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The Case that Bitcoin Is a Bubble (economist.com)
An anonymous reader shares an excerpt from the Economist: It seems that every day, Bitcoin seems to hit a new high. But the reported price can move up and down by $1,000 or so within a few hours. This might have made it a great investment for those who got in at the right price and are nimble enough to get out in time. But it doesn't make it a useful means of exchange (Editor's note: the link could be paywalled; alternative source). When the price is rising fast, those who use bitcoin will be reluctant to part with it; when the price falls, those who sell goods will be reluctant to accept it.
Though not AS volatile, it's the same sort of problem that would come with trying to use actual gold or silver to buy stuff. The vendor would have to be constantly adjusting the price to reflect the day's pricing whims. Very inefficient.
Don't disappoint your bird dog. Go to the range.
That my barber is talking about it, and many people are buying it on speculation.
Stuff that matters?
"It's just like 'beans' or any other internet currency!" "$40/coin? it'll never get higher than that!"
what a fool i was.
Bitcoin has established itself as a viable medium of exchange. It's value in fiat currency is immaterial. The only reason to hold bitcoin is speculation, or to hide assets. Neither of those will change. For the rest of us, we'll use bitcoin when and as needed. It's infinitely divisible, so if the transaction fees are small enough I can still use bitcoin to buy a pack of gum. So I will, and whether or not I use 200 or .00000002 bitcoins to do it makes no difference at all.
I found this part of TFA a bit more illuminating than the summary:
The arrival of bitcoin futures on the CBOE and the CME might have been expected to bring maturity to the market, and to establish a reliable price. But the FT reports that some of the biggest banks including JP Morgan and Citigroup are unwilling to act as market-makers. That is not too surprising. Any market-maker has to hedge its own positions and that looks very hard when the underlying market has such wild swings.
I think future economics textbooks are going to use bitcoin as the go-to example of a bubble. It's a currency that is not backed by the power and might of a government and not tied to a physical asset. On top of that, very few people are actually using it to buy goods and services and its trading is purely on speculation that there will be a greater fool to buy it at a higher price.
Bitcoin, with the limitation is has on the final number which can be issued, has no real future. Governments are reluctant to legislate it right now for several reasons. One reason is because of the lobby of exchanges who are currently making a killing off it. The other is that legislators, as stiff and out of touch as they may seem on the outside, are quite well aware of the ability of this to go underground and they don't want that. However, once bitcoin's ability to increase is exhausted, it has no real future. Legislators will have no choice but to step in and either modify it, or ban it.
To see this, look at the best case scenario for bitcoin. Let's say that it is 100% successful and becomes the de facto world currency. Can you really have a world currency where a few individuals control a set percentage of the world wealth? Owning even one bitcoin in that scenario means you own one 21 millionth of the entire wealth of the world. Now think of those individuals and institutions that own chunks of this.
No, bitcoin cannot continue without an extension. The split that was going to happen was averted when greed got the better of common sense of those who were going to expand it. They think if they can just hold on, if they can just get it accepted by enough people, that they will have a shot at becoming fabulously nouveau riche - as in world-class monetary controlling rich. Not going to happen. The existing money structure will kill it from behind the scenes before this happens. You'll see a sudden spate of exchange breaches financial manipulations (or both) that make it volatile and end up tanking the value, then legislators will step in to protect the market from the failed experiment.
Fitting that the face of old news would come out against anarchy
A more appropriate headline would be Could Bitcoin Not Be a Bubble?
Says increasingly nervous man for 70th time this year since bitcoin broke 1k.
It doesn't even need to be argued; if you're not willfully blinded by greed or some bent philosophy, it's obvious.
And I'm kind of happy regulators aren't doing much about it. There are people who know it's gambling and I don't care about them. So long as Bitcoin isn't big enough to harm the economy in general, the bag holders can suffer for their stupidity (it's not like they haven't been repeatedly warned).
On the other hand, I'm not particularly keen on letting the scammers 'get away with it'. The people running crooked exchanges, deliberately misleading fools into buying in so they can sell at a profit... not a fan.
