Author Topic: Is it too late [bitcoin]?  (Read 90692 times)

PDXTabs

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Re: Is it too late [bitcoin]?
« Reply #650 on: January 10, 2018, 10:37:31 AM »
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?

I can't really answer that question, because I am unwilling to pay $20K for a BTC except as a means to buy goods.

With that said, I would say that in the software world it is normal to pick something that works, and iterate later. That's how programming languages and frameworks often work:

sh&sed&awk --> perl --> python2 --> python3
Netscape JavaScript --> es3 --> es5 --> es6 (and separately TypeScript) --> es7

I'm sure that you could draw a similar timeline for all the JavaScript frameworks that the world has seen (note: a lot of them are now dead).

But if you need to ship a product that works soon, you pick a technology that works today. BTC "works" today.

maizeman

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Re: Is it too late [bitcoin]?
« Reply #651 on: January 10, 2018, 11:34:37 AM »
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?

Perhaps you should first find someone who is actually paying $20k (or even the current price of $14,600) for bitcoin that they are not immediately going to spend?

If you cannot find such a person, it may not be worth getting worked up arguing about how it doesn't make sense to buy bitcoins (specifically) at current price, since, at least in this thread, I don't think anyone is currently buying bitcoins or suggesting that others should.

Scandium

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Re: Is it too late [bitcoin]?
« Reply #652 on: January 10, 2018, 12:01:31 PM »
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?

Perhaps you should first find someone who is actually paying $20k (or even the current price of $14,600) for bitcoin that they are not immediately going to spend?

If you cannot find such a person, it may not be worth getting worked up arguing about how it doesn't make sense to buy bitcoins (specifically) at current price, since, at least in this thread, I don't think anyone is currently buying bitcoins or suggesting that others should.

well some is buying them for $14k. But I'm equally curious why anyone would pay $2k for them..

brooklynguy

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Re: Is it too late [bitcoin]?
« Reply #653 on: January 10, 2018, 12:06:04 PM »
well some is buying them for $14k. But I'm equally curious why anyone would pay $2k for them..

The probable answer in the case of most buyers is that they are (wittingly or unwittingly) hoping for a greater fool to come along who is willing to pay even more.

Ben Hogan

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Re: Is it too late [bitcoin]?
« Reply #654 on: January 10, 2018, 12:25:55 PM »
BTC should go much lower this week. I would wait, and also buy another coin to balance the investment. I'd go with NEO or XMR.

effigy98

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Re: Is it too late [bitcoin]?
« Reply #655 on: January 10, 2018, 04:13:00 PM »
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.

You know that huge fee you pay when you buy a house... I think they call it escrow... Something like ETH can change that expense from 100's (or thousands) of dollars down to pennies. This is just one use case, and there are many like this.

What about the massive fee's charged to move money between countries? I work with a lot of foreigners that send a lot of money home, they are saving a ton of money not paying those fees.

Have you tried to move large sums of money around in our banking system? Just the other day I deposited my normal paycheck for a side hustle and the bank said they had to put a 10 day hold on it before it clears because it's a large amount. I do not have this problem with crytpo to crypto exchanges, there is no banks forcing me to wait.

There has never been before a way to share a piece of data that can be only in one place at a time. In time you will be able to secure your private data and other communication so companies cannot share it like equifax just did. Even if you do not know it yet, you will be using this technology all the time in your daily life.
« Last Edit: January 10, 2018, 04:22:34 PM by effigy98 »

waltworks

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Re: Is it too late [bitcoin]?
« Reply #656 on: January 10, 2018, 04:24:59 PM »
You know that huge fee you pay when you buy a house... I think they call it escrow... Something like ETH can change that expense from 100's (or thousands) of dollars down to pennies. This is just one use case, and there are many like this.

Uh, what? I could see a future where a crypo-contract of some kind functions as the escrow entity (maybe), but fat chance of being able to actually buy a house using BTC right now.

If you haven't bought/sold real estate lately, your big expenses are commissions, title insurance/fees, and (potentially) taxes. None of those is something that a cryptocurrency would really help with.

As of right now, it's a lot MORE hassle and expense to use BTC (and for a large transaction, it would be an insane risk for both parties) than traditional transactions. If BTC is stable over a period of, say, decades, then you might see people start to use it for actual commerce. But it seems purposely designed to prevent that outcome...

-W

effigy98

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Re: Is it too late [bitcoin]?
« Reply #657 on: January 10, 2018, 04:32:12 PM »
If you haven't bought/sold real estate lately, your big expenses are commissions, title insurance/fees, and (potentially) taxes. None of those is something that a cryptocurrency would really help with.

My last 3 properties were all over $1000 in escrow. That is still a very significant chunk of money a smart contract could facilitate automation. Let's just say the average US home price is around 200k, that is still $200 in escrow. Multiple that by homes sold a year and that is still a BILLION dollars. That is a very valuable network. This is just a single use case, there are many other potential markets.

mubington

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Re: Is it too late [bitcoin]?
« Reply #658 on: January 10, 2018, 04:46:14 PM »
There are countless comparable examples.  Linux saves billions of dollars a year vs Windows. But it's peanuts really in the big scheme of things.

The whole crypo narrative and valuation is built on BTC putting a meaninful dent in fiat. Not just dancing around the edges.

The reason Warren Buffet opted out of tech wasn't because he was certain it would fail.... he didn't invest because he didn't know enough to understand WHICH tech firms would fail. He has said on record he is quite certain BTC will fail.

What makes BTC investors think they have such an edge to think 15k is undervalued?

The problem as I see it is there will be a whole lot of pain caused before any future benefits. It's hard to imagine any alternative history where the internet crash or the property crash was circumvented. The idea that Crypto is going to have a soft correction without hurting millions, is unlikely.
« Last Edit: January 10, 2018, 04:58:58 PM by mubington »

shadow

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Re: Is it too late [bitcoin]?
« Reply #659 on: January 10, 2018, 05:20:11 PM »

well some is buying them for $14k. But I'm equally curious why anyone would pay $2k for them..

Alot of people that buy into bitcoin or any crypto don't really understand the tech behind it. Perhaps they're mistaken in how they evaluate its value, believing it's scarce currency, believing it will somehow find mainstream use. Whatever the reason, they believe there is some value that will drive demand. Someone will buy it from them at a higher price than they bought it. Or maybe alot of them understand there is no value and shill and hype it for the less sophisticated speculator to dump into.

There are undeniably elements of the greater fool.

There are other people that have researched blockchain and come to believe in the future of the tech. What they are trying to do is speculate on which will be a future microsoft, google, or amazon or something bigger. These speculators are willing to risk some funds, hopefully only a moderate amount. They are looking more at actual cryptocurrencies and less at company-base blockchains.

The distinction between crypto-base blockchains and company blockchains is that the former is a public, permissionless peer-to-peer decentralized blockchain compared to a private, permissioned non-peer-to-peer network. Blockchain is basically the original definition of crypto, however it has now been adopted to mean other things. In a company blockchain, crypto is not required.

Permissionless blockchain functions like a dumb pipe. It is transaction agnostic, and the rules of its use and access is left for the jurisdiction it passes through. For example, in the U.S., Coinbase has strict know-your-customer laws and forbid certain types of transactions on addresses it hosts. However, it doesn't control the rest of the crypto networks in which it transacts; these networks are extremely resilient to being shutdown, offer greater flexibility of use-cases, superior accessibility and potentially lower transaction cost vs a centralized, permissioned blockchain. A permissioned network can be corrupted or censored; crypto much more resistant to these effects.

