The Bitcoin threads could be interesting in the future

[tecate]

I was merely pointing out that nobody has a clue how to value BTC.

In looking at past pricepoints, D.i.P. has helped you by applying mean averages. From that, you can see that the price has been steadily increasing.
Valuation is a difficulty - albeit as we've discovered via these discussions, gold presents with the very same pricing difficulties.

Meanwhile in Canada.....

If you have $50,000 CAD in the bank today, how do you actually value it on the basis of what's going on in the background? More money has been printed under Trudeau's government than all previous Canadian governments put together.

 

[WolfeTone]

Excellent point Wolfie, I surely must put something on Biden at a near certain 1.05.

Well you brought up the utility theory so I will apply it accordingly.
I am already in the red to several hundred euro in this market. This deficit was accumulated on small incremental bets over a couple of years on long odds candidates who I considered had reasonable prospects of being in the hunt at some point and I could take a tidy profit. As it happens, no such luck.
However, if I were to enter this market today with my hundreds, having not placed a bet yet, I would be very reluctant to place the exact same amount money on a near certain return of 5%. So even though the consequences of losing are exactly the same, the risk of a sudden and immediate loss in return for 5% return outweighs the sentiment of losing the exact same amount of money over a period of years with potentially substantial, albeit remote, returns.

Instead, and accepting that we share broadly the same information - election count, few weeks to official result, Trumps fraud claims not gaining traction in the courts, etc - my interpretation of all that information, and acknowledging that Biden is a practical cert, to lay the 1.06 price provides more utility to me insofar that the potential substantial but remote gains far outweigh the additional and likely loss as it will be inconsequential to me in the round.
So laying at 1.06 provides greater (prospective) value.
If you think that is mad... take a look at the market, in order to back there has to lay. And in this efficient market, it is these price levels that has gained most action.
I appreciate this is a gambling market with a defined end point. But the principles are the same. The market price for bitcoin is a consequence of all available information and the interpretations of that information about Bitcoin, including those who are selling or simply not buying, culminating in a price tag of $18,000.
Unlike US 2020 however, there is no definitive end point for bitcoin.

 

[SGWidow]

Hi WolfeTone.

Just one point that I think is relevant and I would be interested in your views. The crowd dynamic inherent in Betfair's model is usually impressive. But not always. Even in this election, post election day, in my opinion there was a couple of critical hours where Betfair's pricing was miles out.

Specifically, when Trump made that mad speech (very late on election night in the US / early morning on the Wednesday morning here), any reasonable interpretation of this speech was that his "intelligence" (meaning information, analysis of the votes) had already predicted that his voting day lead was not sufficiently large to sustain the anticipated counter postal surge from Biden.

This was the reason he was already calling foul on the election results when his then Betfair odds were c. 1.5 (with Biden at 3.0). In other words, the market had him odds-on to win, when he himself was aware that his goose was probably cooked. This "pricing" inaccuracy lasted a few hours at a critical time.

 

[Duke of Marmalade]

@WolfeTone On a utility play I will not be helping myself to that very easy 5%. The pain of losing €1,000 far outweighs the pleasure of winning €50.

I think the comparison between the bitcoin price and betfair odds is worth exploring. The price of oil or bananas or even shares is not dictated by the betting motive but by the supply and demand for their utility.
Seems to me that the bitcoin price is almost entirely driven by the betting/speculative motive. From the FOMO folk who are betting on what its price will be next week to JK who speculates on its ultimate penetration of global medium of exchange to Fidelity who speculate on the flight from bonds or penetration of the alternative assets market. Almost no-one is buying it for the only utility for which it was intended and is fit i.e. as a medium of exchange.
Where it differs from betfair is that on betfair the "fors" and "againsts" have equal presence. In bitcoin the potential buyers (everybody) far, far outweigh the potential sellers (current holders).
It is a bubble.

 

[Leo]

That's a blatant lie. Time and time again you've said I have not answered! Now when its put up to you you're changing your story.

No, I am consistent is saying you have repeatedly failed to back up your claim that it is possible to send bitcoin over a satellite service without the need for an internet connection.

 

[tecate]

No, I am consistent is saying you have repeatedly failed to back up your claim that it is possible to send bitcoin over a satellite service without the need for an internet connection.

I disagree.

