
Why Bitcoin is guaranteed to be a crappy investment - paulpauper
http://greyenlightenment.com/these-people-are-not-that-smart/
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cft
I have a different theory. There will be a capped total of 21m BTC. In say 10
years, there will be a number of BTC "users". By "users" I mean people who in
their ordinary business use BTC for value exchange. To facilitate that use, we
need to have a certain freely available amount of BTC per user at any time,
say $1000 in USD equivalent. Call this "float"

Then, assuming no BTC lost or locked in long term storage (I suspect these
cause upward corrections of 5-10x from below estimates), the price of BTC will
be btc_px ~= float * users / 21m.

I do not know how to estimate "float". For users there are two scenarios:

1\. Low adoption/high government restrictions, BTC is used for mostly illicit
transactions: say 50,000 users worldwide

2\. High adoption, legal use: perhaps 50m users worldwide.

Assuming my float = 1000 USD we get btc_px ~$20 for scenario 1 and ~$20,000
for scenario 2. I may be off by an order of magnitude in the "float"
assumption. Would love to hear your thoughts.

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aaroninsf
What do you imagine would be the incentive for users to use BTC, rather than
later-generation alternatives?

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Vadoff
What do you imagine would be the incentive for users to use later-generation
alternatives, rather than BTC?

~~~
tuesdayrain
The benefits of alternative cryptocurrencies are faster, cheaper, and
potentially anonymous transactions. Bitcoin's use of PoW and limited supply
means that transaction fees will always be necessary to provide miners with
rewards once all the coins have been mined. In my opinion that is a tradeoff
that will cause most people to use BTC as a digital store of value rather than
a form of payment. I think that if a cryptocurrency ever becomes widely used
for payments, it will be one that uses Proof of Stake/an inflationary supply
and can therefore avoid relying on transaction fees.

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andrewla
The article is generally factually correct. Bitcoin is a commodity; in some
ways investing in Bitcoin is no different from investing in Euros (if you live
in the US).

I think what wiggle room there is is in this statement:

> These astronomical early Bitcoin gains can be treated as an anomaly arising
> from a price discovery process that will never be repeated.

I think there have been numerous price discovery phases in the Bitcoin price
history, and that's reflective of the wild ramp-ups and following crashes, but
it's by no means certain that we've passed the last of the price discovery
phases. Looking only at performance over a cherry-picked timeframe is not a
great way to evaluate the overall quality of a security.

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scottybo
I got caught up in the hype of Bitcoin and thought it would change the world,
but the reality is that it doesn't really 'do' anything. All the apps that
I've seen on the blockchain are pointless, or more efficiently built using
non-blockchain stacks.

I was interested in a coin called MedicalChain which promised to store your
medical records in the blockchain, but it seems to be vaporware (lost a little
bit on that one!).

When Libra came along I thought that it would be 'the one'. Finally, a
blockchain that could reach the mass market and actually be usable. Just a
shame it's Facebook...

~~~
lazzlazzlazz
Have you looked into the so-called "DeFi" space? Compound, MakerDAO,
Synthetix, and others have some very interesting and surprising product
offerings with incredible potential.

Celo and others are working on Libra alternatives.

Arweave has probably the most compelling decentralized but economically
thoughtful web-friendly storage system I've seen — and it's launched, live,
now.

They certainly "do" things, although they're in early days. And none of them
are Bitcoin.

~~~
Mithriil
Arweave looks promising at first, but by reading their yellow paper [1], we
realize they want the storage to be permanent and immutable. It seems
interesting for archives that are not gigantic in size, but for websites...

[1] [https://www.arweave.org/files/arweave-
yellowpaper.pdf](https://www.arweave.org/files/arweave-yellowpaper.pdf)

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metasj
GPT2-bot should autogenerate an essay like this once a month... it would be
guaranteed to get attention each time.

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yanilkr
It makes more sense if Bitcoin is viewed as an insurance rather than an
investment or a commodity.

It's an insurance against the whole world falling apart. Why would the whole
world of finance fall apart? Same reason Roman empire fell part and lost its
significance.

Long back 1000$ was a lot of money, later a million $ was a lot of money and
then billion $ was a lot of money. In today's news, people are describing
events in trillion $ costs. If you extrapolate this trend, money as we know
will be losing its value exponentially.

Bitcoin is a money system that is defined very clearly in terms of quantity,
creation process and exchange etc. This is a good minimum viable product. It
definitely has value just like a commodity. It also has people working on
improving it as if it were an ipo'd company.

Just like language and law, bitcoin is a product of "spontaneous order" and
our knowledge of traditional finance may not have enough mental tools to value
it like another financial product. Some people certainly value it more than
other people. Over a long period of time take span of 100 years, it becomes
easy to imagine having a bitcoin like digital currency with standardized rules
for money creation not controlled by any single party.

