Topic: This is why bitcoin is crashing - page 3. (Read 8133 times)

+1 strix. Hadn't thought of that either but very relevant.

Excellent post TokeN. I would offer one slight clarification that I am sure you would agree with: During the Dutch Tulip craze, tulips were never envisioned as money, nor as proxies for it. They were pretty things that were valued simply for their beauty. Their utility in beautifying property led to a rapid increase in price which attracted investors who had no interest in utility as "property beautifiers," but only in their utility as "portfolio enhancers." The investors created a "tulip market" which attracted more investors, which had the result of quickly pushing tulips out of the price range of humble gardeners and botanical breeders who did not already have them. The financial market killed the flower market and eventually destroyed the wealth of many common folks who came late to the table. (Much as we see happening today in another "market." )

Financiers are constantly trying to "monetize" all sorts of investment vehicles, but this does not mean they conceive of the vehicles as money--simply another means for them to accumulate it. The relative fungible, divisible, and stable supply of precious metals have made them the preferred units of exchange (money) as you have well pointed out. In point of fact, BTC is potentially more fungible, divisible, and stable, than metals ever could be. leading to the intense interest by investors. Less mercenary types may not understand these attributes, and value BTC based on its ease of electronic transfer, and supposed privacy enhancement. Time has revealed that the later is specious, and it remains to be seen if BTC can maintain its dominant position as a crypto-currency, or if the baton will be passed to a more privacy-centric coin such as DRK.

Today investors are being flushed out of crypto-currencies in general, again bringing the price into a range more suitable for common folks. I for one am glad that I can beautify my property with tulips without risking my families financial well being, and look forward to protecting my family's privacy in the same way.

Peace to you all...

OP you don't understand anything about bitcoin rofl

Ive been reading your posts throughought this thread and it strikes me that you appear to be quite oblivious of a couple of principles that make money work.

First of all, the term 'intrinsic value' is an ambiguous term. It means different things to different people so is usually subjective and not of much analytical use. From the point of view of analysing money, it's more instructive to split everything in the universe into 2 types of value:

[1] - utility value
[2] - monetary value

i.e. You would acquire something of 'utility value' because you wanted to keep it and make use of it whereas you would acquire something that had 'monetary value' because you could exchange it for something else.

Note one very important thing here - in an ideal world, these two are almost mutually exclusive. i.e. things which are used as money should have little utility value, otherwise they'd go out of circulation. Conversely things of high utility value do not get used as money. In a less than ideal world, something which functions well as money would possibly have some utility value but its monetary value (i.e. its value to the economy as a token of exchange) should be far higher than its utility value.

Now, if we consider gold, we can observe that most of the world's gold supply is locked up in vaults not doing anything. That's because it's of more value as a token of exchange than as a tooth filling/hi-fi connector or whatever.

Gold does not have 'intrinsic value' in the sense that its value is independent of its role in the economy, rather it acquired monetary value because it possessed certain qualities that made it work as a token of exchange - namely that it was uncounterfeitable, fungible, reasonably attractive etc etc. There is absolutely nothing distinguishing gold from any other metal other than those qualities. It is the fact that it was adopted over time in a monetary role that gave it value.

It's a fundamental principle that any 'token' which becomes adopted in such a monetary role will acquire an associated monetary value that is far in excess of its utility value. There are loads of examples of this throughout the commercial world. Take for example a kids funfair that uses plastic tokens to get on the rides. You have to buy one of those plastic tokens at a premium of many hundreds of percent over what it costs in the hardware shop because at the funfair it is operating in a monetary role.

Now consider the case of cryptocurrencies. If we think of an electronic market to be the kids funfair above (i.e. a closed economic platform) then cryptocurrencies are THE only form of asset that can perform a monetary role on that platform. Up until now we have needed counterparties (banks) to 'mimic' electronic money by simply holding a single number which represents an account balance. When someone transfers money from one account to another, there's no sense electronically in which a transfer occurs - all that happens is that the two counterparties holding balances on behalf of their respective clients agree to decrement one balance and increment the other. This requires a monumental amount of co-ordinated and labour intensive infrastructure and at the end of it all there's no audit trail apart from what each bank happens to record in their own books.

This is why cryptocurrencies are bound to become extremely valueable - precisely because they have *very little* utility value but function superbly as an uncounterfeitable monetary token that does not require counterparties.

Intrinsic value has nothing to do with it. Any medium that can function well as a monetary unit without counterparties is of immense value to a commercial economy. Precious metals have already proven that over millenia, only precious metals cannot travel through wires. Their 'monetary role' worked in the physical world, but now that the world's markets have been transported onto electronic platforms there is a gaping need for a monetary asset that is electronic in origin and counterparty-free.

Bitcoin isn't the first. It's the first one that worked. Man was attempting to do this for about 25 years before bitcoin came on the scene and there were several spectacular failures, but Bitcoin worked - the double spend problem was solved and the blockchain parameters turned out to be reasonably stable.

The tulips could have worked fine in a monetary role but the problem they had was that they couldn't compete with precious metals. They were not ubiquitous enough, not durable enough and not distinct enough so they lost adoption, and with that their associated monetary value.

With Bitcoin, on the other hand, the opposite applies. Precious metals cannot complete with cryptocurrencies, even though that may seem a profound statement to make right at this moment in time. It is however a true statement because the electronic crypto token posses all the monetary properties that precious metals did plus one crucial addition - it originates on and has mobility in an electronic trading network.

