Topic: Bitcoin ends up to be a ponzi scheme after all (Read 1614 times)

They could read this:
http://bitcoinobituaries.com/

Because one could not exist by definition. But try telling this to idiots who heard of bitcoin in 2014 and don't know what log charts are; to them, there was only one runup and one deflation, so they hurry to share their dumb revelation with us.

I never heard of a ponzi that collapsed multiple times.

Bitcoin having the (only) pretention of being a monetary asset, its fundamental is given by the monetary formula: P x Q = M x V.

But better: B = 1/P (the value of a bitcoin), and T = 1/V (the harmonic average of holding times).

M is the amount of bitcoins existing (ultimately 20 million).

If Q value of goods is traded against bitcoin, and if the average holding time between acquiring bitcoin and spending it for goods Q, is T, then the fundamental value of a bitcoin is given by:

B = Q x T / M

You can also say that the fundamental market cap of bitcoin is Q x T.

This is a fundamental, because as long as people want to buy value Q with it, and hold on average the coins during a time T, then the value of the market cap CANNOT be lower than Q x T.

Imagine that people are buying for the equivalent of $ 100 billion on the (black ?) market per year, and they are holding the coins for about 14 days (1/25 of a year, say), then the market cap of bitcoin must be about $4 billion.  Simply because this is the value the coins need to have to be immobilized during 14 days, and being able to buy $100 billion worth.

This is why the fundamental of bitcoin is merchant (and customer) adoption.


But of course, the current market value of bitcoin will include the speculative part of the FUTURE fundamental.  Currently, I don't think that bitcoin has as a monetary fundamental (as defined above) its current price.  I would even think it to be in the double digit range rather.   The current price reflects the speculation on a future higher fundamental of course.  I think the current decline is simply due to people finally realizing that that future higher fundamental, if ever, is not for the next few years.

The high end of the future fundamental would be if bitcoin replaced all of fiat in the world, and would be used in a similar way as fiat now (that is, similar holding times).  In that ultimate case, a coin would go for about $ 3 millon (value today).

If you expect that to happen 150 years from now, you can apply your discounted cash flow technique.  I don't know how much you'll find for the price right now.

If you expect bitcoin to be limited to a market of a few hundred billion dollars in the next decades, then everything depends on the holding times.  Those could be really short if people just use them as a transaction between fiat holdings, which would put the holding times to a few hours only.  In that case, you could expect the market cap to be divided by about 100. and end up in the few tens of millions up to a few hundred millions, which would bring us indeed back to a coin price in the double digits.

The price increases by way of speculation.  

You  two clearly don't know what fundamentals mean.  And surely you wouldn't  even believe me if I explained to you so it's better you find out in your own.  

If you think think there is a fundamental value then you can tell me what it is from a DCF analysis.  Good luck with that since speculative assets have no cash flow.  Finance 101

EVERY monetary asset is "a pyramid scheme".  If bitcoin has the pretention to be a monetary asset, it cannot be anything else but a pyramid scheme, of course.

Gold is a pyramid scheme.  Fiat is a pyramid scheme.  All means of payment are based upon a pyramid scheme.

Why ?

Because the incentive to "buy" the asset (bitcoin, dollars, gold) is purely and solely determined by the speculation that others will want to buy the asset from you later.  In this phrase, "to buy" comes down to "willing to give up value in order to obtain it".  That value can be labor (you are willing to work in order to obtain it), it can be giving up useful commodities (selling a house for bitcoin), it can be giving up other monetary assets (dollars for bitcoin).

In a Ponzi-like pyramid scheme, you expect a *greater* fool.  You expect others to give up much more to get it later, than you were willing to give up to get it now.  With a monetary asset, you expect an *equal* fool: you expect others later to give up about the same than you were giving up now to obtain it.  This is what allows a monetary asset to "store value" in time.
During the phase in which a non-monetary asset becomes a monetary asset, its value rises (from zero, or from its pure usage value, to its monetary value), and we are in the "greater fool" phase.  After that comes a stabilisation and an "equal fool" scheme (in which case the asset DID become a monetary asset), or comes a decline back to zero or its pure usage value (in which case the asset didn't succeed in becoming a monetary asset, and we had indeed a Ponzi-like scheme, with crash).

So saying that bitcoin is a pyramid scheme is an evidence.  If it weren't, it couldn't become a monetary asset in the first place.

