Key Post Why Bitcoin has value

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tecate

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Let me think about this.....a car or a Bitcoin? I think you are proving how absurd the current valuation is. QED as they say.
I think it proves the evolution of your assessment of the utility and value of a scarce, unconfiscatable, immutable, borderless digital asset. People affix value. Most likely you wouldn't have had the same reaction to the consideration of gold in the place of Bitcoin in that analogy yet as per all of the above, gold is largely the subject of a store of value use case (as in that's largely what gives it its value).

And for the record I don't think Bitcoin will reach zero.....as long as criminals use it, it will be worth something.
Good for you - we all have to start somewhere! Lets see...alongside the criminals - how about citizens that want to shield their wealth from a regime that's gone rogue (of which there are many at any given time)?
If I were to offer you €12k worth of potatoes, would you accept? If so you accept that potatoes have a value in today's market. But I bet you'd be looking to off load them as quickly as possible right? Not hold on to them as a store of value for a few years?
Do these potatoes have scarcity designed in? Can you use them to transmit value digitally round the planet in minutes? As with other such analogies, this one fails to accept and acknowledge that Bitcoin brings certain values to the table.

Bitcoin isn't that complex. Perhaps you could head over to the other thread and share your thoughts on how you think the scaling problem will be addressed? Can the protocol be adapted so that the current limit of ~7tps will ever come close to 100,000tps? Every layer 2 proposal I've looking into to date involves taking your money out of Bitcoin and into another platform. What are your thoughts on the power demands of proof of work? Is that viable in the long term assuming broad adoption in terms of cost versus reward, especially as we experience future halvings?
I agree that there are plenty of issues to resolve. I don't think they're insurmountable but only time will tell.
 

Leo

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Do these potatoes have scarcity designed in? Can you use them to transmit value digitally round the planet in minutes? As with other such analogies, this one fails to accept and acknowledge that Bitcoin brings certain values to the table.
They don't, but then cars don't either, and cash is plentiful, so the introduction of scarcity is of no value to me in this transaction. In the car example the additional risk and hassle of accepting Bitcoin isn't worth €1k to me, though of course it may well be to others.
 

Andrew365

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For €1k, no, I wouldn't take Bitcoin.



Something better will come along, when it does, it'll be a race to get out as the price plummets.
Sorry I didn't realize that you're opinion is based on it having to be stable in order to be a store of value?

I treat the value as a variable.
 

Leo

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Sorry I didn't realize that you're opinion is based on it having to be stable in order to be a store of value?

I treat the value as a variable.
The goal of a store of value is as a safe haven against depreciation that affects other assets. Predictability within certain understood constraints, particularly in relation to the base level, is fundamental. Many predict Bitcoin will attain this quality as adoption increases and demand stabilises resulting in a more predictable price, but I think most commentators agree that it's some way off the mark at this point. Ask anyone who bought in at $20k how they feel about Bitcoin as a store of value against the traditional stores.
 

Andrew365

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The goal of a store of value is as a safe haven against depreciation that affects other assets. Predictability within certain understood constraints, particularly in relation to the base level, is fundamental. Many predict Bitcoin will attain this quality as adoption increases and demand stabilises resulting in a more predictable price, but I think most commentators agree that it's some way off the mark at this point. Ask anyone who bought in at $20k how they feel about Bitcoin as a store of value against the traditional stores.
I do not fully agree with those initial two statements. Gold is not a Risk Free asset, it is viewed as a safer asset to Equities and Bonds during times of market stress and that is why the correlation in these markets should be< 0. However if I am a cash investor buying gold I am taking on price risk, therefore the investors has the same type of risk as a Bitcoin investor, with bitcoin of course the price risk is greater due to the volatility.

That is why 99% of retail investors savings are in cash not in gold. If my Equity portfolio drops 5% today I am not rushing out buying gold.

I do agree that the stability is way off the mark at the minute but I see the potential years down the line for it to operate similar to Gold.

