I don't understand all this talk about using BTC to buy stuff..

[neo von retorch]

The short-term fallout is that cards purchased for crypto instead of gaming might start showing up all over on the secondhand market, and prices will dip there. New cards will continue to sell for their original purpose, PC gaming. And a lot of PC gamers were holding off on buying a graphics card at inflated prices, so there's a ton of pent up demand. Some will scoop up secondhand, while many will buy new.

How viable are crypto cards on the secondhand market for gaming? In a best case scenario, they are cards that have been ridden hard and put away went. In a worst case scenario, they are locked down by by the manufacturer and lacking video outputs.

"Normal" GPUs are quite viable. Primarily, crypto works the memory chips relatively hard. Depending on how they were configured, they could theoretically have a shorter lifespan. (In 20+ years I've never had a GPU have a memory failure, but I also haven't tried used, crypto-mining GPUs - outside of my own controlled environment, see later comments!) If the cards were locked down and lack video outputs, then I assume you mean ASICs made and sold specifically for crypto mining. But yeah those aren't what Nvidia or AMD sell.  It also isn't all that telling that cards bought in 2021 were "for crypto." It put demand in overdrive, for sure, and a lot of demand wasn't met by the supply. That demand for GPUs for gaming is unlikely to have gone away completely. Some PC gamers may have thrown up their hands and switched to console gaming. But supply wasn't meeting demand there either...

There's also people like me. I bought a mid-range card before the prices went crazy, but got into some more demanding games and really wanted a newer generation, mid-to-high end card. I begrudgingly paid $800 (MSRP $480) and let the old and new cards mine Ethereum. Overall, the cards paid for themselves and I don't need to mine any more. I use the new card to game and I can either sell the old one or keep it around in a spare gaming machine (which I have; it doubles as an excellent multiplayer game server / host.) I don't know if AMD counts those cards as "sold for crypto" (or how they would know...) but ultimately they were "bought for gaming."

Note these cards while mining have seen memory temperatures of 55C up to about 70C. The danger zone is more like 100C. So "ridden hard" seems like an overstatement. They game great after their ~6 months of hard service.

[jnw]

On the bright side, gamers are now able to get graphics cards affordably :)  I sold a Radeon RX580 for $400 a few months ago, which is now selling for $200 on ebay :)

Correct me if I am wrong, but if crypto tanks won't this dramatically affect the earnings of AMD/NVidia?  And then NVDA/AMD stocks will drop hard?

Actually not a crazy idea to short NVDA as a play on either crypto crashing or high-PE stocks going down as interest rates rise.

But not today lol, NVDA is up at 9.3% currently (5/13/2022).

[PDXTabs]

On a very practical level, I think you are missing the attraction that bitcoin, in particular, but also some other prominent coins have for criminal enterprises.

If I were a criminal all of my transactions would be in XMR which doesn't have high transaction costs and a big public unencrypted blockchain showing all of my criminal activity.

[PDXTabs]

You will soon be able to use Bitcoin to buy Gucci:
https://www.cnn.com/2022/05/08/business/gucci-bitcoin-cryptocurrency-payments-trnd/index.html

Don't people realize every time you buy something with BTC, in the USA, they will have to file a Schedule D for capital gains/loss?  Imagine buying stuff with BTC every day instead of dollars.  The tax nightmare that would be...

Technically if I use GBP (or gold coins) to buy Gucci I'm also supposed to report any gains that my GBP/gold had. But yes, BTC is not a good cryptocurrency, it's just the first. But this is Gucci. Does it even matter?

I'm not anti-cryptocurrency (it beats bad currencies like the Bolivar), but for your cryptocurrency to be successful it needs to have low transaction costs IMHO.

[jnw]

Will this happen to BTC?  It went from like $80 down to $0.00002 in like 3-4 days.  In my opinion all of these coins should be outlawed like they did in China.



Absolutely terrifying.

[dandarc]

Will this happen to BTC?  It went from like $80 down to $0.00002 in like 3-4 days.



Absolutely terrifying.

I mean it could, but I don't think it will be nearly that dramatic with bitcoin specifically. BTC is huge, and has enough big money operations involved to prop it up longer than that. So I think a crash to essentially nothing in BTC is pretty unlikely and almost certainly wouldn't be as swift if it does happen. Plus BTC is designed to be deflationary - rapid inflation like you see there is less likely because of the design of the coin.

Interesting read here on what happened: https://indianexpress.com/article/technology/crypto/5-things-you-need-to-know-about-luna-crypto-crash-7919632/


Guaranteed 20% interest, with a coin that also claimed to peg to USD - too good to be true for long and a collapse destined to happen unless changes made early enough to stop too many deposits to keep things stable. Apparently word got out the 20% interest was going away in favor of a variable rate and investor behavior immediately  moved towards  dumping the "stable" coin, which "only" lost 85% of its value. With the huge imbalance of selling, the algorithm automatically started to create more and more of the sister coin Luna (your chart). So UST experienced a sell off and Luna experienced hyperinflation so acute it makes the old Zimbabwe dollars look like a great idea in hindsight. Kind of thing only computer programmers could make happen really - "75% of the entire currency in our version of the bank to 10% in 3 days - that'll never happen".

So turns out decentralization cannot prevent what looks an awful lot to me like a bank run. Wonder how much the developers and early adopters of these coins profited, or if they had more faith in their system than the rest of the market did.

[MustacheAndaHalf]

Will this happen to BTC?  It went from like $80 down to $0.00002 in like 3-4 days.  In my opinion all of these coins should be outlawed like they did in China.

China banned Bitcoin one year, and rolled out their digital yuan the next year.  Given the preparation required, they were working on their own crypto at the time they banned all others.
https://www.politico.com/newsletters/digital-future-daily/2022/05/13/watch-out-for-chinas-digital-yuan-00032475

The most popular stable coin is USDT, which I believe is backed by a company in Hong Kong that claims to have $1 USD for every 1 USDT.  Actually last week was a nice test, because USDT survived a "bank run" where people redeemed in huge numbers.

