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[flagged] What Is Bitcoin Really Worth? Don’t Even Ask (nytimes.com)
23 points by bitoneill 6 months ago | hide | past | web | favorite | 26 comments

"Ambiguity," "animal spirits," "neuroscience" -- the article could be summed up with "I have no idea what's going on."

> "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

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

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


"for their empirical analysis of asset prices"

Laureate Schiller is the author of the article.

That certainly does sum up the cryptocurrency market, though.

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.

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.

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

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

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.

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

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.

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.

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.

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.

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?

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

Because that's the pitch from bitcoin fans.

What is Bitcoin Really Worth?


Robert J. Shiller, Sterling Professor of Economics at Yale, is an adviser to the Chicago Mercantile Exchange, part of the CME Group. These are his views, not those of the exchange.

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.

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 ;)

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.



Whoa, please stop.

I sent them (is that you scott) an e-mail to delete that last one, due to reasonable evidence for aframe.

Was it compelling new evidence? :p

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

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

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).

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