In a public, permissionless peer-to-peer decentralized blockchain, there is an economic consensus model with cost and incentives. Satoshi Nakamoto conceptualized this in his whitepaper and the creation of bitcoin. All digital currencies before were attacked or corrupted in some way until they failed. What was needed a decentralized system that would have costs to attackers and rewards to miners.

Double-spend was one of the problems: no one should be able to send more than what they have. How do get you participants that don't know or trust each other to agree on one transaction from others and build upon these transactions? You don't want to assume altruism. You want there to be costs to attack and incentives to agree. And you want the costs to be prohibitive and the incentives to be rewarding.

In proof-of-work mining, miners perform hashing until they discovered a random nonce that allows them to confirm and validate a transaction. They invested in mining equipment, electricity, time and effort to solve this algorithm. For this they get rewarded coins, which does not get paid out until many blocks later. All miners must help confirm successive blocks to get the coins.

In some of the newer crypto, a proof-of-stake economic consensus model built upon proof-of-work mining, but without the need for powerful mining equipment. All the transactions in the network charge require fees for the security of the network, which uses a system of validators. You own the crypto, you can use it and stake it. If you try to attack and fail, you lose that stake. If you help agree and confirm transactions, you are rewarded with network fees. There have been extensive research, testing, and development done on proof-of-stake.

This is the type of crypto that people are speculating on. These crypto have a fundamental design to be platforms of the future, with immense scalability, that anyone can build their own decentralized apps upon. All transactions will have costs, which are paid by senders, and which is rewarded to stakers. If there is mainstream adoption and use, the fees can potentially be very rewarding. There are some numbers and calculations out there already; at this point though, much of it is highly speculative, and this is what certain speculators are betting on. The expectation is massive infrastructure built upon these platforms, with one of the first use-cases being closed payment works being able to interchange with each other on a dumb network, where no vendor has disparate home field advantage. 

There are other tech out there that offer a no-fee, no mining network, such as dag structures, some of which use proof-of-work. Other networks use a fee-burning system. However, at this point, it is inconclusive how secure these networks are. It's not clear if the value of a coin is enough to incentivize running a node. It's also not clear what the costs are to endless attacks. There is some contention these models don't work for a decentralized peer-to-peer compared to proof-of-work and proof-of-stake.
« Last Edit: January 10, 2018, 05:47:25 PM by shadow »

waltworks

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Re: Is it too late [bitcoin]?
« Reply #660 on: January 10, 2018, 07:27:25 PM »
Let's just say the average US home price is around 200k, that is still $200 in escrow. Multiple that by homes sold a year and that is still a BILLION dollars. That is a very valuable network. This is just a single use case, there are many other potential markets.

Yes, and that's indeed what I said - it's a TINY part of your overall transaction costs. No way in hell would I try to save 1/10 of 1% on buying a house while simultaneously risking paying plus/minus 20% for it when I go to close!

There's way more potential for killing off Visa and the other payment processing vampires. But again, BTC seems deliberately designed to be useless for that purpose. Eventually someone will get it right but my bet is on the banks (or a big tech company) doing their own crypto thing that wins the day.

-W

maizeman

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Re: Is it too late [bitcoin]?
« Reply #661 on: January 10, 2018, 07:37:57 PM »
There's way more potential for killing off Visa and the other payment processing vampires. But again, BTC seems deliberately designed to be useless for that purpose. Eventually someone will get it right but my bet is on the banks (or a big tech company) doing their own crypto thing that wins the day.

I tend to be less optimistic about bank-based crypto. By definition, the switch to cryptocurrencies to transmit money overseas or replace credit cards are going to cannibalize a lot of sources of fees which currently are major profit centers for existing retail banks.

You've heard the story about how Kodak invented digital cameras in 1975? They didn't do anything with the technology, because they didn't want to cut into the current market for film and photography reagents. By the time they finally did make the jump to digital in the 1990s they were dreadfully behind their competition, and ended up going bankrupt in 2012.

(The Kodak that just managed to spike it's price with random blockchain buzzwords is what was left over after almost all the assets of value were sold off in Chapter 11, and now sells smartphones and tablets using the kodak brandname).
« Last Edit: January 10, 2018, 08:22:16 PM by maizeman »

MrThatsDifferent

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Re: Is it too late [bitcoin]?
« Reply #662 on: January 10, 2018, 07:47:35 PM »

runbikerun

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Re: Is it too late [bitcoin]?
« Reply #663 on: January 11, 2018, 12:31:57 AM »
There's way more potential for killing off Visa and the other payment processing vampires. But again, BTC seems deliberately designed to be useless for that purpose. Eventually someone will get it right but my bet is on the banks (or a big tech company) doing their own crypto thing that wins the day.

I tend to be less optimistic about bank-based crypto. By definition, the switch to cryptocurrencies to transmit money overseas or replace credit cards are going to cannibalize a lot of sources of fees which currently are major profit centers for existing retail banks.

You've heard the story about how Kodak invented digital cameras in 1975? They didn't do anything with the technology, because they didn't want to cut into the current market for film and photography reagents. By the time they finally did make the jump to digital in the 1990s they were dreadfully behind their competition, and ended up going bankrupt in 2012.

(The Kodak that just managed to spike it's price with random blockchain buzzwords is what was left over after almost all the assets of value were sold off in Chapter 11, and now sells smartphones and tablets using the kodak brandname).

Do you have any clear data on on what percentage of retail banking income is comprised of FX fees and credit card non-interest charges? Non-interest income in banks comprises an extremely broad range of options (such as investment charges, for one), and the fees you're describing could actually be a very small part of the total.

It should also be noted that in retail banking, there's a clear correlation between non-interest income and stability: retail banks with substantial non-interest income streams are more resilient to economic shocks.

KTG

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Re: Is it too late [bitcoin]?
« Reply #664 on: January 11, 2018, 05:22:16 AM »
Over $100 billion wiped off global cryptocurrency market following talk of South Korea trading ban https://www.cnbc.com/2018/01/11/bitcoin-ripple-ethereum-prices-fall-after-south-korea-trading-ban-talk.html

Uh-oh.
« Last Edit: January 11, 2018, 05:24:01 AM by KTG »

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #665 on: January 11, 2018, 05:40:59 AM »

Gondolin

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Re: Is it too late [bitcoin]?
« Reply #666 on: January 11, 2018, 05:46:51 AM »
Quote
The whole crypo narrative and valuation is built on BTC putting a meaninful dent in fiat.

This is the crux of the issue for me. How is the creation of a non-government backed currency not a fundamental attack on the very definition of a nation state? Governments have been trying to regulate the economy and tax transaction since the first coins were minted. Is there any chance that the powerful governments of the world just shrug their shoulders at the loss of such a core part of their sovereignty?

Currently the technology is ahead of the law but, as soon as the wished-for adoption of any crypto starts to happen, that crypto will be globally criminalized in an instant.

Cycling Stache

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Re: Is it too late [bitcoin]?
« Reply #667 on: January 11, 2018, 06:47:27 AM »
well some is buying them for $14k. But I'm equally curious why anyone would pay $2k for them..

The probable answer in the case of most buyers is that they are (wittingly or unwittingly) hoping for a greater fool to come along who is willing to pay even more.

How do you know this? 

Cycling Stache

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Re: Is it too late [bitcoin]?
« Reply #668 on: January 11, 2018, 06:48:38 AM »

well some is buying them for $14k. But I'm equally curious why anyone would pay $2k for them..

