Why is Bitcoin "digital gold" crashing right now?

[tecate]

Gold might be worth zero for all I care. It might be worth zero. It might be worth $1,000 an ounce. If I ever choose to buy it or short it, I will study it. But I doubt I will.

No - sorry Brendan but that in NO way cuts it. You've trash talked Bitcoin on this basis - and now when it comes to gold, you don't care. I care. People following this thread care (because it determines very much if there''s any credibility to your claims). So - please explain to readers how you would advise them with regard to purchasing gold right now. As I write this, gold is at $1,742/oz. Should I go out and buy it right now? Is it a steal at that price or should I short it?

This is a $9 trillion dollar industry - so it's got oodles of credibility and professionalism backing it up. Surely someone has a magic formula?

How about Silver? What calculation would you use for determining the fair market price of silver?

You are obviously very knowledgeable in the area of Bitcoin so I also would be very interested in knowing how you arrive at this valuation.

See above my friend - we won't be moving past this until Brendan fesses up :-D

Speaking of Folsom, did you know that Folsom is a hotel that features in the book Bitcoin Billionaires? How's that for coincidence ???

The Social Network was a resounding box office success. Hopefully the second part to the Winklevoss' twins story - 'Bitcoin Billionaires' will be equally well put together when it hits the big screens next year.

 

[Duke of Marmalade]

Not really. I simply acted a bit rashly a few months back. A time-out from cyber space was called for.

Why would one of the largest technology companies in the world have a support page for bitcoin usage?

Because there are people who get a kick out of paying for their games with bitcoin. I don't see that demand ever driving the price to $114,000. But wait, where's my imagination? I foresee a day when all the work is done by robots and the millennials spend all day playing Microsoft games and casually let their peers know how they spent a few bitcoin at the games today. Could be.

 

[WolfeTone]

Because there are people who get a kick out of paying for their games with bitcoin.

Is that it? That is the best reasoning you have why MS is providing the service?

I would get a kick out of paying for my sons xbox games with my toenails. Is there a support page for this?

 

[Duke of Marmalade]

As was explained to you (and as you well knew from the outset), those are the characteristics of a means of exchange and NOT a store of value.

No, I'm not allowing you away with that. You won't answer the question why your store of value criteria clearly contain medium of exchange tests and yet you drop a test which bridges the two aspects. Fair enough.
But I shouldn't have allowed the disingenuous moving of the goalposts in the first place. Bitcoin is first and last a currency, a medium of exchange. The clue is in the name, but read that White Paper again just to satisfy yourself. Its ultimate role as a currency is central to its long term store of value.
A house is a store of value. But it is firstly a place to live. You cannot separate its store of value from its primary use value.

 

[Duke of Marmalade]

Is that it? That is the best reasoning you have why MS is providing the service?

I have expanded that earlier post. You will see that I concede that you might have a point.

 

[Firefly]

Bitcoin is first and last a currency, a medium of exchange. The clue is in the name, but read that White Paper again just to satisfy yourself. Its ultimate role as a currency is central to its long term store of value.

I think it suits the narrative that Bitcoin is a store of value cos it's costs a few grand. That and almost nobody uses it to buy anything. Something tells me if it was the other way round it would be hailed as a currency but not yet a store of value, which you know will come as it's still only shiny & new..

 

[WolfeTone]

I have expanded that earlier post. You will see that I concede that you might have a point.

Yes, the price may never go $114,000 for sure. But that is not really the point is it?
Rather, one of the largest technology companies in the world has provided a support page for customers wanting to pay with bitcoin.

From yours and Brendans perspective surely this makes no sense to you both?

 

[tecate]

No, I'm not allowing you away with that. You won't answer the question why your store of value criteria clearly contain medium of exchange tests and yet you drop a test which bridges the two aspects.

A couple of things your Dukeness.. Please acknowledge that you posted incorrect data and linked to incorrect data. Secondly, either you accept the store of value characteristics that I listed or you have another attempt at citing such a list.

But I shouldn't have allowed the disingenuous moving of the goalposts in the first place. Bitcoin is first and last a currency, a medium of exchange. The clue is in the name, but read that White Paper again just to satisfy yourself. Its ultimate role as a currency is central to its long term store of value.
A house is a store of value. But it is firstly a place to live. You cannot separate its store of value from its primary use value.

Ha ha ha...this is priceless. Would you care to have a look at the title of the thread and then come back to me if you're still confused as to why the discussion focuses on 'store of value' rather than 'unit of account'.

I think it suits the narrative that Bitcoin is a store of value cos it's costs a few grand. That and almost nobody uses it to buy anything. Something tells me if it was the other way round it would be hailed as a currency but not yet a store of value, which you know will come as it's still only shiny & new..

Then put your money where your mouth is and short it right now. Simples.

 

[tecate]

Yes, the price may never go $114,000 for sure. But that is not really the point is it?
Rather, one of the largest technology companies in the world has provided a support page for customers wanting to pay with bitcoin.
From yours and Brendans perspective surely this makes no sense to you both?

They're waiting for the tulips payments page and payments gateway to be put in place.

 

[Duke of Marmalade]

Thought I would throw my 2 cents worth into the Great Price Of Gold debate. The economists tell us that price is the equilibrium between supply and demand. With bitcoin we have absolute certainty on the supply so I suppose the Boss is trying to tease out what is informing the demand.
With gold there is a primary source of demand - jewelry and industrial. The latter is driven by commercial factors. The former is highly subjective. But we know from the WGC that the majority demand is secondary, either store of value or speculation.
Now what I would like to know tecate is are you a primary or a secondary demand agent? This might also help resolve your tit for tat with the Boss. If you are a secondary agent like Fella then the situation is simple, for you the price is the price. But one suspects from your musings that there is at least a bit of the primary demand in you. The question is how do you quantify that primary demand, if it exists.