"UST", by contrast, was an "algorithmic stable coin" involving a sister crypto currency.  Whoever created the algorithm didn't forsee events of last week, when UST collapsed.  But nobody claimed to back UST - redemptions didn't come from a single, trusted company like they do with other stable coins.

Most likely, someone else will try again, but this time with a broader selection of crypto.  I would consider "algorithmic stable coin" very risky, as shown by the collapse last week.

As to Bitcoin dropping, yes it can drop to zero.  While it existed for a few years as a hobby, the Grayscale Bitcoin Trust (GBTC) was created in Sept 2013.  Over the 8 years since, Bitcoin hasn't collapsed to zero (but has crashed over 90% multiple times).  I personally own zero Bitcoin right now because I expect it to crash below $20k before recovering.  But that assumes inflation stays high, the Fed acts, and stocks drop further - taking BTC with them.

[the_gastropod]

Once upon a time, Tether did claim to hold $1USD for every USDT. They repeatedly claimed this, and were shockingly found to be lying (https://fortune.com/2021/10/15/tether-crypto-stablecoin-fined-reserves/) Today, they self-attest (https://tether.to/en/transparency/#reports)  that they hold ~5% in cash. The lion's share (84%) of their backing is in unspecified "commercial paper" many suspect amount to little more than IOU's to a handful of other crypto companies such as Bitfinex. That's $64B in "corporate paper", and virtually no commercial paper brokers have even heard of Tether. https://www.ft.com/content/342966af-98dc-4b48-b997-38c00804270a

To add to the fishiness, the CEO and CFO are also the CEO and CFO of Bitfinex, one of the largest crypto exchanges—and likely the other side of much of Tether's "commercial paper". The CEO and CFO, Giancarlo Devasini—a former plastic surgeon and busted software counterfeiter—are basically ghosts. They don't do interviews, they don't write anything, nada. The company's two frontmen are its general counsel and CTO who are... let's just say less than professionals. These two have repeatedly made completely bizarre and absurd excuses as to why Tether won't permit an audit of its reserves. Here's a rather funny example. In this interview, Paolo, the CTO, just spews complete nonsense on stilts as to why Tether won't submit to an audit: https://www.youtube.com/watch?v=kp5kv7aENxw

A company with a history of lying about its reserves that also refuses an audit and is headed by silent chief execs with  major conflicts of interest just doesn't seem all that trustworthy to me.

[theolympians]

I personally know people that have bought crypto, none have bought anything with it.

[MustacheAndaHalf]

A correction: there's an article claiming Bitcoin has crashed by -99%, -83% and -84%.  So Bitcoin may have crashed by over 80% multiple times, not the figure I cited earlier.  And this article uses some examples where the lowest price was very brief.
https://finance.yahoo.com/news/7-biggest-bitcoin-crashes-history-180038282.html

Many years ago I transferred Bitcoin to a certain address to pay for VPN service.  So I paid for the service that way - not using a credit card or some indirect PayPal approach, but by physically performing the transfer myself.  I think I also bought some kind of transportation ticket that way, too, from someone who was trying to get people using it.  Overall it was rare to find a business that accepted it.

A more significant problem is that after 8% inflation, a $20 bill might buy $18.40 worth of goods compared to a year ago.  But $20 worth of BTC bought a year ago would be worth $10.48 now, and only buy $9.64 worth of goods.  It's a bit like keeping money for groceries invested in small cap tech stock.

[jnw]

I find it interesting that people say technical analysis doesn't mean anything but the chart went side ways along the 30k or so resistance / support level and immediately dropped down to the next support level -- which I predicted a few messages ago in this thread -- which it is at currently.. around $19.5k.  Now it should go sideways a while .. we'll see.   There isn't any fundamental analysis for this 100% speculative coin so all you have is TA and "news".

[lost_in_the_endless_aisle]

I find it interesting that people say technical analysis doesn't mean anything but the chart went side ways along the 30k or so resistance / support level and immediately dropped down to the next support level -- which I predicted a few messages ago in this thread -- which it is at currently.. around $19.5k.  Now it should go sideways a while .. we'll see.   There isn't any fundamental analysis for this 100% speculative coin so all you have is TA and "news".

If technical analysis worked, you could use it to achieve outsized returns. How about put up some play money and see how you do?

[Eco_eco]

Just jumping in with a bit of a contrarian view. I’ve had a little bit of crypto since 2017. The value of my investments has gone up and down a lot over the year, it’s high was $400k in November 21 and it’s low was $30k last week. But that is after also extracting around $100k and crypto has been overall profitable for me. My approach is to use crypto link a rental property and invest for long term yield. It’s also a hobby - I enjoy learning about next projects and where the tech is heading.

Crypto has become a whole lot more usable in the past few years. I routinely use crypto for banking services. It’s a useful way to get 0% or slightly profitable loans.

Right now we are going through one of cryptos big crashes. It’s not especially surprising and hopefully people were prepared for it. It has happened every few years for over a decade now.

[ChpBstrd]

Crypto has become a whole lot more usable in the past few years. I routinely use crypto for banking services. It’s a useful way to get 0% or slightly profitable loans.

I'm intrigued. The last six months has been a most excellent time to owe somebody some crypto. More info?

I personally know people that have bought crypto, none have bought anything with it.

I hear it can be used to buy dollars, but the rate of inflation for that trade is insane.

[Eco_eco]

Crypto has become a whole lot more usable in the past few years. I routinely use crypto for banking services. It’s a useful way to get 0% or slightly profitable loans.

I'm intrigued. The last six months has been a most excellent time to owe somebody some crypto. More info?

I personally know people that have bought crypto, none have bought anything with it.

I hear it can be used to buy dollars, but the rate of inflation for that trade is insane.

There are quite a few crypto projects that offer over collateralised loans. These are often incentivised to grow use of the platform.

For example I can lock up CRO (cronos coin) on Tectonic. I then borrow against it and I will be paid more interest on the CRO that I lock up and I will be charged and effective interest rate of $0 for the loan because of the incentives to use the platform.