Alot of people that buy into bitcoin or any crypto don't really understand the tech behind it. Perhaps they're mistaken in how they evaluate its value, believing it's scarce currency, believing it will somehow find mainstream use. Whatever the reason, they believe there is some value that will drive demand. Someone will buy it from them at a higher price than they bought it. Or maybe alot of them understand there is no value and shill and hype it for the less sophisticated speculator to dump into.

There are undeniably elements of the greater fool.

How do you know this?

runbikerun

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Re: Is it too late [bitcoin]?
« Reply #669 on: January 11, 2018, 06:53:10 AM »
well some is buying them for $14k. But I'm equally curious why anyone would pay $2k for them..

The probable answer in the case of most buyers is that they are (wittingly or unwittingly) hoping for a greater fool to come along who is willing to pay even more.

How do you know this?

If you have a better explanation for how Bitcoin was worth about three thousand dollars in October, nineteen thousand dollars in mid-December, and thirteen thousand dollars today, I'm all ears. Bitcoin's price moves don't make any sense whatsoever unless you assume they're driven by speculation.

maizeman

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Re: Is it too late [bitcoin]?
« Reply #670 on: January 11, 2018, 07:12:20 AM »
Quote
The whole crypo narrative and valuation is built on BTC putting a meaninful dent in fiat.

This is the crux of the issue for me. How is the creation of a non-government backed currency not a fundamental attack on the very definition of a nation state? Governments have been trying to regulate the economy and tax transaction since the first coins were minted. Is there any chance that the powerful governments of the world just shrug their shoulders at the loss of such a core part of their sovereignty?

Currently the technology is ahead of the law but, as soon as the wished-for adoption of any crypto starts to happen, that crypto will be globally criminalized in an instant.

Yes I can see how governments might decide to go after cryptocurrencies because they make it easier to do things like circumvent currency controls or anti-money laundering regulations.

I don't see how a currency not issued by a particular government is an attack on a nation's sovereignty.

Clearly a currency issued by nation B isn't an attack on nation A's sovereignty, right? What about the thousands of currencies in the world today issued by non-governmental organizations. Are these an attack on the sovereignty of individual nations? For an example from the ridiculous end of the spectrum, what about Ithaca Hours?

In before the 1860s, banks and private businesses all over the US used to issue their own currencies, which were only backed by the assets of that company. While a piece of paper might say "one dollar" its actual value would fluctuate based on how far away you were from a branch of the issuing bank/corporation which might redeem it, as well as rumors about how well or poorly the issuing company was doing financially (podcast on the subject). Obviously, logistically we're way off with a single unified currency where I can withdraw dollars in San Francisco and spend them in Kalamazoo without having to worry about exchange rates. However, I don't think the United States was any less sovereign in the 1850s than today.


Scandium

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Re: Is it too late [bitcoin]?
« Reply #671 on: January 11, 2018, 07:38:53 AM »
However, I don't think the United States was any less sovereign in the 1850s than today.

In terms of control of the economy, it most certainly was!

shadow

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Re: Is it too late [bitcoin]?
« Reply #672 on: January 11, 2018, 08:41:10 AM »

well some is buying them for $14k. But I'm equally curious why anyone would pay $2k for them..

Alot of people that buy into bitcoin or any crypto don't really understand the tech behind it. Perhaps they're mistaken in how they evaluate its value, believing it's scarce currency, believing it will somehow find mainstream use. Whatever the reason, they believe there is some value that will drive demand. Someone will buy it from them at a higher price than they bought it. Or maybe alot of them understand there is no value and shill and hype it for the less sophisticated speculator to dump into.

There are undeniably elements of the greater fool.

How do you know this?

Empirically seeing alot of forum comments, outside of mmm forums. Noncyber discussions with others where they believe bitcoin has a very high probability of being a global currency for the masses (this belief was as recent as two months ago). "It has brand name recognition. I'll get in now while everyone is doing it, and then sell when I double or triple, etc".

Many don't understand how wallets and addresses work. Many don't fully grasp the tech. Mark Cuban himself saying people should get in on it with no more than 10% of your financial worth, but offered no reason why it will continue to go up other than "something is worth what someone else is willing to pay for it" (https://youtu.be/vYdrMXkYQfM?t=62).


lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #673 on: January 11, 2018, 09:19:25 AM »
On a philosophical level, though, what is the difference?

The difference is that one is pretending to be a currency that it is not, while the other is trying to be something entirely new. The reason why this is a big difference is because merchant A who accepts US dollar bills has no way to detect a counterfeit US dollar bill that is of extreme high quality like that. So a merchant has no way of protecting itself from the risk of that fake currency which is why Nation B can attack Nation A with a counterfeit currency in such a way.

Bitcoin is not trying to be US dollar bills. Merchants can choose to accept it or not. Since there is no way to counterfeit Bitcoin, if Bitcoin is the only crypto-currency that the Merchant accepts, no additional new crypto-currencies that are created are a threat to the Bitcoin that Merchant A accepts. Likewise, Merchant A's acceptance of Bitcoin in no way threatens the legitimacy of the US dollar bills it receives.

What you're essentially saying is that because a counterfeit Mona Lisa being created is an attack on the original Mona Lisa, then all new art work is also an attack on the original Mona Lisa. ...that doesn't really make sense.

maizeman

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Re: Is it too late [bitcoin]?
« Reply #674 on: January 11, 2018, 09:30:59 AM »
Yup, I'm with lifeanon on this one. The distinction is between an exchanging goods and services for some unit of exchange, with both ends of the transaction knowing what they are giving up and what they are receiving, and exchanging goods and services for some unit of exchange where one side of the transaction thinks they are getting X in exchange for Y but they actually receive Z in exchange for Y.

L.A.S., no one will ever trick you into thinking you are receiving US dollars, but after they walk out of the store you look more closely and realize they actually handed you a bitcoin.

brooklynguy

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Re: Is it too late [bitcoin]?
« Reply #675 on: January 11, 2018, 10:10:59 AM »
The difference is that one is pretending to be a currency that it is not

Even more importantly (insofar as the sovereignty question is concerned), counterfeit money is pretending to be the specific currency that has been sanctioned by the state as its jurisdiction's legal tender (the medium of payment recognized by the legal system as necessarily valid for satisfying financial obligations), the exclusive authority to designate which is an important component of a state's monetary sovereignty.

Gondolin

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Re: Is it too late [bitcoin]?
« Reply #676 on: January 11, 2018, 11:14:59 AM »
Quote
I don't see how a currency not issued by a particular government is an attack on a nation's sovereignty. ....

All good points and I think sovereignty was the wrong word to use.

You mentioned that there were lots of currencies in the 19th century. Now they we've moved away from that model, what makes you think governments (especially repressive ones) will be willing to go back?

At this time the primary argument for cryptocurrency I've seen is that you can dodge governments and transact anonymously. However, for mass adoption, crypto would need to become as regulated as fait (if not more so).

So crypto is the future because it's not like fait but, to be widely adopted, it has to become like fait, which removes the impetus for its adoption. Is there a way out of this contradiction?

I mean, we've all heard the argument that a way that governments are evil and you'll be glad you have a global currency when your government inevitably collapses but, the source of such declarations are usually less than credible.

« Last Edit: January 11, 2018, 11:38:19 AM by Gondolin »

maizeman

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Re: Is it too late [bitcoin]?
« Reply #677 on: January 11, 2018, 11:19:10 AM »
I mean, a way that DOESN'T involve a libertarian screed about how governments are evil and you'll be glad you have a global currency when your government inevitably collapses. We've all heard that line before and while it's fun thought experiment in the US, in China that attitude gets your bitcoin mining operation nationalized while you "commit suicide in prison".

