
Morgan Stanley says the true price of Bitcoin might be zero - SirLJ
http://www.businessinsider.com/morgan-stanley-on-bitcoin-value-2017-12
======
hal9000xp
They still don't get it. I think partly because they live in the first world
country.

The initial reason why BTC took off was pure speculation based on the fact
it's fixed supply + unknown but may be bright future.

As speculators started gambling, people who sell drugs and other illegal goods
saw a great potential in moving their money as they know they eventually can
exchange it to fiats by dumping BTC to speculators.

At this point BTC got its real value as self-fulfilling prophecy.

Following speculators and drug dealers, wealthy people living in countries
like China, Russia saw great potential to move money out of their countries.

Self-fulfilling prophecy continues.

If there was no war on drugs and over-regulation of cross-border money
transfers, BTC would not be taken off.

As first crypto-currency, BTC didn't need fast transactions, low fees etc,
since there was no alternative for these people anyway.

Currently, there are technically better crypto-currencies than BTC but BTC is
still alive because of strong network effect and it's safety was tested by
time (after all it has longest chain in the world).

The whole story about discussions around BTC showed that you can have Phd in
Economics and still suck at economy and simple reasoning beyond standard stuff
you've been taught in university.

~~~
WA
And what do these wealthy Chinese and Russians do, if they never can turn BTC
back to their currency and neither can buy stuff with it?

~~~
_red
Because of the immense amounts of money involved, there will always be some
nation which will allow crypto exchanges back to fiat. In fact this is the
problem the "big boys" have in regulating crypto...create a tight noose and a
smaller country will see the opportunity and set itself up to be crypto coin
financial center. Once you convert to some form of fiat (JPY, CNY, EUR,
whatever), you can then convert to anything else on the global markets. None
of this requires you to travel to that remote country as it all happens on a
website.

This is a relatively minor problem that big central banks have....they would
rather have this problem then the other problem: Create a really tight noose
and people stop bothering to even convert back to fiat and simply pay each
other in crypto. At that point the game is up and 100 years of deficit
spending, political graft, inflation...all of "modern" finance ends.

~~~
candiodari
Alternate explanation. These "rich" are in fact criminals. Now let's qualify
that statements, but some things have become big business:

1) sending drugs ("real" medicine drugs/actual drugs/fake drugs) across state
lines. You see, the government doesn't really check the mail very thoroughly,
so you can just order heroin and have it mailed to you. (and these people also
transact along themselves, for obvious reasons. That used to be a big weak
point in the system and a way to trace it)

2) hostaging things (and, I'm sure, people). IT has become critically
important for pretty much everything, and can be sabotaged. Properly sabotaged
you can demand a ransom.

3) avoiding government scrutiny on things. This can go from tax evasion to
just outright being an enemy over the government, or simply protecting what's
yours. Now keep in mind that, despite people thinking otherwise, governments
are the same type of organisation from a game theory perspective as a mob.
Avoiding these might be judged moral, even by you, and may even be a necessity
for life (e.g. Venezuela).

You might think "third world country", and mostly you'd be right. But do
include Greece, Venezuela, Russia, Ukraine, Turkey and Cyprus as markets where
it is seeing very significant usage. For significant portions of the
population, governments took away their ability to transact in their local
currency (in Greece's case there was at least a plan by mr. Varoufakis to
provide a "local" currency, but all others have simply not provided a usable
alternative, instead denying there is a problem). So bitcoin has filled a
serious and necessary void there.

You see, governments force you to transact in their currency, but they provide
no support at all. In reality, dollar transaction either happen in a way that
was not even new in 300 BC, and probably was not new in ~4500 BC (ie. cash),
or using for-profit institutions of questionable integrity (VISA, ask any
online merchant).

The fact that an underground economy like this can exist at all, with people
unable to easily defraud each other allows for such economies to exist and
grow.

As for the value, it is generally accepted that a currency's value is a direct
result from the movement of value (not money) in said currency (so savings
destroy a currency's value, and having money go around and not be hoarded
anywhere increases a currency's value). This is why the dollar is so much
higher than most other currencies. So conveniently, for most altcoins you can
get a decent guess for the value of the currencies by counting the
transactions. Because transactions aren't free, this can't be scammed for
free, so there must be some level of truth in this.

(expressed in USD) [https://blockchain.info/charts/estimated-transaction-
volume-...](https://blockchain.info/charts/estimated-transaction-volume-usd)

(expressed in bitcoin itself) [https://blockchain.info/charts/estimated-
transaction-volume](https://blockchain.info/charts/estimated-transaction-
volume)

Clearly, bitcoin is comparable in value to many fiat currencies.

Now you might ask if a bitcoin economy is useful or if we should support or
oppose it, and of course all bankers will oppose it. Now of course there's 2
reasons for that. They may personally believe or not believe this is a good
idea, but keep in mind that most are intelligent enough to understand that
their livelihoods depend on bitcoin not growing too large.

Personally I think bitcoin is a very typical early market currency. It is a
"gold standard" and it'll crash, for similar reasons the gold standard
crashed. Ironically, because bitcoin is a criminals currency, people seem to
be very reluctant to actually store value in bitcoin, and this is currently a
great strength of bitcoin the currency. There is no other currency where the
entire money supply circulates every 2 month (e.g. that's ~12 times as fast as
the US dollar), and that's a lower bound in the bitcoin case and an upper
bound in the US dollar case, to that factor could and should be larger.

------
jshaqaw
I’m looking forward to when tech is about creating neat new things again and
not pure zero sum gambling/speculation.