However, the risk is that the value of the CRO coin will drop to the point that either my collateral is sold to pay back the loan, or I’ve effectively lost money because the coin didn’t work out.

How this worked in practice when I wanted to buy a laptop a few days ago was like this:
A) deposited $6,000 of CRO coin, which pays me 1.54% interest plus 2.60% bonus interest in platform incentives (4.14% total)
B) borrowed $2,000 against the CRO deposited. The interest rate I pay on this is 2.20% offset by 3.66% platform incentives. Making an effective interest rate of -1.46% for the loan. I go off happily and buy my laptop.

If CRO goes down in price then my loan gets a little risky, however if CRO goes up then my loan gets very cheap. Since I was planning on holding $6,000 of CRO and taking the capital risk anyway I’m not to worried. The incentives won’t last forever, but if/when they run out I can easily, at not cost and with no lock in, switch to another lender.

This works on many different coins and crypto platforms.

[FLBiker]

I find it interesting that people say technical analysis doesn't mean anything but the chart went side ways along the 30k or so resistance / support level and immediately dropped down to the next support level -- which I predicted a few messages ago in this thread -- which it is at currently.. around $19.5k.  Now it should go sideways a while .. we'll see.   There isn't any fundamental analysis for this 100% speculative coin so all you have is TA and "news".

If technical analysis worked, you could use it to achieve outsized returns. How about put up some play money and see how you do?

I'm guilty of the former (saying TA doesn't mean anything) with the caveat that I know very little about it.  Back in my early investing days, I wrote for an investment newsletter that picked individual stocks.  I was a new college graduate and knew nothing about stocks, but I followed some of the advice that the guy was giving in the newsletter, and I did very well on a couple and not so well on a couple.  As I learned more, I started to understand that what he was doing was called "charting" -- where you look at past patterns on the chart and extrapolate things like support levels and trend lines, and things have names like double shoulder top or whatever, but that it's all pretty much useless when it comes to projecting the future reliably.  Again, this is just my very limited understanding (and perhaps charting and TA aren't the same thing).  I certainly didn't mean any offense, though.

[theolympians]

I don't know anyone that has bought anything with any crypto. I know lots of people who are "investing" crypto. I don't think any one of them has a clue in how to go about buying anything with it. They are only buying it because they think it will go up in price.

Crypto doesn't have utility in the real world. In most transactions you will need a third party to transfer into dollars, or the retailer will just charge you a service fee to convert them to dollars. Either way, it is stupid to use any crypto as currency. The recent volatility demonstrates.

[ATtiny85]

Crypto doesn't have utility in the real world. In most transactions you will need a third party to transfer into dollars, or the retailer will just charge you a service fee to convert them to dollars. Either way, it is stupid to use any crypto as currency. The recent volatility demonstrates.

This is the part that has always confused me when “people” would talk about crypto taking over. At some point there are still dollars involved, and I don’t see how it will ever work otherwise.

[Eco_eco]

Crypto doesn't have utility in the real world. In most transactions you will need a third party to transfer into dollars, or the retailer will just charge you a service fee to convert them to dollars. Either way, it is stupid to use any crypto as currency. The recent volatility demonstrates.

This is the part that has always confused me when “people” would talk about crypto taking over. At some point there are still dollars involved, and I don’t see how it will ever work otherwise.

I think if you are the US the use case of crypto is not clear. However, in other nations there is really no difference between Bitcoin and the local money. If I want to buy something from Amazon the money I have has to be converted into USD. I don’t mind if that money is my local currency, or Bitcoin, or some other crypto. Likewise for purchases from many different providers.

Defi and other crypto financial services are easier to use than traditional banking services, and I don’t have to share any of my personal information to use them. Crypto has already gotten to the point that I would prefer to use it to buy things with than the traditional banking system.


Sent from my iPad using Tapatalk

[Daisy]

I don't know anyone that has bought anything with any crypto. I know lots of people who are "investing" crypto. I don't think any one of them has a clue in how to go about buying anything with it. They are only buying it because they think it will go up in price.

Crypto doesn't have utility in the real world. In most transactions you will need a third party to transfer into dollars, or the retailer will just charge you a service fee to convert them to dollars. Either way, it is stupid to use any crypto as currency. The recent volatility demonstrates.

I learned about Bitcoin almost when it started. The USD is being devalued constantly with money printing. I see the allure of crypto currencies when viewed in this light, but as others have said what is to stop new cryptos/blockchains from being created out of a new algorithm? When you think of that, the "scarcity" promised by cryptos goes away.

I think cryptos could have promise if the scarcity they promised was really a thing. Also, it's the network effect. If cryptos aren't used in transactions, what good are they? I really don't see crypto as an investment but more as a currency. It scares me too much to transfer USD into crypto.

So I have stayed on the sidelines for years, really wanting to like cryptos yet looking back on the dot com bubble and thinking this is the same thing happening.

If cryptos are ever accepted widely as a currency, I think I am better off investing in "real" assets like real estate and stocks now and hoping they keep up with inflation and can transfer to a new widely accepted crypto currency if it ever comes to be and treat it like cash.

[theolympians]

Crypto doesn't have utility in the real world. In most transactions you will need a third party to transfer into dollars, or the retailer will just charge you a service fee to convert them to dollars. Either way, it is stupid to use any crypto as currency. The recent volatility demonstrates.

This is the part that has always confused me when “people” would talk about crypto taking over. At some point there are still dollars involved, and I don’t see how it will ever work otherwise.

In all seriousness, it does sound easy as you put it. However, what happens n the case of fraud? If there is no personal information involved how are you protected?

I think if you are the US the use case of crypto is not clear. However, in other nations there is really no difference between Bitcoin and the local money. If I want to buy something from Amazon the money I have has to be converted into USD. I don’t mind if that money is my local currency, or Bitcoin, or some other crypto. Likewise for purchases from many different providers.

Defi and other crypto financial services are easier to use than traditional banking services, and I don’t have to share any of my personal information to use them. Crypto has already gotten to the point that I would prefer to use it to buy things with than the traditional banking system.


