Author Topic: Is it too late [bitcoin]?  (Read 90691 times)

maizeman

  • Magnum Stache
  • ******
  • Posts: 2998
Re: Is it too late [bitcoin]?
« Reply #600 on: January 05, 2018, 06:04:25 PM »
That does put a different spin on it, thanks!

maizeman

  • Magnum Stache
  • ******
  • Posts: 2998
Re: Is it too late [bitcoin]?
« Reply #601 on: January 06, 2018, 12:09:24 PM »
Why is this "not good news"?

I agree that it is a strike against mainstream adoption of cryptos.  But, perhaps that is as it should be. 

I think it is a totally appropriate response given that cryptos are fake money currently held aloft by popular delusion.

Doesn't this start to get a little circular?

One of the oft repeated arguments on this thread is that cryptocurrencies aren't real money because you cannot buy things with them.

It sounds like your view is that people shouldn't be allowed to buy things with cryptocurrencies because they aren't real money.

Note that neither of those positions have much to do with the price of cryptocurrency, or the people currently trying to buy them up as a get rich quick scheme.  But anyway, yes, if we start with the assumption that people being able to spend cryptocurrencies is bad, then visa cutting off this payment processor is good news rather than bad news.

PDXTabs

  • Pencil Stache
  • ****
  • Posts: 695
  • Age: 35
  • Location: Vancouver, WA, USA
Re: Is it too late [bitcoin]?
« Reply #602 on: January 06, 2018, 12:16:13 PM »
L.A.S.,

Would you be okay with silver backed debit cards?

WhiteTrashCash

  • Handlebar Stache
  • *****
  • Posts: 1244
Re: Is it too late [bitcoin]?
« Reply #603 on: January 06, 2018, 12:16:40 PM »
What I really want to know is if it's too late to invest in MMM's fingernail clippings. I'm worried that I missed my chance with that.

maizeman

  • Magnum Stache
  • ******
  • Posts: 2998
Re: Is it too late [bitcoin]?
« Reply #604 on: January 06, 2018, 12:33:44 PM »
Yes, but you are saying that it's a good thing that people not be able to purchase things in a local currency (say USD) with a visa card when their payment to their credit card provider is settled in bitcoin.

I presume you're okay with people being able to purchase things in a local currency with a visa card when their payment to their provider is settled in a non-local currency (say Euros)?

If so, then the difference between the two scenarios is that you're saying cryptocurrencies are fake money, and euros are real money, and we're back to the circularity issue of cryptocurrencies being fake money because you cannot spend them, and you shouldn't be able to spend them because they're fake money.

If I'm wrong and you're instead saying you don't think I should be allowed to buy things in USD with a visa card if I'm paying my bill in euros, then I guess all I can say is that I don't really understand the basis for that position at all, but I'd be curious to hear your reasoning.

L.A.S.,

Would you be okay with silver backed debit cards?
No, silver is to volatile and has a lot of the same problems as gold when it comes to use as a currency. 

Maybe we should clarify whether we're talking about what people should be allowed to do, and what actually makes business sense to do. I certainly wouldn't want to start a company issuing visa cards that let people buy things in USD and settle their bills to be in either silver or bitcoin (or Turkish Lira for that matter, sorry Turkey). The volatility is such that I imagine sooner or later I'd lose my shirt. But if someone else wants to run that risk, I don't see any societal reason we shouldn't allow them to do so.

PDXTabs

  • Pencil Stache
  • ****
  • Posts: 695
  • Age: 35
  • Location: Vancouver, WA, USA
Re: Is it too late [bitcoin]?
« Reply #605 on: January 06, 2018, 01:02:02 PM »
L.A.S.,

Would you be okay with silver backed debit cards?


No, silver is to volatile and has a lot of the same problems as gold when it comes to use as a currency. 

Note: if you are trying to drag in another thread I started about silver.... Ain't gonna work.  That was a thread I started because I was curious about what people thought about it as an asset class for investing purposes.  I don't believe I was suggesting it should be used to replace fiat currency.

Sure, but you are basically arguing against liquidity in an asset class that you hold. You are fine with me buying and selling silver, but you aren't fine with me making it easier for others to buy and sell silver? Isn't more liquidity always better for almost anyone in an asset class? I would certainly rather invest in a more, rather than less liquid asset.

PS - Obviously, silver != BTC != cryptocurrency, but for the sake of commodity backed VISAs, they all seem the same to me. If I want a corn futures backed VISA, who are you to stop me?

Cycling Stache

  • Bristles
  • ***
  • Posts: 466
  • Age: 42
Re: Is it too late [bitcoin]?
« Reply #606 on: January 06, 2018, 01:12:36 PM »
This is where risk analysis comes into play, and crypto enthusiasts need to understand what they are buying, what has fundamentals, what has strongest chance to survive crashes, how to decrease risk, etc.

I'm pretty sure all of this techno-speak about cryptocurrencies is going to sound pretty ridiculous in a year or two.  Imagine making these same arguments about tulip bulbs and you'll get some idea of why I think so.  Fundamentals?  Risk mitigation of diversification?  Underlying technologies?  Um, none of that actually exists in any relevant way.

We're taking about a runaway market bubble in theoretical abstractions.  Price is totally decoupled from anything you might call a fundamental.  The only way to make money here is for someone else to lose money.  We're speculating on future demand, for something with no known use, so the only demand out there is driven by the growing demand.  It's the classic definition of a bubble, only made more obvious by the lack of any underlying value stream.  At least tulip bulbs could be used to make your garden prettier.

I don't care about bitcoin, but I wonder about this reasoning as applied to investing in the market in general.  We know that people tend to buy high and sell low, and more "irrational" people will pile into the market as they see the price peaking.

So why should we trust the stock market and congratulate ourselves on not worrying about irrational highs (see top is in thread), but in the bitcoin world we can "clearly" see that the market is overvalued and pride ourselves on staying out?

Doesn't the former celebrate the idea that we're not smarter than the market, whereas the latter celebrates the idea that we are smarter than the market?

jinga nation

  • Pencil Stache
  • ****
  • Posts: 971
  • Location: 'Murica's Wang
  • Left, Right, Peddlin' Shite
Re: Is it too late [bitcoin]?
« Reply #607 on: January 06, 2018, 01:28:04 PM »

These hypothetical applications of blockchain will never work until the associated currency is stable.  Like if the US government were to issue a coin worth one dollar, and offer to always buy one or sell one for one dollar, then it could be used for money transfers.  But when the price fluctuates 25% in a matter of hours, the currency is pretty useless for this purpose.

And just to put a finer point on it, it is the speculators who are driving the price fluctuations, and thus preventing the widespread adoption of a coin.  Cryptocurencies are doomed as long as everyone continues to speculate in cryptocurrencies.

What if the crypto is not used as a medium-of-exchange? What if the blockchain allows anyone to transact in their token or currency of choice? What if banks or governments start to issue a crypto version of their currency on top of these blockchains? What if the crypto is not merely a currency, but represents a unit of accounting particular to a service?

Most of the questions have already been redressed, and banks like mitsubishi are conducting blockchain experiments:

https://news.bitcoin.com/mitsubishi-testing-cryptocurrency/
So why do I need a cryptocoin when I can have IBM implement a blockchain for my needs?

https://www.ibm.com/blockchain/use-cases/

shadow

  • Stubble
  • **
  • Posts: 119
Re: Is it too late [bitcoin]?
« Reply #608 on: January 06, 2018, 11:15:02 PM »
So why do I need a cryptocoin when I can have IBM implement a blockchain for my needs?

https://www.ibm.com/blockchain/use-cases/

The original concept of a blockchain is a peer-to-peer permissionless, public network without reliance on intermediaries. Ibm's version of a blockchain is a private, permissioned network where the identities of all participants are known. They use a membership consensus model so they don't need a cryptocurrency to reach agreement and validate transactions. Their use-cases are geared towards businesses, offering or developing custom permissioned blockchains for financial services, vehicle registration and other government services, supply chain management, dispute resolution, healthcare, etc. Different from a public, permissionless blockchain where entities and transactions can be obfuscated, ibm offers "provenance"; every transaction of a blockchain can be observed; each step of the process, the entities and processes being conducted are known. These members serve as intermediaries and they control the rules of the network.

A public, permissionless blockchain offers more flexibility and includes other use-cases that is potentially more cost-effective to transact, such as direct consumer-to-business transactions, or business-to-business that don't require their own custom blockchains. Anyone can use them and newer participants can join without having to invest infrastructure cost and with less barriers.

