protocol changes. If it proves that, it will have proved itself literally unkillable.
Bitcoin is backed by the value of billions of encrypted files. Hard to estimate that value, but that's what it is worth.
It's worth 0, it's not hard at all to estimate that value.
Fanatically anti-fanatical
I've seen two big bubbles in my life in the USA come crashing down - the internet bubble of the 1990s and the previous decade's housing bubble. Here are the signs of a bubble.
1) Prices keep going up even though intelligent people (Slashdotters, for example) can't see any real justification for it.
2) People who don't know anything about the subject come to the conclusion that it will last forever and can't ever lose money.
3) People believe it can't ever go down and start investing in it as a retirement strategy.
4) Stupid people start getting into it. No offense, but when your waitress decides that cryptocurrency is going to be her ticket to becoming wealthy, it's time to get out of it.
5) People start finding high risk ways to put money they don't have into it because they believe that as the price will only go up, they'll soon turn enough profits to pay back the high risk loans they got. Examples would be buying stock on margin and subprime home loans.
6) Big money banks/investment firms in the USA find new ways to invest in it that nobody understands.
You keep bashing the crypto, I'll keep counting my cash.
People horde things all the time. As people horde things the price will continue to climb because the thing people are hording will become more scarce. But sooner or later some one will want to cash out, and that will make the price start to drop just a little. Then when the price starts to drop, more people will hit the "sell" button causing the price to drop faster. Then EVERYONE is going to hit the sell button and the price will plummet to near zero because no one will want to buy while the price is dropping, which will cause the price to drop faster and faster and faster. Moral of the story: Sell NOW! Beat the rush and be happy that you won.
It's worth 0, it's not hard at all to estimate that value.
How much would you pay right now for 1 Bitcoin, if you weren't allowed to sell it until this day next year ?
Of course gold is volatile, in terms of relative value to everyday goods, both up and down. The largest Fiat currencies tend to be stable realitve to everyday goods.
Wrong.
Just the opposite is true: Everything else, including fiat currencies, are volatile relative to goods/services, whereas gold and silver are not.
A 1-Oz US $20 gold coin would, in it's day, buy a fine suit or pay for a lavish dinner at a 5-star restaurant. That same 1-Oz of gold today, valued at around $1200, would purchase an Armani suit or an evening out and a dinner for two at a five-star restaurant.
Two silver US dimes (10-cent pieces) would buy a gallon of gasoline many years ago. Today the value of the silver in those dimes would still buy a gallon of gasoline.
So no, you've got things completely flipped around.
Strat
Progressivism (aka US 'Liberalism'): Ideas so good they need a police/surveillance-state to enforce.
The comparison with the stock market is irrelevant. As for any currency, bitcoin value has to do with the trust people put in, without the interference of a central bank to play with the interest rates on deposits. Contrary to gold, it has no other use than to store value and transfer it, i.e. no bitcoin jewel or electronic components. It can be easily divided and transferred, with no interference. It might not be as efficient to clear transactions as your credit card, but it is a great concept, and more than in theory. However the barrier to entry is still high, and there are still risky dimensions, such as exchanges, theft of private key, poor understanding. Crypto currencies are there to stay, that real questions is which one(s). Limited supply combined with broader adoptions does mean higher value, but then again, a lot of volatility to expect.
Just look at the growth curve. This has nothing to do with value; intrinsic or perceived. Bitcoin merely has this value because investors are piling in - and because Japan recently recognised it as a currency.
But it isn't.
It is not backed by any thing or government
and like all bubbles the time to get OUT is when all the household investors start buying it. People who have never heard of cryptocurrencies until they read an article in the popular media and then "invest", they never make any money. They tend to buy at the top of the market and lose a packet when the inevitable crash happens.
politicians are like babies' nappies: they should both be changed regularly and for the same reasons
Simple supply and demand solves this. If it is hard to find someone willing to sell then the price is too low. If nobody wants to buy the price is too high.
Early in the development of BItcoin or any other cryptocurrency, there was the fear that some exploitable cranny in the mining algorithm could be used to inflate the money supply beyond what the exponentially-more-difficult algorithm was supposed to allow, or that the encryption would be broken. There seems to be a feeling today that BTC has been around long enough now that no such vulnerabilities will appear.
The weakest part of Bitcoin currently seems to be the exchanges. Having another major exchange poofed by hackers could be the what puts an end to this bubble.
Am I the dullest knife in the drawer?
Because, seriously, I can't tell the difference between these two arguments.
I fail to see how cryptocurrency is immune to manipulation. From what I see the crazy swings in value indicate it is far far worse.
But I have never accused preppers of being intelligent.
I'm a good cook. I'm a fantastic eater. - Steven Brust
15mBTC = 0.015 BTC (1,500,000 satoshis) ~ USD$41.
