Hacker News new | comments | show | ask | jobs | submit login
Cryptocurrency chaos as China cracks down on ICOs (reuters.com)
121 points by petethomas 10 months ago | hide | past | web | favorite | 106 comments

A more accurate description would be "cryptocurrency confusion among Chinese startups attempting to float ICOs". Exchange rates for BTC and ETH vs USD (or CNY, for that matter) have barely budged:




...at least in cryptocurrency terms, where a 10% rise/fall in a day happens regularly anyway and usually for no discernible reason.

Exactly; there is no chaos here. There have been a lot of things that could be called chaos but this not really. Most speculators I know made a lot less when they heard the media shout chaos this time than previous times as well.

Litecoin went from 90USD to 60USD.

It was ~80 dollars a week ago. At no point in the past week has it been near 90 dollars. It has hardly budged as a result of this news.

In any case, the news is definitely not making it go up.


Seems like terminology is what causes a bunch of the confusion.

Bitcoin is used synonymously with ICOs. Bitcoin vs. Ethereum and the ICOs that spawn from it are not the same.

Bitcoin is continually referred to as a currency...and it might be or become one but what it seems to be now is just another financial asset. That is, a thing that acts as a storehouse of value like any other tangible or intangible asset. Whether Bitcoin is a good or bad storehouse of value remains to be seen. But mixing terminology confuses the issue.

Jamie Dimon is so clueless and is either lobbying for the interests of 2-nd tier accounting banks or the blockchain is accounting beyond his understanding.

More interesting was a link at the bottom of the page to comments by Jamie Dimon, that bitcoin is essentially the e-tulip...

I don't visit any ICO sites except for stories on HN.

Yet, the last few weeks, I've seen Facebook ads for "initial coin offering" of at least 3 different coins. One was Paragon coin (something to do with weed), another had something to do with speech recognition in the blockchain, and a third one that I can't recall.

All of these ads were trying to tout their celebrity credentials (Paragon coin was pushing one of its rapper investors, again, can't remember the name).

This is a classic example of a bubble to me. "Celebrity" founders who wouldn't know the first things about the blockchain basically throwing together in-vogue terms ("weed!", "speech recognition!", "AI!") to get initial buyers, then cash out.

We've hit peak ICO

It's true lots of celebrities are behind crypto-currencies and are attaching their brand to them. The same can be said for superstar VC firms ( Sequoia Capital, Andreessen Horowitz, Union Square Ventures...) and Filecoin.



Also: > Paragon coin was pushing one of its rapper investors

It's The Game

The best example is probably Ja Rule working at Fyre and Nas' VC fund which from what I hear is pretty much a paper company that generates PR.

This isn't new- Bono's Elevation Partners has been around for a while

If we exclude all the silly buzzword-driven ICOs that have sprung up recently to take advantage of the hype, there are plenty of companies that are years old (started after the 2014 surge) and have decent working products. These companies have been waiting for a surge in cryptocurrency adoption and deserve the funding they are getting.

The internet in the 90s was legit. Yet the Dotcom bubble still happened. There are some actual, successful internet businesses that survived it (Amazon, Paypal, Yahoo, the usual suspects). However, most startups crashed and burned and many people lot a lot of money. The fact that there are legitimate companies doesn't mean that most aren't bullshit

All of that is true except the last line. It's not peak ICO until you see TV informercials. I expect it coming soon though.

Interesting because Jamie Dimon is the CEO of JPMorgan maybe, but the "e-tulip" analogy has been used and abused ever since Bitcoin was first traded. It's not even wrong... except that all currencies are essentially bubbles.

Government's requirement to pay it's taxes in a currency of choice is what gives money it's long term value. There is no similar multi trillion dollar demand awaiting e-tulip's to maintain their value.

That's not to say they will fail quickly, just they need different supports.

That argument has been abused too :) Maybe you are right but my hunch is USD would still be valuable if the US government would accept multiple currencies for taxes.

Yes, interesting because the comments are not just coming from an internet blow-hard.

Instead they're coming from someone with vested interest in delegitimizing cryptocurrencies.