Ibm's private, permissioned blockchain has a different intention and use-case from a public, permissionless blockchain. If they're able to address all your needs, there's no reason not to use them.


Indexer

  • Handlebar Stache
  • *****
  • Posts: 1211
Re: Is it too late [bitcoin]?
« Reply #609 on: January 07, 2018, 05:48:10 AM »
I don't care about bitcoin, but I wonder about this reasoning as applied to investing in the market in general.  We know that people tend to buy high and sell low, and more "irrational" people will pile into the market as they see the price peaking.

So why should we trust the stock market and congratulate ourselves on not worrying about irrational highs (see top is in thread), but in the bitcoin world we can "clearly" see that the market is overvalued and pride ourselves on staying out?

Doesn't the former celebrate the idea that we're not smarter than the market, whereas the latter celebrates the idea that we are smarter than the market?

Different markets. The stock market is made up of professionals, many with advanced degrees and certifications, all trying to outsmart each other. The best of the best are determining prices. Yes, we have still had bubbles. Yes, we have still had periods where the prices seem overvalued. You can read endless research papers arguing that prices are too high or too low. There will be news articles tomorrow on financial websites arguing the price is too high and others arguing it is too low. All of that back and forth is what makes the stock market efficient. It isn't perfect, people can still make impulsive decisions. Also, at the end of the day stocks have intrinsic value. They are worth something to the owner even if they can't sell it.


Bitcoin's price isn't determined by professionals who have been debating with each other going back decades. It's determined solely on speculation. I'd wager the vast majority of the people trading it have no idea what they are trading. The only people I've heard make educated arguments for it are in this thread. Bitcoin's value if no one wants to buy it from you equals zero. There is no intrinsic value from holding onto it. IMO people are trading worthless pieces of code as if they are worth something. The whole market is completely irrational.

sol

  • Walrus Stache
  • *******
  • Posts: 7467
  • Age: 41
  • Location: Pacific Northwest
Re: Is it too late [bitcoin]?
« Reply #610 on: January 07, 2018, 07:57:36 AM »
Doesn't the former celebrate the idea that we're not smarter than the market, whereas the latter celebrates the idea that we are smarter than the market?

Of course it does.  I'm also smarter than my local craigslist market, but not the global stock market.  Know your competition.

ChpBstrd

  • Handlebar Stache
  • *****
  • Posts: 1136
Re: Is it too late [bitcoin]?
« Reply #611 on: January 07, 2018, 09:32:16 PM »
I don't care about bitcoin, but I wonder about this reasoning as applied to investing in the market in general.  We know that people tend to buy high and sell low, and more "irrational" people will pile into the market as they see the price peaking.

So why should we trust the stock market and congratulate ourselves on not worrying about irrational highs (see top is in thread), but in the bitcoin world we can "clearly" see that the market is overvalued and pride ourselves on staying out?

Doesn't the former celebrate the idea that we're not smarter than the market, whereas the latter celebrates the idea that we are smarter than the market?
This is a very smart point.

How do we know cryptocurrencies didn't actually increase in value/utility by thousands of percent in the past year or so? Market prices might simply reflect that change, right? The fact that it went up fast doesn't mean it didn't deserve to go up fast. For example, a company that puts in a couple quarters of 100% revenue gains, or locks in exclusive rights to a lucrative market like drug companies or commodities producers do, might see its stock skyrocket. We would observe these circumstances and say efficient markets were at work. Hence the crypto-thusiasts explaining to the naysayers that they just don't get the underlying rationale.

You can count me among the crypto-naysayers, but I do cringe a bit when past stock returns are used to extrapolate future portfolio performance or justify an AA. That is just as irrational as the people investing their life savings in cryptocurrencies because it's already gone up 5,000% and they just want the next 20%.

I've argued with folks who have the "never sell your stocks" perspective by asking them if there could ever be a price so outrageously high that they'd sell out. E.g. If the S&P rises 200% next year and P/Es were at like 100 would you sell? The response is often "that could never happen, markets are too efficient" but crypto-mania, like the dot-com mania before it, proves that defense false. It could happen. People are willing to chase past returns to the moon. If you don't have a plan to get out at a certain over-valuation, you'll be the one to lose at musical chairs.

To be clear, with stocks you are buying the expectation of owning future cash flows. Companies that quickly grew their cash flows in the past are expected to offer bigger cash flows in the future because they are doing something right. Oftentimes this assessment is correct. Bets on fast-rising but expensive companies like Microsoft, Intel, Facebook, Google, Apple, etc. have paid off handsomely. New investors look at the growing streams of cash flow and find a rational reason to buy shares from the old investors. The supply of investors interested in purchasing cash flows has always been vast.

With cryptocurrencies, you are buying the expectation that other people will pay you more for your coins than you paid, for whatever reason. Cryptocurrencies that have skyrocketed in the past couple years are expected to attract ever more speculators because speculators chase performance. However, since cryptocurrencies produce no cash flows, this game must end at the point when the supply of new speculators dries up. In theory, when "x" coin becomes the new standard world currency or whatever, demand will increase and each coin will be worth millions of dollars. This theory closely mirrors the rationale of goldbugs ("when the US dollar finally collapses, the price of gold is USD will skyrocket").

Both the goldbugs and the cryptothusiasts are betting on a specific scenario playing out that would make them comparatively wealthier. Stock investors are simply betting, for example, that the company's factories will continue producing X tons of product next year, which will be sold for about Y at a profit of about Z. Stocks, because they are priced based on expected cash flows, have a built in pressure release. If prices get too high, alternative sources of cash flow such as bonds become more attractive, which usually, but not always, pushes the price of stocks down. Greater-fool theory investing has no such pressure release, except in the case of gold the consumption of jewelry might be elastic with the price.




Cycling Stache

  • Bristles
  • ***
  • Posts: 466
  • Age: 42
Re: Is it too late [bitcoin]?
« Reply #612 on: January 08, 2018, 12:57:30 PM »
Doesn't the former celebrate the idea that we're not smarter than the market, whereas the latter celebrates the idea that we are smarter than the market?

Of course it does.  I'm also smarter than my local craigslist market, but not the global stock market.  Know your competition.

This is a facile response.  I expect better.

What is your information advantage with respect to the crypto market?  What do you know that makes you smarter than the market?

Who exactly are the irrational people buying up cryptos enough to drive the market price?  Do you know who the market is?  Surely, you've got something better than I heard from my uncle that his friend bought $20 worth kind of analysis.

I have all my money in VTSAX and the I fund (international index).  I believe those are smart investments.  But I don't know what 80% of the companies are, what they do, how they make money, or what their competitive advantage is.  I'm guessing you don't either.  And yet we take pride in making those investments automatically and regularly because we're "not smarter than the market."

So what do we know that the crypto market does not?  What is our information advantage?  It doesn't bother you when Bob at the sandwich shop buys stocks because he heard that just hit an all-time high, but it does when you read an article about someone buying crypto?  Of course, the increase in perceived crypto value seems ridiculous, but is it that much more ridiculous than the 30-40% increase in the stock market we've seen since Trump was elected, especially considering that the SP500 futures were down like 5% on election night when it looked like Trump might win?

Again, I don't have any crypto investments and I'm solidly MMM-certified with my all index fund portfolio (although I did pay off my house), but I think it's a fair question worth considering why we think we're smarter than some markets when one of the fundamental tenants of this board is that, generally, we (and everyone else) is not smarter than the market.

To be clear, I'm not looking for a rehash of the arguments against crypto.  I'm asking what our informational advantage is with respect to the crypto market that does not also apply to the stock market.

sol

  • Walrus Stache
  • *******
  • Posts: 7467
  • Age: 41
  • Location: Pacific Northwest
Re: Is it too late [bitcoin]?
« Reply #613 on: January 08, 2018, 01:14:38 PM »

waltworks

  • Magnum Stache
  • ******
  • Posts: 2856
Re: Is it too late [bitcoin]?
« Reply #614 on: January 08, 2018, 01:23:36 PM »
I think it's because there's an inherent difference between things with inherent value (ownership of a company or bond or commodity, or even a beanie baby) and things that have no inherent value and only a theoretical use right now.

I mean, dollars have a use case, are widely accepted and established, backed by the most powerful nation/military on earth - and I don't want them either! I only want enough to use to buy and sell things. Otherwise, I want to own stuff that has inherent value.

