The Bitcoin threads could be interesting in the future

[WolfeTone]

And no one has yet shown how any of those prices were justified.

How is the price justified for anything? There is no formula other than price comparison, and time, to 'justify' the price of anything.

Price of oil 5yrs ago was $100 a barrel , last Yr $20, this year $40.
Oil does the same thing today as it did 5yrs ago. It's utility has not undergone any fundamental change.

How are any of these prices 'justified' other than comparing the price, derived from market supply and demand, over time.

It is clearly identifiable as a bubble.

A characteristic of a bubble is that it is not clearly identifiable. It's what makes a bubble a bubble.
We can all speculate at any given time what is, or is not, a bubble. But a bubble is only clearly identifiable after its price has burst and crashes. Until that point, it is not clearly identifiable.

 

[WolfeTone]

When does any asset enter a bubble? It's hard to know.

Yes, the point I'm making above.

 

[Brendan Burgess]

How are any of these prices 'justified' other than comparing the price, derived from market supply and demand, over time.

The supply and demand is based on its utility and scarcity and lack of alternatives.

Bitcoin has no utility and plenty of alternatives.

Brendan

 

[tecate]

The supply and demand is based on its utility and scarcity and lack of alternatives.
Bitcoin has no utility and plenty of alternatives.

That's incorrect. You continue to misunderstand the proposition that is bitcoin. You focus on the utility of gold and you and others cite its industrial use. Explain to us then how gold established itself as a store of value long before it ever had these marginal (7.49%) industrial use cases? Such use cases are recent in its history.
Likewise, you fail to understand scarcity. No other asset has the fixed supply that bitcoin has in a store of value context - not even gold. Take the example of peak oil - which we were told some years back we were fast approaching. The oil price went up - and with that, the incentive to find more ways of extracting went up....leading to the development of fracking technology. When the price of gold goes up, so too does the incentive to mine more of it. That's not the case with bitcoin (insofar as the supply schedule is fixed).
On the claim of there being ample alternatives, you also misunderstand the proposition. Maybe because its an assumption on your part that what you value or don't value is the same conclusion that everyone else on the planet arrives at. That's not the case - and the ability to self custody wealth and cut out intermediaries is far more powerful than you have ever acknowledged (or rather, you've not acknowledged it at all - you've dismissed it).

 

[RoseMc]

Brendan,

Can I ask 2 question please?

1. If Bitcoin has no utility, why would the EU produce reports like this?

https://www.europarl.europa.eu/cmsdata/150761/TAX3%20Study%20on%20cryptocurrencies%20and%20blockchain.pdf

[You will no doubt be aware that the Irish Department of Finance has produced its own material in relation to Bitcoin.]

2. Specifically, within this report, are the authors wrong when they say:

A first, and very important, player is the “cryptocurrency user”. A cryptocurrency user is a natural person or legal entity who obtains coins to use them (i) to purchase real or virtual goods or services (from a set of specific merchants), (ii) to make P2P payments, or (iii) to hold them for investment purposes (i.e. in a speculative manner).

Frankly, I understand your difficulties when it comes to valuing Bitcoin but when you make statements to the effect that Bitcoin has no utility, I think that this simply serves to undermine your general position in this regard.

The more credible your response to these questions - actually the more I'd be inclined to respect your general position. If you continue with the unfortunate position that Bitcoin has no utility, then we get into the realms of the recent interview between Piers Morgan & Samantha Reid with Mr. Brexit.

 

[Leo]

1. If Bitcoin has no utility, why would the EU produce reports like this?
https://www.europarl.europa.eu/cmsdata/150761/TAX3 Study on cryptocurrencies and blockchain.pdf

Are you suggesting a study on financial crime, money laundering and tax evasion once and for all confirms the utility of bitcoin?

How do you tally the (almost) anonymity bitcoin proponents tout with their detailing of how anonymity will have to be removed in order to enforce regulatory compliance?

 

[Brendan Burgess]

We are going around in circles

The fundamental question is how do you justify the value of Bitcoin?

None of you is able to do that. None of you is able to explain why it's worth $16,000 and not $5,000. None of you can explain why it was worth $20,000 three years ago. Why it dropped to $3,000 and why it's now back at $16,000

You can only trot out irrelevancies like

• "That is what the market says it's worth"
• "I'll answer when you tell me how you value gold"
• "It's a whole new world"
• "The fiat currencies are in trouble"

 

[RoseMc]

Are you suggesting a study on financial crime, money laundering and tax evasion once and for all confirms the utility of bitcoin?

Not in the slightest. This is a disappointing misrepresentation of my questions.

 

[Leo]

Not in the slightest. This is a disappointing misrepresentation of my questions.