 

[WolfeTone]

Specifically, when Trump made that mad speech (very late on election night in the US / early morning on the Wednesday morning here), any reasonable interpretation of this speech was that his "intelligence" (meaning information, analysis of the votes) had already predicted that his voting day lead was not sufficiently large to sustain the anticipated counter postal surge from Biden.

I don't doubt that is a reasonable interpretation and for sure the crowd dynamic does not always call it right. But this is what represents value. The interpretation of information and putting a price on it or exploiting the price of the market. I hope you capitalised on it.

 

[SGWidow]

Hi WolfeTone.

Agreed.

Regarding personal gains, unfortunately not! Sometimes, it takes a while for the penny to drop. Also, that morning I think I was looking for the number for the Samaritans. I don't think that I could have stomached 4 more years of that gentleman.

 

[DublinHead54]

There is no crypto that is 'one size fits all' in line with your comment that 'all systems have their positives and negatives'. That rule applies to all cryptos - not just to bitcoin.
The attributes of a crypto will feed into its use case and its currently well positioned to rival gold. Beyond that, its decentralised and so there are other conditions/circumstances where it has value as a settlement layer. For large amounts, its currently fine for transactional use. For micro-transactions we all acknowledge that it has some drawbacks (usability, volatility, etc.). If those current drawbacks give way in the future, then it can play a role in that respect also.
You can correct me if I'm wrong but I sense that you feel that the value proposition of bitcoin is or will be covered by a CBDC or the likes? You're working on such a project in some capacity or other if I recall correctly. Then you know that in 2020, the level of activity on that front has gone through the roof. It seems quite clear to me that we'll all be using digital sovereign currencies - starting with back-end implementations and later retail implementations. Some corporate digital money will get approved also. It didn't come off for facebook (albeit they;re not done yet) but we will have some approved at some stage. I don't see these things as threats to bitcoin - I actively encourage them. They'll help bitcoin.

In my view the current adoption of BTC and the direction it is going (from links you have provided) is that of an investment asset rather than the original use as a decentralized currency.

I don't really see any material increase in retail adoption of BTC, unless the treatment under tax law changes. The introduction by paypal by increase retail usage via existing Bitcoin holders converting for goods. But for a new entrant (in the paypal markets) there is zero benefit to using BTC, why would I use btc to purchase something when I then have to work out taxes, never mind having to deal with price volatility.

You are correct, I have been involved in Central Bank Digital Currencies, but that is a very large topic that I don't want to muddy this thread with.

 

[tecate]

In my view the current adoption of BTC and the direction it is going (from links you have provided) is that of an investment asset rather than the original use as a decentralized currency.

If by investment asset, you mean 'digital gold' or an investment asset in its own right - then I agree. Isn't that a vast use case in and of itself?


(Timothy Petersen - Twitter)

I don't really see any material increase in retail adoption of BTC, unless the treatment under tax law changes.

I see the path toward micro-transactional use developing on a much longer time horizon. That's contingent on some improvements being made to usability and scalability. Other than that, contrary to what some claim, the development of a store of value first before becoming more successful as a means of exchange makes more sense to me.
Having said that, the Paypal move helps. It helps with legitimising it, makes it available to a large group of people who may not have had access to it previously, etc. All of these things increase its network effect. It all contributes towards escape velocity/Lindy Effect where bitcoin is concerned.

If you have access to it, then you're more likely to use it. If you have the option of buying something and the seller is in a part of the world where it suits them to accept payments in bitcoin, then a potential customer may be more likely to go with it if there's a reduced cost (no credit card fees) and they have access via paypal where they didn't have before - through a platform that they are familiar with/trust (whereas maybe they understand little about bitcoin).

The difference as opposed to gold is that it can be transacted near instantly - anywhere. It's also more accessible than gold as a store of value for ordinary people. Again, if you have it, you're more likely to use it for transactional purposes also. That - to play out over a longer time horizon - but even if it never cuts it for mainstream payments, there's enough in a digital gold use case for it to be incredibly successful.

 

[DublinHead54]

If by investment asset, you mean 'digital gold' or an investment asset in its own right - then I agree. Isn't that a vast use case in and of itself?

I didn't say it isn't a use case, I just said it wasn't the original intention of Satoshi.