 

[Duke of Marmalade]

Then put your money where your mouth is and short it right now. Simples.

You address this question to me even though I did not actually make the point. This is the second time you have done that

 

[tecate]

Thought I would throw my 2 cents worth into the Great Price Of Gold debate. The economists tell us that price is the equilibrium between supply and demand.

What's this? Preliminary results are in? It seems that the price of gold is determined by the supply and demand dynamic. But lets not jump the gun, lets wait and see what Brendan comes back with.

Incidentally, do you have any sort of formula to go with that? I know that 'stock to flow' is one such model that they tinker around with in the gold world but perhaps you're aware of others?

(Just for any unfortunate neutrals trying to dicypher this discussion, Industrial gold use accounts for about 10% of gold. The World Gold Council classifies Gold jewellery as a function of investment and store of value largely).

 

[Duke of Marmalade]

What's this? Preliminary results are in? It seems that the price of gold is determined by the supply and demand dynamic. But lets not jump the gun, lets wait and see what Brendan comes back with.

Incidentally, do you have any sort of formula to go with that? I know that 'stock to flow' is one such model that they tinker around with in the gold world but perhaps you're aware of others?

tecate I actually did see once an attempt to rationalise its price. I'll try and trace it down. It was based on estimates of how much of world monetary transactions will ultimately be done in bitcoin. I'm not kidding. I know you think its use as a medium of exchange is off topic but this exercise which was done by a bitcoin enthusiast (not a cultist) saw its use as a medium of exchange as the final arbiter of its value/price. From memory he had a topside projection where 15% of world transactions were in bitcoin and that gave rise to a big price as you might guess, somewhere in the range that the prodigal Wolfie has bandied about.
On a slightly separate point I recall you dismissing recent volatility as only of relevance to those with very short term horizons but that long term you were confident of its store of value. I really find that difficult to understand. Even the hedge fund enthusiasts usually comment that it will either be zero long term or something v. big. Also how you can be so confident of its long term value when mainstream economists dismiss the concept also mystifies me. (Okay I know, you're going to throw the Keynesian fax machine at me. )

 

[elacsaplau]

This thread is great craic! I'm fat as a fool on the popcorn.

No I did not know that. Its also a city in California where I have some distant relations living. I hope to visit someday.

Please tell me not the prison!

 

[tecate]

I know you think its use as a medium of exchange is off topic but this exercise which was done by a bitcoin enthusiast (not a cultist) saw its use as a medium of exchange as the final arbiter of its value/price. From memory he had a topside projection where 15% of world transactions were in bitcoin and that gave rise to a big price as you might guess,

Have at it Dukey. Notwithstanding that, I'm keen to hear back from Brendan on how gold is valued.

On a slightly separate point I recall you dismissing recent volatility as only of relevance to those with very short term horizons but that long term you were confident of its store of value. I really find that difficult to understand.

It's as yet formative in the role of a store of value / digital gold.

Even the hedge fund enthusiasts usually comment that it will either be zero long term or something v. big. Also how you can be so confident of is long term value when mainstream economists dismiss the concept also mystifies me.

I've acknowledged many times that Bitcoin could be usurped by another digital currency or it may not garner any further adoption but that's not my current thinking (and of course everyone's opinion is different on that).
Look at the performance of the conventional markets over recent weeks. Does it make sense? Who knew and who prophesised the opposite?

(Okay I know, you're going to throw the Keynesian fax machine at me.)

At ease Dukey, I haven't seen one since Adam was a boy so I'd say you're safe enough.

 

[Brendan Burgess]

I'm keen to hear back from Brendan on how gold is valued.

Hi tecate

You are just being silly now. Irrationality is bad enough.

You think that something you own is worth $10,000 and yet the only basis for that is that Brendan doesn't know how to value gold.

You demean your other arguments by not answering the most fundamental question.

Brendan

 

[tecate]

You demean your other arguments by not answering the most fundamental question.

Brendan, I have to say that it's disappointing that you're doubling down on the double standards.

This aspect of the discussion isn't going anywhere until you explain to us all how gold is valued and its fair price arrived at. I'll even throw you a bone and open it up to Silver also.

Dukey tells us its simply 'supply and demand' and that there is no calculation per se. Would this be in line with your thoughts?

We await the calculation.

 

[Duke of Marmalade]

Dukey tells us its simply 'supply and demand' and that there is no calculation per se.

That's what the economists tell us from an external viewpoint. But Boss is asking you how did you arrive at the price that you satisfies your demand? I suspect the answer is that you have no metric- why not just say so, heck you would be in the good company of Fella.

 

[WolfeTone]

I am planning to short it again when I have a bit of cash and it hits $10k.

Sorry for butting in, but I am intrigued as what the $10K price tag has to do with you shorting bitcoin?
It implies, to me at least, that you have done some sort of valuation yourself? Certainly, its how I imagine how someone of rational thinking would behave - try to make a rational valuation of an item and if its overpriced short it, if its underpriced buy it.
Of course, even the best of rational thinking investors can get things wholly wrong. But its clear, you have determined a price for bitcoin (notably not its current price) where, presumably, you are seeking to minimise any potential losses and maximize any potential profits?
Am I correct? If so, how did you calculate $10k as the price to short it?
Or is your valuation of $10k totally irrational?

Lets see if can recall, the last time you shorted bitcoin, following innumerable proclamations that it is worthless, you sold it at $13,000? and bought it at $5,000k?
Given your toenail, worthless etc claims, can you explain the (ir)rationality in your behavior?

 

[tecate]

@dukey: The answer is that this discussion has been misinformed and part of clearing that up is Brendan clarifying how the fair value of gold is arrived at.

There's no way round that.