Then please clarify, I'm trying to understand why you provided that specific link preceded with the 'If Bitcoin has no utility...' What about that report or its publication confirms that bitcoin has utility?

You phraseology suggests you believe this report confounds Brendan's claims of no utility. How did you arrive at that conclusion?

 

[RoseMc]

The fundamental question is how do you justify the value of Bitcoin?

I note that you have evaded the questions.

The more credible your response to these questions - actually the more I'd be inclined to respect your general position. If you continue with the unfortunate position that Bitcoin has no utility, then we get into the realms of the recent interview between Piers Morgan & Samantha Reid with Mr. Brexit.

There was a reason why I felt compelled to write this in advance. I find this attempt to evade a direct question really disappointing. For the avoidance of doubt, trying to muddy the waters with evasive tactics by ignoring the question and countering with different questions is, in my opinion, at the very low end of the credibility scale.

 

[tecate]

The fundamental question is how do you justify the value of Bitcoin?

By recognising how well it scores in terms of the recognised and fundamental characteristics that account for a store of value and a means of exchange. I've invited you to do that - but because it doesn't fit the narrative you're running with here Brendan, you won't even consider that. That's your basic issue - not bitcoins. Once again, here are those characteristics and how bitcoin/gold/fiat currency rank against them.

None of you is able to do that.

In your opinion - and it's an opinion I most definitely don't share.

None of you is able to explain why it's worth $16,000 and not $5,000.

It has been explained to you many times. It's the scarcest financial instrument the planet has ever seen - more scarce than gold (see my previous post). You rubbish the notion of scarcity when it comes to a store of value and you are completely wrong to do so. In rubbishing scarcity, you are rubbishing the fundamental characteristics of a store of value - that were settled on long before bitcoin existed.
Secondly, its exactly because of folks like you that we will remain in price discovery mode for a number of years. Its a new asset class who's network effect is growing and has demonstrably grown in the three years that these discussions have been ongoing on AAM despite your protests.

Aside from all of that, I've asked you before but it seems given the nature of your question I have to ask you again. Why do you apply one standard to bitcoin with regard to pricing and you don't hold the same level of contempt in that respect for gold (silver or any other commodity whilst we're at it)? You've said that you have encouraged people to buy gold in the past. How can you do that when the mechanism is precisely the same with regard to gold pricing. Please answer that question.

That is what the market says it's worth"

That's not an irrelevancy when it comes to bitcoin, gold or other commodities. It doesn't help provide a neat little calculation or formula but whilst it may not be convenient for you, it's not irrelevant.

"I'll answer when you tell me how you value gold"

Brendan, for as long as you continue with this nonsense, I'll continue to ask you this very question. It's highly relevant because you are engaging in double standards. The pricing mechanism is the very same whether its gold or bitcoin. And don't respond saying gold has value, bitcoin doesn't. We can disagree on that and it seems you still cant hold gold (or any other commodity) to the same standard.
I asked you this three years ago and you downright refuse to answer the question.

The fiat currencies are in trouble"

This is and always will be relevant to the qualities and utilities of bitcoin. Again, you won't have that conversation because you know well - and it doesn't fit your narrative.

 

[Brendan Burgess]

@Rose

Talk about the kettle calling the pot black!

Feel free to explain why you hold Bitcoin worth $16,000 today which were worth $5,000 a year ago and how you can justify both valuations. And if your valuation is based on utility - fine. Explain that.

Brendan

I repeat, in case you missed it.

We are going around in circles

The fundamental question is how do you justify the value of Bitcoin?

None of you is able to do that. None of you is able to explain why it's worth $16,000 and not $5,000. None of you can explain why it was worth $20,000 three years ago. Why it dropped to $3,000 and why it's now back at $16,000

You can only trot out irrelevancies like

• "That is what the market says it's worth"
• "I'll answer when you tell me how you value gold"
• "It's a whole new world"
• "The fiat currencies are in trouble"

 

[Brendan Burgess]

So tecate

I presume you continue to refuse to show your calculations as to why Bitcoin is worth anything?

I can only conclude that it is a bag of hot air and worth nothing.

I look forward to your summary of both sides of the argument about Bitcoin.

Brendan

 

[tecate]

I presume you continue to refuse to show your calculations as to why Bitcoin is worth anything?

Continue on holding bitcoin to a different standard than gold, silver and other commodities, Brendan. I've long since acknowledged (as in three years ago right here on AAM) that bitcoin doesn't provide a neat little formula when it comes to pricing. But what's completely disingenuous in this discussion Brendan is your persistent failure to address WHY you expect a different standard in terms of pricing for bitcoin and won't hold gold, silver and other commodities to the same standard. You've twisted and turned every which way to squirm out from under that - it's there for any reader to see.