Why would they have a vested interest? If they felt it was a good way to make money they'd be all over it.

They are already interested in smart contracts, when I was working with them last year I went to a presentation on ethereum and how interesting it is.

It's the speculative nature of BTC and other coins that he seems to be commenting on.

>Why would they have a vested interest? If they felt it was a good way to make money they'd be all over it.

Because blockchain based currencies like Bitcoin cannot be controlled or manipulated by large entities who have ingrained themselves into the system like a traditional fiat banking system. You can't just create Bitcoin out of thin air and for financial mammoths like JP Morgan who contributed to the 2008 global financial crisis because of irresponsible lending/banking practices, it scares them.

I see BTC as being no different to trading stocks, some days you lose and some days you win.

> You can't just create Bitcoin out of thin air

What do you think miners are doing? And with ICOs you can literally just print however many you want.

> I see BTC as being no different to trading stocks, some days you lose and some days you win.

Sure, but with stocks there's usually a company actually doing something.

Mines put in work. Jpm can/does create wealth by moving figures around on reports, or by betting one asset against another, without any physical limitation on its actions.

"Moving figures around on a report" is capital allocation. The history of the 20th century suggests this is a valuable and non-trivial activity.

> Mines put in work.

It's lost work though, and the amount of work is governed only by the level of competition with other miners, rather than the amount of effort involved insome external task.

> Jpm can/does create wealth by moving figures around on reports, or by betting one asset against another, without any physical limitation on its actions.

That's somewhat beside the point.

> It's lost work though, and the amount of work is governed only by the level of competition with other miners, rather than the amount of effort involved insome external task

It's the cost of securing the network. It's not lost. Fees and rewards pay the miners for the cost of their computing cycles, to provide a secure, very difficult (near impossible) to attack network.

It's the cost of competing for block rewards, which incidentally secures the consensus, yes. It's the price of decentralisation.

And it's still not an external task, it's a facet of running the currency rather than work that is independently useful.

And it's still conjuring money out of nothing.

I think there is another simpler short term vested interest. A lot of people are moving long term savings, and stock market holdings which are managed and profitable for banks and wealth advisers to Crypto Currency that they manage themselves. And for the last couple years, they have been outperforming traditional investments.

Obviously financial advisers will be getting up to speed quickly, but for now I can't ask for ANY % of my 401k to be placed in Crypto. This means less commission and activity in the traditional investing marketplace.

> If they felt it was a good way to make money they'd be all over it.

What makes you think they're not? You don't really believe what this guy says or even believes reflects what he and his company actually does do you?

JPM exist to make money come rain or shine

I don't think they're interested in the purely speculative stuff.

I worked with them as a consultant for a year until June. Blockchain tech and smart contracts were interesting. BTC trading not so much.

He said more than that. He said it is a fraud, it's only fit for murderers and people living in places such as North Korea, it's stupid, and that he'd fire in a second anyone working at JP Morgan that was found to be trading in bitcoin.

Which I find quite interesting considering JPMorgan is running research in smart contracts and has their own chain they'd likely want to push.


>>> Wall Street Journal: JPMorgan Chase, led by CEO Jamie Dimon, is building a new system based on the Ethereum platform

Smart contracts != Bitcoin.

I'm well aware of that. Ethereum, however, falls into the cryptocurrency space and trades on exchanges like Bitcoin. It can be used for cheap international money transfers -- like Bitcoin.

My unspoken point that I feel I should now elucidate was that the optics now have a look of JP Morgan positioning itself to fill in a vacuum they are pushing to create. If they're speaking out publicly like this against it, one could speculate they may be pressuring governments to make more desirable moves for them. They could also be trying to foment FUD in the space to try and empty it while introducing themselves as a secure, traditional, more reliable developer of the technology.

They also have little interest in the Ethereum public chain immediately, and I imagine would only adopt it or connect with it if they are forced to. They are marketing their own private chain which they're open-sourcing to entice developer mindshare. The more people buying into their system (out of fear of the unknown currently dominating the space's mode), the more value there is for the top holders -- who of course would be JP Morgan and its top-ranking employees.