For those who bought Bitcoin at $20k, I doubt they did it as a store of value but more as a speculative investment and I hope they bought an amount in line with their risk tolerance and portfolio split and kept tight limits on when to sell.
 

Firefly

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I think it proves the evolution of your assessment of the utility and value of a scarce, unconfiscatable, immutable, borderless digital asset. People affix value. Most likely you wouldn't have had the same reaction to the consideration of gold in the place of Bitcoin in that analogy yet as per all of the above, gold is largely the subject of a store of value use case (as in that's largely what gives it its value).
Well I know if I came home to the missus with 8 grand in gold she would be properly happier than having the cash itself. On the otherhand if I came home and told her that instead of 8 grand in cash we know are the proud owner of a Bitcoin I'm pretty sure the reaction would be quite different!!

Good for you - we all have to start somewhere! Lets see...alongside the criminals - how about citizens that want to shield their wealth from a regime that's gone rogue (of which there are many at any given time)?
Using Bitcoin (or anything else) to shield their wealth from a regime that's gone rogue will generally make them criminals too but I take your point.

Sadly, you'll find that those poor sods don't have much of anything anyway.... Any idea of what kind of wealth we are talking about?

And more importantly, given Bitcoin is up and running a decade now, any idea of how many people have used it for such purposes???
 

tecate

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Leo said:
The goal of a store of value is as a safe haven against depreciation that affects other assets. Predictability within certain understood constraints, particularly in relation to the base level, is fundamental. Many predict Bitcoin will attain this quality as adoption increases and demand stabilises resulting in a more predictable price, but I think most commentators agree that it's some way off the mark at this point. Ask anyone who bought in at $20k how they feel about Bitcoin as a store of value against the traditional stores.
You're cherry picking the worst example in terms of volatility. Additionally, gold has had some pretty savage corrections of its own in its not too distant past. Other than that, I think there's a misunderstanding over what makes a store of value.

Volatility is not acceptable in creating a reliable currency. However, it doesn't necessarily negate something being a store of value where store of value is deemed to be 'items where the value does not decay over time and may in fact increase in value'.

Question: If an item losses 33% of its value in a single year, is it a store of value...OR...would such an event make it null and void as a store of value?
Well I know if I came home to the missus with 8 grand in gold she would be properly happier than having the cash itself. On the otherhand if I came home and told her that instead of 8 grand in cash we know are the proud owner of a Bitcoin I'm pretty sure the reaction would be quite different!!
Well, there;'s a few things to unpack there. Firstly, I don't know yer missus - perhaps she's a raging Bitcoin maximalist! :-D
However, given that you don't believe in it, I don't think you're going to do a good job in selling that to her, right? If you sat down with her and said that you'd researched it and BTC is very risky as an investment currently but with that it has far greater breakout potential than any other asset class right now. Furthermore, that it's non-correlated and outside of the existing system (which - seems like its teetering towards recession/crash scenario) - and could act as a hedge. Finally, that you've looked at the risk vs. reward on it - and it would be worth having 5% portfolio exposure to it. But you believe what you believe - and that's fine. :)

Using Bitcoin (or anything else) to shield their wealth from a regime that's gone rogue will generally make them criminals too but I take your point.
Well, perhaps we need to be questioning governments a bit more, don't you think. If something is inherently unjust and it implicates personal finances, I'd sooner have it in crypto. People get labeled all manner of things - doesn't mean we have to be accepting of it.

Sadly, you'll find that those poor sods don't have much of anything anyway.... Any idea of what kind of wealth we are talking about?
Doesn't matter. There are people at all points in the wealth spectrum affected when a country is financially mismanaged.

