
Bitcoin plunges again. Now the only currency worse than Bitcoin is Venezuela’s - wpietri
https://www.latimes.com/business/la-fi-bitcoin-venezuela-20181126-story.html
======
taurath
> The reason bitcoin miners are willing to do the very real work of processing
> transactions is that they think the bitcoin they're getting paid with will
> keep rising in value. And what would make them do that? Well, the finite
> supply certainly helps, but at some point there has to be more demand for
> them too. Which means that people have to actually start using them.

I can't help but feel some similarities to housing bubbles here.

~~~
bb88
And demand will only return when the price stabilizes. And because the price
isn't stabilizing, demand isn't coming back.

~~~
Spartan-S63
Not to mention that Bitcoin has a very low value proposition outside of being
a store of value. I can see a crypto economy where Bitcoin backs the value of
other cryptocurrencies, but it’s not a good first-party currency. It’s a mere
store of values nd people don’t really agree that it’s useful to exchange for
services. They just see it as useful to hold value.

Something like Ethereum, with a real value-proposition, is a more worthwhile
cryptocurrency.

Basically, I see crypto evolving into pseudo-fiat currencies with some large
financial institution (that isn’t a nation-state) ensuring it’s a valuable
commodity. I’m just not convinced we can (or should) escape a fiat-like
economic system.

~~~
bb88
I would argue it's not even a store of value anymore with the price tumbling.

When you buy bitcoin or ethereum, you get what? A number. I can sell you a
number. Better yet, I can sell you a cryptographically signed number if you
want. But that itself is just a number.

At some point, even something like gold has a certain amount of scarcity. But
with crypto, there's no scarcity, even if you can artificially limit the
number of coins. One can always just create a new bitcoin alternative...

The point is, there is nothing, absolutely nothing, that underpins the price
of a BTC to anything in the real world.

~~~
yebyen
Yes, but how many of those numbers can you sell at cost? (There is crypto
scarcity, who values the random newcoin at the same as some "established coin"
Bitcoin or close, older friend coin? I can see that BCH, LTC, BAB, BSV, etc
have all not come close to the price of the original BTC. So, "store of value"
is obviously wrong, but...)

~~~
bb88
That's a marketing problem. :)

"Each one will be a unique and priceless number using the largest of prime
numbers. Each number comes with a genuine certificate of authenticity hand
signed with the author's private key..."

~~~
yebyen
Only the best numbers... I hear you, one must back their best issued numbers
with actual software to ensure their value ;) BSV has handcash, honestly that
seemed like a great wallet until I realized it wasn't supported by any of my
held coins!

~~~
bb88
My point is that one way to look at bitcoin is that it's nothing more than a
marketing scheme. And the "scarcity" in bitcoin is just artificial at best.
Yes BTC has scarcity, but cryptocurrency itself has no scarcity, proven by the
fact that there are over 1,000 alt coins. And all of those coins are just
number generators.

Here's another way to illustrate the issue:

I have two numbers.

1\. The first takes your user id "yebyen" and appends a number to it so that
the SHA-256 hash is exactly 0x0. It will take 20 years of processing power on
the NSA computers, so it should be worth something to you.

2\. The second number is an encrypted location somewhere in the US where I've
buried $1000. It will cost you $1010 to acquire it from me. I'll decrypt it
for free but it will be worth exactly $0 afterwards. But until then it's worth
$1000 and you can give the number to whoever you want to.

Which number has a bigger intrinsic value?

~~~
yebyen
Ok, now do traditional fiat money...

This is a good metaphor, but it's not perfect. You haven't explained how or
why you'll be burying $1000 exactly 21 million times, every 10 minutes until
2140. Or why it becomes worthless immediately upon decryption... nobody can
unbury the cash value of an individual Bitcoin, rendering it worthless, but
they can be transferred instantly from party to party, which partially funds
the ongoing operations of the network.

Even Satoshi himself cannot end Bitcoin at this point.

Even if he still lives, and has the keys to the large stash of Bitcoin he
mined in the beginning, it could be a major market-altering event if he dumped
them all at once, but it would likely not be the end of Bitcoin.

Sure, it's great marketing, with an extremely long con...

~~~
bb88
> This is a good metaphor, but it's not perfect. You haven't explained how or
> why you'll be burying $1000 exactly 21 million times, every 10 minutes until
> 2140.

That's an engineering problem. ;)

And it's also beside the point. One has intrinsic value, one doesn't.

> Or why it becomes worthless immediately upon decryption...

The reason the number is worth something is because there's real money tied to
it. Once the guarantee of value disappears, the value of the number also does.