Sent from my iPad using Tapatalk

[theolympians]

I posted incorrectly.

If personal information is not included, how is one protected in the case of fraud?

[Eco_eco]

I posted incorrectly.

If personal information is not included, how is one protected in the case of fraud?

Transactions within the crypto world (ie borrowing, lending, etc) are based on crypto address ownership rather than personal identity.

Transactions that resolve into USD (like buying a gift card or a product on Amazon) require proof of identity. But providing proof of identity to a provider (like crypto.com or Coinbase) is a lot less intrusive than traditional banking.

My bank often requires proof of identity, proof of income, source of funds, number of dependants, age of dependant, proof of employment, length of time in employment, etc etc.

If applying for a loan banks here in New Zealand are also required to review several months of personal transactions to confirm that you can afford payments as interest rates rise.

Edit: fixed a typo

[GuitarStv]

I posted incorrectly.

If personal information is not included, how is one protected in the case of fraud?

You're not.  The crypto world is rife with fraud.

https://www.ftc.gov/news-events/data-visualizations/data-spotlight/2022/06/reports-show-scammers-cashing-crypto-craze

Since 2021, about a billion dollars was lost in crypto due to fraud - more than any other payment method in the world.

And it makes sense when you think about it.  Most crypto transactions can't be undone, and lack identifying information of the parties involved.  That's exactly what a fraudster wants.

[mrs sideways]

I posted incorrectly.

If personal information is not included, how is one protected in the case of fraud?

You're not.  The crypto world is rife with fraud.

https://www.ftc.gov/news-events/data-visualizations/data-spotlight/2022/06/reports-show-scammers-cashing-crypto-craze

Since 2021, about a billion dollars was lost in crypto due to fraud - more than any other payment method in the world.

And it makes sense when you think about it.  Most crypto transactions can't be undone, and lack identifying information of the parties involved.  That's exactly what a fraudster wants.

If anyone wants a good ongoing catalog of fraud, check out Molly White's website: https://web3isgoinggreat.com/

[ChpBstrd]

I posted incorrectly.

If personal information is not included, how is one protected in the case of fraud?

You're not.  The crypto world is rife with fraud.

https://www.ftc.gov/news-events/data-visualizations/data-spotlight/2022/06/reports-show-scammers-cashing-crypto-craze

Since 2021, about a billion dollars was lost in crypto due to fraud - more than any other payment method in the world.

And it makes sense when you think about it.  Most crypto transactions can't be undone, and lack identifying information of the parties involved.  That's exactly what a fraudster wants.

If anyone wants a good ongoing catalog of fraud, check out Molly White's website: https://web3isgoinggreat.com/

^ That site is GOLD.

[jnw]

I find it interesting that people say technical analysis doesn't mean anything but the chart went side ways along the 30k or so resistance / support level and immediately dropped down to the next support level -- which I predicted a few messages ago in this thread -- which it is at currently.. around $19.5k.  Now it should go sideways a while .. we'll see.   There isn't any fundamental analysis for this 100% speculative coin so all you have is TA and "news".

Seems to be going as predicted.. going sideways at around $19.5k for a while.  Technical Analysis is something.  Next support level is around $11k.

[ChpBstrd]

Cryptocurrencies could go to near-zero within a year or two if politicians start piling on. Now that it's not going straight up anymore, it seems like more and more critics are coming out of the woodwork and using the "fraud" word. The domino effect of collapsing crypto firms who were only using their depositors' money to speculate on continued appreciation, if not directly enrich the people orchestrating the thing, is going to continue. As governments start regulating crypto out of existence by requiring things like - IDK - proven collateral for "stable"coins, which are derivatives contracts by another name, crypto will become essentially uneconomical as speculative vehicles across most of the globe. When more and more people start complaining to their representatives about losing money on crypto schemes, those same representatives will start investigations and hold hearings and promote regulations that will push down prices further.

The normalization and legalization of sports gambling will do the rest.

What's sad is that it is very unlikely the many forum threads with people arguing in favor of crypto will be lost to history, just like those with people arguing in favor of dot-com stocks, beanie babies, Florida condos circa 2007. The internet - the easiest way ever devised to record information - erases its own history. Very few people will be able to find these words in 10 years.

[LateStarter]

. . .

I learned about Bitcoin almost when it started. The USD is being devalued constantly with money printing. I see the allure of crypto currencies when viewed in this light, but as others have said what is to stop new cryptos/blockchains from being created out of a new algorithm? When you think of that, the "scarcity" promised by cryptos goes away.
. . .

Does the existence of iron and aluminium, etc. degrade the scarcity of gold ?

I don't think anyone is claiming that crypto as a whole is scarce, nor metals either.

[simonsez]

What's sad is that it is very unlikely the many forum threads with people arguing in favor of crypto will be lost to history, just like those with people arguing in favor of dot-com stocks, beanie babies, Florida condos circa 2007. The internet - the easiest way ever devised to record information - erases its own history. Very few people will be able to find these words in 10 years.

@ChpBstrd can you clarify the paragraph above?  I took your first sentence to mean that forum threads about crypto would be around forever (unlikely to be lost to history) due to what the second sentence says about the ease of internet records existing.  The rest of the 2nd and 3rd sentences seem to go in the opposite direction.

[GuitarStv]

. . .

I learned about Bitcoin almost when it started. The USD is being devalued constantly with money printing. I see the allure of crypto currencies when viewed in this light, but as others have said what is to stop new cryptos/blockchains from being created out of a new algorithm? When you think of that, the "scarcity" promised by cryptos goes away.
. . .

Does the existence of iron and aluminium, etc. degrade the scarcity of gold ?

I don't think anyone is claiming that crypto as a whole is scarce, nor metals either.

Iron, aluminum, and gold are all very different things with different uses.  You don't coat things in iron so that they look pretty, and you don't make solid gold tools because they wouldn't last very long under use.