A nice solution where the bad guys lose and the idiots suffer would be great.
Please give us one more BitCoin story today. I want the hat trick.
Yes, the price of a "single" bitcoin may fluctuate by thousands of dollars an hour, but bitcoin can be divided rather deep (I don't know the exact decimal place). Maybe instead of talking about how much a "single" bitcoin is fluctuating, we should be talking about how much the smallest transferable unit is fluctuating. Or maybe how much $1 USD is worth in bitcoin.
Of course, we never will since it just doesn't have that eye-popping "OMG I'M GONNA BE RICH" feeling that talking about a "single" bitcoin brings.
Full disclosure: I dont invest in btc, but have seen some friends get in on the action and make some safe cash by exitting precautiously. I don't have any regrets not investing myself, as I don't have that much cash to gamble, even now that I knew it raised so much from the moments I considered it. I always saw it as gambling my family's future in a feeling, and being in IT, I like more deterministic ways of spending my hard-earned savings.
Opinion: I think cryptocurrency is being the victim of professional investor shenanigans just like the real estate/mortgage economy was before the 2007 crash - speculation over econo-babble like the subprime bonds packaging is nothing more than the equivalent speculation over techno-babble blockchain, smart-contracts and whatnot. People are basically investing in something that someone is ensuring them will have value, yet WE ALL KNOW its worth is, at present time, only based on demand and not in actual use. all investors knows this but hope they might exit before it stabilizes. They are just being too greedy.
But this is exactly why I, unlike the 2007 crash, don't think all the fuzz is actually bad for crypto - only greedy investors will lose when crypto stabilizes, i.e. crashes. Because it likely WILL CRASH according to MOST savvy sources, such as Warren Buffet. Even the notables that do support crypto aren't stating verbatim it won't crash - they just state they believe in the concept for what it was made. And that's not growing in value exponentially to make people rich, but to provide fiat to those that do not want to depend on the centralized, yet divergent supervision of standard fiat.
When it crashes, people that really trully do use crypto for goods/services transactions will swarm to acquire it. And that's the beauty of it's purpose.
I believe only the really dumb, really greedy people will lose A LOT with the burst of the bubble - those that really can't see the writtings on the wall, keep their money "there" expecting unlimited growth. I will even provide a tongue-in-cheek commentaire: the largest BTC portfolio is currently in the hands of people that invented and let Facebook slide right under their noses (the Winklevoss twins). That surely has to mean something, and it's beyond me how they haven't sold their position yet with their experience on being late to the party.
http://thegreatbitcoinbubble.c...
The fundamental problem with BitCoin is not its volatility. The volatility will eventually go away if the underlying technology turns out to be sound.
The fundamental problem with BitCoin is that the number of transactions it can handle is orders of magnitude below what is necessary for a reasonably liquid currency with a total value in the billions of dollars. As it is, BitCoin only works as long as most of that money either sits still or moves around in huge transactions of at least thousands of dollars at a time.
It is entirely possible that the problems get solved. However, a quadrupling like BitCoin Cash has done is just nowhere near orders of magnitude improvement.
Finally! A year of moderation! Ready for 2019?
The next time you're casting around for arguments against fixed-supply currencies, you can just reprint this line: "When the price is rising fast, those who use bitcoin will be reluctant to part with it; when the price falls, those who sell goods will be reluctant to accept it."
// This is not a sig.
From Twitter:
Tulips are not durable, not scarce, not programmable, not fungible, not verifiable, not divisible, and hard to transfer. But tell me more about your analogy...
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Morning Story: Some major even in the Bitcoin market
Later Story: Article on how Bitcoin is a bubble
You only really need the two.
The real uses gold has (for example, conductivity or ornamentation) pale in comparison to the value that gold holds in relation to other currencies.
The vast majority of value people place on gold is the same reason bitcoin is valuable - scarcity.
All of the digital aspects of bitcoin just enable you to give someone a piece of bitcoin the same way someone could give you a piece of eight, and to ensure scarcity is real. Otherwise the value proposition is remarkably similar.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
But remember the famous saying "the market can remain irrational longer than you can remain solvent."