~~~
yebyen
> The reason the number is worth something is because there's real money tied
> to it.

That's the reason why Tether and stablecoins like it ostensibly have value.
Bitcoin and friends have value because they are fungible and because people
assign a value to it. (Much like fiat money.)

There was never any guaranteed value, but many people saw Bitcoin transacting
at $0.05 and put it through the paces, understood what they were observing,
and saw that it was massively undervalued as a new technology. Since then it's
been proven to work on a repeatable basis, with some caveats like the issues
that come with increasing popularity scaling up the volume and value per coin,
like $50 transaction fees, but that's another engineering problem.

If you told me for some reason that you thought Bitcoin and every
cryptocurrency will simultaneously become worth less than that $0.05,
overnight, I would assume that you are either a kook, or again, perhaps, that
you've discovered another engineering problem... demands further explanation.

We're not talking about Tether though, we're talking about fungible
instruments. You wouldn't say that a stock is valueless because its value
fluctuates.

~~~
bb88
> Bitcoin and friends have value because they are fungible and because people
> assign a value to it. (Much like fiat money.)

The dollar is the official currency of the US, and all transactions the
government makes is required to be in the US dollar.

Bitcoin is an optional currency, made fashionable by the likes of Aston
Kutchner, and appears to be more akin to a polyester leisure suit of the
1970's than the US Dollar.

Both Bitcoin and a polyester leisure suit at one point had value, and they
both got their value based upon fashion and celebrity.

> We're not talking about Tether though, we're talking about fungible
> instruments.

I can make 1 fashionable number worth $1M. Or, I can also make 1 million
fashionable numbers worth $1 each. It doesn't matter that the price is fixed,
if I have infinite supply.

From wikipedia:

[https://en.wikipedia.org/wiki/Tether_(cryptocurrency)](https://en.wikipedia.org/wiki/Tether_\(cryptocurrency\))

Tether claims that it intends to hold all United States dollars in reserve so
that it can meet customer withdrawals upon demand, though it was unable to
meet all withdrawal requests in 2017.[33] Tether purports to make reserve
account holdings transparent via external audit; however, no such audits
exist.[8] In January 2018 Tether announced that they no longer had a
relationship with their auditor.[34]

~~~
yebyen
You say Polyester leisure suit, I say auditable distributed ledger, let's call
the whole thing off...

I really am not an advocate of Tether, or Bitcoin anymore at this point to be
honest (it's proven to have on-chain scaling issues, and I still have doubts
about lightning network)

I am not a "maximalist" for any one coin, I'm just saying you have to be an
absolute luddite to not see the value of the innovation. I'm not one of those
who says "all money will be on the blockchain by X date"

But if you honestly think that the technological advancement of
cryptographically secured distributed mobile currency is on the level or same
plane of value as a 1970's leisure suit, sponsored by Aston Kutcher, then I'm
not sure there's anything I can do to help you...

Bitcoin can fail, Bitcoin can go to $0, but Bitcoin was only the first. The
ones that follow may not make anyone rich (directly, in the sense of "to the
moon"), but I think it's no exaggeration to say they have changed and will
continue to change the way we do money forever.

------
RaceWon
Am I wrong in believing that if not for Silk Road, BTC would have never gotten
above $10 at Most?

------
yebyen
Real talk, you have to plan your bitcoin hodling around tax season, with the
worst possible outcomes always in mind. Wait until next March, when US taxes
are due, or until next May after the timely returns have been paid off
already...

"The market can remain irrational for longer than you will remain solvent." I
certainly am not one who has made out, inasmuch, like a bandit as many Bitcoin
investors may have, but I've been following Bitcoin for a long time (as long
as it's been around) and the best, most outlasting advice, true in most
markets and not unique or special at all in any way is still "don't put all
your eggs in one basket."

If taxes come to be accepted in Bitcoin across the nation, this might turn out
to be a game-changer. Or it might mean nothing. I don't know what the state
taxes are like in Ohio[1], but this is an interesting development to be sure.
Regardless, you should continue to plan around the uncertainty that comes on
either side of "tax season." Bitcoin or not.

[1]: [https://techcrunch.com/2018/11/25/ohio-becomes-the-first-
sta...](https://techcrunch.com/2018/11/25/ohio-becomes-the-first-state-to-
accept-bitcoin-for-tax-payments/)

~~~
dragonwriter
> Wait until next March, when US taxes are due

April 15 is usually not in March.

