What's the deal with bitcoin now?

[lkn]

On 2/28/2024 at 3:59 PM, Conno said:

This is a quantum shift in mindset compared to traditional assets and especially fiat garbage

A currency (like USD, EUR, etc.) is a medium of exchange, not an investment vehicle to “gain wealth”.

 

As for scarcity and traditional assets, lots of assets have scarcity, prime real estate would be a good example. Also, traditional assets generally have intrinsic value, e.g. if I own all the copper in the world, I could set my own price, because people need copper for certain things (although set it too high, and people will find substitute materials), but if I own all the bitcoins in the world, who would actually have a need for them?

 

What we “no coiners” fail to understand is how this is not just a giant zero-sum game. A rather succesful one, I must admit, but still just a zero-sum game with nothing of value having been produced.

Edited February 29 by lkn

[Conno]

3 hours ago, lkn said:

A currency (like USD, EUR, etc.) is a medium of exchange, not an investment vehicle to “gain wealth”.

 

As for scarcity and traditional assets, lots of assets have scarcity, prime real estate would be a good example. Also, traditional assets generally have intrinsic value, e.g. if I own all the copper in the world, I could set my own price, because people need copper for certain things (although set it too high, and people will find substitute materials), but if I own all the bitcoins in the world, who would actually have a need for them?

 

What we “no coiners” fail to understand is how this is not just a giant zero-sum game. A rather succesful one, I must admit, but still just a zero-sum game with nothing of value having been produced.

 

People fall into three categories regarding Bitcoin. The haters, the believers and the not a clue / don't care crowd.  I'm not going to argue the points that have been argued a million times since Bitcoins creation as it's a never ending argument. Believers can never win, as the next crash on the horizon is always going to be the one that kills it stone cold dead according to the no-coiners. Also you can never win, at least not until the day arrives when and if it does crash to zero. So far the no-coiners haven't done a very good job at predicting this fall to zero, but there's always next year right! Plus they would all be multi-millionaires by now if they had chosen to buy early rather than slagging it off. Bitcoin has been declared dead every single cycle without fail since it was invented. Talk about a broken record.

 

Given the above, I will state some additional thoughts.

 

Bitcoin was never intended to be an investment vehicle at inception, it has just turned out that way. I agree that many but not all, are now looking at it as a store of value like traditional Gold rather than a means of exchange. Greshams Law is why people are HODLing it and spending their paper garbage instead [Just ask people in inflation ravaged countries their thoughts on Bitcoin.] Satoshi Nakamoto whoever he/she or they were, designed it as decentralised electronic money and a permissionless means of exchange where no 3rd party is involved. That in and of itself has intrinsic value already [it does to me at least] compared to the fiat garbage everyone thinks of as money. Fiat isn't money by the way, it's currency and a debt based inflationary one at that and a one that you increasingly have less and less control over as the centralised control freaks increasingly do their thing..  Satoshi also managed to solve the unsolvable up until that point in time, the Byzantine General problem. That in my opinion also has a intrinsic value compared with the printed out of thin air, fractional reserve, debt based fiat scam. 

 

Further points, prime real estate isn't limited in supply, they are creating new prime real estate every single day of the week. Additional copper is dug out of the ground and added to the supply also every single day. Just like the tradition store of wealth Gold, whos above ground supply has through history generally kept up in % terms with population growth. As the price rises it becomes more profitable to make an even greater effort to mine even more. Just not possible with Bitcoin, 21 million and that's your lot after the year 2140. Never, and I mean NEVER in the history of human civilization has there been anything comparable to deflationary Bitcoin with its deentralised ledger technology. Believe in it or don't, it's a free world and I'm spending, or risking in your opinion, my own currency not yours, so what's the problem? There has only ever been 2 forms of real money throughout history and that has been Gold and Silver. I'd argue you are witnessing a 3rd being born. 

 

Can I ask you one question? 

 

What price does a Bitcoin need to hit before a no-coiner will start accepting defeat? $500k? $1m? $5m? $10m? The same arguments have been made since it went over $1. I suppose the no-coiner mindset will never admit defeat at any number. So be it, either it's going to zero eventually or it's here to stay with an ever increasing value when measured in fiat paper. I know which side of the fence I prefer to be on.