And more importantly, given Bitcoin is up and running a decade now, any idea of how many people have used it for such purposes???
Ah, this old chestnut :-D
Bitcoin started with a few cypherpunks on message boards trading theories on how to build cryptographic money or digital gold. They've come from that to a crypto marketplace with a capitalization of $266 billion today - with it front and centre, the object of discussion and debate in the highest echelons of world politics. The internet didn't unfold for years - nor will this. There have been false dawns with AI - it's been around for years yet it's only right now it's on the precipice of having an epic impact on society. The same for the Internet of Things.
Naysayers may not be satisfied with the rate of progress of BTC/crypto but for me, it's development has been outstanding.
 

Firefly

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There are people at all points in the wealth spectrum affected when a country is financially mismanaged.

The internet didn't unfold for years - nor will this.
Bitcoin is pretty well known at this stage and if it was any good Joe Soap on the street would be using it to get his money out. Yet we seem to have nobody really using it for this purpose. As far as I can see there are 2 main groups of people transacting in Bitcoin - those speculating and those engaged in criminal activity.
 
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Leo

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I do not fully agree with those initial two statements. Gold is not a Risk Free asset, it is viewed as a safer asset to Equities and Bonds during times of market stress and that is why the correlation in these markets should be< 0. However if I am a cash investor buying gold I am taking on price risk, therefore the investors has the same type of risk as a Bitcoin investor, with bitcoin of course the price risk is greater due to the volatility.
It's not about being risk free, I don't think there's any such asset, it's about reducing the risk as much as possible. Gold tends to move in more predictable patterns, with a much higher base than crypto.

I do agree that the stability is way off the mark at the minute but I see the potential years down the line for it to operate similar to Gold.
My belief is that crypto may well serve a purpose as a store of value at some point, but that crypto won't be Bitcoin.
 

Leo

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You're cherry picking the worst example in terms of volatility. Additionally, gold has had some pretty savage corrections of its own in its not too distant past. Other than that, I think there's a misunderstanding over what makes a store of value.
Yep, that's fair, I did. But I think it demonstrates the poor current standing of Bitcoin as a store of value when it is suffering significant volatility that seems based on little more than the rumour mill at times.

Question: If an item losses 33% of its value in a single year, is it a store of value...OR...would such an event make it null and void as a store of value?
To be fair, it would probably depend on what's going on with other asset classes, if most other classes took a 50% hit, then 33% would look good. If the others were pretty stable, then of course 33% would suggest it was a poor choice as a store of value. With Bitcoin down ~33% in two months, are you saying that's now void as a store? :D
 

tecate

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Bitcoin is pretty well known at this stage and if it was any good Joe Soap on the street would be using it to get his money out.
I'm sorry but that's just not an informed view. It being 'well known' doesn't mean there should be an expectation that it either gets used now or we decide that it's not being used now, ergo it will never be used. A move towards digital currency is no small thing. Bitcoin didn't just come out of a box as a ready to use product - complete with eco-system. That's all still work in progress.

The origins of the internet (arpanet) stretch a long way back before you and I ever looked to use it. Then when we did, there were scaling issues (think of that screeching dialup modem sound from back in the day). Ways were found to scale it - and the roll out of that isn't even finished yet. I remember being interested in it at a pre-aol stage but there wasn't all too much that could be done with it. You could have taken the view back then that it was a waste of time and would never work or never be of any real use to anyone. Even years later, I still had relatives who said they could never see themselves using it (and of course, some years later, they do nothing else but use it).

Ways have to be made to make it more consumer friendly. People have to be exposed more to digital currency - and that will happen with the likes of Libra ( or Wallmart, or the Chinese CBDC or whomever else). The prospect of people using a digital currency becomes far more realistic when people are already conditioned towards it.

Other than that, it is being used to transact money across borders. I spoke to a guy who was influencial in opening up South America for a world leading crypto exchange 6 months ago. As an Argentine native, he said that there was significant interest in its use there - but its early days. The same with places like Venezuela. Of course, it's not to the extent that some of the crypto media suggest but it is creeping in. Data from LocalBitcoin is one source which attests to that.

