It's obviously a bubble, just stop and think about it for a moment. P2P payments over the internet clearly have some utility, but the quantity of bitcoins owned has no relationship to its utility, thus, the incredible rise in price can be attributed almost entirely to speculation. The masses don't care about P2P payments (at least not as far as that concept might relate to cryptocurrency), they are engaged in a FOMO reaction to constant hype and the false narrative that bitcoin is going to be the future of money. It's not as if all these new bitcoin buyers are going to engage in some kind of novel economic activity or wealth creation, they are just going to hodl till they're ready to cash out. Certainly, it is clear that bitcoin's rise in price does not track with any sort of uptick in commercial activity by the masses... really, every sign points to a bubble.
Is Bitcoin a Bubble? Economists Say ‘Yes’
181–190 of 238 posts
Re: Is Bitcoin a Bubble? Economists Say ‘Yes’
#182Earlier quoted context omitted.
It's not deus ex machina, because it's not unexpected. Lightning has a working alpha on Bitcoin, and Ethereum has something similar with Raiden, plus the Plasma paper and early code, a recently-published spec for the first version of sharding with a 100x throughput improvement, various special-purpose off-chain solutions like FunFair's fate channels, TrueBit for verifiable computation off chain, a simple multicore ha…
Yes I am a long term believer in the technology, my gut just says the next correction that comes will be a bloodbath. Accordingly, I'd prefer to wait until that occurs before getting more involved. If I'm wrong and "lose money" (ie don't get the gains) I'm okay with that too, since I've thought about this a fair amount and I'm confident my position is the most reasonable at this time.
Yeah that's probably a good idea.
Re: Is Bitcoin a Bubble? Economists Say ‘Yes’
#183Earlier quoted context omitted.
I agree. As soon as anyone starts comparing crypto currencies and Bitcoin to tulips I tune out. It is a sign that they clearly do not understand what they are talking about.
Because bitcoin and tulips have nothing in common? Bitcoin is a commodity, tulips are a commodity. Tulips went through a particular phase of hype with a famous bubble (and crash). It's not irrational to look at bitcoin through that lens. Bitcoin might be new tech, but commodity markets and the human psychology and greed that drive them are old as dirt. Those who ignore history are doomed to repeat it.
In my understanding, bitcoin and its supporting technology is a monetary system. So, in my opinion, comparing bitcoins with tulips will be similar to comparing Fractional Reserve Banking with tulips.
Re: Is Bitcoin a Bubble? Economists Say ‘Yes’
#184Everyone that I've talked to seems to be aware of the (seemingly) inevitable price drop, but that doesn't seem to be stopping them from buying in. Most people just assume they'll be able to sell what they have when the price drops before all the 'dumb' people have a chance to do the same. They just assume they'll be the lucky ones. I don't think everyone can be the lucky ones though. I think after this all calms down…
That's textbook bubble behavior. One caveat with Bitcoin is that the network is so slow (effectively just 3 transactions per second) that a crash would be spread out over time. If a panic starts you won't be able to get a slot to sell your bitcoins unless you pay an enormous transaction fee. It could be an interesting situation where the rich literally pay to get to the head of the line and avoid the crash.
> One caveat with Bitcoin is that the network is so slow (effectively just 3 transactions per second) that a crash would be spread out over time.
This is false, the majority of people selling already have their coins on coinbase or other exchanges and would not add to the transaction volume hitting the blockchain.
Re: Is Bitcoin a Bubble? Economists Say ‘Yes’
#185I'm curious how much of an understanding of coding and computer science gives you an edge here in terms of making money. It's weird seeing people on the news talking about different cryptocurrencies when they obviously don't understand the technical merits of each. For example, Litecoin and Bitcon differ by the block mining times and the hash function used and Ethereum allows more complex smart contracts etc. but the…
The crypto market trades more on sentiment first, then technicals.
Re: Is Bitcoin a Bubble? Economists Say ‘Yes’
#186Re: Is Bitcoin a Bubble? Economists Say ‘Yes’
#187Gotta love how the negative crypto articles rise to the top on HN immediately. What's not understood is that crypto is a way for the un-banked (1/3 of the people on earth who barely have clean water, toilets or telephones, yes telephones and that make $1/day) now have access and participation in a global trading platform. Disruption for the first time is happening to both VCs and traditional investment bankers and th…
Except that bitcoin transaction cost is what, $10 or $15 now? There's no way "unbanked" people will benefit from that, at all.
There have been low transaction fees in the past and they can return. Currently that is not the case.
Re: Is Bitcoin a Bubble? Economists Say ‘Yes’
#188Earlier quoted context omitted.
Most of the time Ethereum is less than a penny for a simple value transfer, and it does more than twice as many transactions per day as Bitcoin. It's also pretty easy to implement simple payment channels: http://www.blunderingcode.com/a-lightning-network-in-two-pag...
I was just pulling up avg tx fees. I realize that tx cost on ETH varies highly, do you have a preferred site to tell what contracts are economically viable for what amounts? For instance I would be happy to buy a cryptokitty or two at the ~1 USD price range, but if the tx fees are ~1 USD then it's obviously a no go.
It does not make much sense to use avg tx fee to see if a currency is suitable for micropayments. You should be looking at the min tx fee.
Re: Is Bitcoin a Bubble? Economists Say ‘Yes’
#189"Experts" predicting bitcoin's impending doom is nothing new. Does anyone remember Professor Mark Williams, a top economist who is so well regarded that he has been called to testify before Congress many times? In late 2013, he predicted that bitcoin would crash from $1200 to under $10 within the next 6 months [1]. After he was proven wrong, he revised his claim to say that the crash would happen eventually. I guess…
This is true of every bubble ever. No one knew how to predict when the real estate bubble was going to collapse. And they wouldn't have been able to make any specific predictions, despite real estate being an obvious bubble. It was very easy to see that the price did not reflect the fundamentals. And Bitcoin is similar. The fundamentals of Bitcoin do not support the price. Also in terms of putting your money where yo…
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Re: Is Bitcoin a Bubble? Economists Say ‘Yes’
#190I've seen a few estimates for what value Bitcoin would have if it did become a world currency (or suchlike), and they're all in the $500 000+ range. So the current price of around $20 000 is consistent with the theory that Bitcoin will succeed with probability 5% and go to zero with probability 95%. I don't think that's obviously wrong, so I'd say it's wrong to call it a bubble. And even if Bitcoin does go to zero th…
I think a 5% chance of bitcoin becoming a world currency is obviously wrong. You also have to figure in discount rates.
>You also have to figure in discount rates.
Yeah, and risk aversion which I think would be much more significant.