Edited February 29 by Conno

[G_Money]

[NickyLouie]

9 minutes ago, Conno said:

 

 

What price does a Bitcoin need to hit before no-coiner will start accepting defeat? $500k? $1m? $5m? $10m? The same arguments have been made since it went over $1. I suppose the no-coiner mindset will never admit defeat at any number. So be it, either it's going to zero eventually or it's here to stay with an ever increasing value when measured in fiat paper. I know which side of the fence I prefer to be on.

 

The Blackrock etc ETF's set the foundation for BTC legitimacy, it's still in its infancy but sky's the limit at this point.

 

[NativeBob]

go altcoins, nevermind btc

 

[noobexpat]

2 minutes ago, NickyLouie said:

 

The Blackrock etc ETF's set the foundation for BTC legitimacy, it's still in its infancy but sky's the limit at this point.

 

 

Blackrock know that usa is filled with many fools who will part with their money. They still get their annual management fees if it goes up, down or sidewards. They don't care.

 

But they don't want their competition getting in first.

[NickyLouie]

3 minutes ago, noobexpat said:

 

Blackrock know that usa is filled with many fools who will part with their money. They still get their annual management fees if it goes up, down or sidewards. They don't care.

 

But they don't want their competition getting in first.

 

Blackrock ain't the only one holding the bag at this point, lots of instability in the world and people (fools according to you) want to park some of their savings somewhere.

 

[noobexpat]

3 minutes ago, NickyLouie said:

 

Blackrock ain't the only one holding the bag at this point, lots of instability in the world and people (fools according to you) want to park some of their savings somewhere.

 

 

Many places to park savings!

But to buy something that has zero value beyond what a greater fool will pay for it is absurd.

Unless you believe in a never ending supply of fools. At least that would be logical!

[ukrules]

2 hours ago, noobexpat said:

Unless you believe in a never ending supply of fools.

 

Doesn't have to be never ending but lets say it lasts for 100 years, is that essentially the same as forever?

 

One day longer than we live and it's not a zero sum game.

 

It doesn't need to 'go up forever' and the supply of fools is in great abundance.

[Heng]

the market took the news of the US gov liquidating some of their seized btc rather well yesterday.   

[lkn]

17 hours ago, Conno said:

Satoshi Nakamoto whoever he/she or they were, designed it as decentralised electronic money and a permissionless means of exchange where no 3rd party is involved. That in and of itself has intrinsic value already [it does to me at least]

Transferring a bitcoin relies on the bitcoin network, i.e. it is not true “peer to peer” (or permissionless) as you cannot send me a bitcoin without relying on third party miners.

 

So it is this network (of third party miners) that provide value, not the bitcoin itself, do you agree? I.e., if the network shuts down, bitcoins lose their value, as we have seen with many alt coins.

 

But to use this network (of third party miners), which indeed does provide value, we actually pay a transaction fee to these miners, furthermore, the miner who handles our transaction is additionally given a block reward: New bitcoins issued and given to the miner, thus an indirect cost to everyone holding bitcoins.

 

I think it is important to understand this distinction, as then we can put a value on things, the bitcoin network is effectively competing with Wise, PayPal, Western Union, MoneyGram, a.s.o., which provide a similar service, although with their services, you interact with a known third party, whereas with bitcoin, you interact with an unknown third party.

 

But the existence of the bitcoin mining network should not affect the value of a bitcoin, i.e. it does not provide the “intrinsic value” as you mention above.

 

17 hours ago, Conno said:

Can I ask you one question? 

 

What price does a Bitcoin need to hit before a no-coiner will start accepting defeat?

 

For me, it is not about price, I would need to be shown how value is actually being generated, i.e. how this is not just (at best) a zero-sum game. And not subjective value like “I think it has value that I can send money to someone in Africa without needing my bank’s approval”, as I showed above, such thing can certainly have value, but we need to examine exactly where the value is coming from, i.e. in the above statement the value is from the network not the coin itself, and we have a pretty good idea of what the value of sending money abroad is (i.e. the price currently charged by Western Union etc., or even the BTC transaction fee).

 

Furthermore I would like to add that it seems that criminal gangs, scammers, sanctioned regimes, and other actors who cannot use the traditional banking system have seized on stable coins, and there is a strong correlation between the price of bitcoin and the amount of USDT issued.

 

Therefore it seems very likely that USDT is partially (and possibly indirectly) backed by BTC, and the amount if outstanding USDT is proportional to how much circulating stable coins the above actors need, which (unfortunately) seems to be a rising amount.

 

I mention this because this is might actually be some of the real demand for BTC, i.e. anyone buying BTC as an investment is just doing so as pure speculation, but someone needing a $1B USDT loan actually need BTC to provide as security, and right now, there seem to be these people taking out loans like that, who have few other options because of their activities.