There are other barriers to its use also - such as banks banning the ability of customers to buy it with credit card. That's significant as it can be the first entry point to someone gaining exposure to crypto. And of course, these confounded AML/KYC regs are causing so much friction, there would be far more people on-boarded into the crypto eco-system without them.

As far as I can see there are 2 main groups of people transacting in Bitcoin - those speculating and those engaged in criminal activity.
Yes, speculative and store of value related transactions implicate a large proportion of transactions (amidst a growing transaction level). On the criminal activity front, see here -> LINK -> that's a misnomer.




 

tecate

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Yep, that's fair, I did. But I think it demonstrates the poor current standing of Bitcoin as a store of value when it is suffering significant volatility that seems based on little more than the rumour mill at times.
The point is that it's early doors. Volatility a plenty - no question. However, trotting out that one peak to trough is not providing the whole picture. On the whole, it's proven to be an asset which has maintained and accumulated value.



To be fair, it would probably depend on what's going on with other asset classes, if most other classes took a 50% hit, then 33% would look good. If the others were pretty stable, then of course 33% would suggest it was a poor choice as a store of value.
Ok, so it's confirmed then. Gold is a poor store of value (as gold - in the not so distant past took a 33% nose dive).
 

Leo

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Ok, so it's confirmed then. Gold is a poor store of value (as gold - in the not so distant past took a 33% nose dive).
It was while it dropped 33% anyway, unless of course most other assets were dropping at a similar or worse rate.
 

tecate

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It was while it dropped 33% anyway, unless of course most other assets were dropping at a similar or worse rate.
Ok, so I guess the point I'm making is that Bitcoin has every much a right to be classed as a store of value as gold does (as long as you account for the stage it is at in it's development).
 

Leo

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Ok, so I guess the point I'm making is that Bitcoin has every much a right to be classed as a store of value as gold does (as long as you account for the stage it is at in it's development).
Yeah I hear you, and then my thoughts on it are it shouldn't be considered a store of value until there is more broad adoption and stability. A store of value should provide a significant element of safe haven, that can't be said of Bitcoin right now.
 

Firefly

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how about citizens that want to shield their wealth from a regime that's gone rogue (of which there are many at any given time)?
Can you provide any evidence that people are using it for that? It may certainly happen in the future, but right now is there anyone in any great numbers transacting in Bitcoin except criminals & speculators?

Bitcoin didn't just come out of a box as a ready to use product - complete with eco-system. That's all still work in progress.
The internet didn't unfold for years - nor will this.
Perhaps, but it's difficult to see how it's worth $266 billion then..
 

Andrew365

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Can you provide any evidence that people are using it for that? It may certainly happen in the future, but right now is there anyone in any great numbers transacting in Bitcoin except criminals & speculators?
This should answer your questions. It is all great when we live in a country that uses the Euro or Dollar but not so much for Venezuela

 

Firefly

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This should answer your questions. It is all great when we live in a country that uses the Euro or Dollar but not so much for Venezuela

Thanks for the link and although it's a solid use case it's very much an edge case - a failed, controlling regime suffering from extreme hyperinflation. I would doubt Bitcoin would continue to be used if / when Venezuela hangs up its socialist gloves.
 

Andrew365

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Thanks for the link and although it's a solid use case it's very much an edge case - a failed, controlling regime suffering from extreme hyperinflation. I would doubt Bitcoin would continue to be used if / when Venezuela hangs up its socialist gloves.
I answer you request to provide 'any evidence'. On whether they will continue to use it you are speculating.
 

Firefly

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I answer you request to provide 'any evidence'.
OK - let me rephrase and I think these are in order:

As far as I can see there are 3 main groups of people transacting in Bitcoin - those speculating, those engaged in criminal activity and those in extreme edge cases (failed socialist regimes suffering hyperinflation).


I'm not discounting cryptos or Bitcoin for what it's worth. However unless it used by people to actually buy stuff on a great scale, it will remain the preserve of criminals and those in edge cases. If that happens, then speculators will also leave the market as the number of new suckers will dry up.
 
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