Someday, bitcoin will crash. But if it could reach $18,000, it could reach $180,000 or $1,800,000 before it does.
It's not a fiat currency. It's a matter of when it pops, not if.
It is not backed by gold. It is not backed by the faith of a government (The US dollar is backed by the faith in the US government). This thing is backed by nothing. We don't even know who created it.
It's going to tank and in splendid fashion. Just wait for the panic selling to start at some point.
You can't possibly mean "medium of exchange" in the normal sense of that term, can you? This is what "medium of exchange" normally means:
Someone wants a car and has firewood.
With BARTER they'd have to find someone willing to trade a car for firewood. That would suck.
Instead they look at Craigslist and find the kind of car they want sells for $8,000
They make arrangements to sell $8,000 worth of firewood.
After the people come pick up the firewood and payments clear, they contact Craigslist sellers and buy a car for $8,000.
The dollars are a medium of exchange because the person selling the car isn't the person receiving the firewood Dollars, as a medium of exchange, allow value delivered to one person (firewood buyers) to later be valued the same by another person (the car seller).
Here's how the exchange would "work" with Bitcoins instead of dollars:
Someone wants a car and has firewood.
They look at Craigslist and find the kind of car they want sells for 2 BTC.
Actually 1.8BTC now.
No, wait, 2.2 BTC.
They make arrangements to sell 2.2BTC worth of firewood.
After the people pick up the firewood and the payments clear, they contact Craigslist sellers, who now want 3BTC for a car.
It doesn't allow the value of firewood to later be used to buy a car, because there's no telling how much 2BTC might be worth two or three days from now.
What kinda works as this:
Now selling this car for $8,000. Accepting payment by cash, certified check, Bitcoin, Visa, or MasterCard. Bitcoin can be used as a method of payment, a way of transmitting dollars from place to place, just like a check or a Visa card. The difference is. Visa transaction is confirmed in about 800 milliseconds, a Bitcoin transaction takes a day or so.
I'm normally a "bitcoin fan" in that I think it's a very neat idea and I'm pretty sure that in a thousand years, people will all be using something kind of like that as the most-common currency. Most of the arguments against Bitcoin also apply to dollars and Euros, so the arguments usually don't impress me, because dollars have a track record that most people think is good enough. And if dollars are good enough, then Bitcoin is good enough.
I don't actually own any bitcoins, except for very short periods just to make some purchases. BTC are just something I use to buy things; it's not something I invest in or anything like that.
This recent craziness and volatility are no good. Bitcoin ceases to achieve its purpose, while this is happening. It's got to stop, or else bitcoin won't be money anymore.
I'm not terribly concerned right now, but if this shit is still happening a year from now, then that's that for bitcoin. Its price could go up to $100k per BTC, and yet also, it will have changed from something useful to something useless.
Corollary: When everyone - usually including your neighbor or friend down the street, or your grandma - is trying to buy in and ride the wave, but they can't really explain how commodity X works or will make money, it's over. It's time to get out. You've missed the wave as an investor, and you're going to get burned joining too late.
Bonus: If the "everyone" people wanting to buy commodity X can't even really explain how or why it will make money, it's going to get REALLY ugly.
The following fit the pattern:
Microsoft and other internet/tech stocks (2000)
Housing (2007)
Gold (2012)
Bitcoin (2017) will likely be the next big entry to the list.
The idea that bitcoin is scarce is the biggest lie there is. Every other item you list is something that all cryptocurrencies share.
Yes that is true, but just like plutonium also being rare does not diminish the value of gold, other cryptocurrencies being scarce does not diminish the value of bitcoin... bitcoin being scarce is just a necessary condition enabling a whole infrastructure that supports people using Bitcoin. It's not the entire REASON for value, it's what enables value to be held.
How many other cryptocurrencies have an approved futures market for example...