A more basic interpretation would be, he calls Bitcoin a fraud only because it's not him and the bank making the money in that space.

I bet the horse and buggy manufacturers had bad things to say about Ford as well. Thomas Edison devoted a fair chunk of his life to trying to discredit AC electricity.

The genesis block was timestamped with a headline about banks getting bailed out. Anyone who reads into Dimon's statements too much doesn't really get what crypto is about.

They are interested in ethereum and smart contracts, and the potential for them.

Bitcoin is mentioned particularly because it is a vehicle of pure speculation.

That much has always been obvious to anyone paying attention. It's not a currency. Currencies can either be deflationary or inflationary. Cryptocurrencies are inherently deflationary* which makes them bad currencies but perfect for speculative investment. That's the core of every cryptocurrency out there today. The utility as a currency is at best secondary, or even tertiary. It's only a matter of time until those bubbles burst.

Edit: fine, amend what I said to be "the vast majority of current cryptocurrencies with high market caps are deflationary". Most usage of cryptocurrencies today is in "investment", not monetary exchange.

Though this has been a feature of the vast majority of cryptocurrencies, it is not inherent. For example Monero has an inbuilt tail emission once the initial supply is exhausted that will continue indefinitely. See more here: https://getmonero.org/resources/moneropedia/tail-emission.ht...

That's true for pure currencies (e.g. Bitcoin), however most of the newer ones have various functionalities. You may or may not like Ethereum, but its use as a currency is a small part of what it has on offer. And technically at the moment it is inflationary, as well.

> Cryptocurrencies are inherently deflationary* which makes them bad currencies but perfect for speculative investment.

It's so funny that people think that deflationary makes something a bad currency. On the other hand an inflationary currency inherently steals from the poor and gives to the rich. I'd call that a "bad" currency. Inflationary currencies are also perfect for speculative investment. Imagine starting up a 3x leveraged ETF with the underlying debt instrument denominated in bitcoin. Of course with an inflationary currency, the real value of that underlying debt will go down, (and usually, the interest rates stay low), which makes institutionalized risky plays possible.

> On the other hand an inflationary currency inherently steals from the poor and gives to the rich.

How so?

The poor have nothing, in fact what they usually have is debt. Inflation makes that shrink over time.

And yes, inflationary currencies encourage investment, as you can#'t make gains just by sitting on the medium of exchange.

Failing to see why these are bad.

> as you can#'t make gains just by sitting on the medium of exchange

So instead they speculate on assets like commodities and energy (excluded from core inflation) and real-estate. How is that any better?

> And yes, inflationary currencies encourage investment

You can't encourage investment without encouraging savings. What you end up with is too much money going after too few assets. This is why interest rates are so important. Too high and the market bubbles, too low and the market tanks.

For inflationary currencies, you have a group of dudes who declare what the rate should be. That to me is the weakest part of this whole scheme.

Instead of a council of wizards declaring the interest rate, market money works more like a feedback loop - with the rates being set by supply and demand.

The best part of market money is, instead of banks being allowed to loan out printed money - loans have to come from people who save and defer consumption.

I'd rephrase the parent comment to say "inflationary currency steals from savers". Imagine someone like me, without debt but trying to save money for something (larger deposit so I don't have to take 30 years mortgage for example).

I am not rich by any stretch but I am not poor either. Probably I would fall into middle class (if middle class still exists as it's been disappearing). Inflation is really harming me and people like me.

Basically what inflationary currency does is it forces frugal people who would otherwise not go into debt to take loans anyways as they realize that saving is a lose lose idea right now. Better to take a mortgage or two and let inflation slowly erase value of your debt.

Saving's a poor idea at the moment because the interest rates on offer are so tiny.

Looking at the last 25(ish) years of UK data the base rates have tended to be above inflation, until the 2008 crisis.

But yes, inflation will slowly devalue your debt if the debt is a static amount, borrowing can be a good driver of growth, when managed well. And sitting on piles of currency is not good either - the currency is a medium of exchange, not a store of value, it's better to encourage the economy by encouraging investment over hoarding.

