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The Bitcoin bubble – Greater fool theory

economist.com

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Re: The Bitcoin bubble – Greater fool theory

#111

Post by koonsolo »

ska wrote: post #30
HorizonXP wrote: post #21

The article makes a valid point. Everyone can not possibly sell all of their Bitcoin, and if they tried, it would be defined as a crash. I would be lying if I said I wasn’t worried about this. But I think it’s wrong to think of Bitcoin as a commodity, or that it needs some killer application. I really think Bitcoin is best thought of as a currency. Fiat currencies work because as a whole, we agree on its value. Usual…

Fiat currencies work because as a whole, we agree on its value. This is fuzzy thinking, as it doesn't even make sense to talk about the value of a currency - only it's price. Mixing up concepts like this is what makes a lot of bitcoin and related conversations very muddled. When you start off your thought with a category error, as you have here, it's hard to get anywhere useful.

You got me confused now. The price of $1 is $1, no? But the value is that I need 1 or 100 to buy a bread.

Re: The Bitcoin bubble – Greater fool theory

#112

Post by tom_mellior »

Nothing in this article is new, but OK. Here is its conclusion:

> If everyone tried to realise their Bitcoin wealth for millions, the market would dry up and the price would crash; [...]. And because investors know that could happen, there is every incentive to sell first. When the crash comes, and it cannot be too far away, it will be dramatic.

Let's try this with something else:

If everyone tried to realise their Google stocks for millions, the market would dry up and the price would crash; [...]. And because investors know that could happen, there is every incentive to sell first. When the crash comes, and it cannot be too far away, it will be dramatic.

If everyone tried to realise their hoarded gold for millions, the market would dry up and the price would crash; [...]. And because investors know that could happen, there is every incentive to sell first. When the crash comes, and it cannot be too far away, it will be dramatic.

Look, I'm an economist! Sell your Google shares NOW!

(Or, to make the point directly, yes "that could happen", but that doesn't mean that it's likely. And if it's not likely, the conclusion doesn't hold. And if the conclusion doesn't hold, the author is not justified in saying that it's likely. The argument is essentially a circular one: If I assume that Bitcoin is likely to crash, I can "reason out" that it is likely to crash.)

Re: The Bitcoin bubble – Greater fool theory

#113

Post by craigc »

adrianveidt wrote: post #105
craigc wrote: post #94

Earlier quoted context omitted.

I have used Bitcoin for purchases in the past. I try not to do it so often because of the exact thing you mentioned, but I feel like this is something that could improve with time. If Bitcoin does get mass adoption and becomes THE worldwide currency then that also means that the volatility will decrease significantly to the point where I wouldn't have any problem transacting using Bitcoin. I realize the idea of that…

How would volatility decrease in case of mass adoption?

When Bitcoin was $10 a $1 move in price was a 10% change.

When Bitcoin was $100 then a $1 move in price was a 1% change.

When Bitcoin was $1000 then a $1 move in price was a 0.1% change.

If Bitcoin gets mass adoption then the price per Bitcoin could be $50,000 (assume $1 trillion market cap) or higher. At that point a $1 market movement would be a 0.002% change. To get the same 10% movement as at $100 would require a $5,000 market price swing which while possible is less likely.

It means a lot more money would have to be bought or sold to cause the same percent movement in price.

Bitcoin is already much less volatile today than it was in the past.

Re: The Bitcoin bubble – Greater fool theory

#114

Post by sctb »

beepboopbeep wrote: post #2

I'm here for the shit posting.

It seems like that's what you're mostly here for. Would you please stop, read the guidelines, and then not do this again? We ban accounts that continue because it's an abuse of the community.

https://news.ycombinator.com/newsguidelines.html

Re: The Bitcoin bubble – Greater fool theory

#115

Post by _pdp_ »

Not sure if this is true but I heard that currently less then 1% of the world population holds bitcoin deposits. Only a handful of people are holding large bitcoin deposits. Now if you believe that Bitcoin will get widely adopted then why is it so difficult to believe that the price will go up? And why do you care how much a single bitcoin is worth? As if we are going to be trading in whole bitcoin numbers. Fractions are perfectly fine and if you have problems with them just use multipliers.

Apart from the lack of legal structures, is Bitcoin that different from bonds or holding stock options which you bought for pennies? Alaska was purchased for mare $7m in 1960s which is worth $100m in today's money. You no longer can attach a price for Alaska because it not for sale but it is certainly worth a lot more. Similarly, Bitcoin is by far the largest wealth distribution most of us will experience.

