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.