@Gondolin, have I at any point posted anything that resembles a libertarian screed about how governments are evil?

I'd be happy to discuss your other questions if you like, but not if you're going to insult me by ascribing positions to me that I have never asserted.

Gondolin

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Re: Is it too late [bitcoin]?
« Reply #678 on: January 11, 2018, 11:35:20 AM »
Oh no no, not you specifically! You've never said anything like that.

I just meant that I've not seen an answer to the contradiction I mentioned above that didn't involve condemnation of government as a given. When I said, "we've all heard..." I meant generally, people following these discussions have heard that line of argument.

I'm sorry. I'll edit my original post - I was thinking to myself while typing and can see that I was not being coherent.

maizeman

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Re: Is it too late [bitcoin]?
« Reply #679 on: January 11, 2018, 11:49:21 AM »
Oh gotcha, thanks for the clarification Gondolin! I to try to maintain a rational discussion, so it was quite upsetting to think I might be coming across like that.

You mentioned that there were lots of currencies in the 19th century. Now they we've moved away from that model, what makes you think governments (especially repressive ones) will be willing to go back?
I think most governments would prefer all transactions occur in currencies they issue. The question is how much work is it to prevent people from using other media of exchange vs how big is the benefit from doing so. At one extreme, I'm sure the IRS would prefer that people refrain from barter, and technically I believe you're supposed to report barter income on your taxes. But the amount of repression it would take to track and/or eliminate every last barter transaction in the country is a lot more work (and would use up a lot more political capital) than the benefits to the government of doing so.

Similarly, while there are things governments can do to discourage people from using cryptocurrencies, at this point I think it would be difficult to eliminate their use entirely, particularly in ineffective repressive regimes like Venezuela.

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At this time the primary argument for cryptocurrency I've seen is that you can dodge governments and transact anonymously. However, for mass adoption, crypto would need to become as regulated as fait (if not more so).
The other primary argument is that you can dodge using credit card processors or paypal when paying people when you're not in the same room as them. Until recently that meant saving money (and it may again if some of the 2nd or 3rd iteration cryptocurrencies live up to their current promises, but we'll have to wait and see). It also means not being constrained for legal transactions where it is difficult to secure the business of a payment processor (either because of terms of use which are more stringent than "nothing illegal") or because you're in a business with high levels of chargeback fraud (which is a quick way to get blacklisted from credit card processors).

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So crypto is the future because it's not like fait but, to be widely adopted, it has to become like fait, which removes the impetus for its adoption. Is there a way out of this contradiction?

Well it depends on whether you're excited about the potential of cryptocurrency to replace gold  -- I'm not, but then I wasn't excited about gold itself either -- to to replace credit card payment processors.

For me, the exciting part of cryptocurrencies isn't their use as a store of value -- maybe that'll come someday if actual payment volumes go up enough for volatility to go down -- but as a medium of exchange that lets me pay someone anywhere in the world without us having to rely on a mutually trusted 3rd party, who will take a significant cut of our transaction, may take several days to give the money to that other person after I give it to them, and can always decide that they don't approve of why I'm sending a payment, even if the reason for that payment is completely legal.

None of the above is an argument to buy cryptocurrencies as an investment.

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Re: Is it too late [bitcoin]?
« Reply #680 on: January 11, 2018, 11:57:09 AM »

However, for mass adoption, crypto would need to become as regulated as fait (if not more so).

So crypto is the future because it's not like fait but, to be widely adopted, it has to become like fait, which removes the impetus for its adoption. Is there a way out of this contradiction?


Can you elaborate on this premise? And why the assumption there is a contradiction?

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Re: Is it too late [bitcoin]?
« Reply #681 on: January 11, 2018, 01:24:34 PM »
Wow so much selling off today. Ripple down 40%!!! God can you imagine if that was a stock that you owned?!?!

Or the $100 bill in your pocket was now worth $60 today?

This is madness. I don't care about the technology, or the fact that it could bounce back tomorrow. This is insane. Anything related to money should not be this volatile unless there are real economic meltdowns going down.

Anyone who might have *sold* something yesterday and was paid in Ripple, has to be like WTF. Then again, not a lot you can buy with Ripple anyway.

I cannot understand how supporters of this nonsense can still think these are worthwhile investments or alternatives to $$$. Unless you are in Venezuela or North Korea.

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Re: Is it too late [bitcoin]?
« Reply #682 on: January 11, 2018, 01:45:11 PM »
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The whole crypo narrative and valuation is built on BTC putting a meaninful dent in fiat.

This is the crux of the issue for me. How is the creation of a non-government backed currency not a fundamental attack on the very definition of a nation state? Governments have been trying to regulate the economy and tax transaction since the first coins were minted. Is there any chance that the powerful governments of the world just shrug their shoulders at the loss of such a core part of their sovereignty?

Currently the technology is ahead of the law but, as soon as the wished-for adoption of any crypto starts to happen, that crypto will be globally criminalized in an instant.


Unlikely.  Here's why:  By law, in the US taxes AND wages must be paid in USD. 

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Re: Is it too late [bitcoin]?
« Reply #683 on: January 11, 2018, 02:54:52 PM »
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The whole crypo narrative and valuation is built on BTC putting a meaninful dent in fiat.

This is the crux of the issue for me. How is the creation of a non-government backed currency not a fundamental attack on the very definition of a nation state? Governments have been trying to regulate the economy and tax transaction since the first coins were minted. Is there any chance that the powerful governments of the world just shrug their shoulders at the loss of such a core part of their sovereignty?

Currently the technology is ahead of the law but, as soon as the wished-for adoption of any crypto starts to happen, that crypto will be globally criminalized in an instant.


Unlikely.  Here's why:  By law, in the US taxes AND wages must be paid in USD.

I'm not saying you're wrong. Just posting a related article.

https://www.coindesk.com/arizona-lawmakers-want-let-people-pay-taxes-bitcoin/

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According to the text, the measure would allow for the use of "a payment gateway, such as bitcoin or other cryptocurrency, using peer-to-peer systems" in order to pay "tax and any interest and penalties" owed to the state government.

The bill goes on to state:

"The Department [of Revenue] shall convert cryptocurrency payments to United States dollars at the prevailing rate within twenty-four hours after receipt and shall credit the taxpayer's account with the converted dollar amount."

Whether the measure gains traction in the Arizona legislature remains to be seen. A similar effort was undertaken in New Hampshire in 2016, but concerns expressed by some state lawmakers primarily around bitcoin's volatile price ultimately led to the bill being scuttled.
« Last Edit: January 11, 2018, 03:55:13 PM by Optimiser »

thenextguy

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Re: Is it too late [bitcoin]?
« Reply #684 on: January 11, 2018, 03:18:09 PM »
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The whole crypo narrative and valuation is built on BTC putting a meaninful dent in fiat.

This is the crux of the issue for me. How is the creation of a non-government backed currency not a fundamental attack on the very definition of a nation state? Governments have been trying to regulate the economy and tax transaction since the first coins were minted. Is there any chance that the powerful governments of the world just shrug their shoulders at the loss of such a core part of their sovereignty?

Currently the technology is ahead of the law but, as soon as the wished-for adoption of any crypto starts to happen, that crypto will be globally criminalized in an instant.


Unlikely.  Here's why:  By law, in the US taxes AND wages must be paid in USD.

I'm not saying your wrong. Just posting a related article.

https://www.coindesk.com/arizona-lawmakers-want-let-people-pay-taxes-bitcoin/

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According to the text, the measure would allow for the use of "a payment gateway, such as bitcoin or other cryptocurrency, using peer-to-peer systems" in order to pay "tax and any interest and penalties" owed to the state government.