Now you may disagree that with the fact that Bitcoin is currently traded for prices way above to what it used to be worth 6-7 years ago but similarly from the 1960s to 2017s the average inflation is about 1430.1% Keep mind that the 60s were neither globalised nor connected as much as today. And in a global, connected world everything happens at much faster pace.

Btw, I am not an economist, neither I claim that I have a good grasp of cryptocurrency. I just have an opinion :) and that all it is.

Re: The Bitcoin bubble – Greater fool theory

#116

Post by acjohnson55 »

HorizonXP wrote: post #21

The article makes a valid point. Everyone can not possibly sell all of their Bitcoin, and if they tried, it would be defined as a crash. I would be lying if I said I wasn’t worried about this. But I think it’s wrong to think of Bitcoin as a commodity, or that it needs some killer application. I really think Bitcoin is best thought of as a currency. Fiat currencies work because as a whole, we agree on its value. Usual…

But when a transaction costs $5, it's tough to buy into that.

Re: The Bitcoin bubble – Greater fool theory

#117

Post by gberger »

_pdp_ wrote: post #115

Not sure if this is true but I heard that currently less then 1% of the world population holds bitcoin deposits. Only a handful of people are holding large bitcoin deposits. Now if you believe that Bitcoin will get widely adopted then why is it so difficult to believe that the price will go up? And why do you care how much a single bitcoin is worth? As if we are going to be trading in whole bitcoin numbers. Fractions…

1%? I would have guessed 0.1 - 0.2%.

Re: The Bitcoin bubble – Greater fool theory

#118

Post by adrianveidt »

ufo wrote: post #18
brndnmtthws wrote: post #11

Frankly I'm astounded by the vitriol toward Bitcoin on HN. Bitcoin has the potential to actually change the world (unlike most of the BS startups coming out of SV), and yet all these voices on HN poo-pooing Bitcoin appear (to me at least) to outweigh those who are willing to give it a shot. Why is this? Do people fear what they don't understand? Are they mad because they feel like they missed out? Does Bitcoin's succ…

I dont think poopooing bitcoin's speculative bubble has to do with poopooing it as a technology. For its original purpose as a digital currency, USD value should not matter (as long as it doesn't fluctuate too much)

PoW costs money. As PoW difficulty increases, and mining reward decreases, it makes sense for value to increase to make it sustainable.

Re: The Bitcoin bubble – Greater fool theory

#119

Post by howlin »

tom_mellior wrote: post #112

Nothing in this article is new, but OK. Here is its conclusion: > If everyone tried to realise their Bitcoin wealth for millions, the market would dry up and the price would crash; [...]. And because investors know that could happen, there is every incentive to sell first. When the crash comes, and it cannot be too far away, it will be dramatic. Let's try this with something else: If everyone tried to realise their G…

Google shares represent a stake in Google's revenue stream. It has an intrinsic value beyond what you could currently sell a share at on the stock market. Likewise gold has some intrinsic value in manufacturing and ornamentation.

Bitcoin has no intrinsic value. Its value is just what you can trade it for at the moment.

Re: The Bitcoin bubble – Greater fool theory

#120

Post by craigc »

heifetz wrote: post #110
craigc wrote: post #84

Earlier quoted context omitted.

This same question could be asked about many technology startups. Why should Uber be valued higher than Lyft? That's a pretty crude comparison, but I'm just pointing out that just cause someone comes along and makes a clone of something doesn't mean it will be worth more than the original even if it is technologically superior. It's true that forking a cryptocurrency required much less work than starting a company, b…

except that Uber and Lyft are operating companies with revenue, expenses and earnings. Bitcoin is a "currency" without inherent value, or cashflow potential. I admit, Bitcoin may have some utility, but is that utility any different from another cryptocurrency? To rephrase my question, if someone was able to clone Gold, why should Gold be worth more than the clones?

I'm not saying it SHOULD be worth more. Just saying that market behaviors don't always make logical sense.

Right now most cryptocurrencies trade against Bitcoin. If that were to change it would require all exchanges introducing new trading pairs against some other coin. Not saying that won't happen, but it would take some time.

Also, yes those companies have revenue, expenses, earnings which can be used to value them. My point was let's say tomorrow I release my own uber competitor. Even if it is better in every way than Uber: Better UX, faster, easier to make payments, all robotic cars (debatable if that is better :]), etc, etc.

That does not mean that my app will gain adoption and end up becoming more valuable than Uber. Some of it has to do with brand recognition, first mover advantage, press coverage, etc.

A lot of people thought Ethereum would take over as the dominant cryptocurrency cause it can arguably do everything bitcoin and more, but that didn't happen and Bitcoin is still going strong.

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