

Bitcoins: A Giant Bubble? Maybe, but the currency could still be worthwhile - AndrewDucker
http://www.theregister.co.uk/2013/04/15/bitcoin_bubble/

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From a valuation point of view I think Bitcoin behaves more like a stock than
a currency.

Imagine you have a tech company with a decentralized, very cryptographically
strong, and very reliable global wire transfer system with a lot of great
features. Imagine that this wire transfer system gains a lot of users and a
lot of mindshare, and becomes a heavily discussed and very recognizable brand.
(At least as recognizable as Paypal.)

What would this company be worth? Now divide the total current "float" of
Bitcoins by this total valuation and there you have the rational value of 1
BTC.

A pretty high valuation, at least in the billions, seems reasonable given that
there are mobile chat startups going for $1billion right now.

I also don't think Bitcoin is a currency in the classical sense. I think it's
a _new thing,_ a genuine fundamental innovation in economics along the lines
of the invention of equity or short selling or similar. It's like a hybrid
between a currency, a stock, and a wire transfer system, and is more than the
sum of these parts. It might be the first fundamental innovation in economics
in quite some time.

Part of why I see it this way is that traditional economists, even very bright
ones like Krugman, don't get it. IMHO the "pop Austrians" that tend to love
Bitcoin _also_ don't get it. It's possible that its creators don't even get
it. This amount of combined don't-get-it-ness combined with its growing
popularity signals a fundamental piece of novelty in my view.