The bill goes on to state:

"The Department [of Revenue] shall convert cryptocurrency payments to United States dollars at the prevailing rate within twenty-four hours after receipt and shall credit the taxpayer's account with the converted dollar amount."

Whether the measure gains traction in the Arizona legislature remains to be seen. A similar effort was undertaken in New Hampshire in 2016, but concerns expressed by some state lawmakers primarily around bitcoin's volatile price ultimately led to the bill being scuttled.

It's worth noting this is for Arizona state taxes. There may be different regulations for federal taxes.

But still, very interesting!

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Re: Is it too late [bitcoin]?
« Reply #685 on: January 11, 2018, 05:26:23 PM »
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I don't see how a currency not issued by a particular government is an attack on a nation's sovereignty. ....

All good points and I think sovereignty was the wrong word to use.

You mentioned that there were lots of currencies in the 19th century. Now they we've moved away from that model, what makes you think governments (especially repressive ones) will be willing to go back?

At this time the primary argument for cryptocurrency I've seen is that you can dodge governments and transact anonymously. However, for mass adoption, crypto would need to become as regulated as fait (if not more so).

governments may not "enjoy" having currencies they don't control, but there's nothing they can do aside from making those currencies illegal and going after the participants.  but that hasn't stopped the pirate bay or drugs or human trafficking or whatever else.  governments don't have ultimate control and many governments are corrupt and perhaps even profit from enabling all kinds of "illegal" activities -- cryptocurrencies would be no different.

So crypto is the future because it's not like fait but, to be widely adopted, it has to become like fait, which removes the impetus for its adoption. Is there a way out of this contradiction?

I mean, we've all heard the argument that a way that governments are evil and you'll be glad you have a global currency when your government inevitably collapses but, the source of such declarations are usually less than credible.

if a government of a country (Japan may be closest currently, or perhaps North Korea or Venezuela or somewhere) does allow bitcoin to be used as a national currency, i don't think that would make bitcoin "like fiat" in any way.  the "rules" governing the currency itself would still be set by the consensus of the global bitcoin community, not by that government.  i don't see a contradiction there.

runbikerun

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Re: Is it too late [bitcoin]?
« Reply #686 on: January 12, 2018, 02:08:13 AM »
I've seen variations on both on this form and elsewhere of an argument that can be summarised as "even if crypto is in a bubble right now, putting my money in a crypto index means I'll hold the winning currency when it all shakes out, and my profits will easily cover my losses on the others".

I happen to think this is a very poor argument already, because there's no guarantee that any rise will follow on from a crash, no matter how many times people compare the current situation to 1999 dot-com valuations. But that comparison has me thinking: if you had followed a broadly similar approach in 1999, assuming the winners would cover the losers, would you have done well?

In a word: no. In two words: fuck no. Going back in time and investing in a basket of dot-com stocks would be a catastrophic money bonfire for years to come.

Let's leave off the losers entirely: the likes of boo.com, which simply burned down. Let's assume our internet index investor was lucky enough only to invest in companies which still exist.

Their stake in AOL Time Warner has never recovered from the crash: it remains well below its peak price. Every dollar put into it is about a 35 cent drag on the rest of the portfolio.

Their Microsoft stake was conservative, and passed its 2000-peak valuation in...late 2016. Factor in inflation, and it's joining AOL in the "bust" column.

Our investor's stake in Amazon and Apple was smart, but looked pretty dumb until 2005 for Apple and 2009 for Amazon, when each stock finally returned to its 2000 peak (again, not factoring in inflation).

Google did not go public for several more years, and Facebook wouldn't exist for several years yet.

Investing in an index of cryptocurrencies, based on the example of the dot-com crash, therefore appears to be an idea without any real-world backing, and indeed circumstantial evidence that it may be an objectively bad idea. I think it's because, for FIRE advocates, the idea that "the index recovers speedily" is so heavily ingrained. That only appears to hold true for the index as a whole: there's no reason an index focused on a subset of the market can't suffer for an extended period.

Cycling Stache

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Re: Is it too late [bitcoin]?
« Reply #687 on: January 12, 2018, 02:57:28 AM »

well some is buying them for $14k. But I'm equally curious why anyone would pay $2k for them..

Alot of people that buy into bitcoin or any crypto don't really understand the tech behind it. Perhaps they're mistaken in how they evaluate its value, believing it's scarce currency, believing it will somehow find mainstream use. Whatever the reason, they believe there is some value that will drive demand. Someone will buy it from them at a higher price than they bought it. Or maybe alot of them understand there is no value and shill and hype it for the less sophisticated speculator to dump into.

There are undeniably elements of the greater fool.

How do you know this?

Empirically seeing alot of forum comments, outside of mmm forums. Noncyber discussions with others where they believe bitcoin has a very high probability of being a global currency for the masses (this belief was as recent as two months ago). "It has brand name recognition. I'll get in now while everyone is doing it, and then sell when I double or triple, etc".

Many don't understand how wallets and addresses work. Many don't fully grasp the tech. Mark Cuban himself saying people should get in on it with no more than 10% of your financial worth, but offered no reason why it will continue to go up other than "something is worth what someone else is willing to pay for it" (https://youtu.be/vYdrMXkYQfM?t=62).

The point I hoped to elicit is what is your informational advantage with respect to bitcoin that the market doesn't know and hasn't priced in?

Do you know how many people bought Ford today and for what reasons?  Do you know which stocks in the 3,606 companies in VTSAX have gone up more than 50% in the last year?  Do you care?  Are you basing your investments decisions whatsoever on that information, or the lack thereof?

When a cabbie tells you he saw that the stock market went up and might invest, do you sell?

It's interesting how very, very little we know about our investments in index funds, and yet (if we're smart) we don't question them because we have confidence in an efficient market, at least over the long term.

Yet we see something like bitcoin and we're sure it has to be a bubble because . . . why?

We know something that nobody else does?

We see something that is absolutely clear but the $224 billion market for bitcoin hasn't figured out how to price in?

We saw a post by someone in a forum who claimed to like bitcoin but didn't really understand it, and we conclude that poster could skew the entire market?  How many people do we think are completely uneducated and betting money large enough to skew a $224 billion market?  What is the data based on?  How many forum posts do we have to see to conclude that a significant number of investors investing enough money to matter must be making idiotic decisions just hoping for other suckers?

Stock prices are a gamble on the uncertainty associated with the future projected earnings or value of a company.  Generally, the companies that we're familiar with don't move by large amounts because their markets are well understood and there is a track record of data.  When Coca Cola has a good quarter, its price may increase by a few percent.  A company like Apple can increase significantly over a 10-year period based on a couple of big plays that turn out to be incredibly successful.  The stock price is not a reward for that behavior.  Rather, it's a prediction about how much Coca Cola or Apple will earn or be worth going forward.

Bitcoin is harder because its much more difficult to assess the potential success, and difficult to assess the worth if it explodes.  There might be a 99% chance that bitcoin goes to zero, and 1% chance that it becomes worth gazillions.  We might intuitively want to treat 99% as the same as 100% and conclude therefore that bitcoin is worthless, but a $224 billion market right now is betting differently.  While markets can certainly be inefficient in the short-term, the real question is what is our special ability--our informational advantage--to know that it's an inefficient market.

I have no idea whether bitcoin will be a success or what it could be worth.  But I also realize that I don't have information better than the market, and therefore--like Warren Buffett--I would never short it, or conclude that it must be worthless based on something I believe I know that a market of that size doesn't.