Edited March 1 by lkn

[BillStrangeOgre]

On 7/30/2022 at 8:07 PM, Farang123 said:

Good time to buy or will it become worthless in the not too distant future?

 

It's been written off so many times in the past.

Major banking/investment institutions are now becoming involved through ETFs etc which will also draw in retail investors.

Those institutions have trillions under management and if just 1% of those funds are put into BTC then the price will be going much higher. 

 

[BillStrangeOgre]

On 2/29/2024 at 6:28 PM, lkn said:

A currency (like USD, EUR, etc.) is a medium of exchange, not an investment vehicle to “gain wealth”.

 

As for scarcity and traditional assets, lots of assets have scarcity, prime real estate would be a good example. Also, traditional assets generally have intrinsic value, e.g. if I own all the copper in the world, I could set my own price, because people need copper for certain things (although set it too high, and people will find substitute materials), but if I own all the bitcoins in the world, who would actually have a need for them?

 

What we “no coiners” fail to understand is how this is not just a giant zero-sum game. A rather succesful one, I must admit, but still just a zero-sum game with nothing of value having been produced.

True but how did it work when the first government convinced us to accept a piece of paper in exchange for a real world asset? 

[BenStark]

5 minutes ago, BillStrangeOgre said:

True but how did it work when the first government convinced us to accept a piece of paper in exchange for a real world asset? 

 

That piece of paper was backed by an asset called gold

[BillStrangeOgre]

9 minutes ago, BenStark said:

 

That piece of paper was backed by an asset called gold

 

9 minutes ago, BenStark said:

 

That piece of paper was backed by an asset called gold

That's what they told us and they even wrote on each bit of paper that the government guarantees the debt! 😉

Still a huge leap of faith for the populace to accept it over hard assets, yet it did catch on.

I have no worry that a crypto currency wether it's Bitcoin or not could be accepted and one day will be 

[BillStrangeOgre]

On 2/29/2024 at 9:35 PM, NickyLouie said:

 

The Blackrock etc ETF's set the foundation for BTC legitimacy, it's still in its infancy but sky's the limit at this point.

 

...and all that institutional money that will flow in (we're seeing it now with the launch of the ETFs) will stabilise the price over the long term.

As more money comes into BTC the price will be less volatile and so more attractive as a store of value

Edited March 4 by BillStrangeOgre

[lkn]

2 minutes ago, BillStrangeOgre said:

I have no worry that a crypto currency wether it's Bitcoin or not could be accepted and one day will be

 

There are a bunch of technical problems that just makes it a really bad payment method, but ignoring that, there is also a fundamental problem with how coins are issued, as fiat is really an IOU but a crypto coin is more like a virtual commodity, and the worth of it is therefore determined by how much the next guy is willing to pay for it (in goods, services, or fiat).

 

It is true that USD (and other currencies) are no longer backed by gold, but central banks still operate using a balance sheet, and all issued currency are liabilities for the central bank which will have assets that match these liabilities, this used to be gold, but today it will be mortgage-backed securities, government bonds, a.s.o.

 

So USD and other currencies are not unbacked per se, but crypto is. Sure, we may have too much debt, and in theory the US government could default on their debt, which would render government bonds worthless (or at least lose some value), and that would affect currencies partially backed by US government bonds.

 

But this is all very well understood (by people who study these things) and crypto is not a solution to this problem, regulation and oversight normally is. Crypto often seems to advocate the opposite, but the proof is in the pudding, and so far the history of crypto is filled with examples of a lot of perceived wealth being wiped out in an instant, like FTX, Quadriga, MtGox, Terra/Lunar, Celsius Network, Three Arrows Capital, a.s.o. — and we also have 100 billion worth of USDT where the issuers refuse to submit to an audit, so going by Occam’s razor, those 100 billlion does not exist.

[lkn]

18 minutes ago, BillStrangeOgre said:

As more money comes into BTC the price will be less volatile

More money = more people interested in buying?

 

That means increased demand, but supply cannot be increased to follow demand.

 

Economics 101 says that when demand is larger than supply the price will go up.

 

So how do you conclude that more money going into bitcoin will lead to a less volatile price?