If you have access to it, then you're more likely to use it. If you have the option of buying something and the seller is in a part of the world where it suits them to accept payments in bitcoin, then a potential customer may be more likely to go with it if there's a reduced cost (no credit card fees) and they have access via paypal where they didn't have before - through a platform that they are familiar with/trust (whereas maybe they understand little about bitcoin).

That is a very messy use case for BTC. The power of BTC is that it knows no borders and can be transferred simply, there is no need to insert a middle man (paypal) who will charge a fee. In paypals adoption of BTC it is not targeting the money transfer aspect but the e-commerce area (consumer buying goods and using paypal to complete the transaction). The fact that in paypals largest markets purchasing with BTC triggers a taxable event makes it rather pointless to use. Your example above seems to be geared towards the ebay aspect of paypal, but their business has vastly changed since then. Perhaps it is more prevalent in the US, but nearly every online shop has a 'pay with paypal' button.

So my point stands that until tax treatment of BTC changes, there is really no benefit to a consumer to use BTC in day to day purchasing over their debit card.

 

[WolfeTone]

@WolfeTone On a utility play I will not be helping myself to that very easy 5%. The pain of losing €1,000 far outweighs the pleasure of winning €50.

My conclusion from that is that you do not actually think 1.05, in this market, represents value. The risk of a 100% sudden and immediate loss in a few short weeks outweighing the reward of an easy 5% return in the same timeframe. Otherwise there is little rationale to your thinking in this regard.

And this is the essence of the using the US election as means to understanding what value is, or is not. There is tendency from yourself and others to hold bitcoin to some standard of a quantifiable and calculated measure of value that is not required for any other product, commodity or service. Even one as uncomplicated as the Betfair market for US Presidency.

The only standard is the market, and an efficient one at that.

As tecate has been at pains to highlight with the commodity of gold, there is no quantifiable calculated method to value gold. There is information - by way of indicators, comparisons, correlations, forecasts, etc that assist market traders in determining whether to buy, sell, hold etc the commodity of gold. Gold is an age old commodity and the information that is used to measure its value has evolved and developed and has become more refined over the centuries. But it is still all a matter of interpretation of the available information. It is why the price fluctuates and it is why there are buyers and sellers that pitch prices outside the efficient market price.

Bitcoin is relatively new by comparison. The information used by market participants is much broader I would suggest and in turn contains a higher degree of speculation for sure. But the scale of the market in terms of transaction volume makes it an efficient market.
I use whatever information I think is pertinent and gauge what impact it is, in my opinion, likely to have. For instance, tecates Canadian dollar graph above is worth exploring further as it appears to chime very much with my expressed views on this site over the years. In turn, its correlation to bitcoin will, on the face of it, put upward pressure on the price of bitcoin. But that is just my interpretation.

Where it differs from betfair is that on betfair the fors and againsts have equal presence.

Im not sure this is correct either. I assume you are talking about monetary presence? As it is impossible to determine the number of participants on either side. If you take my lay bet in isolation at 1.06. If I lay the price for €500 I am liable to pay €30. So there is €500 sitting on one side of the bet while only €30 on the other side....its the definition of 1.06.
If there was equal presence in monetary terms on both sides of the market the price would be even money.

 

[tecate]

I didn't say it isn't a use case, I just said it wasn't the original intention of Satoshi.

Sure, no problem. A lot has been made of that by others here. However, its quite normal when it comes to innovation that something may set out on a different trajectory as people seek to use the tech/innovation for different purposes.

That is a very messy use case for BTC.

Paypal is just a channel - but I see what you mean. I'm far from a fan of paypal. However, this can play out well for bitcoin. Whatever initial touchpoint people have had with bitcoin, its rarely by the most efficient means. My hope would be that Paypal's platform introduces a whole raft of new people to bitcoin. If they break their duck on it via paypal - to me, that's a big deal. In the longer run, I'd hope those same people move on from paypal and use it outside of the paypal platform.

So my point stands that until tax treatment of BTC changes, there is really no benefit to a consumer to use BTC in day to day purchasing over their debit card.

No problem - that can get itself ironed out whilst bitcoin is currently establishing itself as a bona fide store of value.

You were vested in btc to some extent from what I recall. I'd imagine you had some rationale for being vested in it. What is/was that rationale?

 

[Duke of Marmalade]

My conclusion from that is that you do not actually think 1.05, in this market, represents value.