You can certainly overpay for a stock, and any given stock can go to zero. If you buy the whole market, though, you aren't worried about that because the entire market going to zero would probably coincide with some incredible catastrophe. Crypto currencies could drop to zero and a bunch of people would be angry - but the fallout would be pretty limited otherwise. So while I don't care about the possibility of VTSAX dropping to nothing when I make investment decisions, it's a huge concern if I'm going to buy crypto (or stock in a single company).

Stocks and bonds also have a long history. Crypto has essentially none. At some point there will probably be companies doing work with crypto and doing it well, and THOSE would be worth investing in, just like you can invest in a big banking corporation or a payment processor or any other financial firm.

-W

Cycling Stache

  • Bristles
  • ***
  • Posts: 466
  • Age: 42
Re: Is it too late [bitcoin]?
« Reply #615 on: January 08, 2018, 01:39:13 PM »
This is a facile response.

Yay!

I think we may have just had a Princess Bride moment.  I don't think that means what you think it means.

I think it's because there's an inherent difference between things with inherent value (ownership of a company or bond or commodity, or even a beanie baby) and things that have no inherent value and only a theoretical use right now.

I mean, dollars have a use case, are widely accepted and established, backed by the most powerful nation/military on earth - and I don't want them either! I only want enough to use to buy and sell things. Otherwise, I want to own stuff that has inherent value.

Again, I'd like to focus on what our informational advantage is, not what the pros and cons might be.  You might not hold dollars or gold (which arguably could work like crypto currency), but you would expect to receive whatever the market value is for them.  You don't pay $10,000 for an apple because dollars don't have inherent value.  You (probably) don't scoff at people who hold gold as 10% of their portfolio because there is some history to support it as a reasonable allocation, even though gold has no inherent value.

So why do we not mock the people who buy gold as 5-10% of their portfolio (even if we don't own it)?  Is it just because there's a history to support the valuation?  If so, then that's just one factor in setting the price, not a reason that it's really worthless.

I don't own crypto and I don't plan on owning crypto.  But there's a certain smugness of tone in the dismissive nature of a lot of these posts that caused me to wonder how good our analysis really is and why we think we know better than the market.  It mirrors almost exactly the dismissiveness in the "Top Is In" thread (and in which I've shared), but there celebrating that we're not smarter than the market.
« Last Edit: January 08, 2018, 01:43:40 PM by Cycling Stache »

runbikerun

  • Bristles
  • ***
  • Posts: 354
Re: Is it too late [bitcoin]?
« Reply #616 on: January 08, 2018, 02:00:06 PM »
I think there's a very big difference between "I'm not smarter than the market" and "I can beat the market". We index not because we believe the first, but because we believe the second.

An iced tea company trebled its stock price overnight by changing its name to include the word Blockchain and making vague noises about moving into blockchain tech. Am I smarter than the morons who bought at treble the company's earlier share price? Quite possibly. Can I beat the market? No.

There are plenty of things I'm happy to say I think the market has wrong. Uber is a catastrophic money bonfire that loses a billion dollars a year and collects lawsuits like Eddy Merckx collected victories, and it's valued at nearly fifty billion dollars. I'm pretty sure that's a disaster in the making and that it's going to collapse completely, but I'm not going to try to make money off that because I remember the most important rule: the market can remain irrational longer than I can remain solvent.


sol

  • Walrus Stache
  • *******
  • Posts: 7467
  • Age: 41
  • Location: Pacific Northwest
Re: Is it too late [bitcoin]?
« Reply #617 on: January 08, 2018, 02:01:46 PM »
This is a facile response.

Yay!

I think we may have just had a Princess Bride moment.  I don't think that means what you think it means.

Nay!

waltworks

  • Magnum Stache
  • ******
  • Posts: 2856
Re: Is it too late [bitcoin]?
« Reply #618 on: January 08, 2018, 02:15:36 PM »
Again, I'd like to focus on what our informational advantage is, not what the pros and cons might be.  You might not hold dollars or gold (which arguably could work like crypto currency), but you would expect to receive whatever the market value is for them.  You don't pay $10,000 for an apple because dollars don't have inherent value.  You (probably) don't scoff at people who hold gold as 10% of their portfolio because there is some history to support it as a reasonable allocation, even though gold has no inherent value.

So why do we not mock the people who buy gold as 5-10% of their portfolio (even if we don't own it)?  Is it just because there's a history to support the valuation?  If so, then that's just one factor in setting the price, not a reason that it's really worthless.

I don't own crypto and I don't plan on owning crypto.  But there's a certain smugness of tone in the dismissive nature of a lot of these posts that caused me to wonder how good our analysis really is and why we think we know better than the market.  It mirrors almost exactly the dismissiveness in the "Top Is In" thread (and in which I've shared), but there celebrating that we're not smarter than the market.

I'd happily pay $10k for an apple if that was the going price for apples (and such hyperinflation had also increased the value of my holdings commensurately). Dollars are just tokens. Who cares about dollars? If I need a hammer, I care about having a hammer. I don't stockpile any more than I plan to use. If bitcoins, or whatever, become widely used for exchange, then I'll happily use those if they work better than dollars - and I'll still hold onto as few as possible.

My point is this: it's doesn't require a special information advantage to say that MMM's newly created market for fingernail clippings is crazy, and that nobody should buy said clippings. The existence of a "market" for something doesn't inherently mean anything about whether putting money in is worthwhile.

We are judging the whole *universe* of crypto as (currently) inherently useless and valueless. We have lots of evidence that the "currencies" aren't being used as such in any meaningful way, and that lots of low-information people are buying the tokens not because they understand or plan to *use* the tokens, but because they want to sell them for more money later.

There's lots of history on these kinds of speculative manias. It's not hard to make that call.

-W

Cycling Stache

  • Bristles
  • ***
  • Posts: 466
  • Age: 42
Re: Is it too late [bitcoin]?
« Reply #619 on: January 08, 2018, 03:26:44 PM »
My point is this: it's doesn't require a special information advantage to say that MMM's newly created market for fingernail clippings is crazy, and that nobody should buy said clippings. The existence of a "market" for something doesn't inherently mean anything about whether putting money in is worthwhile.

VTSAX owns stock in 3,606 companies.  Do you know what the 2,800th biggest company is?  Do you know what they do?  Do you know what use there is for that company?  I couldn't even find a list of all the companies in VTSAX.  But I own stock in that 2,800th biggest company, and you probably do too. 

Why?  Because enough money has gone into the market for that company's shares to set a price for them, and you trust that market price even though you have no idea what that company is, what it does, or why it should be valued at whatever price it is. 

If bitcoin was traded by 12 people, each putting in $10, I'd agree with you.  That's an insufficient market.  But you haven't offered any evidence that bitcoin is currently an insufficient market.  Just that you don't think bitcoin makes sense.

So what is the difference in your analysis between bitcoin and the 2,800th biggest company in VTSAX?  That we have independently worked out that the bitcoin market got it all wrong, but that the market for the 2,800th biggest company in VTSAX is just right even though we know nothing about its business or anything else about it?

dougules

  • Handlebar Stache
  • *****
  • Posts: 1286
  • Location: AL
Re: Is it too late [bitcoin]?
« Reply #620 on: January 08, 2018, 03:46:58 PM »
My point is this: it's doesn't require a special information advantage to say that MMM's newly created market for fingernail clippings is crazy, and that nobody should buy said clippings. The existence of a "market" for something doesn't inherently mean anything about whether putting money in is worthwhile.

VTSAX owns stock in 3,606 companies.  Do you know what the 2,800th biggest company is?  Do you know what they do?  Do you know what use there is for that company?  I couldn't even find a list of all the companies in VTSAX.  But I own stock in that 2,800th biggest company, and you probably do too. 

Why?  Because enough money has gone into the market for that company's shares to set a price for them, and you trust that market price even though you have no idea what that company is, what it does, or why it should be valued at whatever price it is. 

If bitcoin was traded by 12 people, each putting in $10, I'd agree with you.  That's an insufficient market.  But you haven't offered any evidence that bitcoin is currently an insufficient market.  Just that you don't think bitcoin makes sense.

So what is the difference in your analysis between bitcoin and the 2,800th biggest company in VTSAX?  That we have independently worked out that the bitcoin market got it all wrong, but that the market for the 2,800th biggest company in VTSAX is just right even though we know nothing about its business or anything else about it?

