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Serious Money Is Warming to Bitcoin (wired.com)
42 points by otoburb 64 days ago | hide | past | web | favorite | 25 comments

My understanding of this appeal to institutional investors is that it's simply a good risk-reward macro speculation play. A decent amount of macro folks are forecasting some sort of monetary crisis or at least significant inflation in the years ahead.

In the scenario that there is a full-blown crisis that requires a currency reset rather than just restructuring, what are we resetting to? Assign probabilities to gold, silver, a new fiat currency, or cryptocurrency. Given the small market cap of Bitcoin, a small investment would pay off incredibly well if that's where the chips fall down the line.

At a market cap of ~180 Billion USD, Bitcoin has a market cap similar to Pepsi Co. The USD monetary base is something like $4000 Billion and all gold ever mined is worth about $7500 Billion. Of the three, Bitcoin is a growth play plain and simple. Even if it's the least likely system of the future, a probability above 0 means institutions will likely buy some as a hedge. (Edit: That is, if institutions are ever allowed to. Many pension funds in Europe are forced to buy negative-yielding government bonds... sigh.)

This article talks about “the crypto industry” and mentions things like “institutional investment in crypto” and so on.

It’s odd that in an article so detailed there’s just no mention of the fact that there are no fundamentals whatsoever to any of these things, and they’ve been used almost entirely for speculation since inception.

Where’s the actual industry? In what are these institutions investing?

The fundamentals appear to be intrinsic scarcity + facilitating illegal transactions easily (circumventing currency controls, drug deals, malware ransoms, etc.).

I haven't seen much intrinsic value beyond those two things. Everything else is fluff (e.g. coffee shops taking bitcoin) or speculation.

That said, illegal transactions are an absolutely massive part of the global economy.

What's perplexing to me is that governments haven't yet reacted to this by bringing the hammer down. Realistically, if you're not involved in fluff or speculation you're probably using bitcoin to break the laws of some country.

An autonomous platform means that multiple mutually distrusting parties can transact without fear of the trusted third-party that controls the platform raising fees to extract economic rent from them once they're locked in.


Bitcoin was designed to be honest and sound money. In the way that gold once was. Contrary to the way fiat money is.

For now, the fundamentals are simple: supply side is fixed and known, and demand is speculation.

In the ideal case for bitcoin, over time, people will gradually use bitcoin more for actual commerce. As this adoption increases, liquidity increases, and price becomes less volatile. The speculation we have now is the necessary first step on that road, because it gives bitcoin a price (i.e. props it up) and gives it some liquidity.

People complaining that bitcoin is just for crime are slandering it.

People complaining that it has no intrinsic value don't understand that nothing in the world has intrinsic value, including gold. Intrinsic value is bad monetary theory derived from bad philosophy.

Bitcoin was designed first and foremost to be a peer-to-peer electronic cash. That is exactly what it is called in the title of its whitepaper. Satoshi describes how Bitcoin would be used in peer-to-peer transactions with full nodes processing gigabytes of data every day, so that Bitcoin could process transaction volumes comparable to Visa.

Now with a limit of 300,000 transaction per day thanks to the Core development team and the censorship of the main forums, BTC has no underlying or intrinsic value. It is based entirely on speculation and memes.

10 minute block times, no path to proof of stake or any less resource intensive consensus protocol, dominated by ~19 mining pools, some handful could arguably collude to launch a 51% attack, and block rewards halving in 2020

> nothing in the world has intrinsic value, including gold

This is incorrect. Both Western Europe and uncontacted pre-Colombian America considered gold extremely valuable for use as jewelry. That’s what intrinsic value means, people value it for what it actually is.

And nobody says bitcoin is exclusively used for crime. In practice it is used both for crime and financial speculation.

> That’s what intrinsic value means, people value it for what it actually is.

People value gold for it's scarcity. If there was limitless supply of gold, no-one would be interested in buying it for a high price. It's the same for diamonds, and why De Beers sought to control the supply of mines and synthetic means of production, which creates an artificial 'scarcity'. This is also why cubic zirconia is not prized for jewelry, despite it's similar aesthetic qualities to diamonds.