Contrast with crypto.  Bitcoin and Ethereum are both designed to do the same thing - pretend to be 'currency' and a store of 'wealth'.  They're completely interchangeable.  As are a zillion other types of crypto.  So with crypto you're not comparing iron and gold . . . you're comparing one worthless rock you found on the side of the road with another worthless rock someone else found on the side of the road.  Sure, the rock in your hand is 'scarce' because you're the only one who has it.  But anyone can go out and pick up their own rock which will do pretty much the same thing - so the 'scarcity' should have no impact at all on value.

[Villanelle]

. . .

I learned about Bitcoin almost when it started. The USD is being devalued constantly with money printing. I see the allure of crypto currencies when viewed in this light, but as others have said what is to stop new cryptos/blockchains from being created out of a new algorithm? When you think of that, the "scarcity" promised by cryptos goes away.
. . .

Does the existence of iron and aluminium, etc. degrade the scarcity of gold ?

I don't think anyone is claiming that crypto as a whole is scarce, nor metals either.

Iron, aluminum, and gold are all very different things with different uses.  You don't coat things in iron so that they look pretty, and you don't make solid gold tools because they wouldn't last very long under use.

Contrast with crypto.  Bitcoin and Ethereum are both designed to do the same thing - pretend to be 'currency' and a store of 'wealth'.  They're completely interchangeable.  As are a zillion other types of crypto.  So with crypto you're not comparing iron and gold . . . you're comparing one worthless rock you found on the side of the road with another worthless rock someone else found on the side of the road.  Sure, the rock in your hand is 'scarce' because you're the only one who has it.  But anyone can go out and pick up their own rock which will do pretty much the same thing - so the 'scarcity' should have no impact at all on value.

I like to thing of it like children's artwork.  There is only 1 drawing of a dinosaur under a rainbow made my Timmy Smith on the 87th day of Mrs.  Jones' first grade class 2022, in the medium of Crayola markers.  And there are only 27 drawings made with Crayola markers by any student on Mrs.  Jones' first grade, 2022, 87th day.  Those are scarce indeed. But there is also artwork made in Mr.  Thomas' class that day.  And the artwork made on the 129th day.  And the art made with crayons.  And the art Timmy painted of a dinosaur *eating* a rainbow.  So individually, all are scare, or even unique. 

But not a single one of them has any real value, beyond a parents' love. 

Does the existence of Mr. Thomas' class artwork make Mrs' Jones' class' artwork any less scarce?  No.  But it certainly degrades the ability of Timmy's mom to claim some exceptionalism in her son--on outside value of his art--just because he scribbled a dinosaur.

[ChpBstrd]

What's sad is that it is very unlikely the many forum threads with people arguing in favor of crypto will be lost to history, just like those with people arguing in favor of dot-com stocks, beanie babies, Florida condos circa 2007. The internet - the easiest way ever devised to record information - erases its own history. Very few people will be able to find these words in 10 years.

@ChpBstrd can you clarify the paragraph above?  I took your first sentence to mean that forum threads about crypto would be around forever (unlikely to be lost to history) due to what the second sentence says about the ease of internet records existing.  The rest of the 2nd and 3rd sentences seem to go in the opposite direction.

Data are rarely lost forever any more, they are simply made unavailable. So it is nearly impossible to find out about what the discussion looked like on Facebook in 2010, or even what you posted in 2010, because if you go to any social media now you’ll only be snowed under by the latest content. It would require a major fishing expedition to find the first 100 threads on this simple forum, on which the format of the data hasn’t changed for nine years or more and there are not algorithms devaluing old content and making it harder to find.

Keyword searches work in some contexts but not others, so if you wanted to find a music video of Y2Khai from 1999 or a parts schematic for a 1982 John Deere tractor you can find it, but if the keywords are not unique or you don’t know the unique character combination that will lead to the result you have in mind, then you’re out of luck. What did an early retirement conversation look like in early 2000? Good luck finding that content on geocities or yahoo or whatever. It becomes a forensic process over time, which is why the cryptobros were never rebutted with links to arguments made in 1999 or 2000, and the home boners are never rebutted with content from 2006-2007. The internet keeps herding people into the same mistakes because it has a memory problem.

[PDXTabs]

. . .

I learned about Bitcoin almost when it started. The USD is being devalued constantly with money printing. I see the allure of crypto currencies when viewed in this light, but as others have said what is to stop new cryptos/blockchains from being created out of a new algorithm? When you think of that, the "scarcity" promised by cryptos goes away.
. . .

Does the existence of iron and aluminium, etc. degrade the scarcity of gold ?

I don't think anyone is claiming that crypto as a whole is scarce, nor metals either.

Bitcoin and Ethereum are both designed to do the same thing - pretend to be 'currency' and a store of 'wealth'.  They're completely interchangeable.

That's not true. That's not true at all.

https://ethereum.org/en/smart-contracts/

[the_gastropod]

. . .

I learned about Bitcoin almost when it started. The USD is being devalued constantly with money printing. I see the allure of crypto currencies when viewed in this light, but as others have said what is to stop new cryptos/blockchains from being created out of a new algorithm? When you think of that, the "scarcity" promised by cryptos goes away.
. . .

Does the existence of iron and aluminium, etc. degrade the scarcity of gold ?

I don't think anyone is claiming that crypto as a whole is scarce, nor metals either.

Bitcoin and Ethereum are both designed to do the same thing - pretend to be 'currency' and a store of 'wealth'.  They're completely interchangeable.

That's not true. That's not true at all.

https://ethereum.org/en/smart-contracts/

That particular example wasn't accurate, you're right. But there are countless clones of various popular cryptocurrencies. Litecoin, Bitcoin Gold, Bitcoin Diamond, etc. that are either *exactly* the same code-wise as Bitcoin, or at least very similar.

The argument, then, becomes "but they're scarce *on this particular network*", which... is a much weaker argument when you're trying to compare these to physical entities.

[ChpBstrd]

. . .

I learned about Bitcoin almost when it started. The USD is being devalued constantly with money printing. I see the allure of crypto currencies when viewed in this light, but as others have said what is to stop new cryptos/blockchains from being created out of a new algorithm? When you think of that, the "scarcity" promised by cryptos goes away.
. . .