The 2800th biggest company in VTSAX is either making an actual profit or is expected to at some point.  Bitcoin makes nothing.  There is no profit and never will be. 

waltworks

  • Magnum Stache
  • ******
  • Posts: 2856
Re: Is it too late [bitcoin]?
« Reply #621 on: January 08, 2018, 04:25:57 PM »
My point is this: it's doesn't require a special information advantage to say that MMM's newly created market for fingernail clippings is crazy, and that nobody should buy said clippings. The existence of a "market" for something doesn't inherently mean anything about whether putting money in is worthwhile.

VTSAX owns stock in 3,606 companies.  Do you know what the 2,800th biggest company is?  Do you know what they do?  Do you know what use there is for that company?  I couldn't even find a list of all the companies in VTSAX.  But I own stock in that 2,800th biggest company, and you probably do too. 

Why?  Because enough money has gone into the market for that company's shares to set a price for them, and you trust that market price even though you have no idea what that company is, what it does, or why it should be valued at whatever price it is. 

You need to explain why this doesn't apply to the 90's Beanie Baby "market", or the Dutch tulip "market".  Would you invest in those, on the theory that you're not smarter than the "market"?

VTSAX (or the global world of stocks generally) has a HUGE diversity of companies, most of which are profitable, listing their shares under government (SEC) oversight. They can't lie/cheat/steal from their shareholders (usually) without severe consequences. It's *many* orders of magnitude larger than the BTC market, and it is connected to basically everything every human on earth does daily. Knowing what the 2800th largest company does is irrelevant unless you're trying to pick individual stocks. There's a long, long history to look at when deciding to invest (or not).

Moreover, there's tons of statistical evidence to show us that it's almost impossible to beat the stock market. It might be that in some number of years the same is true of the crypto world, but as of right now, it's certainly not.

They're not even vaguely comparable.

-W

maizeman

  • Magnum Stache
  • ******
  • Posts: 2998
Re: Is it too late [bitcoin]?
« Reply #622 on: January 08, 2018, 04:44:48 PM »
Well this gets a bit into the natural of probability.

Let's say that there is a 1% chance that an apple might be worth $1M on February 1st. That would give it an expected value of $10,000 today ($1M * 0.01). Even if that were that case, I wouldn't be running around trying to snap up apples for six or seven thousand dollars, because I'm comfortable with my FIRE plan and don't feel the need to indulge super high risk investments where I'm not sure if the expected value is more or less than the current asking price.

Now let's say on February 2nd, the sun comes up, and apples are still worth what they've always been ($0.30-$1 or roughly $1-$3/lb). Does that make people who decided they were willing to make the extremely high risk gamble and pay $5k for an apple because it had an expected value of $10k irrational? As long as they realized it was an extremely high risk gamble, no, I would argue it doesn't necessarily make them irrational.

I think I am not smarter than the crypocurrency market to the extent that, while I have absolutely no desire to buy into it as a high stakes lottery ticket where I have no way of confidently knowing if the expected value is more or less than the current selling price, I also wouldn't want to be in the position having shorted the market (which is what a lot of folks are trying to figure out how to do over in the "how to profit off of the bubble" thread). I would even argue it is much easier for mostly intelligent rational people to get burned on investments where 99% of the time you make a modest profit and 1% of the time* you lose your shirt (shorting cypto) than the opposite (buying crypto which in an ideal world everyone would understand is an extremely high risk gamble).

I also would not have felt comfortable short selling tulips or beanie babies without the benefit of future knowledge.

*I'm using one percent because it's simple to type. Please feel free to substitute any probability between 10% and 0.0000000000000001% depending on your own assessments of the probability a given crypocurrency actually becomes widely used as a payment network.

Indexer

  • Handlebar Stache
  • *****
  • Posts: 1211
Re: Is it too late [bitcoin]?
« Reply #623 on: January 08, 2018, 05:08:08 PM »
Quote
VTSAX owns stock in 3,606 companies.  Do you know what the 2,800th biggest company is?  Do you know what they do?  Do you know what use there is for that company?  I couldn't even find a list of all the companies in VTSAX.  But I own stock in that 2,800th biggest company, and you probably do too. 

For starters I agree with everything waltworks and dougules have said. Comparing bitcoin to the 2800th largest doesn't make any sense.

That said, the holdings of VTSAX are available online. The 2800th largest holding as of 11/30/2017 was Universal Stainless & Alloy Products Inc(USAP). Their market cap is 159 million. Here is a link to their annual report: http://www.annualreports.com/HostedData/AnnualReports/PDF/NASDAQ_USAP_2016.pdf

That company has assets, 2016 revenues were 154 million, and it's been around since 1994. That company could fail. Luckily, it's lumped together with over 3600 different stocks.

Bitcoin doesn't make anything. There are no revenues or assets. It's a piece of code. It's intrinsic value is zero. It has far more in common with tulips than any stock, including USAP.

Yes, I can say a market trading something with zero intrinsic value is irrational, and I'm not going to participate in that market.

phil22

  • Stubble
  • **
  • Posts: 144
  • "This quote is very memorable." -Randall Munroe
Re: Is it too late [bitcoin]?
« Reply #624 on: January 08, 2018, 05:34:07 PM »
Quote
VTSAX owns stock in 3,606 companies.  Do you know what the 2,800th biggest company is?  Do you know what they do?  Do you know what use there is for that company?  I couldn't even find a list of all the companies in VTSAX.  But I own stock in that 2,800th biggest company, and you probably do too. 

For starters I agree with everything waltworks and dougules have said. Comparing bitcoin to the 2800th largest doesn't make any sense.

That said, the holdings of VTSAX are available online. The 2800th largest holding as of 11/30/2017 was Universal Stainless & Alloy Products Inc(USAP). Their market cap is 159 million. Here is a link to their annual report: http://www.annualreports.com/HostedData/AnnualReports/PDF/NASDAQ_USAP_2016.pdf

That company has assets, 2016 revenues were 154 million, and it's been around since 1994. That company could fail. Luckily, it's lumped together with over 3600 different stocks.

Bitcoin doesn't make anything. There are no revenues or assets. It's a piece of code. It's intrinsic value is zero. It has far more in common with tulips than any stock, including USAP.

Yes, I can say a market trading something with zero intrinsic value is irrational, and I'm not going to participate in that market.

there are thousands if not millions of cryptocurrencies that actually are just code.  you haven't heard of 99.99% of them, nobody uses them or cares about them, and therefore they are worthless.

bitcoin is not just code.  there are millions of bitcoin users and owners around the world, and the most powerful network of computers ever assembled running 24/7 keeping bitcoin transactions running and keeping them secure.  it's a global community of people with a shared belief physically doing things to keep bitcoin running.

you may not agree with them or think bitcoin is going to 0 quicker than they do, and that's fine, but bitcoin is not just code.

maizeman

  • Magnum Stache
  • ******
  • Posts: 2998
Re: Is it too late [bitcoin]?
« Reply #625 on: January 08, 2018, 06:00:58 PM »
We started out with the interesting question of whether cryptocurrency prices are subject to the efficient market hypothesis. Somehow this degenerated into the rehashed to death argument over whether or not cryptocurrencies are stocks. Bitcoin is not a stock. Monero is not a stock. PizzaCoin is not a stock. However, this observation doesn't help us get at the answer to the original question, because stocks are not the only things which have efficient markets.

Currency exchange rates (which is what bitcoin and other crypocurrencies are trying to be) are subject to the efficient market hypothesis. Modern currencies have no intrinsic value. They provide no direct return. The fact that currency exchange rates are governed by efficient markets does not mean that there is an economic argument for you to buy a cap weighted index funds of the world's biggest currencies. Yet despite all of those statements, still the markets are efficient.

Now maybe you reject the idea that bitcoin is a currency. The next best analogy still isn't a stock, it's a commodity. This is a less perfect analogy, since most (though I'm not sure all) commodities do have some intrinsic value/use. Still porkbelly markets are subject to the efficient market hypothesis. Frozen orange juice futures are subject to the efficient market hypothesis. If I saw that the price of porkbellies had gone up 1,600% in one year, I'd be shocked. But I won't go out and short sell porkbellies.

A good test for whether or not markets are efficient is to ask the question "Is there a risk free way to make free money?" If the answer is yes, the market is inefficient (but if you take advantage of that opportunity you'll bring it closer to efficiency). If the answer is no, you've failed to disprove the hypothesis that the market is inefficient. And repeatedly failing to disprove a hypothesis is the closest anyone can come to proving something.