~~~
dawhizkid
I think the frenzy around bitcoin has just exposed the fact that many people
in tech are in it for the money and don't really care about building products
that positively "change the world."

~~~
havetocharge
Or confirmed what many of us knew after observing the market gyrations of the
year 2000.

------
htormey
This is not a good article on bitcoin as it focuses on valuing it as a medium
of exchange.

Seeking alpha has a better series on the subject which provides charts and
sources to back up its analysis.

The above article just cites a Morgan Stanley paper without providing access
to it.

This part of the seeking alpha series focuses on btc usage:

[https://seekingalpha.com/amp/article/4122695-bitcoin-
series-...](https://seekingalpha.com/amp/article/4122695-bitcoin-
series-2-usage#click=https://t.co/XaXsedE15x)

If you look at btc usage, it seems like about 97% of blockchain transactions
are speculation. I.e buying/selling on exchanges as opposed to it being used
to pay for goods and services.

When you factor in transaction costs and the time it takes transfers to go
through, it seems pretty safe to say that btc in its current form is not being
used as money. This is nothing new.

The question now is what if anything is btc worth as a store of value? I’d
love to see an article dig into that question a bit more. All the parent
article has to say on this topic is:

“Like digital gold? Maybe. Does not have any intrinsic use like gold has in
electronics or jewelry. But investors appear to be ascribing some value to
it.”

Which really doesn’t tell you much.

------
jacknews
Again, a very selective headline, since the analyst is essentially saying
there are no "fundamentals" to bitcoin, nothing to really anchor it's price.

Yes, the value could be zero - if no-one wants to buy it. But currently, some
do, and so the "value" is whatever they are willing to pay, either in terms of
dollars, or head of cattle, or whatever.

Of course if "value" is defined as "intrinsic usefulness" then it perhaps is
actually worth nothing at all, very much like any fiat currency (though in
paper form I guess those have some "firewood" or "toilet paper" value).

------
simonblack
We've seen the astronomic valuation of worthless objects thing before. As well
as the 'This time it's different' fallacy before.

I'm talking about the Dot.com boom and bust.

[https://en.wikipedia.org/wiki/Dot-
com_bubble](https://en.wikipedia.org/wiki/Dot-com_bubble)

------
thisisit
I sometimes wonder if pieces like these, trying to value bitcoin actually
understand what they are doing. Cryptocurrencies are entirely new and trying
to fit it within an existing fixed framework is an issue.

The main question is - How do we look at it? Is it a currency, store of value,
derivative, medium of exchange, technology?

This valuation seems to focus on the medium of exchange and currency aspect.

But there are other ways to approach it. One of the easiest and maybe
amateurish way to look is through the mining and electricity costs. Sure, it
is like a self fulfilling prophecy - more you mine, higher the difficulty and
hence higher electricity costs, then you mine more, difficulty increases and
it goes in circles. Obviously the electricity costs are alone not enough to
justify the current value. But it certainly will not be zero.

------
turblety
Bitcoin is either worth nothing or worth a lot more than it currently is. I
think most people agree that its current valuation is very wrong.

~~~
nerdponx
If businesses are expected to conduct large transactions in Bitcoin, its price
has to be high, owing to the fixed supply. Otherwise there will literally
wouldn't be enough Bitcoin available to make transactions work.

That said, I think cryptocurrency ought to be cheap, so people don't hoard it.
All this speculation hype has been fantastic for awareness, but I hope it dies
down so that people can start actually transacting in cryptocurrency.

~~~
sputr
"I think cryptocurrency ought to be cheap, so people don't hoard it."

More importantly it needs inflation. I just don't see how a currency with
builtin deflation can ever be used for anything but a value store. I still
don't get why this isn't more widely discussed. Am I missing something?

~~~
abritinthebay
It’s discussed _at length_ by its critics. IMO bitcoin proponents can’t avoid
this problem and mostly hand-wave it away with vague statements or long
treatises about how the banking system should (but doesn’t) work.

Blockchain is great tech and bitcoin is a wonderful speculation tool/pyramid
scheme but the current situation is an anomaly (as the transaction speeds and
prices are showing).

~~~
sputr
Ah, no matter how much we are aware of it filter bubble still get's us.

------
red5tar
Some don't understand bitcoin, because they think money is real.

------
gravypod
Bitcoin is backed by nothing but trust. Just like US dollars.

~~~
earthtolazlo
The difference is that you can actually buy things with USD.

~~~
thanatropism
Also: you _want_ to buy things with USD (or invest/lend) because USD kept
under a mattress will deteriorate. While Bitcoin by structure is supposed to
never deteriorate, just increase in value.

Everyone else's saying this: the value of Bitcoin is either zero or infinity[
_]. This was clear way from the beginning, and while I regret not cashing in
on the bubble before.

[_] This assuming the normal continuation of capitalism and the global concert
of nations where there is openness to commerce and multiple fiat currencies.
Of course, in Mencius Moldbug's dream (who first called for something like
bitcoin in '08) where strong authoritarian government prevents other
currencies from hanging on... it's an utopia. We might as well trade in time
credits.

------
pimmen
When/if Bitcoin becomes accepted everywhere and all bitcoins have been mined,
but we keep producing new stuff we can buy, the value of a single bitcoin
approaches infinity.

That’s why I don’t like them.

~~~
MsMowz
Maybe there should be a centrally agreed upon authority that can change the
size of the money supply by fiat. That seems like that would fix most of the
problems with Bitcoin.

~~~
Zak
At a cost of being the very problem decentralized cryptocurrency was meant to
solve.

But a cryptocurrency doesn't have to be designed with a deflationary monetary
policy hardcoded. Monero, for example has a steadily decreasing block reward
that will bottom out at 0.6 instead of Bitcoin's 0. Ethereum is also designed
for a steady increase in supply if I understand correctly.