The electronic trading platform has only been around for a few decades and new forms of money take time to accrue value which they can only do through adoption into a monetary role (like the plastic funfair tokens).

So if you want to judge whether bitcoin has monetary value or not, don't look at the price, look at the adoption. If that starts declining then you might have a point with the tulip analogy.

Until then all bets are off.

National fiat currencies have problems not resolvable without breaking the integrity. Integrity is important for money to work. Internet has a solution. People love internets .

Just connect the dots now .

That's never going to happen is it.

Yeah, but most of us get paid in fiat and have to pay our bills in the same currency. What benefit does changing into a different currency have for this? So maybe for my savings then, but I'd have to have faith in bitcoins as an asset, and as per original post, it's not gold, its a tulip bulb.

My vision is that it needs to grow into something bigger. When it is used by nation states as a global settlement system, then we can judge how useful and successful it is. We are still at an early stage right now.

But why do we need a decentralised system. I'm sure there are some people out there who don't trust banks and support btc for this reason. But the resulting technology has resulted in a system that makes it easy to buy drugs and launder money. I think the vast majority of people want to be able to make safe, reliable payments electronically where they don't have to gamble on exchange rates or being ripped of by exchanges. Having a decentralised system has not achieved

Transactions would imply some sort of currency. If you're willing to use fiat, then it has it's own problems, as it keeps accumulating debt, which cannot be resolved entirely without breaking the integrity of the system.

Other forms of crypto-currencies have one or another form of overseeing authority, which might not be censorship resistant.

So Bitcoin is really an ideal form of money, that we could possible have.
Do we need one? Everyone decides for themselves.

What's so great about a global currency?  Local currencies are good for some things.  Once upon a time a group of parents created a local currency.  It was used to track babysitting time in the group.  As I recall a 10 point note got you 1 hour of babysitting per kid.  The trouble started when my wife hoarded.  She babysat until she had almost all of the notes.  She complained when more notes were created to keep the system from collapsing.  I suggested she either give some of the notes away as gifts to get them back in circulation or use some for actual babysitting services.  What I missed at that time was suggesting the exchange rate be allowed to float.  If a 10 point note became worth 2 hours or even more of babysitting then the missing hoard didn't hurt anyone.  Eventually we could have replaced a 10 point note with 10 1-point notes, etc., to satisfy the needs of the group.  No one expected to exchange our notes into anything else except babysitting time within our group.  Still, my wife, despite her hoard, needed to buy gas and food, etc.  Our group eventually disbanded as the kids grew up and families moved away, etc.  The notes became artifacts.  One can imagine lots of local currencies with suitable scopes.  Of course it could become tedious to track all of them.  Hmm, maybe a single global currency would be useful.

Bubbles are fun if you know how to use them. It attracts people.
It needs to have an element of intrigue and a promise of opportunity.
Bitcoin has both with its volatility and mysterious creator.

Any global currency not overseen by a central or distributed (stakeholders) authority needs to be based on some sort of work to be scarce and neutral towards all the participants. I believe Bitcoin is a pure form of money in that sense.

The next step is getting rid of resource scarcity through technological advancements, in which case the idea of "money" and "economy" as a whole may no longer apply. How long will it take? Time will tell. But we are getting there .

As per the analogy, when bulbs lost favour with speculators then they returned to their real function, to produce flowers.

So, some may think that the same may happen with bitcoin, we just use it for transactions. But bitcoin is a combination of currency and transaction system. Can the two be separated? Even if you could I can't see a need for a system like this.

If all you want is reliable instant transactions accepted anywhere then maybe something like apple pay is the future. Google pay anyone?

Why am I wasting my time with a troll ?

 

Great analogy. Obviously the people who are responding with "ah brah, the tulip thing again," did not correctly read your post. The people thinking this is another tulip post should listen more and speak less.
This is the important part - "The ones and zeros that programmers create are there to provide a service, a transaction. They are not for storage of wealth."
This get's us back to what all the wisest people in the bitcoin/crypto space have been saying since the beginning. The value is not as a currency, the value is the ledger.

I believe it will become near to worthless at some point but that might take 5 years or it might take 100.

Eventually it might still be worth something just to own it for bragging rights, although if there is no miners out there is that possible!

A bubble is a bubble, people buy in to it on the hope of it will be worth more in the future. I don't see a great deal of re-use in the technology behind btc either, yes its decentralised but it takes a lot of energy to maintain the block chain. Is this really the best way to have a global currency?

The analogy does seem to fit the whole crypto market quite well really.




The future holds what?

 
Let's see if you have balls.
Bet that Bitcoin goes to zero ?

Fair enough, it has some bubble characteristics. But surely you can agree that there are more facets and depth to BTC than most other bubbles (tulips especially)? I assume youre talking about BTC as an investment (the 'buy coins just to sell them, lets get rich quick' side). Id agree that is the aspect of BTC that is most at risk of 'popping' long term imo, but just cos the price is falling hard now its far from likely to be a 'popped bubble' failure - even at 10$ per coin people can get a good return with good trading strategy - as they do with other commodities & currencies.

In the broader sense,(at the very least) BTC as a technology is very unlikely to 'fail', even if it just ends up being a back end system supporting transactions where the banks/money transmitters 'rent' the use of system from miners.

Maybe you shouldve pick something from the 90's .com bubble that flopped to compare it to :p

As you said, lets see what history has to say:)