
What Is Bitcoin Really Worth? Don’t Even Ask - bitoneill
https://www.nytimes.com/2017/12/15/business/bitcoin-investing.html
======
amasad
"Ambiguity," "animal spirits," "neuroscience" \-- the article could be summed
up with "I have no idea what's going on."

~~~
danans
> "Ambiguity," "animal spirits, " "neuroscience"

Those are all real areas of research in behavioral economics[1][2][3].

> \-- the article could be summed up with "I have no idea what's going on."

There's nothing wrong with saying that you don't know what's behind the rise
in Bitcoin's value, but pointing out that it has features of several known
irrationality inducing biases, including the ones you quoted above. That's all
Shiller is doing here.

I prefer that opinion over the one that claims a priori that Bitcoin's value
is backed by economic fundamentals.

[1] [https://www.investopedia.com/terms/a/animal-
spirits.asp](https://www.investopedia.com/terms/a/animal-spirits.asp)

[2]
[https://en.wikipedia.org/wiki/Ambiguity_aversion](https://en.wikipedia.org/wiki/Ambiguity_aversion)

[3]
[https://en.wikipedia.org/wiki/Neuroeconomics](https://en.wikipedia.org/wiki/Neuroeconomics)

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bitoneill
_But the ability to short an asset more easily won’t necessarily overcome the
power of investor excitement.

In 1936, John Maynard Keynes suggested why. He played down the role of
quantitative analysis and probability estimates in human thinking of the
assessment of ambiguous future events. People in such situations are
vulnerable to a play of emotions and at times a “spontaneous urge to action”
that he called “animal spirits.” He argued that much of what happens in
financial markets has to do with people learning, from price movements, about
each other’s animal spirits._

~~~
themgt
Exactly. Even if you think BTC is an absurd bubble for a non-viable
technology, if you guesstimate the global animal spirits & meme hype has
another year or two to boil over, shorting BTC now is just a way go bankrupt.

~~~
Z1nfandel
"The market can remain irrational longer than you can remain solvent."

Recognizing a bubble and predicting the pop are two wildly different
challenges.

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kurthr
Can we put an upper limit on the value by saying that it can't be worth more
than it costs to destroy trust in the block chain by inserting invalid
transactions?

If that would only require 50% of the mining hardware and some 10s or 100s of
transactions (e.g. an hour a day or even a week of power). I don't know what
it would cost to do that, but if it was only recouping sunk costs, and future
income for the miner then it should be relatively easy to calculate even if it
changes all of the time.

edit: I don't see how as a store of value it could be worth something that is
effectively uncounterfitable and well established like gold ($7T), which would
set a $350k maximum. As a transaction medium BTC wouldn't be a good choice
anyway even as a first mover.

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jaimex2
Why are journalists obsessed with bitcoin needing to replace money? It doesn't
have to in order to succeed.

~~~
gooseus
What exactly does "succeeding" look like for bitcoin nowadays?

Because back before it became "that the thing that everyone was trying to
profit from", there was at least the sense that it would be somewhat useful as
a currency, if not replace cash entirely for most online transactions.

~~~
tenaciousDaniel
It really doesn't seem like crypto could ever be useful as a replacement for
currency, because it's deflationary. There are a few interesting projects
looking to create a stable coin on top of Ethereum.

~~~
perl4ever
Has anybody (smarter than me) looked at the Bitcoin code and said "what if we
try to change it such that transaction costs are capped rather than number of
coins"? That would basically make the supply proportional to demand...or
something like that.

~~~
xorcist
It doesn't seem to matter much if transaction costs are fixed. 0.0005 BTC paid
for a transaction two years ago. It will still pay for a transaction. That
doesn't seem to make many end users much happier.

They would rather like to see transaction costs sharply drop to compensate for
the equally sharp rise in USD/BTC value. Sadly, that's not how it works, which
has led to endless drama on the Internet.

~~~
perl4ever
I meant _real_ transaction costs, not nominal. Which of course points vaguely
to the idea that if the supply of bitcoins expanded proportional to usage
maybe it wouldn't be deflationary?

~~~
tenaciousDaniel
I've never understood why the supply needs to be fixed. So long as there's a
mechanism around creating new coins.

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stefs
i don't see how, in theory, the points brought against bitcoin differ from
potential vulnerabilities of traditional currencies. they all suffer from the
same problems.

> Bitcoin is vastly more volatile than conventional money and relatively few
> people trust it as a store of value.

that could and has happened to a real currency; there were lots of countries
that preferred, e.g., dollars or euros to the native currency as soon as this
native currency started to tank.

> Even if that hurdle [trust] is crossed, how much crypto-currency will people
> need? Putting it in economic terms, will the demand for Bitcoin have the
> same velocity as the demand for money?

trust would mean, more sellers would accept crypto-currency as payment. the
more sellers accept crypto-currency, the more of it people would need. this is
purely a question of trust. bitcoin may not be trusted yet, but that's one of
the prerequisites for the discussion given earlier in the article. no reason
you shouldn't be able to use bitcoin to buy bread at the local store or as
down payment for a house.

> Will there be the same number of hoarders?

i don't really understand this point - but even if it was true, that's not an
inherent fault of bitcoin.

> And what about all the other cryptocurrencies that exist today, and those
> that will arise in the future? Bitcoin might well be replaced by something
> different and better, and end up being worth nothing at all.

this has happened to lots of traditional currencies.

moreover, traditional currencies are subject to counterfeiting (even though it
doesn't matter much in practice).

\---

sure, in practice it's different, as (rich, stable) states have an interest in
keeping their currency reasonably stable and can act in certain ways as an
informed actor to control/steer their currency in a certain direction. this is
the only major difference i see (as long as bitcoin isn't derailed by a
hostile actor).

but in the end, currencies are worth what actors are willing to pay for it, a
principle that applies to both bitcoin and traditional currencies.

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easymovet
Cryptocurrency is the first time all three of: cash, stocks, and gold have
been the same thing. So take the sum of NYSE etc, Au, M0,all salaries needed
to run those infrastructures and banks devide by the number of ethereum
tokens, btc, and eth to get a price.

The reason I say ethereum instead of all alt coins is because once people
figure out that the chain needs to be decentralized to be secure they will
stop making their own coins and will do tokenized assets instead. full
disclosure: I'm long on Doge ;)

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divbit
After previously stating on here that I would hold my 5$ of bitcoin forever, I
sadly decided to sell them a couple of weeks ago. I'm sure I will regret this
some day. Sorry for messing with you guys.

~~~
foota
Was it compelling new evidence? :p

~~~
divbit
I'm not sure where your coming from with this question, so I won't answer to
avoid confusion.

~~~
foota
Was a reference to your bio, "I speak my mind... sorry. Also, I change my mind
when presented with compelling new evidence.... sorry."

~~~
divbit
Ohhh. Ok Totally forgot about that. Actually I partly sold it so I don't have
to worry about the account as I was sort of 'pruning' my password manager.
Also partly because, I commented a while ago that I think it's a bit of a
rigid, unforgiving technology, compared to e.g. using banks or such for money,
where you can get someone to fix any messed up transactions, rather than
having to crack sha 256 or whatever if you misplace a secret key. (My guess is
that the price will only go up, but have to act according to philosophical
beliefs sometimes I guess).