Scarcity alone is not enough to make something valuable.

The value of gold comes from the fact that is has been a financial hedge (safe haven, at least to some degree) for a very long time, and presumably will continue to be for a very long time.

I'm not sure if that is a correct use of "financial hedge" but it seems to get the point across. Gold is not necessarily a good store of value, but its downside is certainly much more limited than a lot of other things.

This is a circular argument, as the earliest uses of jewelery was likely as a store of value (your tribe could trade jewelery for food with a neighboring tribe in emergencies)

There exists no objective argument that gold is somehow more beautiful than say, a flower or a rainbow... We only think of it as "beautiful" because of its money-like properties (i.e. it's scarce, durable, easily carried & transferred)

This suggests to me that gold is valuable precisely for the same reasons as Bitcoin, not because of some magical notion of "intrinsic value" that eludes other money alternatives.

(Yes, I'm aware gold has some minor uses in electronics manufacturing, but then lots of people are currently building electronic devices with Bitcoin wallets, so both have uses in this regard...)

> ... considered gold extremely valuable for use as jewelry. That’s what intrinsic value means, people value it for what it actually is.

Oh. So that's why most gold in the world was made into jewlery and is held by jewlery afficiandos. /s

Yes. Gold has some intrinsic value but to determine how much that intrinsic value influences the price it is enough to look at how much of gold is used for its intrinsic value.

Intrinsic value of bitcoin is its ability to transfer value to any place on earth through internet in reasonable time at affordable price without trusted third party.

You can see how much value of bitcoin comes from that by looking at how much bitcoin is used for this purpose. The rest comes from the same place that the rest of gold value comes from, scarcity and durability.

I thought india n china , especially india, really bought gold as jewellery.


There is no such thing as intrinsic value.

I wouldn't want to commit a crime and get my money in something on a transparent ledger anyone can track.

In my experience, overwhelmingly, intrinsic value means something has value "just because." That's how most people discussing monetary concepts use the term. Also true in philosophy. It's basically a magical thinking/religion type of idea.

If you have a citation to the contrary, like in an economics textbook, I'd be interested to see it, and I'm open to that possibility. But I would still think that most people are using the term the way I described [unless you have a citation about that...].

Today, the price of gold is overwhelmingly determined by its use as a financial instrument. Not because it's pretty and not for its industrial uses. To the best of my knowledge. I don't know how to actually measure this.

I have a small amount of Bitcoin so this scenario would be good for me, but the looming crisis is that transaction fees will go really high (or the chain will become insecure) once Bitcoin’s inflation runs out.

The magical 21 number will come into question, which will really dent confidence in the entire premise.

> People complaining that bitcoin is just for crime are just slandering it.

This one really gets my goat. There are so many ridiculous laws. It’s illegal to consume alcohol in Saudi Arabia. It’s illegal in Russia to use profanity in theaters, and in Thailand it’s illegal not to play a salute to the king before every film. Besides geographical differences in current times, the differences throughout history are more striking.

Thank God for the existence of other countries or else I would be forced to say those laws in Russia and Saudi Arabia are justified, and any technology that that lets people subvert them is immoral.

The idea that one can live in a country where fundamental political values are wrong is alien to most people. Every form of imposition that the government applies is justified with ideological notions like the social contract. So one can only explain the value of censorship resistance by pointing out how it enables people to escape tyrannical laws in those other countries, which unlike our own perfect countries, are repressive.

They are investing in anti-fragility, scarcity, immutability, the world's largest super computer, instant transactions, tx volume, among other things.

You can arrive at a value of the network (and value per btc) using these numbers when you consider tx volume.

The world's slowest supercomputer, amirite?

(Actually tho is there a coin out there that let's people post jobs to be computed as a useful proof of work? I would be curious to know.)

elastic,i-exec and sonm (maybe others too there is a lot of innovation there)


I'm not sure where the sentiment came from (I probably read the article to quickly?) It sounds as if coinbase now had a larger share because a major company switch moved their existing assets.

Retail is serious money. I'm actually quite happy that Bitcoin has more retail investors than institutional, and I hope it stays that way (a few billion dollars of institutional money at this point is not important).

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