 

Also, the way you say “more money comes into BTC” makes me wonder if you have tought through how bitcoin sales actually work: If I buy a coin for $65k then I will pay someone else for this coin, this someone may take the $65k and spend it on a new car or similar, so the money is no longer there. There is not a big pool of money that can be used, when people wants to cash out of bitcoin. If you want to cash out, a requirement is that someone else is willing to buy your coin from you, there is no market maker that will step in or some pool of cash you can take from, and leave your bitcoin somewhere else. And this is why the price is so volatile, it’s like baseball trading cards.

[ukrules]

12 minutes ago, lkn said:

There are a bunch of technical problems that just makes it a really bad payment method

 

I prefer to think of Bitcoin as a treasury asset

 

[BillStrangeOgre]

11 minutes ago, lkn said:

More money = more people interested in buying?

 

That means increased demand, but supply cannot be increased to follow demand.

 

Economics 101 says that when demand is larger than supply the price will go up.

 

So how do you conclude that more money going into bitcoin will lead to a less volatile price?

 

Also, the way you say “more money comes into BTC” makes me wonder if you have tought through how bitcoin sales actually work: If I buy a coin for $65k then I will pay someone else for this coin, this someone may take the $65k and spend it on a new car or similar, so the money is no longer there. There is not a big pool of money that can be used, when people wants to cash out of bitcoin. If you want to cash out, a requirement is that someone else is willing to buy your coin from you, there is no market maker that will step in or some pool of cash you can take from, and leave your bitcoin somewhere else. And this is why the price is so volatile, it’s like baseball trading cards.

...just as stock market have got larger so it takes ever more money to move the market substantially (volatility)

FTSE, Dow Jones, Nikkei etc rarely move by large amounts in a short period of time as BTC does. BTC volatility will decrease as the market capitalisation increases 

[lkn]

10 hours ago, BillStrangeOgre said:

...just as stock market have got larger so it takes ever more money to move the market substantially (volatility)

With stocks, it is not that when a stock becomes expensive, it takes more money to move the price further.

 

The price is based on the underlying performance of the company, so while you may find that e.g. Apple has grown so big, that they are selling a new iPhone every single year to every person on the planet, and therefore they can no longer grow their profit and therefore their stock stops growing, as a share in Apple is really just partial ownership of the profit generated by Apple, so if that has sthbilized, so should their share price.

 

 

But there are many examples of large companies growing even larger. Apple was the first company to hit a $1 trillion dollar market cap in 2018, and only two years later, they hit $2 trillion. Today we have several companies worth more than a trillion dollars, and lock at NVIDIA’s meteoric rise, but this is all about companies selling goods and services with a profit and growing their market.

 

You simply cannot compare this dynamic to price of crypto coins, as there is no underlying activity that we can use to value things.

 

So again, why do you think more people buying BTC will cause less volatility? With the stock market, it is sort of the opposite, all the retail traders cause more volatility because they generally lack the skills to properly value stocks, so they buy and sell based on emotions. With BTC you only have these traders who buy and sell based on emotions, as all models to price BTC is based on either technical analysis (emotions) or stock-to-flow, but that is not much different from TA.

[lkn]

10 hours ago, ukrules said:

I prefer to think of Bitcoin as a treasury asset

With a treasure asset though, somebody is owing you money, and they will pay you interests on that money.

 

If you buy BTC, nobody will pay you interest, and nobody owes you anything. So a better analogy would be a commodity. You can place your money in a commodity (corn, oil, wheat, copper, etc.) and you have the commodity until you sell it to someone else.

 

Main difference though is that you can pretty much always sell corn, copper, or oil, because there are people or industries that depend on these things. Not sure who depend on BTC.

[BillStrangeOgre]

41 minutes ago, lkn said:

With stocks, it is not that when a stock becomes expensive, it takes more money to move the price further.

 

The price is based on the underlying performance of the company, so while you may find that e.g. Apple has grown so big, that they are selling a new iPhone every single year to every person on the planet, and therefore they can no longer grow their profit and therefore their stock stops growing, as a share in Apple is really just partial ownership of the profit generated by Apple, so if that has sthbilized, so should their share price.

 

 

But there are many examples of large companies growing even larger. Apple was the first company to hit a $1 trillion dollar market cap in 2018, and only two years later, they hit $2 trillion. Today we have several companies worth more than a trillion dollars, and lock at NVIDIA’s meteoric rise, but this is all about companies selling goods and services with a profit and growing their market.

 

You simply cannot compare this dynamic to price of crypto coins, as there is no underlying activity that we can use to value things.