Further, deflationary currency values work yesterday over work today, helping people lock in value and higher wealth purely by being older entrants into the market.

Inflationary currency values work done tomorrow over work done yesterday. If there's a major catastrophe, like, say a giant hurricane that devastates a coastal state with a healthy economy, then the returns on work done tomorrow have a effect that can cascade through the economy magnified by the money multiplier. On the other hand, if you valued work done yesterday, and a bunch of value is destroyed by a major disaster, it is a sunk cost, not an unfunded liability that affects the person who depends on the payment of that liability, and the person who depends on that person, and so forth.

The thing is I really entered economy (got a university degree and started working full time and getting paid) around 2011. So in my life I have never experienced a time period which was good for savers.

Just seems to me that as a saver I never get a break in this economic system. I feel pressure to go into debt and take some crazy loans just not to be left behind.

I think my work experience is quite short though, just 6 years or so. Over longer period of time, since economy moves in cycles, there will be a cycle with higher interest rates (like 5-10 percent) which will again be good for savers. Waiting for this cycle to arrive :)

The advice today is pretty much the same as it was 5 years ago: buy into a low cost fund. Since you're in the UK, through a Stocks & Shares ISA.

I recall the same complaints about low interest rates back in 2012, but the returns from, for example, the Vanguard LifeStrategy 80% Equity over the last 5 years were 16.07%, 9.16%, 8.00%, 10.84%, 17.04%. A bit better than a savings account. Of course, when there's another market crash the value will drop, but there you go.

Which country do you live in and what inflation rate (and what metric) are you suffering under? Versus what rate of return on basic index fund?

Plenty of countries have lived through double-digit inflation. The real issue there is not so much savings as wages: inflation means needing to renegotiate wages more often. This caused a lot of the UK's labour unrest in the 70s, for example, or the problems of Brazil leading to the "Real".

Also people keep thinking inflation is purely due to money supply and forgetting that eventually you have to exchange money for goods and services at some kind of price level.

I live in London, UK. I agree inflation is very low right now (has been for a decade in EU really). However this is still really bad for savers like me as there is no safe place for me to store my money with any sensible interest rate (most banks here will give you something ridiculous like 0.25% interest rate on savings now...). Feels like savers never get a break in the current economic system.

But I was making an argument about why inflationary currency might not be great for everybody. It's definitely not a win win. Inflationary currency helps some people but also harms other people, deflationary currency would just switch groups that are being advantaged/disadvantaged.

I don't believe it would, it would slow the economy a lot in many different ways.

The post you replied to asked about the returns on a tracker fund as compared to inflation, as that's generally the way to make relatively safe, modest interest on money at the moment. Investing, rather than saving.

Unless you're saving it in forms of wads of cash under the bed, you should be getting some interest from it, even if it's just parked in a bank account. And even larger interest if you actively look around for opportunities to invest. And such investment is beneficial to other economic actors, who are on the receiving end of it.

the poor do not usually 'have debt', and when they do, the interest rate is high (payday lenders, credit cards). Inflation does not benefit people with high interest rates, it benefits people with very large pools of money borrowed at interest rates near or lower than inflation. That is mostly institutional investment and banks, and select high value leverage traders, a mostly wealthy subset.

The poor are hurt by inflation because their wages are more severely devalued by real value loss. If you're spending most of your wages on day to day expenses, the effect on "margin of survival" from a small devaluation is hugely magnified relative to if you're spending very few of your wages on day to day expenses. I suggest you work through some math on the back of an envelope to really understand this effect. An easy case: Let's say you are barely scraping by, spending nearly 98% of your wages on expenses and there's 3% inflation. What happens next? What happens if you spent 20% of your wages on expenses in the same scenario?

The common retort is that "wages catch up to inflation" but that's nonsense. The whole premise of inflation being used to stimulate jobs is that it devalues the real cost of employment: you can't have your cake and eat it too.