I've seen variations on both on this form and elsewhere of an argument that can be summarised as "even if crypto is in a bubble right now, putting my money in a crypto index means I'll hold the winning currency when it all shakes out, and my profits will easily cover my losses on the others".

I happen to think this is a very poor argument already, because there's no guarantee that any rise will follow on from a crash, no matter how many times people compare the current situation to 1999 dot-com valuations. But that comparison has me thinking: if you had followed a broadly similar approach in 1999, assuming the winners would cover the losers, would you have done well?

In a word: no. In two words: fuck no. Going back in time and investing in a basket of dot-com stocks would be a catastrophic money bonfire for years to come.

This is a tempting argument, but it follows a typical behavioral economics error--the belief that a person would have seen patterns at the time once he/she knows the pattern after the fact.

Bubbles always seem "clear" after the fact.  Of course the dot com bubble seems ridiculous now.  But a trillion dollars or more at the time disagreed with that assessment.  In retrospect it was wrong, but that was not the best estimate at the time.  Everyone can see now that the housing market was absurd in 2007 before prices plummeted, yet that was not the perception in 2007 (at least any more than it was in 2000 when prices were already on their way up), and interestingly, I think housing prices in most major markets are already back and past those "absurd" prices again now.

It is entirely possible that bitcoin is going to be worthless.  Indeed, it might be the most likely outcome.  But given the amount of money that has been invested in that market, I'm skeptical of any individual's claim that it is "obvious" to them that bitcoin is worthless for reasons that a $224 billion market couldn't figure out.  I'm also skeptical of claims that it must be because of a bunch of uninformed people investing, because really, how many people investing in index funds understand the fundamentals of Ford's business, much less the fundamentals of the 3,605 other companies in VTSAX. 

brooklynguy

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Re: Is it too late [bitcoin]?
« Reply #688 on: January 12, 2018, 07:24:10 AM »
Yet we see something like bitcoin and we're sure it has to be a bubble because . . . why?

We know something that nobody else does?

We see something that is absolutely clear but the $224 billion market for bitcoin hasn't figured out how to price in?

Again, as maizemain pointed out, the efficiency of a market itself tells you nothing about the suitability of the underlying asset as an investment.  And bitcoin has no intrinsic value, so the bitcoin market can be efficient in the sense that it quickly incorporates all available material information about itself into itself (which does not imply that the price established by the market reflects any sort of intrinsic value (which, again, doesn't exist in the case of bitcoin)).  Like the stock market, the bitcoin market can be thought of as a Keynesian beauty contest in which traders are setting prices not necessarily based on what they believe the inherent value to be, but based on what they believe everyone else believes the inherent value to be, or even based on what they believe everyone else believes everyone else to believe the inherent asset value to be, and so on (ad infinitum, if you wish), which can explain the rise of bubbles without resorting to any challenge to the efficiency of the market.  The material information being incorporated into the market includes the very fact that a mania around the market appears to have developed, creating a self-reinforcing feedback loop that drives the market price higher and higher.

In the case of assets that do have intrinsic value (and that are traded in efficient markets) (like stocks), in the long-run, the market runs out of greater fools (and investors who believe in the existence of greater fools), so the "weighing machine" that is the market in the long-term corrects the overvaluation created by the "voting machine" that is the market in the short-term.  In the case of assets that do not have any intrinsic value (like bitcoins, or MMM's fingernail clippings), there is no fundamental value that the market can converge towards in the long-run, and purchasing those assets in the hope that their market value will rise in the future is not investment but speculation.

Cycling Stache

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Re: Is it too late [bitcoin]?
« Reply #689 on: January 12, 2018, 07:43:22 AM »
In the case of assets that do have intrinsic value (and that are traded in efficient markets) (like stocks), in the long-run, the market runs out of greater fools (and investors who believe in the existence of greater fools), so the "weighing machine" that is the market in the long-term corrects the overvaluation created by the "voting machine" that is the market in the short-term.  In the case of assets that do not have any intrinsic value (like bitcoins, or MMM's fingernail clippings), there is no fundamental value that the market can converge towards in the long-run, and purchasing those assets in the hope that their market value will rise in the future is not investment but speculation.

But see gold.  It doesn't have an intrinsic value and nobody is holding it to do stuff with (for the most part), yet it has a market for it that is highly developed and efficient.  Gold buyers are not all betting that a greater sucker will come along some day, but rather that because gold has been used as a basis for trade in the past and can be so used today and in the future (although nobody has to), that it's worth holding.

The error is in thinking that because of the extent of the uncertainty about bitcoin's ultimate price, that it must therefore necessarily be a bubble.  It could be, in the same way that many companies that start off hot may ultimately crash.  The bet is on the potential price, and even if there's one chance in a hundred that it's worth gazillions, that bet can be worth it.  That doesn't mean that bitcoin is necessarily a good investment.  But it does mean that bitcoin may not be worthless, and enough money is being put in to consider that possibility.

Here's an easy example.  If I charged you a penny for a 1-in-100 chance of winning $2, you would and should play that game as long as I let you (assuming it doesn't take you any time!), even though 99 times out of 100 you'll lose.   The bitcoin market--like any market--is trying to figure out both the likelihood of success and the value if it hits.  Those factors are incredibly uncertain, and the price movements reflect that, but that's different from saying that it's worthless.

brooklynguy

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Re: Is it too late [bitcoin]?
« Reply #690 on: January 12, 2018, 08:03:27 AM »
Gold buyers are not all betting that a greater sucker will come along some day, but rather that because gold has been used as a basis for trade in the past and can be so used today and in the future (although nobody has to), that it's worth holding.

If they are purchasing gold with the hope/expectation that its market price will increase, that's exactly what they're doing.  See any of Warren Buffett's writings on the subject for excellent discussion of exactly this point.

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Those factors are incredibly uncertain, and the price movements reflect that, but that's different from saying that it's worthless.

I didn't say bitcoin is worthless.  Nothing that has a market of ready and willing buyers can ever be worthless, because it will always be worth at least as much as what a ready and willing buyer will pay for it.  But bitcoin has no intrinsic value.  Maybe tomorrow buyers will stand ready and willing to purchase bitcoins for 200% of today's market price, or maybe 0%.  Because there's no intrinsic value, your return is entirely dependent on what other people are willing to pay in the future.  Same story with MMM's fingernail clippings.  That's speculation, not investment.

Cycling Stache

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Re: Is it too late [bitcoin]?
« Reply #691 on: January 12, 2018, 08:18:55 AM »
Gold buyers are not all betting that a greater sucker will come along some day, but rather that because gold has been used as a basis for trade in the past and can be so used today and in the future (although nobody has to), that it's worth holding.

If they are purchasing gold with the hope/expectation that its market price will increase, that's exactly what they're doing.  See any of Warren Buffett's writings on the subject for excellent discussion of exactly this point.

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Those factors are incredibly uncertain, and the price movements reflect that, but that's different from saying that it's worthless.

I didn't say bitcoin is worthless.  Nothing that has a market of ready and willing buyers can ever be worthless, because it will always be worth at least as much as what a ready and willing buyer will pay for it.  But bitcoin has no intrinsic value.  Maybe tomorrow buyers will stand ready and willing to purchase bitcoins for 200% of today's market price, or maybe 0%.  Because there's no intrinsic value, your return is entirely dependent on what other people are willing to pay in the future.  Same story with MMM's fingernail clippings.  That's speculation, not investment.

I understand the point you're trying to make, but it all feels a little circular.