 

So again, why do you think more people buying BTC will cause less volatility? With the stock market, it is sort of the opposite, all the retail traders cause more volatility because they generally lack the skills to properly value stocks, so they buy and sell based on emotions. With BTC you only have these traders who buy and sell based on emotions, as all models to price BTC is based on either technical analysis (emotions) or stock-to-flow, but that is not much different from TA.

I think you'll find the share price is not set on the underlying performance of the company but sentiment. More investors buy than sell the price goes up and vice versa. That's how the market works

 

Remember the dot com bubble! New internet start ups with absolutely no cash flow attained million dollar valuations. Their share prices weren't based on the underlying performance of the companies...there was no underlying performance! 

What drove the price was sentiment. Simply more investors believing the price would go higher.

 

So yes you can compare crypto to shares in as much as both markets work the same way, supply and demand.

 

[BillStrangeOgre]

11 hours ago, lkn said:

More money = more people interested in buying?

 

That means increased demand, but supply cannot be increased to follow demand.

 

Economics 101 says that when demand is larger than supply the price will go up.

 

So how do you conclude that more money going into bitcoin will lead to a less volatile price?

 

Also, the way you say “more money comes into BTC” makes me wonder if you have tought through how bitcoin sales actually work: If I buy a coin for $65k then I will pay someone else for this coin, this someone may take the $65k and spend it on a new car or similar, so the money is no longer there. There is not a big pool of money that can be used, when people wants to cash out of bitcoin. If you want to cash out, a requirement is that someone else is willing to buy your coin from you, there is no market maker that will step in or some pool of cash you can take from, and leave your bitcoin somewhere else. And this is why the price is so volatile, it’s like baseball trading cards.

The larger a market becomes (capitalisation) the more money it takes to move it one way or the other (volatility)

And yes, as more money flows in that means increased demand and prices go up. But a percentage of that inflow will remain in the market. Not everyone sells when prices go down. Over time the market gets larger and therefore it takes ever larger volumes of selling or buying to move the market. Less volatility.

[Conno]

No further comment required.

 

 

[ukrules]

6 hours ago, lkn said:

With a treasure asset though, somebody is owing you money, and they will pay you interests on that money.

 

If you buy BTC, nobody will pay you interest, and nobody owes you anything. So a better analogy would be a commodity. You can place your money in a commodity (corn, oil, wheat, copper, etc.) and you have the commodity until you sell it to someone else.

 

Main difference though is that you can pretty much always sell corn, copper, or oil, because there are people or industries that depend on these things. Not sure who depend on BTC.

 

You're right of course, I'm just 'ahead of the curve'. Look back on this post in 5 to 10 years time, it will still be here.

[lkn]

10 hours ago, BillStrangeOgre said:

Remember the dot com bubble! New internet start ups with absolutely no cash flow attained million dollar valuations. Their share prices weren't based on the underlying performance of the companies...there was no underlying performance! 

And how did that turn out? Lots of people lost their money, because there was no underlying value, so yes, that aspect of the stock market is indeed similar to crypto (“Irrational exuberance”).

 

But most companies are valued based on earnings and growth potential.

[Neeranam]

45 minutes ago, lkn said:

And how did that turn out? Lots of people lost their money, because there was no underlying value, so yes, that aspect of the stock market is indeed similar to crypto (“Irrational exuberance”).

 

But most companies are valued based on earnings and growth potential.

Did you buy any BTC when I told you to  when it was under $17k last year?

[arithai12]

12 hours ago, lkn said:

...

If you buy BTC, nobody will pay you interest

...

Just a note on this particular statement. True that BTC doesn't pay interest, but some other well established cryptos do. If you stake, e.g. SOL will pay about 4% and DOT even up to 16% if memory serves me. That is in shares.

[lkn]

8 hours ago, arithai12 said:

Just a note on this particular statement. True that BTC doesn't pay interest, but some other well established cryptos do. If you stake, e.g. SOL will pay about 4% and DOT even up to 16% if memory serves me. That is in shares.

Can’t really compare this to interests as staking rewards are generally done by issuing new coins, so you are diluting the supply. For example, if everybody with SOL was staking their coins, and they got 4% for this, there would have to be added 4% new coins to cover this expense, so effectively you just debase each coin with 4% and give each coin owner 4% more in new coins, i.e. it’s all a wash.

 

The only way this can work in practice is when the coins have no underlying value, because if you actually had some underlying value (e.g. a stable coin backed by USD) it would be trivial to show that you are paying staking rewards by issuing new unbacked coins.

Edited March 6 by lkn