Does the existence of iron and aluminium, etc. degrade the scarcity of gold ?

I don't think anyone is claiming that crypto as a whole is scarce, nor metals either.

Bitcoin and Ethereum are both designed to do the same thing - pretend to be 'currency' and a store of 'wealth'.  They're completely interchangeable.

That's not true. That's not true at all.

https://ethereum.org/en/smart-contracts/

That particular example wasn't accurate, you're right. But there are countless clones of various popular cryptocurrencies. Litecoin, Bitcoin Gold, Bitcoin Diamond, etc. that are either *exactly* the same code-wise as Bitcoin, or at least very similar.

The argument, then, becomes "but they're scarce *on this particular network*", which... is a much weaker argument when you're trying to compare these to physical entities.

The economic term is “product substitution”. I.e. if the price of beef gets too high, I can eat chicken.

There is no limit to the number of cryptocurrencies that could be created, and any new crypto can perform the same functions as any other crypto in its class. The steel / aluminum / gold comparisons don’t really add up because these metals are not substitutable. A better comparison might be an $80 t-shirt made by a particular fashion designer. Anyone can make a t-shirt and post it for sale at $80 but for whatever reason only some brands serve the status symbol function that accounts for $75 of the price.

It’s a whole other level of madness to buy the $80 t-shirts because they are so expensive and to expect a greater fool to pay $500 for them in the future.

[JAYSLOL]

. . .

I learned about Bitcoin almost when it started. The USD is being devalued constantly with money printing. I see the allure of crypto currencies when viewed in this light, but as others have said what is to stop new cryptos/blockchains from being created out of a new algorithm? When you think of that, the "scarcity" promised by cryptos goes away.
. . .

Does the existence of iron and aluminium, etc. degrade the scarcity of gold ?

I don't think anyone is claiming that crypto as a whole is scarce, nor metals either.

Bitcoin and Ethereum are both designed to do the same thing - pretend to be 'currency' and a store of 'wealth'.  They're completely interchangeable.

That's not true. That's not true at all.

https://ethereum.org/en/smart-contracts/

That particular example wasn't accurate, you're right. But there are countless clones of various popular cryptocurrencies. Litecoin, Bitcoin Gold, Bitcoin Diamond, etc. that are either *exactly* the same code-wise as Bitcoin, or at least very similar.

The argument, then, becomes "but they're scarce *on this particular network*", which... is a much weaker argument when you're trying to compare these to physical entities.

The economic term is “product substitution”. I.e. if the price of beef gets too high, I can eat chicken.

There is no limit to the number of cryptocurrencies that could be created, and any new crypto can perform the same functions as any other crypto in its class. The steel / aluminum / gold comparisons don’t really add up because these metals are not substitutable. A better comparison might be an $80 t-shirt made by a particular fashion designer. Anyone can make a t-shirt and post it for sale at $80 but for whatever reason only some brands serve the status symbol function that accounts for $75 of the price.

It’s a whole other level of madness to buy the $80 t-shirts because they are so expensive and to expect a greater fool to pay $500 for them in the future.

I like that example, really well put

[LateStarter]

. . .

I learned about Bitcoin almost when it started. The USD is being devalued constantly with money printing. I see the allure of crypto currencies when viewed in this light, but as others have said what is to stop new cryptos/blockchains from being created out of a new algorithm? When you think of that, the "scarcity" promised by cryptos goes away.
. . .

Does the existence of iron and aluminium, etc. degrade the scarcity of gold ?

I don't think anyone is claiming that crypto as a whole is scarce, nor metals either.

Bitcoin and Ethereum are both designed to do the same thing - pretend to be 'currency' and a store of 'wealth'.  They're completely interchangeable.

That's not true. That's not true at all.

https://ethereum.org/en/smart-contracts/

That particular example wasn't accurate, you're right. But there are countless clones of various popular cryptocurrencies. Litecoin, Bitcoin Gold, Bitcoin Diamond, etc. that are either *exactly* the same code-wise as Bitcoin, or at least very similar.

The argument, then, becomes "but they're scarce *on this particular network*", which... is a much weaker argument when you're trying to compare these to physical entities.

The economic term is “product substitution”. I.e. if the price of beef gets too high, I can eat chicken.

There is no limit to the number of cryptocurrencies that could be created, and any new crypto can perform the same functions as any other crypto in its class. The steel / aluminum / gold comparisons don’t really add up because these metals are not substitutable. A better comparison might be an $80 t-shirt made by a particular fashion designer. Anyone can make a t-shirt and post it for sale at $80 but for whatever reason only some brands serve the status symbol function that accounts for $75 of the price.

It’s a whole other level of madness to buy the $80 t-shirts because they are so expensive and to expect a greater fool to pay $500 for them in the future.

Of course metals are substitutable. Not all metals substitute well for all others and not in all circumstances but few applications demand exclusively one specific metal.
The metals analogy only breaks down where new cryptos can be created out of thin air and new metals can't. But again, a new crypto is not Bitcoin and doesn't affect the scarcity of Bitcoin.

T-shirts ? It's very easy to produce fake branded t-shirts - in fact, it's a major industry - and it devalues the status-brands.
Not so easy to produce fake Bitcoin. The value is not in the status - the value is in the controlled scarcity.

[GuitarStv]

So the whole value of bitcoin is in the scarcity of the brand then, not in the actual utility of the product (since there exist many identical cryptocurrencies)?

[LateStarter]

So the whole value of bitcoin is in the scarcity of the brand then, not in the actual utility of the product (since there exist many identical cryptocurrencies)?

In my opinion, the primary value of Bitcoin is as a store-of-value, and that is based on the absolute scarcity of Bitcoins.

Bitcoin does also have utility as a means of exchange. How much utility is open to debate and there are good arguments on both sides. However, this aspect is developing constantly so who knows what tomorrow will bring ? Not me, but my expectation is that things will get better rather than worse.