True to form - once again, you won't engage in a conversation re. the universally recognised characteristics of a good store of value (see graphic in my post above) - because you know that bitcoin scores exceptionally well in that regard.

I can only conclude that it is a bag of hot air and worth nothing.

I honestly don't mind what conclusion you come to Brendan. However, I think anyone here should have all the information so that they can make up their own minds.

 

[Duke of Marmalade]

1. If Bitcoin has no utility, why would the EU produce reports like this?

https://www.europarl.europa.eu/cmsdata/150761/TAX3%20Study%20on%20cryptocurrencies%20and%20blockchain.pdf

This is not a contribution to the debate but a technical question.

In simple terms, these cryptographic puzzles are made up out of all information previously recorded on the blockchain and a new set of transactions to be added to the next “block”. Because the input of each puzzle becomes larger over time (resulting in a more complex calculation), the PoW mechanism requires a vast amount of computing resources, which consume a significant amount of electricity.

I believe this is wrong, but I may be wrong. PoW does not involve verifying the whole ledger every time. The reason PoW is getting more difficult is because the price of bitcoin has become large attracting many miners to the contest. But because the protocol adjusts the difficulty of the puzzle to target 10 mins per block, then the more players the more difficult the puzzle. It is not because the blockchain is getting bigger. If I am right and the EU report is wrong it rather undermines the credibility of the latter.

 

[24601]

Brendan,

Can I ask 2 question please?

1. If Bitcoin has no utility, why would the EU produce reports like this?

https://www.europarl.europa.eu/cmsdata/150761/TAX3%20Study%20on%20cryptocurrencies%20and%20blockchain.pdf

[You will no doubt be aware that the Irish Department of Finance has produced its own material in relation to Bitcoin.]

2. Specifically, within this report, are the authors wrong when they say:

A first, and very important, player is the “cryptocurrency user”. A cryptocurrency user is a natural person or legal entity who obtains coins to use them (i) to purchase real or virtual goods or services (from a set of specific merchants), (ii) to make P2P payments, or (iii) to hold them for investment purposes (i.e. in a speculative manner).

Frankly, I understand your difficulties when it comes to valuing Bitcoin but when you make statements to the effect that Bitcoin has no utility, I think that this simply serves to undermine your general position in this regard.

The more credible your response to these questions - actually the more I'd be inclined to respect your general position. If you continue with the unfortunate position that Bitcoin has no utility, then we get into the realms of the recent interview between Piers Morgan & Samantha Reid with Mr. Brexit.

I think that's definitely the first time ever that the utility of something has been explained by reference to its convenience in laundering the proceeds of crime.

 

[Leo]

The reason PoW is getting more difficult is because the price of bitcoin has become large attracting many miners to the contest. But because the protocol adjusts the difficulty of the puzzle to target 10 mins per block, then the more players the more difficult the puzzle.

Specifically for bitcoin, you're correct. Difficulty does go up or down based on computing power applied by those competing to win the reward, and is assessed every 2016 blocks.

 

[RoseMc]

Hi Brendan,

Please read what I have said in previous posts. It is unfair and flat wrong to suggest that I claimed to know the value of bitcoin. Please quote where I suggested this. It is simply not true and again disappointing that the truth is being jettisoned here. What I actually said is closer to the exact opposite:

Frankly, I understand your difficulties when it comes to valuing Bitcoin....

I also don't understand the references to pots and their colour. All that has happened is that you made a statement which I believe to be untrue. I also believe that rather than accept that you made a wayward statement as part of a general debate (which is forgivable), you would prefer to muddy the waters and change the focus of the debate and evade questions (which is really not a nice way to engage in debate).

 

[RoseMc]

I think that's definitely the first time ever that the utility of something has been explained by reference to its convenience in laundering the proceeds of crime.

Honestly, it was the first report that I happened upon this morning. It serves its, not it's, purpose. I am reluctant to explain my thinking further until Brendan addresses my two questions. There have been a few posts from Brendan since my questions were asked so it will be interesting to see how he decides to play it.

 

[Leo]

Honestly, it was the first report that I happened upon this morning. It serves its, not it's, purpose.

I find this attempt to evade a direct question really disappointing. For the avoidance of doubt, trying to muddy the waters with evasive tactics by ignoring the question and countering with different questions is, in my opinion, at the very low end of the credibility scale.

Indeed!

I am reluctant to explain my thinking further until Brendan addresses my two questions. There have been a few posts from Brendan since my questions were asked so it will be interesting to see how he decides to play it.

Have you read the other thread where this was addressed in great detail? As you said yourself...

I find this attempt to evade a direct question really disappointing.