> 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.
I thought that miners are essentially selling most of the new mined coins (in particular to pay for electricity, new hardware). Since the info in the blockchain is public ... does someone have a good study about this?
That's great. Bitcoin needs to get to the state where mass media also thinks that it's over for Bitcoin. The desparate phase is when the last weak hands get rid of their Bitcoins, and that marks the bottom of.the crash.
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.
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.
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...)
"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..."
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!
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.
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...
> 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.
> 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.
> 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.
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]
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.
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.
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.
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.
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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.
The reason it would be part of a catalyst for the latest downward slide is because Craig Wright masquarades as Satoshi Nakamoto, who owns 10% of all Bitcoin.
Although Craig Wright has never proved his ownership, he is wealthy by any stretch, and threatened to sell his bitcoin into the market. The people and funds holding support levels around $6,000 USD pulled their bid in the face of this, and helped panic sell.
Craig Wright has not moved any of Satoshi Nakamoto's mined coins.
Secondly, Roger Ver exists on the other side of the war. He owns a large cloud mining farm, and has been redirecting hash rate that customers paid for. He has been redirecting it away from Bitcoin to his Bitcoin ABC fork, to help win this ego war. He is paying the customers in his bitcoin still, so that they don't have a disruption in payouts.
Ultimately, there is a lot more bitcoin on the market to fund the bitcoin-cash war, between two very wealthy people.
This has nothing to do with your theory of trust. There's just more supply than demand. Anybody can hedge their store of value. You can hedge the USD value changes with futures, you can hedge gold, you can hedge bitcoin, any currency or commodity really. Your conclusions are misguided, but there is room for market maturity in bitcoin.
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.
> 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.
The logic behind the BCH-ABC/SV war affecting BTC prices was that both of the principals behind the BCH split were early Bitcoin investors with substantial BTC holdings, and they were selling off these holdings to prop up the value of their preferred currencies and fund mining equipment.
There's some evidence for that in both their Twitter statements and the fact that BCH-SV has skyrocketed as every other cryptocurrency plummets, but ultimately I find it a little unconvincing. BAB (BCH-ABC) has also dropped recently, and I doubt that even a rich egomaniac can affect the whole BTC market as much as has happened recently. I'd chalk it more to capitulation as the previous bubble bursts.
My main point is that the word "Trustless" has been abused repeatedly over the past year. "Bitcoin Trustless" doesn't mean what most people think it meant.
And it was most obvious when people were forced to pick sides in the BCH-ABC vs BCH-SV flamewars.
I have picked a side, and I won't tell you which one, but I'm not sure that I've been forced to monetarily pick a side. In fact I've seen enough propaganda around "unified" coin that sounds a lot like "you better not have picked a side yet," I still think there might be some advantage to have not picked a side, and to maintain that.
Are most exchanges picking a side yet? (What side are you on?)
In principle, no. You're supposed to review the code you run. The open-source status of bitcoin is a vital part of its security model.
This isn't a nitpicky point either. Bitcoin has specifically avoided any sort of automatic update mechanism, and not just because of the security risks involved. Additionally many companies and miners take their time evaluating new releases before upgrading.
Really? After spending years watching the pro-bitcoin people shill their crap, this is the first argument I've seen espousing a requirement to understand the code before using your wallet.
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.
eh I'll take the -8 downvotes. Programmers aren't dip buyers, only early adopters, but not great traders. You won't get much consensus on this reality.
That's a gambler fallacy argument. You need to contextualize the price. Why did it rise? Mass public adoption with a wave of speculation. People thought they'd all get rich off it. This is not comparable to 2013.
Calling it a dip doesn't make it a dip. You need concrete reasoning for why it's going to go up to previous prices again if that's what you believe will happen. Many people got burned in the last bubble, so they're going to be cautious about it.
High volatility is exactly what you don't want in a store of value. Boom-bust cycles are terrible for stores of value.
To answer your question, equities and stocks are in fact not great stores of value. Cash in a bank is the most common one.
Your comparison is also pretty bad. Housing and stocks had hundred-year track records before they fell. More importantly, they have demonstrated value. Stocks are backed by real, income-generating businesses. Houses are things people live in.
Bitcoin, on the other hand, has no real demonstrated utility beyond some light crime, like buying some drugs, penny-ante extortion, and a little money laundering. You can't live in it. You can't even make jewelry with it, so unlike gold there's no practical use propping the price up.
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.
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.
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
I can't help but feel some similarities to housing bubbles here.