Now let's say you think the bitcoin market isn't efficient and the price of a bitcoin today is a lot higher than the "real" expected value of a bitcoin. There's a wonderful mechanism in place to take advantage of that fact. The rational response to being absolutely sure that bitcoin prices are above their real expected value is to go out and sell bitcoin futures, get paid about what people are willing to pay for the coin today, and then when the price crashes, given them back a worthless string of ones and zeros. If you and enough people like you come to the same conclusion, and are willing to sell enough futures at low enough prices, eventually the price will drop to whatever the "real" value of a bitcoin is, even if that value is zero and the market will have become efficient. Markets are fun like that.

maizeman

  • Magnum Stache
  • ******
  • Posts: 2998
Re: Is it too late [bitcoin]?
« Reply #626 on: January 08, 2018, 06:38:04 PM »
We started out with the interesting question of whether cryptocurrency prices are subject to the efficient market hypothesis. Somehow this degenerated into the rehashed to death argument over whether or not cryptocurrencies are stocks. Bitcoin is not a stock. Monero is not a stock. PizzaCoin is not a stock. However, this observation doesn't help us get at the answer to the original question, because stocks are not the only things which have efficient markets.

I think the question is: are peoples' perceptions of the marginal utility of cryptos rational?


No, that's a different question from the one we were talking about.

lifeanon269

  • Bristles
  • ***
  • Posts: 337
Re: Is it too late [bitcoin]?
« Reply #627 on: January 08, 2018, 06:57:03 PM »
VTSAX owns stock in 3,606 companies.  Do you know what the 2,800th biggest company is?  Do you know what they do?  Do you know what use there is for that company?  I couldn't even find a list of all the companies in VTSAX.  But I own stock in that 2,800th biggest company, and you probably do too. 

Thank you Cycling Stache. You've made some excellent points. You bring up a lot of good counter points to those that espouse the benefits of index stock investing while condemning investing of any kind into crypto-currencies.

Earlier in another post I mentioned that it isn't a bad idea to put just 1% of your portfolio into bitcoin since, for the most part, it is a non-correlated asset. I am a big advocate of index investing, but while I suggested a 1% allocation for Bitcoin, it was criticized by those who say that index investing is the only viable investment choice.

It is often the argument, that being profit driven businesses, they provide dividends and grow as a business becoming more valuable in the future. The criticism against Bitcoin is that it has no "intrinsic" value (which I disagree with) and does not generate revenue of any kind. However, businesses only generate profit if the business that they are in is a demanded business. If a business does not generate profit, then there are no dividends given to investors. Furthermore, obviously not every business succeeds. Given a lack of demand for a company's product, the company can decline dramatically, go bankrupt, etc. Many companies have come and gone within the S&P 500 index. Everyone that promotes index investing has no idea of the actual valuations, earnings, future productivity, competition, debt, assets, etc of all of the companies within the index.

If the critique against Bitcoin is the fact that it isn't a revenue generating company, and the main path promoted for investing in revenue generating companies is to do so through index investing, then to take that logic further, one must be willing to advocate for investing in railroads, luxury goods, retail, software, airlines, publishing, insurance, aerospace, apparel, semiconductors, banking, restaurants, and all manner of markets that exist within the index. Much of these markets themselves have no "intrinsic" value to the human race as well. If you can't make a case for investing in the future of each one of those markets individually, then the argument for indexing becomes less about the fact that you're investing in revenue producing companies in those markets and more about the fact that you're divesifying your investment across a large number of those markets such that your exposure to each one is limited.

So if you can't make the case for specifically investing in the future of railroads or any other individual market that exists in the S&P 500, but you do advocate for investing in it at a miniscule amount (say 1% or less), then how can one criticize the choice to put 1% in a crypto-currency? As I said, this isn't about the revenue producing aspects of a company as, absent profits, there are no dividends for investors. It then comes down to whether or not you feel that the future railroads market has a brighter future than the Bitcoin market. Insert whatever S&P 500 market you'd like in for railroads and I'm sure you could come across something that you don't fully understand or something that would likely have a questionable future. Yet, buy index investing, you're buying into that. Combine this with the fact that you could potentially be investing in some very questionable markets during times where their valuations are extremely high, and you'd probably find yourself some very risky investments being made (albeit at small percentages <1%) within your index. Yet we're OK with that simply because of the fact that it only makes up a small percentage of our portfolio.

The point about not being smarter than the market or not trying to beat the market simply comes from the diversification that indexing provides. It isn't that indexing provides us deep insight to the stock market that allows us to feel like expert investors.

So again, promoting investing into potentially declining markets through indexing (even though diversified) allows one to criticize someone who chooses to invest an equally diversified portion of their portfolio (1% or less) into cryptocurrencies? The Bitcoin market is larger than most S&P 500 companies. If we can't individually make the case for investing directly into each and every one of the companies within the S&P 500 index, then how can you make the case for or against investing in a market the size of Bitcoin, especially if you don't fully understand that market? The argument seems pretty arbitrary otherwise as to what we're OK with investing via an index.

Personally, I know more about the crypto-currency market and the technologies within it than I do about any given market that exists within the S&P 500 index. I am a big proponent of index investing, but I allow myself to extend my diversification beyond what the S&P 500 index provides because of how closely I follow what is going on in the Bitcoin space and the fact that I actively participate in the technology of it. Bitcoin may not replace fiat currencies in our lifetime, but I believe that there is a large enough following and large enough demand for it that it will not go to $0 any time soon. Much to the same extent that open-source Linux is not a common desktop choice for every day users in their home, there is still a large enough niche market for it to continue to exist and evolve for personal desktops.

Cycling Stache, I know this is one step further than the argument you're making, but I thought I'd add in and go a little bit further with the points you were making. Good discussion none-the-less.

maizeman

  • Magnum Stache
  • ******
  • Posts: 2998
Re: Is it too late [bitcoin]?
« Reply #628 on: January 08, 2018, 07:22:51 PM »
You can have efficient markets for items with no intrinsic value.

You can have non-efficient markets for items with intrinsic value.

So whether or not something has intrinsic value doesn't tell you whether the market for it is efficient, and whether or not the market for something is efficient doesn't tell you whether or not it has intrinsic value.

maizeman

  • Magnum Stache
  • ******
  • Posts: 2998
Re: Is it too late [bitcoin]?
« Reply #629 on: January 08, 2018, 08:59:43 PM »
Because it was interesting to think of examples of all four pairwise combinations:

Inherent value, efficient market: US stock market.

No inherent value, efficient market: Euro denominated price for dollars.

Inherent value, non-efficient market: Used textbooks. (Source: https://www.npr.org/sections/money/2014/11/10/363103753/textbook-arbitrage-making-money-off-used-books)

No* inherent value, non-efficient market: diamond engagement rings.

*Well negligible compared to sale prices.

PDXTabs

  • Pencil Stache
  • ****
  • Posts: 695
  • Age: 35
  • Location: Vancouver, WA, USA
Re: Is it too late [bitcoin]?
« Reply #630 on: January 08, 2018, 09:08:52 PM »
Bitcoin doesn't make anything. There are no revenues or assets. It's a piece of code. It's intrinsic value is zero. It has far more in common with tulips than any stock, including USAP.

Windows is just code, does that mean that it has no intrinsic value?*

Do cryptographic primitives have intrinsic value when they are used to secure your credit card number during online transactions? Because cryptographic primates are just code.

* - I'm fine if you say yes, I hate Windows, but a bunch of MSFT shareholders would disagree.

EDIT - I have no idea how to correctly value BTC or ETH, but that doesn't mean that it has no intrinsic value, it just means that I don't know how to measure it.
« Last Edit: January 08, 2018, 09:11:33 PM by PDXTabs »

Indexer

  • Handlebar Stache
  • *****
  • Posts: 1211
Re: Is it too late [bitcoin]?
« Reply #631 on: January 09, 2018, 04:30:08 AM »
Bitcoin doesn't make anything. There are no revenues or assets. It's a piece of code. It's intrinsic value is zero. It has far more in common with tulips than any stock, including USAP.

Windows is just code, does that mean that it has no intrinsic value?*

Do cryptographic primitives have intrinsic value when they are used to secure your credit card number during online transactions? Because cryptographic primates are just code.

* - I'm fine if you say yes, I hate Windows, but a bunch of MSFT shareholders would disagree.

EDIT - I have no idea how to correctly value BTC or ETH, but that doesn't mean that it has no intrinsic value, it just means that I don't know how to measure it.

Intrinsic value = what's left over if no one is willing to buy it from you. In the case of Windows the ability to use it would be it's intrinsic value. Stocks have dividends and voting power. Bonds have income. Your home providers shelter. Tulips can be eaten. What is a bitcoin worth if no one wanted to buy it from you? What can you do with it that makes it valuable even if the market decided it wasn't valuable? Zero, right?