Finally, "encourage investment" well if you think that every investment is wise that is reasonable. However, inflation pushes people into investment. So what that effectively means is that cost of the risky business behavior of the top classes is socialized. You could also see it as 'encouraging consumption', which if you believe in conservation as a moral good, is antithetical.

It is true that inflation will make the value of the debt shrink over time, however that is only true of wages rise at the same rate or faster, something that has not been happening. So inflation reduces the value of the debt whilst at the same time interest rates increase it to make up for the lost value and without a corresponding rise in wages then the value of the debt is not falling and becoming easier to repay as you suggest it would.

At the moment, the base rates in the UK are well below inflation, it's entirely possible to get a mortgage (for instance) at a rate lower than inflation, eroding the debt in real terms.

The wage thing is a red herring, and has effects regardless of the currency model.

Base rate is below inflation but you try and find a mortgage at that rate. HSBC currently have a fixed rate mortgage at 1.94% for 2 years, base rate is 0.25%. Inflation is currently at 2.9% so you could get a mortgage where the debt is eroding in real terms however I am not sure why you would disregard wage inflation this scenario, wages are required to pay the mortgage, and whilst there may be other factors involved wages inflating a slower rate than general inflation means that the "real term" debt reduction we are discussing is practically non-existent for most people.

I disregard wage inflation in this scenario because we are comparing inflationary and deflationary currencies. In either case if the change in your wages doesn't stay above the change in value of the currency you're stuffed.

i.e. it's not a property of the money.

But it is a property of the money. Part of the reason why inflation is a policy is that it supposedly creates jobs, which is why professional economists fret about stagflation threatening their vaunted models. The way that inflation theoretically props up jobs is by reducing the real value of labor[0]... So wage erosion is fundamental raison d'être of the currency.

A cynic would argue that the policy works because a good way to enforce employment is by forcing people to stay afloat.

[0] https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...

Ah I see, then yes theoretically you can borrow and watch low interest rates and high inflation erode the value of the debt.

"The utility as a currency is at best secondary, or even tertiary. It's only a matter of time until those bubbles burst."

The value as a currency is what would give them existential staying power.

The USD is not hugely valuable because it's backed by US treasuries - it's valuable because it's extremely liquid and can be used ubiquitously.

BTC etc. bubbles may not 'pop' like tulips, because there are a) institutional holders of major blocks that can do things to keep the price up, b) speculative holders have no need to liquidate and I think will want to 'hold' so as to avoid losses and c) there is a small 'actual' area wherein BTC is a currency, which is the black market. There is, globally enough of a 'general black market' to create some demand for BTC as a currency.

I think those 3 things combined means that it's possible BTC can hold it's 'paper value' for quite a long time.

Two other existential factors:

1) The BTC mania has yet to truly hit mainstream, and it's making it's way globally.

2) The press is still piling on the hyper. A lot of bloggers have positions in BTC they do not disclose.

But it's all ridiculous and fake speculation.

Jaimie Dimon is technically correct, this BTC 'makes no sense' - but if enough people believe in it enough, then it will exist.

yeah. Why do people buy gold for their portfolios? for the same reason BTC will exist.

As a backup, so that if the shit hits the fan they have something that's held value and fascination for thousands of years?

right. So why does it hold value when shit hits the fan? you can't eat it, you can't treat a disease with it. Will it hold value in the future? My point is, it's really just convention. So, the same logic applies to bitcoin.

"My point is, it's really just convention. So, the same logic applies to bitcoin."

Not quite ...

Gold is a 5000 year old convention - across cultures, languages, geographies and epochs.

BTC is a few years old, and nobody really cares about it that much.

Yes - they are essentially 'conventions', but they're so different in that regard they are hardly comparable.

yes, these differences are reflected in the market caps. But just cause some convention is 5000 years old, it doesn't mean new convention cannot overtake it. Bitcoin is 7 years old and doesn't seem to be going away.

Bitcoin hardly has convention on its side at this point!

It has (artificial) scarcity.