[Bateaux]

So the whole value of bitcoin is in the scarcity of the brand then, not in the actual utility of the product (since there exist many identical cryptocurrencies)?

In my opinion, the primary value of Bitcoin is as a store-of-value, and that is based on the absolute scarcity of Bitcoins.

Bitcoin does also have utility as a means of exchange. How much utility is open to debate and there are good arguments on both sides. However, this aspect is developing constantly so who knows what tomorrow will bring ? Not me, but my expectation is that things will get better rather than worse.

Just like brands and styles Bitcoin can go out of favor.  A shinny new coin with more function could easily replace it.  It doesn't have anything to back it but imagination.

[Daisy]

Of course metals are substitutable. Not all metals substitute well for all others and not in all circumstances but few applications demand exclusively one specific metal.
The metals analogy only breaks down where new cryptos can be created out of thin air and new metals can't. But again, a new crypto is not Bitcoin and doesn't affect the scarcity of Bitcoin.

T-shirts ? It's very easy to produce fake branded t-shirts - in fact, it's a major industry - and it devalues the status-brands.
Not so easy to produce fake Bitcoin. The value is not in the status - the value is in the controlled scarcity.

If something is to be used as currency, by its nature it should have controlled scarcity. Hasn't the money supply of the US dollar doubled or something like that in the last few years? This is one of the reasons for the current inflation. More US dollars chasing a limited number of physical entities means the price of the physical entities goes up valued in US dollars.

I like to explain it to people not very interested in economics and complaining about inflation with this example. When playing the game of Monopoly, people start buying properties and as each person accumulates more cash and properties, they begin to increase the price of each property and eventually some people run out of cash and one person wins the game because there is no more cash to keep inflating the prices. There is a scarce amount of cash in the Monopoly game. Now, imagine that as the game goes on, someone arrives with a new game of Monopoly with its own cash inside of the game, and the players of the original game now have access to this new doubled money supply. Of course, now they can continue to keep bidding higher and higher prices for the limited amount of properties on the original Monopoly board. Somebody new to the game has not accumulated this cash and is at a disadvantage. That is inflation.

That's why currencies need to have controlled scarcity. It is actually what crypto currency proponents advertise as one of the benefits compared to US dollars that can be created digitally with no backing from the central bank. Crypto currencies implement the controlled scarcity in their algorithms.

The scarcity is also the reason why precious metals (or for that matter other forms of barter) have been used as currency for thousands of years. Certain metals have certain physical characteristics and scarcity that make them more usable as currency.

I see no problem if Bitcoin is decided by the global community to be used as currency with this built in scarcity. However, until that happens I see buying Bitcoin as a purely speculative investment.

[Telecaster]

So the whole value of bitcoin is in the scarcity of the brand then, not in the actual utility of the product (since there exist many identical cryptocurrencies)?

The way most Bitcoin proponents would put it (and I agree with the basic logic) is that is has been collectively decided that Bitcoin is the coin of choice and so will remain that way just because of the first mover and network effects.  Like I say, that makes a certain amount of sense to me.   I could be wrong, but I think it is reasonable to assume Bitcoin will remain the prime mover in this area. 

The problem though is that Bitcoin is an objectively bad currency.  Transactions are simply too slow, too cumbersome, and too expensive to be useful.   It is also an objectively bad store of value.  For example, Elon Musk managed to lose about $200 million of shareholder's money speculating on Bitcoin.  That was stupid and irresponsible.   Musk had no idea what that potential rate of return was, and there is no possible way to even estimate it.   Worse, he initially announced Tesla would accept Bitcoin for payment, then backtracked after realizing that was not feasible.  Very stupid thing to do.  Similarly, El Salvador's Bitcoin speculation is also extremely irresponsible.  All governments have ongoing expenses and future obligations which can be estimated that need to be balanced with income from taxes and other source.  Locking up public money in a speculative venture with no way to estimate the future value is government malfeasance. 

So if it isn't unit of account or store of value, what is it?  It is a collectable.  There is enforced scarcity.   So the future price comes down to if there are more people who want to own Bitcoin in the future than own it now.  Simple as that.   I have no idea if more people will want to own it in the future.   It is possible but given the limited use cases, I find it unlikely.   

[GuitarStv]

It will also be interesting to see if the continued rampant environmental damage that Bitcoin causes to remain a viable collectible will remain as palatable going forward.

[Telecaster]

If something is to be used as currency, by its nature it should have controlled scarcity. Hasn't the money supply of the US dollar doubled or something like that in the last few years? This is one of the reasons for the current inflation. More US dollars chasing a limited number of physical entities means the price of the physical entities goes up valued in US dollars.

I like to explain it to people not very interested in economics and complaining about inflation with this example. When playing the game of Monopoly, people start buying properties and as each person accumulates more cash and properties, they begin to increase the price of each property and eventually some people run out of cash and one person wins the game because there is no more cash to keep inflating the prices. There is a scarce amount of cash in the Monopoly game. Now, imagine that as the game goes on, someone arrives with a new game of Monopoly with its own cash inside of the game, and the players of the original game now have access to this new doubled money supply. Of course, now they can continue to keep bidding higher and higher prices for the limited amount of properties on the original Monopoly board. Somebody new to the game has not accumulated this cash and is at a disadvantage. That is inflation.

That's why currencies need to have controlled scarcity. It is actually what crypto currency proponents advertise as one of the benefits compared to US dollars that can be created digitally with no backing from the central bank. Crypto currencies implement the controlled scarcity in their algorithms.

A couple nits:  There is inflation is Monopoly because each player gets $200 when they pass go.  So there is a constant injection of new money into the game.  But the real driver  of inflation is that when you get a Monopoly rents go up a lot, so prices skyrocket as the game goes on.  Players go bankrupt because they can't keep up with the increasing rent. 

For a real currency though, you do want some expansion of the money supply, roughly at the same rate as GDP, maybe a hair more.   If not, you get deflation, which leads to high unemployment.  We've seen that many times in our country's (USA) history.    A major design failure of Bitcoin as a currency was the deflationary design.   That practically guarantees it is unsuitable as a currency, and as we've seen almost nobody uses it for normal transactions.  They just hold onto it hoping the price will increase.  That's fine for a commodity, but terrible for a currency. 