I'm buying index funds in large part with the hope that I'll be able to sell those funds to someone later at a higher price.  Sure, they pay me a dividend along the way, but I'm not buying them for their dividend payments.

What about the 80 companies in the S&P 500 that don't pay dividends?  Why am I buying them?  They don't pay me anything, and they're not about to go into forced liquidation, so why do I buy them?  Because I'm hoping the price will go up in the future.

The problem with the term speculation is that it's ambiguous as used.  We typically think of it as taking a flyer on something that is risky, but technically, it applies to the purchase of almost every investment where you're buying with the hope that the price will increase in the future.   Indeed, here's the applicable OED definition for what it's worth:

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Speculation -- "Investment in stocks, property, etc. in the hope of gain but with the risk of loss."

brooklynguy

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Re: Is it too late [bitcoin]?
« Reply #692 on: January 12, 2018, 08:34:13 AM »
What about the 80 companies in the S&P 500 that don't pay dividends?  Why am I buying them?  They don't pay me anything, and they're not about to go into forced liquidation, so why do I buy them?  Because I'm hoping the price will go up in the future.

They are productive assets.  Even in the total absence of any ability to ever sell them, they will produce value for you (by generating profits that could ultimately be paid out as dividends, whether or not those companies are currently choosing to pay out dividends).  Their ability to generate profits in the future is being taking into account by the market in setting the price at which you could sell your ownership stake into the market today, but there is no need to ever sell them in order to realize value from them.  So, unlike assets without intrinsic value, they are not being priced solely on the basis of expectations about what others are or will be willing to pay for them; they have actual intrinsic, fundamental value (which gets factored into the price that others are willing to pay for them).

runbikerun

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Re: Is it too late [bitcoin]?
« Reply #693 on: January 12, 2018, 10:00:13 AM »
Cycling Stache: my point wasn't based on recognition that the dot-com bubble was a bubble. What I was pointing out was that a rationale I've seen a number of times from crypto indexers - that even if the market is in a bubble, buying coins across the board will leave you holding the eventual winners and turning a good profit - isn't supported by the evidence, and in fact is strongly contradicted by the evidence of the 2008 collapse. Even if someone had correctly called the bubble in 2000, indexing dot-com stocks would not have been a good plan.

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Re: Is it too late [bitcoin]?
« Reply #694 on: January 12, 2018, 10:18:26 AM »
But see gold. 

I think gold is a GREAT example, but for the opposite reason that you do.

Gold used to be money.  It was physically mined and then used as an anonymous medium of exchange.  Prices were mostly stable as long as it was ubiquitous, but hoarding sometimes caused deflation (think kingdoms with every cent stored in the castle vault, leaving the citizens destitute).

The global economy abandoned gold for a reason.  There wasn't enough of it to be a useful medium of exchange.  Libertarians who pine for the days of the gold standard because they oppose the entire concept of fiat currency have an unsurprisingly large amount of overlap with libertarians who pine for a future ruled by bitcoin because they oppose the concept of fiat currency.  Both groups misunderstands how money works in our economy.  Both groups can prop up an otherwise inadequate asset by selling it back and forth to each other, and convincing new buyers to play along.  Bitcoin enthusiasts are just modern day gold bugs.

Gold still has industrial uses, and some companies are absolutely dependent on buying and consuming a steady supply.  They do not set the price, though, because of all the speculators.  I imagine that in the future we may discover new industries that are dependent on blockchain (not bitcoin), and which buy and consume a steady supply.  Just like with gold, the value of the asset to them is unlikely to be related to the market price set by speculators. 

The price of bitcoin and the price of gold are both controlled primary by media coverage, not utility.  The price is denominated in dollars, which are money, because gold/bitcoin is not money.

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Re: Is it too late [bitcoin]?
« Reply #695 on: January 12, 2018, 10:35:55 AM »

The point I hoped to elicit is what is your informational advantage with respect to bitcoin that the market doesn't know and hasn't priced in?

Do you know how many people bought Ford today and for what reasons?  Do you know which stocks in the 3,606 companies in VTSAX have gone up more than 50% in the last year?  Do you care?  Are you basing your investments decisions whatsoever on that information, or the lack thereof?

When a cabbie tells you he saw that the stock market went up and might invest, do you sell?

It's interesting how very, very little we know about our investments in index funds, and yet (if we're smart) we don't question them because we have confidence in an efficient market, at least over the long term.

Yet we see something like bitcoin and we're sure it has to be a bubble because . . . why?

We know something that nobody else does?

We see something that is absolutely clear but the $224 billion market for bitcoin hasn't figured out how to price in?

We saw a post by someone in a forum who claimed to like bitcoin but didn't really understand it, and we conclude that poster could skew the entire market?  How many people do we think are completely uneducated and betting money large enough to skew a $224 billion market?  What is the data based on?  How many forum posts do we have to see to conclude that a significant number of investors investing enough money to matter must be making idiotic decisions just hoping for other suckers?

Stock prices are a gamble on the uncertainty associated with the future projected earnings or value of a company.  Generally, the companies that we're familiar with don't move by large amounts because their markets are well understood and there is a track record of data.  When Coca Cola has a good quarter, its price may increase by a few percent.  A company like Apple can increase significantly over a 10-year period based on a couple of big plays that turn out to be incredibly successful.  The stock price is not a reward for that behavior.  Rather, it's a prediction about how much Coca Cola or Apple will earn or be worth going forward.

Bitcoin is harder because its much more difficult to assess the potential success, and difficult to assess the worth if it explodes.  There might be a 99% chance that bitcoin goes to zero, and 1% chance that it becomes worth gazillions.  We might intuitively want to treat 99% as the same as 100% and conclude therefore that bitcoin is worthless, but a $224 billion market right now is betting differently.  While markets can certainly be inefficient in the short-term, the real question is what is our special ability--our informational advantage--to know that it's an inefficient market.

I have no idea whether bitcoin will be a success or what it could be worth.  But I also realize that I don't have information better than the market, and therefore--like Warren Buffett--I would never short it, or conclude that it must be worthless based on something I believe I know that a market of that size doesn't.

Information will have a gap and will be incomplete. This incompleteness is also the basis of decision-making. Those who know a little more or have a better understanding have an advantage. Information is also situational.

Gathering information has to start somewhere, from what people say and think. And when alot of people indicate their knowledge level, you can fairly consider it circumstantial enough, and you can reasonably include it within the spectrum of reasons. Also, I make no determination why the price is what it is; I only provide reasons why people are willing to buy at whatever price it is. If you're asking me how do I know what price bitcoin should be? I did not make this analysis about what price it should be. If you're asking why people are buying at different price levels? I can reasonably provide various reasons.

George Soros shorted the bank of england. Nassim Taleb shorted derivatives. Post-bitcoin fork to bitcoin cash, if you had accounts on various exchanges, and you held bitcoin cash on bittrex, you could have immediately sold your bittrex and bought it back for half price on other exchanges. The first two days of eos ico, you could immediately sell the tokens after the daily sale and sell for 2-3x the price. In various investment books, they talk about hedge fund managers who used to beat the house as professional gamblers, but the occupation held a physical safety risk, so they turned to stocks and used their informational advantage. Situationally at times, we see instances of information advantage.

I don't care about bitcoin. I do compare it to other crypto. Holding bitcoin alone does nothing in terms of cashflow, other than the ability to liquidate it. However, certain crypto actually pay dividends or fees if you own them. This will generate income regardless of the market price of the coin itself; whether the yield ratio is worthwhile or not is another matter. How many people know this about crypto and can this be considered information advantage?

Indexer

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Re: Is it too late [bitcoin]?
« Reply #696 on: January 12, 2018, 03:09:37 PM »
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.