I think you'd have to be very ... optimistic to view BTC as a long term hedge like gold right now.

right. It has less convention than gold and less valuation. Bitcoin market cap is what 50-70 billion?. What is the non-industrial fraction of gold's market cap? 1 trillion? so, if bitcoin permanently stays at 10% of gold's hedging value, it justifies a valuation of 100 billion. that's not counting at all usefulness of bitcoin for money transfers.

Ugh, methinks you are deliberately missing my point.

There is no reason to think bitcoin is a good long term hedge.

there is no reason yet to think that. But my point is it could become that hedge. Because there is no fundamental reason for gold to be treated as that hedge. So, my point is, the fact that there is no fundamental reason to use bitcoin is not really a great argument against it. Because there is no fundamental reason to use gold and it is used anyway.

There's no fundamental reason, no, however it has proven desirable and valuable over thousands of years.

By your logic anything could be a hedge in future. Which is strictly speaking true, but not very useful.

You may wish to consider the ~25% drop we've seen in the last couple of weeks when deciding on how well bitcoin holds its value through the ages...

gold is also volatile and has had 25% pullbacks. Plot gold over time and you'll see. Hedging is not about the volatility per se but about correlation with other investments.

anything could not be a hedge. It needs to be liquid, transferable, international, etc. etc. bitcoin is on the way there. I am not saying it will supplant gold, I am saying it could. that probability is certainly not zero.

And I think you're looking at the world through bitcoin-tinted glasses there.

I wish I had been 5 years ago

Well likewise when they were $0.50 a piece I toyed with the idea of getting some, just in case.

That doesn't mean I think they're a reliable investment or comparable to gold, just that in hindsight I could have been very rich by for a few bucks back then.

Ah well.

"For the same reason BTC will exist."

Gold and BTC are not nearly the same thing.

> Cryptocurrencies are inherently deflationary

How so?

Eventually all the BTC will have been mined and no new BTC will ever be created again, unlike regular currencies in which the money supply can always rise alongside the expansion of the economy.

BTC will eventually become a fiscal straight jacket. It may take quite a while to take effect, but is inevitable and the more BTC become integrated into the economy, the more eventual pain it will cause down the line.

All cryptocurrencies are inherently deflationary because one example of an attempt at a cryptocurrency (BTC) is inherently deflationary?

If you have a limited supply of currency in a growing economy, it's inherently deflationary. So far I haven't seen proposals for cryptocurrencies that can grow as a function of the underlying economy. Maybe there are some.

All current attempts at cryptocurrencies, of which there are very, very many have been inherently deflationary. Can you point me to a single one either current or even planned that isn't? We are discussing the real world.

Both Ether and Monero are uncapped and deflationary. So 2 out of the top 10 at the moment. I didn't bother checking beyond that.

The only way cryptocurrency would be a straightjacket on the economy is if there were only one cryptocurrency. Actually there are hundreds, and it's trivial to make more. Rather than a digital gold standard, we have a system of competing privately-issued currencies, which Hayek advocated in his book The Denationalization of Money.

> Actually there are hundreds, and it's trivial to make more.

Good argument. But people will slowly realize that, to introduce good innovations in new blockchains, they should be setup as side-chains, to not create inflation in the crypto world.

Maybe. I'm just saying cryptocurrency won't give us deflationary constraints, since we can always create new currencies if we want to. If it turns out we do fine just sticking with a few main ones, that's ok too.

What's the analogy of a fiscal straight jacket mean? BTC value could increase indefinitely but you can always trade smaller and smaller fractions of BTC.

You have a finite amount trying to represent a growing economy. Work yesterday becomes worth more than work today and the fruits of economic output are retained by those who hold currency.

The 'main reason' BTC is deflationary is because it's not used as a currency, and as prices rise, people want to 'hold' thereby creating less liquidity etc.

It's a funny thing to watch.

Most of the so-far released ones have a specific cap on how many tokens will be mined. Bitcoin does, for example. But it's not a hard requirement of cryptocurrencies, I think.

Bitcoin is also designed to make future coins harder to mine, thus more expensive. The only incentive to sell bitcoin is if you think the entire thing is about to fail.

Bitcoin isn't really designed to do that. It is designed to increase difficulty with competition. If no one was interested in mining bitcoin it would be exactly the same difficulty to mine today as it was one day one.