Monetary assets can last a long time, but if we assume that all monetary assets stop one day being a monetary asset (maybe even gold), then ALL monetary assets will crash back to zero one day.  The only thing that distinguishes them is the time span over which they did keep up.  Gold has a record for about 5000 years.  Dollars have been crashing down since 1914 with a factor of 23, but are still a monetary asset.  Bitcoin, who knows.

Thanks you said it much better than I.

+1

The guy who says I am too dumb thinks that there is NO fundamentals and only speculation in the bitcoin price increase from $0 to $270.

I call bullshit.  

Now I'm too dumb?

No it seems you can't admit that your statement of Bitcoin's price increase being "purely speculation" is pure bullshit.

My simple example disproved your statement and gives non-speculative fundamentals that support bitcoin's value.

If you are going to insult my intelligence by playing the "look it up yourself" card you may as well just run away from the argument as I've addressed your claim in a straight forward manner debunking your bullshit claim.

If someone buys bitcoin and a merchant chooses to accept it for payment....it gives it value (a price...example $0 to $270)...the trade between bitcoin and goods is not speculative. It is a transaction.

Obviously your definition of speculation is pretty broad to encompass every day transactions. I suppose when I go to McDonalds to buy a cheeseburger that is speculation with my dollars eh?

lol please spare me the pompous arrogance

Hard to see when a bubble pops, but Bitcoin does have fundamentals. It offers a decentralized way of safely and anonymously transacting funds (virtual objects of value) from one party to another anywhere with an internet connection within approximately one hour without the need of middlemen, i.e banks or other institutions. All transfers are secured mathematically (cryptographically) by the largest and safest (decentralized) computer network in the world and are saved in a public ledger, which protects coins from being doublespent. It offers infrastructure to an entire new economic sector, and at the same time has the power to disrupt existing formerly and falsely trusted industries such as the banking sector, federal reserve banks, perhaps even irresponsible nation states - all formerly believed to be system-relevant.

No one forced the guy to deliver a pizza for 10000 Bitcoins back in the days. No one forced anyone greedy enough to buy Bitcoins at 1000 Dollars. Promises are sold everywhere on the streets, and it wasn't clear at all that Bitcoin's price would ever increase thousandfold from its initial price.

Umm, no.  All you described was a transaction.  If I bought a beanie baby for pennies and traded my neighbor for bike, therefore fundamentals.  That's your example?

I won't bother to explain to you cause you're too dumb.  Just google it on your own.  I'll give you a hint though.  Start by searching "future cash flow".  Then search "carry trade" if you wanna know how fundamental analysis can be used to trade currencies.

All commodities are speculative.  The price is derived purely from supply/ demand forces.  If you buy Bitcoin for pennies and sell it to a greater fool for $1000.  Congratulations,  you made a good spec trade.  No fundamentals involved

Lol obviously you don't know what purely speculation means.

I've debunked your claim. Now all you have is to play the vague card of what "fundamentals" means in your view. I've given you a fundamental usage for Bitcoin to give it non speculative value. Of course you ignore it and don't address it.

Lol look who is embarrassing themself.

sumzeroend
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registereed new acct. to tell us something thats been said 1000 times already?

Bitcoin fits into the definition of Shiller's "naturally occurring ponzi" which is a more or less a behavioral economics explanation of inflating asset bubbles

I think this is just misunderstanding.   You can say bitcoin is no good without it being a pyramid scheme.  I could buy a load of carrots and find it a bad transaction, either was a bumper harvest and others similarly were able to source enough carrots so we got too much supply or it could just the produce was bad.   Even if I was scammed by some front, still not a pyramid
  Theres no multiplication effect in bitcoin causing it to be a pyramid, the only similar thing might be the online hype effect where knowledge and acceptance of bitcoin was not linear but more exponential but the protocol itself is quite set and regular to stop over supply

The obvious is you don't know what fundamentals mean.  

The troll is high in this one.

Of course he doesn't his account was created today and can't seem to use the word ponzi in the proper context of its definition.

Edward is funny to listen to though. "We are going to $1"....

Oh really? lol please show the holes in my argument.

You say bitcoin lacks fundamentals and is purely from speculation but I just gave you a simple example of where bitcoin is not purely speculation-used and has fundamental uses going on within the economy/network of bitcoin.

Please embarrass me away.  

You probably don't know that Edward is guy who was screaming SELL when Bitcoin was 2$ in 2011

You're  embarrassing yourself.