Currency exchange rates (which is what bitcoin and other crypocurrencies are trying to be) are subject to the efficient market hypothesis. Modern currencies have no intrinsic value. They provide no direct return.

Do modern currencies have intrinsic value? What is a dollar worth if no one wants to trade it with you? Zero right? Hmm... Dollars are legal tender for all debts, public and private. I have a mortgage and the bank is legally required to accept dollars. For me, dollars have an intrinsic value related to keeping my home. This logic applies to anyone with dollar denominated debt. Yes, that value will be different for each entity, but it creates long lasting demand for dollars.

bitcoin is not just code. 

I didn't say it was just code. I said, "It's a piece of code. It's intrinsic value is zero." The second sentence is the important one.  The fact that people mine it doesn't give it value. It's utility should give it value and that value should justify mining it. Right? How much is it actually being used to buy things? That would be it's utility, correct? Right now it's all speculation, just like the tulips.
« Last Edit: January 09, 2018, 04:34:53 AM by Indexer »

maizeman

  • Magnum Stache
  • ******
  • Posts: 2998
Re: Is it too late [bitcoin]?
« Reply #632 on: January 09, 2018, 06:26:45 AM »
Currency exchange rates (which is what bitcoin and other crypocurrencies are trying to be) are subject to the efficient market hypothesis. Modern currencies have no intrinsic value. They provide no direct return.

Do modern currencies have intrinsic value? What is a dollar worth if no one wants to trade it with you? Zero right? Hmm... Dollars are legal tender for all debts, public and private. I have a mortgage and the bank is legally required to accept dollars. For me, dollars have an intrinsic value related to keeping my home. This logic applies to anyone with dollar denominated debt. Yes, that value will be different for each entity, but it creates long lasting demand for dollars.

What you're describing, the dollar having value specifically because you can use it to pay your mortgage/property tax bill, is a great example of extrinsic value, in that its value is entirely dependent on other people being willing to accept it in return for goods and services (such as accepting it in return for not evicting you from your home). Whether they're now locked into a contract which requires them to continue to accept dollars until the end of a mortgage is essentially just a way of time shifting that willingness to accept dollars from when you signed your mortgage payment to a bunch of time points over the next 15 or 30 years. Note, I'm not disagreeing with the observation that the fact that lots of people has USD denominated mortgages means that there will be demand for USD for some time to come, only that this is not what intrinsic value means.

But if we're talking about the basket of things called "modern currencies" we shouldn't just talk about the dollar. The dollar is one of the most successful, most stable currencies in the world today, and also happens to be the native currency for either a majority or plurality of forum members. Perhaps the most striking example of how the value of modern currencies is extrinsic rather than intrinsic comes from the 2016 demonetization in india, where their prime minister announced that, overnight, all existing 500 and 1,000 rupee notes were no longer legal tender for all debts public and private (link). When that external source of value was removed, the old currency rapidly became worthless.

worldtraveler

  • 5 O'Clock Shadow
  • *
  • Posts: 20
Re: Is it too late [bitcoin]?
« Reply #633 on: January 09, 2018, 06:56:42 AM »
https://www.zerohedge.com/news/2018-01-09/jamie-dimon-i-regret-calling-bitcoin-fraud

Less than four months after Jamie Dimon lashed out at bitcoin, warning that it was would "eventually blow up" because it was "worse than tulip bulbs" and that "any trader trading bitcoin" will be "fired for being stupid", the JPMorgan CEO said he "regrets" his infamous criticism of bitcoin, in which he called the cryptocurrency a "fraud."

In an interview with FOX Business' Maria Bartiromo, Dimon repented, softening the comments he made in a September banking conference, saying "I regret making them."

While Dimon said that he personally is still "not interested in the subject at all" he conceded that blockchain "is real." Dimon also softened his tone on initial coin offerings, saying that ICOs need to be reviewed “individually”.

"The blockchain is real. You can have crypto yen and dollars and stuff like that. ICO's you have to look at individually", Dimon told Bartiromo.

"The bitcoin to me was always what the governments are gonna feel about bitcoin as it gets really big, and I just have a different opinion than other people. I'm not interested that much in the subject at all."

PDXTabs

  • Pencil Stache
  • ****
  • Posts: 695
  • Age: 35
  • Location: Vancouver, WA, USA
Re: Is it too late [bitcoin]?
« Reply #634 on: January 09, 2018, 08:58:39 AM »
Bitcoin doesn't make anything. There are no revenues or assets. It's a piece of code. It's intrinsic value is zero. It has far more in common with tulips than any stock, including USAP.

Windows is just code, does that mean that it has no intrinsic value?*

Do cryptographic primitives have intrinsic value when they are used to secure your credit card number during online transactions? Because cryptographic primates are just code.

* - I'm fine if you say yes, I hate Windows, but a bunch of MSFT shareholders would disagree.

EDIT - I have no idea how to correctly value BTC or ETH, but that doesn't mean that it has no intrinsic value, it just means that I don't know how to measure it.

Intrinsic value = what's left over if no one is willing to buy it from you. In the case of Windows the ability to use it would be it's intrinsic value. Stocks have dividends and voting power. Bonds have income. Your home providers shelter. Tulips can be eaten. What is a bitcoin worth if no one wanted to buy it from you? What can you do with it that makes it valuable even if the market decided it wasn't valuable? Zero, right?

I think that the intrinsic value of a BTC is that it lets you make a cryptographically secure yet public transaction across geographic and political boundaries in the block-chain with a network of thousands of nodes. So yes, if no one else is using it, it has no intrinsic value. But that is also true of say, the internet. What's the intrinsic value of the internet if tomorrow everyone except for you stopped using it? It would cease to exist in the way that we understand it today, and lose all value.

I'm fascinated with this whole train of thought. For example, Linux is free, but it is estimated that it would have taken $19B in 2012 to recreate just one distro. What is the monetary value of Windows if Linux (and FreeBSD, and OpenBSD, etc) are free? Whatever someone will pay for it.

Additionally, I would add that BTC may become the AmigaOS of cryptocurrencies. AmigaOS used to have a lot of value, but as people have transitioned to other (newer, better) hardware and software, its value is almost zero.
« Last Edit: January 09, 2018, 09:03:15 AM by PDXTabs »

brooklynguy

  • Handlebar Stache
  • *****
  • Posts: 2204
  • Age: 38
Re: Is it too late [bitcoin]?
« Reply #635 on: January 09, 2018, 09:59:01 AM »
What you're describing, the dollar having value specifically because you can use it to pay your mortgage/property tax bill, is a great example of extrinsic value, in that its value is entirely dependent on other people being willing to accept it in return for goods and services (such as accepting it in return for not evicting you from your home).

It's worth noting that many items with ostensible intrinsic value are entirely dependent on other people's willingness to recognize human-created fictions.  A share of stock, which you've classified as having intrinsic value (correctly, according to the generally accepted meaning of "intrinsic value" in this context), is, after all, nothing more than fractional ownership of a corporation, which is a legal fiction that does not actually exist.  Its value (and the value of many of the underlying components from which its value derives) is entirely dependent on other people's willingness to recognize and uphold such fictions (unlike some of the other items you cited as having intrinsic value, such as pork bellies and frozen orange juice, which can both be consumed and therefore provide utility in objective reality whether or not anyone else believes in their existence).

Note that I'm not disagreeing with anything you've stated regarding intrinsic/extrinsic value or efficient markets (all of which I do agree with).  I'm just noting that it's possible to drill down even further on the "inherentness" of something's value than what you've described (which aligns with the generally accepted meaning of "intrinsic value" in this context).

You could argue that a pork belly has more inherent value than a share of stock in a corporation that owns nothing but pork bellies, which in turn has more inherent value than a share of stock in a corporation that owns nothing but pork belly futures.

maizeman

  • Magnum Stache
  • ******
  • Posts: 2998
Re: Is it too late [bitcoin]?
« Reply #636 on: January 09, 2018, 10:32:09 AM »
What you're describing, the dollar having value specifically because you can use it to pay your mortgage/property tax bill, is a great example of extrinsic value, in that its value is entirely dependent on other people being willing to accept it in return for goods and services (such as accepting it in return for not evicting you from your home).