It says a lot to me, that if I want to invest in any other cryptocurrency I generally have to buy them with bitcoin. :-)
"There is more worth loving than we have strength to love." - Brian Jay Stanley
The funny thing with BitCoin is that you have technology specialists mostly talking about it, instead of economists or historians. Some history is helpful: https://www.youtube.com/watch?...
Just because I can hook a shark from a boat, I do no offer to wrestle it in the water.
If only I had mod-points right now... this is exactly right. Combined with the transaction costs, and massive fluctuations in value, it's increasingly difficult, if not impossible, to see Bitcoin taking off as a currency. And if it's not a currency, then what is it? Between this and the revelation in The Last Jedi that Rey, like Anakin, is a child of The Force, created by Yoda and Obi-wan to counter Ren, the parent post hits the nail on the head.
We need a currency that can be used to buy goods, that is traceable, safe, global, and stable. Last couple months proved that Bitcoin failed miserably here. What are our options? Go back to gold? Bitgold anyone?
If you want mine your own cryptocurrency, you need a motherboard with 19 PCIe 1X slots to plug in 19 GPUs and a couple of 1200W PSUs.
I just invested my family's entire life savings into Bitcoin and took out a loan from an alternative lender to invest a little more.
Now I'll just sit back and let it peak and then sell it all, just before it crashes.
I can't wait! I even quit my job and told my boss that I fucked his daughter and that he can fuck himself. I told that whole place to fuck themselves. I told my landlord to go fuck himself.
My family is gonna be so jazzed when we're filthy rich.
I'm gonna go tell my gay son to go fuck himself too and that I don't need is stupid money.
Plutonium does not diminsh the value of gold because it is not used for the same things. Other cryptocurrencies can just replace bitcoin.
Who'da thunk it -- fake gold has the same problem that make it a bad basis for a currency that real gold has.
Watch this Heartland Institute video
If Bitcoin manages to be successful and achieve widespread adoption, it will necessarily need to increase in value, due to it's scarcity.
What we are seeing could be a bubble, but it could also be due to adoption. Volitility was very low for 2015 and 2016, and with the exception of a few short dips, has been fairly consistently up in 2017.
If Bitcoin is successful, it will eventually find an equilibrium, and plateau, much like gold has.
Someone should create a site to visualize bitcoin's energy consumption as fossil fuels.
Think of Bitcoins like actual gold coins but with one major difference.....they are (almost) infinitely divisible. I understand and agree that government regulations or other issues can affect Bitcoin and how it develops but I don't think there is any chance it will be banned, outlawed, or otherwise. And as long as that doesn't happen, it will have some value, just like gold coins. How it trades and how it moves around can be shaped by regs but it will still trade and/or move around. It's property as far as the IRS is concerned so there is a legal framework for it to exist that is already in place.
TL;DR the regulations are already in place, Bitcoin is property, just like gold coins.
Maybe its already been stated, but if you review the terms of the CBOE and CME contracts you will see at no time are bitcoins even used, or delivered.
All contracts are settled in cash.
It's a shadow market - not unlike a derivative, where there is no shorting and the bankers are just earning fees on the hype-churn.
>If Bitcoin manages to be successful and achieve widespread adoption, it will necessarily need to increase in value, due to it's scarcity.
But here's the funny thing nobody seems to notice - Bitcoin is just a ledger, nothing about it really cares what 'a bitcoin' is. You divide by ten and move on. There's no real scarcity so long as you can move the decimal place.
I'm not sure what the point of tulips being divisible is.
Because when something grows to some very large amount of value, if it's not divisible it essentially locks out the possibility of trade to all but a handful of people.
As the price of Bitcoin grows it does not matter because anyone can still use .001 bitcoin for a transaction. If you have a 15k tulip bulb the ability to extract value from it is far more limited and thus the market or users will shrink.
Rare tulips were indeed scarce.
Not really though since once you have a bulb, you can divide it to create more. If you have one bitcoin you cannot create another. "scarce" is not all about absolute quantity, it is about the inability to duplicate as well.
What's the value of bitcoin in and of itself?