Not on my utility curve anyway, I hate betting odds on. Clearly there are big boys on Betfair who don't mind very short odds and whose utility curves are neutral.

There is tendency from yourself and others to hold bitcoin to some standard of a quantifiable and calculated measure

Not just me. John Kelleher, seeking some anchor for value targets long term penetration as a medium of exchange. Even your good self has come up with a metric for valuing it. I think most players don't bother with such pedantry, to them it is a price that moves and therefore scope to win or lose money.

As tecate has been at pains to highlight with the commodity of gold, there is no quantifiable calculated method to value gold. There is information - by way of indicators, comparisons, correlations, forecasts, etc that assist market traders in determining whether to buy, sell, hold etc the commodity of gold. Gold is an age old commodity and the information that is used to measure its value has evolved and developed and has become more refined over the centuries. But it is still all a matter of interpretation of the available information. It is why the price fluctuates and it is why there are buyers and sellers that pitch prices outside the efficient market price.

I agree there is no objective method for putting a price on gold. It is not part of my argument that one needs such an objective method. I'm with John Kelleher (sorry but it is my central point) store of value cannot exist long term without having some utility hat to hang on. Bitcoin has only one possible utility and that is as a medium of exchange. Trustless, censorship free, travels long distances even by satellite (according to @tecate) are not utilities.

Im not sure this is correct either. I assume you are talking about monetary presence? As it is impossible to determine the number of participants on either side.

I didn't explain the point very well. On Betfair all the participants have equal opportunity to buy or lay. On bitcoin everybody can buy but only a very very small minority who already hold bitcoin can sell - seems a tad lopsided to me.

 

[WolfeTone]

I'm with John Kelleher (sorry but it is my central point) store of value cannot exist long term without having some utility hat to hang on.

And that is your perogative to go with him. I don't necessarily disagree, but where we part ways is on expectation for the moment of realisation that BTC has fulfilled its promise of becoming a widely used medium of exchange, or not.
Kelleher is not definitive on when that moment will arrive. You appear to dismiss any chance of it ever occuring. I anticipate that it has a more than reasonable prospect. I'm more bullish about it today than ever.
My perception of bitcoin at the last peak was that it was huge, about to make a breakthrough to mainstream adoption. When the crash came I did panic somewhat and took a parachute jump.
With bitcoin nearing it's peak price again, my perception this time around, somewhat more knowledgeable of the whole concept, is that bitcoin is still relatively tiny. It has a long, long way to go to achieve mainstream adoption as a MoE, but I would be more confident of its potential now than ever.

On Betfair all the participants have equal opportunity to buy or lay. On bitcoin everybody can buy but only a very very small minority who already hold bitcoin can sell - seems a tad lopsided to me.

Can't let you away with this Duke. There are no buyers without sellers, vice-versa.
You seem to be implying that the bitcoin market is inefficient with too few sellers and many, many buyers?
I would argue that the capital market of $300bn + it is an efficient market of buyers and sellers.

 

[Duke of Marmalade]

Can't let you away with this Duke. There are no buyers without sellers, vice-versa.
You seem to be implying that the bitcoin market is inefficient with too few sellers and many, many buyers?
I would argue that the capital market of $300bn + it is an efficient market of buyers and sellers.

I might have this wrong, but you have not talked me out of the point yet. Of course there are equal actual buyers and sellers. What I am arguing is that there are far more people in a position to buy than there are in a position to sell.
Take the Mona Lisa. Lots of folk would like to buy the ML. Indeed at the prices that these things go for lots of people would like to sell the ML. But only one person is in a position to sell the ML and can therefore more or less name their price.
I am not sure that means the bitcoin market is inefficient, it means that the supply and demand dynamic is very lopsided. And it is not really a point about its scarcity, which is merely a function of where Satoshi put the decimal point. This is true whilst there is almost any demand and clearly at this point there is. But some day (don't ask me when) the satoshi will drop and there will be NO demand ergo the price will collapse.

Of course similar arguments could be made about individual shares. However, most shares do not stand in isolation and there are well accepted tools for deciding whether a particular share is over or under priced compared to its peers. There is also a very active derivatives market which can serve sellers who do not own the shares. This is one of the main arguments for derivative markets, they lead to equal availability of buyers and sellers. I don't think the bitcoin derivatives market has achieved that status yet.