~~~
duelingjello
Sorry, it's not insurance against the world falling apart because
cryptocurrencies (Ccs) have no intrinsic worth. With no internet access, no
internet or no miners, you can't conduct trades (unless you give wallet PK,
but then it still doesn't have worth beyond what you can actually buy with it
in a post-internet world).

OTOH, vital, scarce commodities and property have intrinsic worth because they
can be used or are valued. Gold, silver, platinum, diesel fuel, guns, knives,
equipment, huge tracks o' land

From the begging and until now, Ccs only make sense as a _transactional_ money
analog, not an investment other than an extremely speculative (volatile) one
that could lose most/all of its value anytime.

If you want to hide money for a couple of days, do some money laundering
(j/k), buy some drugs (j/k^2) or send money anonymously, Ccs are great. Please
don't put the bulk/large amount of your savings into Cc unless you're leaving
a repressive regime or want to give it all to me to avoid taxes. }:D

~~~
kegn
Nothing has intrinsic value. When you say something can be used or has value,
you are speaking subjectively.

To be valuable economically, something just needs to be both scarce and sought
after. Just because they are valuable to a specific set of persons does not
mean they have intrinsic value.

Pricing of goods and services is emergent in nature, based on demand, scarcity
and rate of consumption.

The 'bitcoin hype' is exactly what you are describing when you say:

> Ccs only make sense as a transactional money analog

Bitcoin was designed to just be a general accounting ledger that can't be
forged. It is supposed to be a transactional money analog.

The 'value' that you should be investing in when talking about bitcoin is not
its price in dollars, but rather that the idea:

The 'value' in bitcoin is that non-mutable accounting ledgers will be more
reliable and provide a better account of economic activity over some duration
than its pre-existing counterpart. The only way it will lose this is if the
security of the system breaks.

~~~
duelingjello
You're not making an honest argument while making a sweeping generalization
and a strawman about something else. Money has value if you can buy things
with it. Gasoline has value if you need it. Bitcoin has no value if no one
will accept it or trade it. That's _reality,_ not hypotheticals.

~~~
kegn
I believe you are missing the point I was trying to make.

I was stating that nothing, not even bitcoin or money or gold or water has
intrinsic value. Anything can have value to a person who is in need of a
seller's goods. That was not my argument. Things have subjective value. Things
do not have some mystic intrinsic property that makes them inherently
valuable.

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tuesdayrain
>Commodities over the long-run track inflation and do not produce the sort of
inflation-adjusted excess returns that stocks do. This means that Bitcoin, in
spite of large gains from 2010-2013 and from 2015-2017, is guaranteed to be a
shitty investment.

So commodities are bad investments, and the author deems Bitcoin a commodity,
therefore Bitcoin is a bad investment? I don't find this logic very
convincing. Bitcoin has numerous properties that traditional commodities do
not have, which makes all the difference.

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biolurker1
Haven't seen a BTC hate post for a while here. Anyway, bitcoin is the best
investment of the new century so far and that is the fact. Anything else is
speculation and biased.

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quirkafleeg3
Ah Cryptocurrencies. Like trading in bits of paper that say 'IOU some
paperclips'.

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nordsong
Bitcoin by design is not meant to be an investment. Its a bank account, that
cannot be seized. It cannot be inflated. That's the solution to the worlds
endless debt cycle. Although it does not do a fantastic job at day to day
transactions it has other attributes that make it the most amazing
technological breakthrough of our lifetime.