~~~
yebyen
I was basically assuming you're ahead of the game, since your paperwork must
be in at March to be on-time, unless you file for yourself or if your
accountant really likes you, I guess... you're right, the deadline is in
April, and I assume similarly, charitably, that taxes paid in May as I said
are mostly on-time, while that's not strictly true.

YMMV IANAL this is not legal advice, if your tax budget is not already ready
to be paid off in March, then I wish good luck to you.

------
dragontamer
BCH-ABC vs BCH-SV was a online flame war that only really involved the 4th
largest coin (BCH). But why would it be the cause of this latest downward
slide?

There's a theory that the BCH-ABC vs BCH-SV war brought to light: that
"trustless" doesn't really mean trustless. It means "trustless, as long as you
trust the coin". Innately, the BCH-ABC vs BCH-SV flamewar destroyed the notion
of trustless and decentralized.

Anyway, I don't really know why BTC has done so poorly here. And the
correlation to the BCH-ABC vs BCH-SV war may have just been coincidence. But
its worth thinking about and discussing... maybe we can learn something from
the past few weeks.

\--------

Alternatively: "Store of Value" was a self-defeating prophesy. BTC was a
"good" store of value, until it lost 50%+ in just a week or two. So as BTC
fell, it just fell harder and harder, as the "store of value" argument was
defeated.

~~~
wpietri
The pretty obvious explanation as to why it is doing poorly is that it was a
bubble. People bought it because it was going up, which caused it to go up
further. Now that it's going down, nobody wants to buy it and a lot of people
want to sell it.

As far as I can see, there's no particular reason to expect the slide to end
here. Stocks have a valuation floor based on income and assets. Commodities
have floors based on the people who use those commodities to create economic
value. Most currencies have a floor for many reasons, but partly because a
central bank will stand behind it and defend its price. Bitcoin has none of
those.

~~~
bb88
> As far as I can see, there's no particular reason to expect the slide to end
> here.

The real bottom is underpinned by the "True Blue Bitcoin Believers", who will
most likely die than sell their bitcoin shares.

In a few years we'll realize the true value of Bitcoin wasn't the blockchain,
but it's existence as a curiosity of sorts, where people were buying and
selling purely imaginary things -- numbers -- which had no real value in the
real world.

~~~
wpietri
Yes indeed. Although I'm not sure the TBBBs will provide much of a floor.
Holding doesn't prop up the price; they have to keep buying.

I heard somebody refer to Bitcoins as "math beanie babies", which certainly
fits your model.

------
lupinglade
Who could have seen this coming? Heh

------
KasianFranks
This is when you buy.

~~~
wpietri
By that theory, you should be putting your money in the Venezuelan Bolivar. If
a big fall means a big buying opportunity, then the Bolivar's the clear
winner, as it has fallen farther.

------
garmaine
That’s really cherry picking dates. Use 12 months instead of Dec 31st and it’s
only down 50%, not 80%. Use 18 months and it’s actually in the green.

Bitcoin is volatile. No one disputes that.

~~~
wpietri
Anybody who ever called it a store of value was disputing that.

~~~
garmaine
If you zoom out the graph it has been a pretty good store of value. It just
has many boom-bust cycles overlaid on top.

Would you say equities or housing are a poor store of value, comparing early
2007 to late 2008?

~~~
taurath
Equities and housing have some floor from the value of scrap materials - the
value floor for a failed idea is 0.

~~~
garmaine
The value floor of a trust minimized machine arbitration system is not zero.
It is the aggregate cost of displaced legal and financial services, which can
be substantial.

~~~
bb88
Yes, yes it is 0.

Why I don't have to use your trust minimized machine arbitration system, when
I can build my own, just like the 1,000 or so other alt-coins.

~~~
garmaine
Which would also be included in that valuation, the total value of which would
be equal to or greater than the alternative costs.

~~~
wpietri
Not at all. At least not in any realizable way.

Even if a "trust minimized machine arbitration system" (which Bitcoin isn't)
had much practical use and so displaced existing non-automated services, your
notion of value still doesn't make sense.

As an consider email. People used to spend a lot of money preparing and
shipping/mailing physical documents. Much of that has been replaced by email.
But what's the price of sending an email? Zero, or as close to it as makes no
difference

Is email valuable? Surely. Does that translate into a high price? Definitely
not, because supply is approximately infinite.

------
panarky
The only currency worse than Bitcoin is Venezuela's _over the last 12 months_

Every national currency is far, far worse than Bitcoin _over the last 24
months, 36 months, 48 months, 60 months, 72 months, and so on back to its
inception_