Doesn't the reward halve every 210000 blocks?

The size of the reward doesn't actually change the difficulty though.

There's a limited amount of bitcoin to go around.

There are other cryptocurrencies aside from Bitcoin, even if Bitcoin is not able to be a true currency (e.g. fungibility issue). See Monero. It has a tail emission.

Every cryptocurrency based on Bitcoin mechanics has the same problems as Bitcoin. That, as you rightly pointed out, does not discount other cryptocurrencies without these issues. I was aiming solely at Bitcoin (and similar cryptocurrencies).

Wouldn't that make the value of a token rise, as there is demand but no supply?

Yes, that is what deflation is, is it not? More goods for the same amount of currency?

You're right, my bad.

I think of crypocurrencies as an escrow.

Given the bubble, I kinda wish I was brave enough to speculate. But I can't even bring myself to buy a lottery ticket. My loss.

Might also be one of those PT Barnum things. There's a sucker born every minute, and the internet is big to reach all of them.

So sorry, What do you mean by tulip? I am ESL and couldn't find any useful information from googling.

If you follow the link guneydas provided you can read about a historical event known as tulip mania. In the Dutch republic of the seventeenth century the prices of tulip bulbs kept going up for a couple of years. At the height of this madness a single bulb of a novel species of tulip could even buy you a house in Amsterdam. But a tulip has very little value beyond looking pretty, so the prices were based purely on hype and speculation. Then one day the bubble popped, and tulip bulbs were once again pretty much worthless.

This was one of the first economic bubbles in known history, so it is considered an archetype, and people refer to it to make a point about the volatility of a commodity (such as housing or Bitcoin). It has become an idiomatic expression in several languages.

Whenever someone refers to something as 'tulip bulbs', that person wants to draw a parallel between that historical event and whatever commodity they are comparing it to. It is a way of saying that something is being invested in simply because everyone is doing it, and because the value of the item keeps going up. And they believe that it is very likely a bubble, because they consider the commodity vastly overpriced.

That's a delightfully clear explanation of the origin of that phrase.

However just using the word 'tulip' usually makes the writer's prejudices crystal clear. But if anybody also wants an explanation why the famous 'Tulip Mania' is 90% a myth and is therefore not a useful analogy for understanding 'Bitcoin Mania', then I will politely suggest this essay: https://stratechery.com/2017/tulips-myths-and-cryptocurrenci...

The very fact that an influential figure like Jamie Dimon is opposed to cryptocurrencies IS significant. However, Dimon's actual arguments against cryptocurrencies, which have remained unchanged for the past 4 years, seem very weak, (as least as long as he continues to base his objections on ill-informed slurs such as 'tulips')

>Compare cryptocurrencies to, say, the U.S. dollar. The U.S. dollar is worth, well, a dollar because…well, because the United States government says it is. And because currency traders have established it as such, relative to other currencies. And the worth of those currencies is based on…well, like the dollar, they are based on a mutual agreement of everyone that they are worth whatever they are worth. The dollar is a myth.

The dollar is not a myth. The dollar is backed by the largest economy in the world. The dollar is controlled for stability. People are required to pay taxes in dollars to participate in the largest economy in the world. That is value in my opinion.

Bitcoin does not have this value or backing. Its price comes from speculation with no underlying justification. The online drug trade is not that big, and Bitcoin's extremely deflationary nature means it will not be adopted a base currency.

The people buying it right now are banking on it becoming a mainstream currency and them having a lot of control over that economy. I see no reasonable path to this happening. Even the fact that people are doing this means that it won't be adopted (and thus, spent) by average users, as the majority of participants are hoarding it or mining it for profit.

I think it's unfair to BTC to say that its price comes entirely from speculation on its future value. It's certainly a major component, but BTC also has value in its own right, derived from its special properties. So it's not quite like tulips, which were pure speculation.

Tulips can be grown and look pretty too...

Guidelines | FAQ | Support | API | Security | Lists | Bookmarklet | Legal | Apply to YC | Contact