The fact that it is not a currency tied to any one country has huge value, and tangentially you could argue there is vanity value in being part of the blockchain.
An alternative payment system to credit cards? Yeah, how is that going for you?
In the long term, extremely well. You ask like Steam being out is a deal-breaker. But anyone can see long term the trend is growth in acceptance.
And it always runs the risk of governments cracking down on it
Please tell Venezuelans how "real" currencies have no risk at all from government action. The fact is that Bitcoin is far more removed from such concerns because a government may be able to crack down on exchanges but cannot actually do anything about Bitcoin itself, and governments in other countries generally will not. The U.S. in particular will prop up Bitcoin forever because all they really care about is visibility into transactions.
According you China dropping out of support for Bitcoin should have crushed Bitcoin use. Yet obviously it did not. Can you explain why?
Bitcoin is currently in the "greater fool" investment mode.
Yes it is, but an even GREATER fool is one that believe any currency is not at even greater risk. All investment is risk. I agree that Bitcoin is risky compared to something like stocks (well depending on the company of course), but I'd say it's not all that much riskier than leaving your money as cash in any particular currency. I agree you shouldn't put any money into Bitcoin you are not prepared to lose but it's not like that same kind of risk is not all over the place, and Bitcoin seems less risky than some other things.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Largest problem I see is the free flow of roughly 4%. No sane investor would put money in this except for the super high risk part of their portfolio.
I think the entire sentiment of "it's rising, so no one will spend" is overblown. I spend BTC most when it's rising towards what I expect to be a peak or crash. It's a cheap and easy way to take a bit of profit without bothering to move BTC onto an exchange. When it's stable, I'm more likely hodling for the future or completely divested.
Money is an umbrella term for things that have certain properties. An instance of money generally meets all or most of the desired properties. Other than that, the only sensible definition that I've ever seen is the circular definition that money is what people use as money. What gets used as money can be predicted, somewhat, by understanding the desirable properties.
Bitcoin is an electronic system that attempts to implement as many of the properties of the abstract platonic concept of money as it practically can. I've seen it argued, and I mostly agree, that it does a better job of implementing the desired properties than anything else. It isn't perfect here and it isn't perfect there, but in totality and weighted by our current needs it is better than any of the alternatives, including gold, USD, etc.
Is the exchange rate in a bubble right now? Maybe, or "probably". Is it a tulip-bubble that will pop and then disappear forever? Almost certainly not, at least not if you consider cryptocurrencies in general - the chances of bitcoin specifically disappearing in the future is much better than the chances of bitcoin-the-idea disappearing.
See that "Preview" button?
How about the case that bitcoin is worthless?
Bitcoin, to me, is wothless. I don't know how to safely store it, I don't know how to safely spend it, and I don't know what I can safely and reasonably spend it on. (Note the operative word: safely.) If you wanted to buy something of value from me and offered me bitcoin, my response would be "F you, I want actual money."
If I were given a file and someone told me "that's a wallet containing 10 bitcoin" I would probably delete it. I've lost nothing and saved myself the trouble of figuring out this bullshit. It's not even like I deleted something representing hard work.
All I see is a bunch of government officials in China siphoning money and GPU makers selling stuff at inflated prices.
And there were both higher and lower value tulips.
Are you being purposefully obtuse? A) The lower value tulips were not scarce in any sense, and B) it's not like you can magically turn a very expensive bulb into a cheaper one, you have to find someone willing to trade. I can take a bitcoin and instantly use .001 of it if I like.
Tulips are not freaking potatoes. You can't just cut a bulb into pieces and have each bulb grow a new tulip... It was an *annual, seasonal market*.
Tulips will replicate over time if given enough food. So again, any tulip can be replicated.
What you are saying here is vastly worse for any inkling you could compare tulips to BitCoin, because bitcoins do not degrade on their own, they may be lost but are not in any way seasonal. It literally madness for you to bring up the seasonality of tulips and continue to claim they have anything to offer us when understanding the Bitcoin market. The only use they have is for ignorant people to make incredibly misleading comparisons that make zero sense if you understand either Bitcoin or tulips.