It's worth noting that many items with ostensible intrinsic value are entirely dependent on other people's willingness to recognize human-created fictions.  A share of stock, which you've classified as having intrinsic value (correctly, according to the generally accepted meaning of "intrinsic value" in this context), is, after all, nothing more than fractional ownership of a corporation, which is a legal fiction that does not actually exist.  Its value (and the value of many of the underlying components from which its value derives) is entirely dependent on other people's willingness to recognize and uphold such fictions (unlike some of the other items you cited as having intrinsic value, such as pork bellies and frozen orange juice, which can both be consumed and therefore provide utility in objective reality whether or not anyone else believes in their existence).

Note that I'm not disagreeing with anything you've stated regarding intrinsic/extrinsic value or efficient markets (all of which I do agree with).  I'm just noting that it's possible to drill down even further on the "inherentness" of something's value than what you've described (which aligns with the generally accepted meaning of "intrinsic value" in this context).

You could argue that a pork belly has more inherent value than a share of stock in a corporation that owns nothing but pork bellies, which in turn has more inherent value than a share of stock in a corporation that owns nothing but pork belly futures.

That's a very good point that there isn't a bright line between having inherent/intrinsic value and not. While the line I was using between intrinsic/extrinsic value is: "If no one wanted to buy/trade for the item, is there still a benefit to having it" it is important to also think about all the other aspects of "value", like a share of stock representing ownership in a corporation, or the existence of corporations themselves which also exist only because we've all agreed as a society to act like they exist.

That's part of what's been fascinating for me to watch in the discussions about crypocurrency on these different threads. A lot of the terrible qualitative* flaws/weaknesses people bring up with cryptocurrencies also apply to lots of other things we take for granted in the modern world, but it seems like a lot of people are really don't like the idea of how much of our day to day lives are based on useful fictions... on both sides of the debate, since I see both people arguing that bitcoins or ether or whatever have intrinsic value and people arguing that all nationally backed currencies have value, while non-nationally backed currencies do not.

*I want to make sure I acknowledge that are also lots of quantitative flaws in current cryptocurrencies (like volatility, number of places that accept them as payment (small), cost of using them as payment (unworkably expensive at the moment, at least for bitcoin), inflation/deflation trends, etc) that set them apart from most of the other useful fictions we employ in our day to day lives.

ChpBstrd

  • Handlebar Stache
  • *****
  • Posts: 1136
Re: Is it too late [bitcoin]?
« Reply #637 on: January 09, 2018, 02:30:41 PM »
Did we just hit peak cryptomania? Wonder how many Kodak insiders will be selling now that the stock doubled?

https://finance.yahoo.com/news/kodak-creating-kodakcoin-own-cryptocurrency-181422100.html

thenextguy

  • Stubble
  • **
  • Posts: 200
Re: Is it too late [bitcoin]?
« Reply #638 on: January 09, 2018, 02:40:40 PM »
Did we just hit peak cryptomania? Wonder how many Kodak insiders will be selling now that the stock doubled?

https://finance.yahoo.com/news/kodak-creating-kodakcoin-own-cryptocurrency-181422100.html

I would be interested in hearing from those who say stock markets are efficient.

Optimiser

  • Pencil Stache
  • ****
  • Posts: 539
  • Age: 35
  • Location: PNW
Re: Is it too late [bitcoin]?
« Reply #639 on: January 09, 2018, 03:27:50 PM »
Did we just hit peak cryptomania? Wonder how many Kodak insiders will be selling now that the stock doubled?

https://finance.yahoo.com/news/kodak-creating-kodakcoin-own-cryptocurrency-181422100.html

http://www.zdnet.com/article/kodak-announces-the-kodakcoin-blockchain-cryptocurrency/

I have no idea how this will affect Kodak's profitability, but it is an interesting use of blockchain technology.

JAYSLOL

  • Pencil Stache
  • ****
  • Posts: 968
Re: Is it too late [bitcoin]?
« Reply #640 on: January 09, 2018, 03:34:34 PM »
Bitcoin doesn't make anything. There are no revenues or assets. It's a piece of code. It's intrinsic value is zero. It has far more in common with tulips than any stock, including USAP.

Windows is just code, does that mean that it has no intrinsic value?*

Do cryptographic primitives have intrinsic value when they are used to secure your credit card number during online transactions? Because cryptographic primates are just code.

* - I'm fine if you say yes, I hate Windows, but a bunch of MSFT shareholders would disagree.

EDIT - I have no idea how to correctly value BTC or ETH, but that doesn't mean that it has no intrinsic value, it just means that I don't know how to measure it.

Windows is not open-source.  It is a copyrighted piece of software that can produce an income if used for certain functions.  What can you do with a bitcoin other than trade or spend it?  I don't own blockchain tech by buying a bitcoin, what can I do with a bitcoin that creates anything or performs a function worth anything? 

PDXTabs

  • Pencil Stache
  • ****
  • Posts: 695
  • Age: 35
  • Location: Vancouver, WA, USA
Re: Is it too late [bitcoin]?
« Reply #641 on: January 09, 2018, 04:30:32 PM »
Bitcoin doesn't make anything. There are no revenues or assets. It's a piece of code. It's intrinsic value is zero. It has far more in common with tulips than any stock, including USAP.

Windows is just code, does that mean that it has no intrinsic value?*

Do cryptographic primitives have intrinsic value when they are used to secure your credit card number during online transactions? Because cryptographic primates are just code.

* - I'm fine if you say yes, I hate Windows, but a bunch of MSFT shareholders would disagree.

EDIT - I have no idea how to correctly value BTC or ETH, but that doesn't mean that it has no intrinsic value, it just means that I don't know how to measure it.

Windows is not open-source.  It is a copyrighted piece of software that can produce an income if used for certain functions.  What can you do with a bitcoin other than trade or spend it?  I don't own blockchain tech by buying a bitcoin, what can I do with a bitcoin that creates anything or performs a function worth anything?

Well, you can "produce an income if used for certain functions," for example, trade. Saying that the bitcoin network has no intrinsic value is like saying that PayPal or VISA have no intrinsic value.*

* - note: I purchased exactly 1.0 BTC in order to facilitate online commerce from the UK and Australia with businesses that either offered large discounts for orders in BTC or refused to take anything except BTC.

JAYSLOL

  • Pencil Stache
  • ****
  • Posts: 968
Re: Is it too late [bitcoin]?
« Reply #642 on: January 09, 2018, 07:02:55 PM »
Bitcoin doesn't make anything. There are no revenues or assets. It's a piece of code. It's intrinsic value is zero. It has far more in common with tulips than any stock, including USAP.

Windows is just code, does that mean that it has no intrinsic value?*

Do cryptographic primitives have intrinsic value when they are used to secure your credit card number during online transactions? Because cryptographic primates are just code.

* - I'm fine if you say yes, I hate Windows, but a bunch of MSFT shareholders would disagree.

EDIT - I have no idea how to correctly value BTC or ETH, but that doesn't mean that it has no intrinsic value, it just means that I don't know how to measure it.

Windows is not open-source.  It is a copyrighted piece of software that can produce an income if used for certain functions.  What can you do with a bitcoin other than trade or spend it?  I don't own blockchain tech by buying a bitcoin, what can I do with a bitcoin that creates anything or performs a function worth anything?

Well, you can "produce an income if used for certain functions," for example, trade. Saying that the bitcoin network has no intrinsic value is like saying that PayPal or VISA have no intrinsic value.*

* - note: I purchased exactly 1.0 BTC in order to facilitate online commerce from the UK and Australia with businesses that either offered large discounts for orders in BTC or refused to take anything except BTC.

I'm saying other than trade, Bitcoin and the Blockchain can't be used to produce anything.  Obviously anyone can buy and sell literally anything, tangible or intangible, physical or virtual and "make money" as long as you sell it at a higher price, as MMM highlighted by offering his fingernail clippings at bargain prices.  We could even buy and sell digital fingernail futures and "make money".  But if i buy Windows, I can make a profit using it (to do correspondence, build a website, write an app, create graphic art, produce advertising, or even mine bitcoin) without selling it.  I don't use up my Windows in the process of making a profit, so its not comparable to an open source piece of software that facilitates trade in a currency. 

MustacheAndaHalf

  • Handlebar Stache
  • *****
  • Posts: 1352
Re: Is it too late [bitcoin]?
« Reply #643 on: January 09, 2018, 07:48:41 PM »
Kodak is going to make bitcoin miners and create it's own alt coin.  Kodak has nothing to do with Bitcoin, and it's stock soared.  I'd say it's too late for Bitcoin.
http://www.bbc.com/news/technology-42630136

maizeman

  • Magnum Stache
  • ******
  • Posts: 2998
Re: Is it too late [bitcoin]?
« Reply #644 on: January 09, 2018, 09:12:19 PM »
Visa and Paypal do more than just transfer value from buyer to seller.  They can reverse the payment, too. ...