[ChpBstrd]

Bitcoin may be scarce, but there is no scarcity of scarce things. New coins with scarcity features are issued all the time, just like collectibles are manufactured daily and marketed as collectibles.

[PDXTabs]

It will also be interesting to see if the continued rampant environmental damage that Bitcoin causes to remain a viable collectible will remain as palatable going forward.

This is a big deal. You could imagine a ban on using fossil fuels in bitcoin mining farms. This is also where I usually point out that electricity rates can go negative on the five and 30 minute spot markets and you can get paid to use energy if you are an industrial consumer. But it's probably better to mine green hydrogen than bitcoin with your free green energy.

[Daisy]

If something is to be used as currency, by its nature it should have controlled scarcity. Hasn't the money supply of the US dollar doubled or something like that in the last few years? This is one of the reasons for the current inflation. More US dollars chasing a limited number of physical entities means the price of the physical entities goes up valued in US dollars.

I like to explain it to people not very interested in economics and complaining about inflation with this example. When playing the game of Monopoly, people start buying properties and as each person accumulates more cash and properties, they begin to increase the price of each property and eventually some people run out of cash and one person wins the game because there is no more cash to keep inflating the prices. There is a scarce amount of cash in the Monopoly game. Now, imagine that as the game goes on, someone arrives with a new game of Monopoly with its own cash inside of the game, and the players of the original game now have access to this new doubled money supply. Of course, now they can continue to keep bidding higher and higher prices for the limited amount of properties on the original Monopoly board. Somebody new to the game has not accumulated this cash and is at a disadvantage. That is inflation.

That's why currencies need to have controlled scarcity. It is actually what crypto currency proponents advertise as one of the benefits compared to US dollars that can be created digitally with no backing from the central bank. Crypto currencies implement the controlled scarcity in their algorithms.

A couple nits:  There is inflation is Monopoly because each player gets $200 when they pass go.  So there is a constant injection of new money into the game.  But the real driver  of inflation is that when you get a Monopoly rents go up a lot, so prices skyrocket as the game goes on.  Players go bankrupt because they can't keep up with the increasing rent. 

For a real currency though, you do want some expansion of the money supply, roughly at the same rate as GDP, maybe a hair more.   If not, you get deflation, which leads to high unemployment.  We've seen that many times in our country's (USA) history.    A major design failure of Bitcoin as a currency was the deflationary design.   That practically guarantees it is unsuitable as a currency, and as we've seen almost nobody uses it for normal transactions.  They just hold onto it hoping the price will increase.  That's fine for a commodity, but terrible for a currency.

You bring up some good points. A little inflation is good, but not doubling the money supply in a few short years.

I believe Bitcoin does create new coins up until a certain point in a controlled algorithmic way. However, I think at some point no new coins could be created. There is a maximum amount. It could be 20 years down the road...I don't know the exact number.

I said up above I disagree with people treating Bitcoin as an investment. I see it only as a possible currency, a unit of exchange for goods and services, just like the US dollar and other currencies. The only thing that would give it value is if more people actually used it for exchange. I am not willing to take that risk for now. I would rather keep my wealth in real assets and stocks that would hopefully keep up with inflation.

[Daisy]

Bitcoin may be scarce, but there is no scarcity of scarce things. New coins with scarcity features are issued all the time, just like collectibles are manufactured daily and marketed as collectibles.

Totally agree. The only thing that gives bitcoin scarcity is the algorithm. New coins, new algorithms...not scarce at all in the big picture.

[LateStarter]

Of course metals are substitutable. Not all metals substitute well for all others and not in all circumstances but few applications demand exclusively one specific metal.
The metals analogy only breaks down where new cryptos can be created out of thin air and new metals can't. But again, a new crypto is not Bitcoin and doesn't affect the scarcity of Bitcoin.

T-shirts ? It's very easy to produce fake branded t-shirts - in fact, it's a major industry - and it devalues the status-brands.
Not so easy to produce fake Bitcoin. The value is not in the status - the value is in the controlled scarcity.

If something is to be used as currency, by its nature it should have controlled scarcity. Hasn't the money supply of the US dollar doubled or something like that in the last few years? This is one of the reasons for the current inflation. More US dollars chasing a limited number of physical entities means the price of the physical entities goes up valued in US dollars.

I like to explain it to people not very interested in economics and complaining about inflation with this example. When playing the game of Monopoly, people start buying properties and as each person accumulates more cash and properties, they begin to increase the price of each property and eventually some people run out of cash and one person wins the game because there is no more cash to keep inflating the prices. There is a scarce amount of cash in the Monopoly game. Now, imagine that as the game goes on, someone arrives with a new game of Monopoly with its own cash inside of the game, and the players of the original game now have access to this new doubled money supply. Of course, now they can continue to keep bidding higher and higher prices for the limited amount of properties on the original Monopoly board. Somebody new to the game has not accumulated this cash and is at a disadvantage. That is inflation.

That's why currencies need to have controlled scarcity. It is actually what crypto currency proponents advertise as one of the benefits compared to US dollars that can be created digitally with no backing from the central bank. Crypto currencies implement the controlled scarcity in their algorithms.

The scarcity is also the reason why precious metals (or for that matter other forms of barter) have been used as currency for thousands of years. Certain metals have certain physical characteristics and scarcity that make them more usable as currency.

We seem to be in near full agreement.

I see no problem if Bitcoin is decided by the global community to be used as currency with this built in scarcity. However, until that happens I see buying Bitcoin as a purely speculative investment.

Again, I mostly agree.

Bitcoin is not currently an effective store-of-value - that's very clear. It will require much wider and more diverse adoption to bring that about.

Those that think Bitcoin can become a store-of-value and are prepared to put money on it, the early adopters, are taking a risk - and they will be rewarded/punished in accordance with the ultimate outcome.