I gave up reading your post after that bit on nonsense, I'll let you have the last word as you are taking on the tone of some kind of religious fanatic here, and you already posted a stronger counter-argument to using tulips as an example that I did...
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Dividend paying blue chip stock can be a good choice for those who are into playing the IPO lottery. Cryptocurrency is just more of this short term, big payoff sort of thinking that leads us into these bubbles. And low-information investors are the key to making a bubble work, there are some people who profit very greatly in during these bubbles and a lot of people who lose a little bit of money playing at investment. Bubbles will keep happening because the losses for the millions of small investors aren't so large that they learn their lesson, and the gains are too big for the strategic people keep at the scam.
Gold is not so bad because it doesn't go to 0. But if for people who sink their retirement into gold only to have it worth half as much by the time they need it have hurt themselves. And more importantly, they could have doubled their money [over decades] by investing more wisely. Shares on the other hand, I've ridden them to the bottom. Once they are off the list they are a real pain to sell.
Real estate is not too bad either, as demand generally goes up and supply is generally fixed. Or in some regions may even shrink as land grants and eminent domain take land off the market permanently. You can still lose a lot of money if you buy some property only to have it surveyed as flood zone a decade later.
“Common sense is not so common.” — Voltaire
Bitcoin is just poker online now. It had an idea and promise, but that fell apart when wall st came in....
Bitcoin == Napster
Etherum == Gnutella
Litecoin == Morpheus.
We've been here before...See which one survives.
You can win up to $200 worth of Bitcoin every hour, for free!
As has been mentioned elsewhere
By other people who do not not understand what the term "scarce" actually means...
bitcoin is not scarce. It is possible to create a practically infinite variety of crytocurrencies
Only ONE of which is bitcoin, why is that hard to grasp? Apparently it is very hard to grasp the concept that no matter how many cryptocurrencies you create only one of them is Bitcoin, which is the gold standard (ha!) if you will of cryptocurrencies.
Bitcoin can be, and has already been, "forked"
And you are just as forked if you use a derivative, which is not technically the same at the BitCoin people actually use.
This notion doesn't exist with any other commodity, gold is gold
So you've never ever seen something colored gold that was not actually made of gold? HMM.....
You can't just go out and create a completely new type of gold
BAM. I'll leave it there with all that egg dripping off you, at least you'll have something to eat it with.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
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If you invest $1000, I will give you $50 back.
1) Who knows when it will burst. Tomorrow or a year from now? Who knows?
2) The Bitcoin bubble is small compared to the Tulip bubble.
3) During the Tulip bubble people invested their entire life savings, their homes, all their families wealth.
4) If you have invested a few hunded bucks - who cares. If you've invested more than that, chances are you are a mug punter.
5) After the Tulip bubble burst, Tulips didn't vanish. People continued to grow, buy and sell them and make a living off them - but at a rather more realistic price.
You should see some the alt-coin bubbles...
Litecoin has gone up ~120% in two days on non-trivial volume. Over-all it's gone up ~7000% since early this year...
If Bitcoin went up over the last few hours, the sticker price would need to go down. If BTC went down, the price would need to go up. So no way to know what the price should be a few hours from now. Hence it's a really bad medium of exchange.
If you ignore the wild fluctuations and pretend BTC only goes up, prices would go down every day - prices will always be lower tomorrow. Therefore you should always wait until tomorrow to buy something with BTC. Spending it is always foolish, if you pretend it will only go up, at a significant rate.
After a re-read of my own comment, I have much more cringeworthy typos and incoherences than the uncany use of "crypto" for these digital currencies (which some even state aren't that much crypto to begin with). But my opinion is solid.
It says a lot to me that if I want to invest in bitcoin that I have to buy them with dollars.
Greater fool theory: The price of an object is determined not by its intrinsic value, but rather by irrational beliefs and expectations of market participants
https://en.wikipedia.org/wiki/...
Casteism
https://en.wikipedia.org/wiki/...
https://en.wikipedia.org/wiki/...
Casteism