Sorta makes you wonder why the foreign merchants offered such large discounts for BTC or refused to except anything else...

I mean based solely on the information in your post, I'm going to go out on a limb and guess: Because it cut down on their losses from chargeback fraud?

If we go outside of information in your post, I'd guess the actual reason is that dealing with US credit cards can be a pain for small companies in other countries and because of horror stories about what can go wrong with paypal merchant accounts, particularly if you have a sudden uptick in business, which tend to scare off people who are just starting out in new business ventures.

https://www.reddit.com/r/paypal/comments/6lhxme/what_happens_when_you_pay_paypal_15k_in_fees/

PDXTabs

  • Pencil Stache
  • ****
  • Posts: 695
  • Age: 35
  • Location: Vancouver, WA, USA
Re: Is it too late [bitcoin]?
« Reply #645 on: January 09, 2018, 09:32:42 PM »
Visa and Paypal do more than just transfer value from buyer to seller.  They can reverse the payment, too.

What is your recourse if merchants in UK and Australia don't deliver as promised?

Sorta makes you wonder why the foreign merchants offered such large discounts for BTC or refused to except anything else...

Very true. I'll give you a hint: there are products (including some microscopic organisms such as Necator Americanus) that are legal in most countries but are a violation of the terms of service of PayPal and/or VISA. If you deal in these legal products, how are you supposed to take payments from foreign soil? Have you ever dealt with cross border checks?

Also, there are web hosting companies that are willing to accept cryptocurrency for payment. Imagine if you are a political dissident in a hostile country that can now pay for overseas hosting (and VPN services) with an anonymous cryptocurrency like Monero. In fact, here is the list of providers that accept Monero.

« Last Edit: January 10, 2018, 09:52:31 AM by PDXTabs »

mubington

  • 5 O'Clock Shadow
  • *
  • Posts: 51
Re: Is it too late [bitcoin]?
« Reply #646 on: January 10, 2018, 09:31:40 AM »
Visa and Paypal do more than just transfer value from buyer to seller.  They can reverse the payment, too.

What is your recourse if merchants in UK and Australia don't deliver as promised?

Sorta makes you wonder why the foreign merchants offered such large discounts for BTC or refused to except anything else...

Very true. I'll give you a hint: there are products (including some microscopic organisms such as Necator Americanus) that are legal in most countries but are a violation of the terms of service of PayPal and/or VISA. If you deal in these legal products, how are you supposed to take payments from foreign soil? Have you ever dealt with cross border checks?

Also, there are web hosting companies that are willing to accept cryptocurrency for payment. Imagine if you are a political dissident in a hostile country that can now pay for overseas hosting (and VPN services) with an anonymous cryptocurrency like Monero. In fact, here are the list of providers that accept Monero.

This is all very true, but the problem is, such use cases are such a microscopically, small percentage of global trade. So sure lots of people will find this useful, but if even part of your coin valuation is based on BTC putting a dent in global trade in the medium term, than I'd be personally cautious of this. Even if the whole of africa based their entire GDP on crypto, that would be barely 1%. Countries such as USA and China have valuable economies and it will be relatively hard to (legally) play in those economies if you don't play along with their currency and tax preferences.
« Last Edit: January 10, 2018, 09:33:21 AM by mubington »

Scandium

  • Handlebar Stache
  • *****
  • Posts: 2188
  • Location: EastCoast
Re: Is it too late [bitcoin]?
« Reply #647 on: January 10, 2018, 10:05:51 AM »
Visa and Paypal do more than just transfer value from buyer to seller.  They can reverse the payment, too.

What is your recourse if merchants in UK and Australia don't deliver as promised?

Sorta makes you wonder why the foreign merchants offered such large discounts for BTC or refused to except anything else...

Very true. I'll give you a hint: there are products (including some microscopic organisms such as Necator Americanus) that are legal in most countries but are a violation of the terms of service of PayPal and/or VISA. If you deal in these legal products, how are you supposed to take payments from foreign soil? Have you ever dealt with cross border checks?

Also, there are web hosting companies that are willing to accept cryptocurrency for payment. Imagine if you are a political dissident in a hostile country that can now pay for overseas hosting (and VPN services) with an anonymous cryptocurrency like Monero. In fact, here are the list of providers that accept Monero.

This is all very true, but the problem is, such use cases are such a microscopically, small percentage of global trade. So sure lots of people will find this useful, but if even part of your coin valuation is based on BTC putting a dent in global trade in the medium term, than I'd be personally cautious of this. Even if the whole of africa based their entire GDP on crypto, that would be barely 1%. Countries such as USA and China have valuable economies and it will be relatively hard to (legally) play in those economies if you don't play along with their currency and tax preferences.

I love the increasingly obscure justifications why BTC et al is useful. But no good explanation why it useful to the rest of us 99.99% of people. We who don't run VPN services in oppressive regimes I mean...

Even if BTC was used by 100% off dissident bloggers in every regime in the world, and everyone sending money to countries where bank/paypal transfer is unavailable, how much of global trade is that?? 0.0001%?

PDXTabs

  • Pencil Stache
  • ****
  • Posts: 695
  • Age: 35
  • Location: Vancouver, WA, USA
Re: Is it too late [bitcoin]?
« Reply #648 on: January 10, 2018, 10:22:57 AM »
I love the increasingly obscure justifications why BTC et al is useful. But no good explanation why it useful to the rest of us 99.99% of people. We who don't run VPN services in oppressive regimes I mean...

Even if BTC was used by 100% off dissident bloggers in every regime in the world, and everyone sending money to countries where bank/paypal transfer is unavailable, how much of global trade is that?? 0.0001%?

Again, I'm not investing in BTC, but all of these arguments remind me of the 1990s when everyone thought that open source software could never work. Just because we lack the imagination to see the success of cryptocurrency doesn't mean that it won't be successful. Satoshi Nakamoto didn't invent BTC to get rich, Nakamoto invented BTC to solve a problem in global finance during the biggest financial calamity in 78 year. Similarly Bell Labs, AT&T, and Berkeley didn't invent Unix to get rich, but its descendants (OS X, Darwin, Linux, Android, FreeBSD, etc) run on a ton of IoT, phone, and server platforms. No one could see how Unix was going to stick around for the long haul, no one could describe the path that it would take, and yet it is still with us. That's my prediction for cryptocurrency, not that I can pick the winners and losers, not that I can tell you what will happen, but that much like C or Unix, 47 years from initial conception it will be doing just fine.

Scandium

  • Handlebar Stache
  • *****
  • Posts: 2188
  • Location: EastCoast
Re: Is it too late [bitcoin]?
« Reply #649 on: January 10, 2018, 10:29:04 AM »
I love the increasingly obscure justifications why BTC et al is useful. But no good explanation why it useful to the rest of us 99.99% of people. We who don't run VPN services in oppressive regimes I mean...

Even if BTC was used by 100% off dissident bloggers in every regime in the world, and everyone sending money to countries where bank/paypal transfer is unavailable, how much of global trade is that?? 0.0001%?

Again, I'm not investing in BTC, but all of these arguments remind me of the 1990s when everyone thought that open source software could never work. Just because we lack the imagination to see the success of cryptocurrency doesn't mean that it won't be successful. Satoshi Nakamoto didn't invent BTC to get rich, Nakamoto invented BTC to solve a problem in global finance during the biggest financial calamity in 78 year. Similarly Bell Labs, AT&T, and Berkeley didn't invent Unix to get rich, but its descendants (OS X, Darwin, Linux, Android, FreeBSD, etc) run on a ton of IoT, phone, and server platforms. No one could see how Unix was going to stick around for the long haul, no one could describe the path that it would take, and yet it is still with us. That's my prediction for cryptocurrency, not that I can pick the winners and losers, not that I can tell you what will happen, but that much like C or Unix, 47 years from initial conception it will be doing just fine.


Again, that's the blockchain technology, which yes might have some use. But BTC is almost irrelevant to that. (ironically) financial firms are experimenting with it for their use. But why should the specific one-of-many crytocoin BTC be worth $20k? If Visa, or whatever else, is replaced with a blockchain tech it's almost certain it won't be BTC, or ETH, or dogecoin.. So what is the reason people are willing to pay $1k-20k for each one of those?