Update: I Googled "how many bitcoin holders" and I get that there are over 700,000 who own at least 1 BTC. So I suppose that does supply a critical mass of potential sellers so this is probably a rabbit hole.

 

[WolfeTone]

So I suppose that does supply a critical mass of potential sellers so this is probably a rabbit hole

Agreed.

More interesting is your reversion to JK comments on investopedia to endorse your own views on bitcoin utility. As mentioned I don't necessarily disagree with the view expressed rather I require some understanding as to what the point of reckoning will be to realise this view. Obviously trying to time the market is futile but I would suggest a substantial and sustained period of non-adoption, or next to, as a prospective tipping point in returning bitcoin to zero?
There is no real sign of that at the moment and in my view unlikely to be given the current state of Central Bank interference in money supply.

What I didn't realise about JK article in investopedia until this evening was that he goes full circle in his assumptions. Not only giving reasons why bitcoin could return to zero but also making assumptions and estimates of how its price could go to $514,000!

Kelleher applies a simple model (and wisely applying the quote "All models are wrong. some are useful") of calculating bitcoin price through bitcoin penetrating 15% of global money supply divided by 21m bitcoin.
If such an adoption rate were to materialise I would suggest the volatility to have greatly dissipated, thus making bitcoin acceptable and mainstream, fulfilling its utility of a MoE.

This is similar to my own simple calculation except I think Kelleher is too generous.
I'm cognisant that the global economy of the human race, including nation states and corporations, is indebted to the tune of 3 times more it actually values itself. For an artificially constructed system it really is a derisory position to be in. I would expect that a great deal of that money supply will eventually be destroyed and I also limit bitcoin to a modest 2% of the money supply.

It is this precarious position of the monetary system, combined with rapid advances in technology in everything from food, medicine and healthcare, education, transport, communication, to the adoption of widespread environmentally sustainable approaches in industry and agriculture, that will radically overhaul the way of life for practically everyone on the planet in the coming decades.

Politics will try to interfere to manipulate the economic forces that emanate from these radical changes as it always does. There will be winners and losers, as there always are.
In the midst of all this Bitcoin will offer an opportunity for everyone and anyone to obtain a degree of financial and economic autonomy as a means to protect against this political interference and manipulation. I price bitcoin at $34,500 over next 18-24months.

 

[Duke of Marmalade]

@WolfeTone you use the word adoption. I would put current adoption as a medium of exchange as being zero. So when you say there is currently adoption I presume you mean as a store of value or as a speculative vehicle. In JK’s logic this is cart before the horse and is ultimately unsustainable unless it becomes underpinned by MOE adoption.
Even if folk lose faith in their local currency I can never see bitcoin being adopted in any meaningful way as a MOE. Your 2% would be a very high rate of adoption possibly on a par with sterling which has over 60 million people using it as their day to day transactional currency. 15% is silly.

 

[WolfeTone]

I would put current adoption as a medium of exchange as being zero

It's not quite zero but in the grand scheme of things it is at micro levels.

So when you say there is currently adoption I presume you mean as a store of value or as a speculative vehicle. In JK’s logic this is cart before the horse and is ultimately unsustainable unless it becomes underpinned by MOE adoption.

I'm do not dismiss this view but again I refer to when the point of reckoning will emerge that will act as the catalyst to returning bitcoin to zero? Impossible to gauge, although I wholly accept that this is a possibility.
But as it stands of today I do think that point is moving further away rather than closer.

There is also the diffusion of innovation theory, a cursory application of this theory to bitcoin and the parallels to mainstream adoption over the long-term are there to see.
Time, is a critical unquantifiable determinant.

 

[tecate]

It's not quite zero but in the grand scheme of things it is at micro levels.

There's no doubt but that BTC is much further along with a store of value / 'digital gold' use case rather than micro-payments. However, crypto and bitcoin is very much on the minds of payments networks. It's a matter of speculation but some point to the commencement of Paypal's bitcoin offering with this increase in demand and thus price being more than just a coincidence.
Time will tell but I think a much longer time horizon is needed to see what impact it can make from a payments perspective. It's being argued that bitcoin needs to be actively used as a means of exchange before it can act as a store of value. I think that it establishing itself as a store of value can in some ways be helpful to it establishing itself as a means of exchange.