You know that huge fee you pay when you buy a house... I think they call it escrow... Something like ETH can change that expense from 100's (or thousands) of dollars down to pennies. This is just one use case, and there are many like this.

What about the massive fee's charged to move money between countries? I work with a lot of foreigners that send a lot of money home, they are saving a ton of money not paying those fees.

Have you tried to move large sums of money around in our banking system? Just the other day I deposited my normal paycheck for a side hustle and the bank said they had to put a 10 day hold on it before it clears because it's a large amount. I do not have this problem with crytpo to crypto exchanges, there is no banks forcing me to wait.

There has never been before a way to share a piece of data that can be only in one place at a time. In time you will be able to secure your private data and other communication so companies cannot share it like equifax just did. Even if you do not know it yet, you will be using this technology all the time in your daily life.

Massive fees moving money between countries? It's $4.99 with XOOM to send money to most countries, and most of the exceptions to that rule still cost less than $10.00. Bitcoin transactions on average costs $28 right now.

Your problem at the bank is because you were using a check. You are comparing 1900 technology to 2017 technology and surprised it doesn't work as well. My direct deposit is available same day. I can move tens or hundreds of thousands of dollars between accounts for free if I can wait 2-3 days, or for $15 same day. Bitcoin would be $28... again, not helpful.

Sharing information= that's blockchain. Not bitcoin. Most people agree that blockchain will have uses. That doesn't mean squat for bitcoin.

Bitcoin is trying to solve problems that don't exist. Let me rephrase... people are trying to justify Bitcoin's existence by making up problems that it could hypothetically solve if those problems existed. You can transfer money electronically really easily. That isn't a problem that needs to be solved. Bitcoin let's you do it with a numbered account which is great for illegal transactions, but other crypto currencies are doing that better now.

phil22

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Re: Is it too late [bitcoin]?
« Reply #697 on: January 12, 2018, 05:27:39 PM »
In the case of assets that do have intrinsic value (and that are traded in efficient markets) (like stocks), in the long-run, the market runs out of greater fools (and investors who believe in the existence of greater fools), so the "weighing machine" that is the market in the long-term corrects the overvaluation created by the "voting machine" that is the market in the short-term.  In the case of assets that do not have any intrinsic value (like bitcoins, or MMM's fingernail clippings), there is no fundamental value that the market can converge towards in the long-run, and purchasing those assets in the hope that their market value will rise in the future is not investment but speculation.

i agree with Cycling Stache.  the difference between the stock market and say the bitcoin market is just the long history of the stock market.  that's it.

the stock market has apparently not run out of "greater fools".  the average stock is priced 3x its book value, meaning 2/3 of the market price of your stocks is pure speculation.  you are absolutely hoping a "greater fool" comes along to buy your shares of stock/VTSAX/whatever some day.  the stock market is not converging on the book value of your stocks.

phil22

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Re: Is it too late [bitcoin]?
« Reply #698 on: January 12, 2018, 05:38:41 PM »
Sharing information= that's blockchain. Not bitcoin. Most people agree that blockchain will have uses. That doesn't mean squat for bitcoin.

blockchains are useless without a built-in valuable token to incentivize participation.  you can't have a valuable blockchain without a valuable token, and you can't have a valuable token without a valuable blockchain.

Bitcoin is trying to solve problems that don't exist. Let me rephrase... people are trying to justify Bitcoin's existence by making up problems that it could hypothetically solve if those problems existed. You can transfer money electronically really easily. That isn't a problem that needs to be solved. Bitcoin let's you do it with a numbered account which is great for illegal transactions, but other crypto currencies are doing that better now.

bitcoin stands on its own.  it's a self-contained secure system.  no one needs to justify its existence, it just exists.  no one needs to justify the market price of bitcoin either.  if you personally think the market price is too high, don't buy any.

there are literally billions of people around the world without access to modern banking or non-corrupt fiat currencies.  is bitcoin the solution?  maybe, maybe not.

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #699 on: January 12, 2018, 05:39:17 PM »
Massive fees moving money between countries? It's $4.99 with XOOM to send money to most countries, and most of the exceptions to that rule still cost less than $10.00. Bitcoin transactions on average costs $28 right now.

Your problem at the bank is because you were using a check. You are comparing 1900 technology to 2017 technology and surprised it doesn't work as well. My direct deposit is available same day. I can move tens or hundreds of thousands of dollars between accounts for free if I can wait 2-3 days, or for $15 same day. Bitcoin would be $28... again, not helpful.

Sharing information= that's blockchain. Not bitcoin. Most people agree that blockchain will have uses. That doesn't mean squat for bitcoin.

Bitcoin is trying to solve problems that don't exist. Let me rephrase... people are trying to justify Bitcoin's existence by making up problems that it could hypothetically solve if those problems existed. You can transfer money electronically really easily. That isn't a problem that needs to be solved. Bitcoin let's you do it with a numbered account which is great for illegal transactions, but other crypto currencies are doing that better now.

I just want to dispute the idea that fees are $28 for a transaction on the Bitcoin network at the moment. That's just a myth that is often spewed by media when talking about the fees with Bitcoin. The truth is that 140 satoshis/byte transactions are routinely confirmed everyday. Furthermore, transactions with a fee of about 200 satoshis/byte will generally get you confirmed within an hour or two. If you're using a SegWit wallet, your typical transaction (1 input>2 outputs) will be about 166 bytes in size. That means that for a transaction with a fee rate of 140 s/byte, it will cost you about ~$3.25 depending the price of BTC at the time. If your transaction is slightly higher priority, you can bump your fee rate up to 200-300 s/byte and have it confirmed within an hour and that will cost you about ~$5.80. You can do this at any time of day, any day of the week, which isn't something your traditional bank will be able to accomodate.

This is why averages don't mean anything because many people are way overpaying their fees when sending their transactions to be included in a block. That's like going to a bank and having the bank teller ask you what fee you'd like to pay and the teller tells you can pay as little as $3.25, but everyone else is paying $20 on average...what fee do you think you'll choose to pay? The average doesn't mean anything, what does matter is the minimum fee you can personally get away with and still have a transaction confirmed.

For current fee rates that are being confirmed, you can use these charts:

https://dedi.jochen-hoenicke.de/queue/#24h
http://bitcoinfees.earn.com/

As far as additional use cases with Bitcoin go, The Republic of Georgia and Sweden are currently using the Bitcoin blockchain to register public land titles and make them publicly verifiable. There is a very high level of trust in the Bitcoin network which is why these countries are able to do this and why this use case isn't found being actively pursued on other blockchains. We'll begin to see more and more use cases like this as time goes as due to the fact that the Bitcoin network itself has established itself as an extremely trustworthy network that is very anti-fragile. Add in the fact that second layers are actively being developed and deployed on the network and you'll see some real innovation begin to take place.

This is something that traditional centralized institution simply can't compete against and it is the focal point for the benefit that the Bitcoin blockchain will provide society; an immutable and publicly verifiable ledger that can extend to many use cases. Time is on Bitcoin's side. The longer it exists and continues to function securely, the more the public's trust in it grows. Any new crypto-currency that is invented from here on out will need to compete against a growing public trust in a network that has long stood against time and all its obstacles. This is why an open decentralized internet won out against centrally controlled corporate intranets. So no, I don't think Bitcoin is trying to solve problems that don't exist. I think there is a void in our society that can be filled with decentralized solutions that Bitcoin is prepared to fill.
« Last Edit: January 12, 2018, 05:55:36 PM by lifeanon269 »