#DeleteFacebook
Humans have been happy to pay for perceived rather than intrinsic value since at least the first bank note was introduced a few hundred years ago.. and probably before that as well.
"Worth" is exactly what someone would pay for it, regardless of whether they base their decision on perceived or intrinsic value. In the case of bitcoin, that's obviously greater than zero.
The recent worldwide ransomware attack, which encrypts computer data unless the hackers are paid in Bitcoin is probably the cause of the increase. Demand goes up as institutions and companies, including hospitals, see that there is nothing they can do but buy bitcoins and pay the criminals.
E Proelio Veritas.
The suit or 5-star restaurant arguments are devious because these are both items available at a wide variety of price points. A "fine" suit could be defined as a Men's Warehouse basic suit that is at least all wool (~$300), or it could be defined as the finest bespoke Saville Row suit ($10k+). "Armani Suit" is a ridiculous measure of value because Armani actually makes suits at a fairly wide range of price points with several sub brands. A "5-star restaurant" could be defined as a basic entree and appetizer at a nice steakhouse with no alcohol (~$100) or it could be defined as a spot at a multi-Michelin star restaurant with the finest Bordeux to wash it down ($1k+).
Long story short, compared to real goods, the price of gold has varied widely. In the last 100 years, an ounce of gold has been worth as much as $2,500 in 2017 dollars or as little as $300. At times, it's bought a J.C. Penny Suit, at other's it's bought a fine bespoke suit.
*waves hands* You will want things that others want, because other want those things *waves hands*
Please mod parent up, for providing specifics that give context.
Value of any currency usually depends of the stability of the governing body. So long as people mine CC's then they will be prized. So basically hardware used to mine the stuff is the governing body and so long as its progressive then CC's will be sort after.
What you're missing is that while the miner does need to take into account his expenditure for finding a block, that's not the determining factor in the price of BTC.
As with all things, the price is determined by demand : There's someone out there who desperately wants to buy some BTC because that's what he needs to complete some other transaction; for example, perhaps there is some "crazy" guy who is selling a dream car, but only for BTC,
Doesn't exist. There is no legal product, right now, that can only be purchased via bitcoin, and only one illegal product that can be purchased only with bitcoin. Anything you want to buy, you can buy *without* bitcoin.
This means that the insane demand is due mostly to people who simply want the bitcoin for sale value - i.e. speculators. People who want to buy something don't need to fuel the demand for bitcoin - it's cheaper to buy that something with money. When (if) there is actual demand for bitcoins for spending purposes the price will rocket.
As another poster upthread pointed out, wannacry only made 17BTC from the scam, yet demand for an extra 17BTC doubled the "value" of bitcoin. It doubled because so few people use it for actual spending that a minor increase in BTC spending fuels the demand immensely. If BTC were an actual currency, then having people need 17 more units wouldn't cause the price to double.
TBH, bitcoins *are* useful - you can use them as an indicator about whether the person you're talking to actually has a clue about economics, or not.
I'm a minority race. Save your vitriol for white people.
And what "fundamentals" would those be, exactly?
The actual transactional volume of cryptocurrencies. The value of the goods bought/sold with the cryptocurrencies. Etc. Derivative financial instruments and funds are essentially side bets on the underlying asset (such as bitcoin) and typically have at best a loose correlation to the actual value of the asset. Think of it like the difference between the amount of money the NFL makes (several billion/year) versus the amount of money bet on NFL games per year (FAR more). People are looking at the amount being bet on bitcoin and conflating that with the actual value of the bitcoin economy. Not the same thing.
The manipulations happen in 'non-numerical' ways, and in a 'mob rule' sort of way. Gold standard folks seem to ignore that sort of reality, and fixate on the fact that the absolute quantity is unchanged, despite the massively varying relative value to meaningful things.
XML is like violence. If it doesn't solve the problem, use more.
People tend to consider gold to be valuable in itself. As long as people in general believe that, it will be valuable in itself. Paper money might or might not have value after the apocalypse. Bitcoin won't. It would be a pretty unimpressive apocalypse that left the Internet running well, so transactions could reliably get into the blockchain.
"When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes
FTFY.
Also, paying for tangible objects or services is simple. You hand over the money and get the object or service. Bitcoin is more involved, and a transfer involving two people only is pretty much limited to transferring ownership of a wallet.
"When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes
We can normally recognize bubbles before they pop. Figuring when the pop comes is more difficult, as is convincing people involved. Now, previous bubbles have involved actual things. The tulip bubble popped, but tulips were still worth something. Real estate was still valuable after the crash. The Chinese economy will continue to be there, even if it stops growing. Bitcoin, after a crash, may well be worth nothing.
"When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes