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Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

davidgerard.co.uk

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Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#41

Post by selectodude »

patrickg_zill wrote: post #36
Edmond wrote: post #32

Earlier quoted context omitted.

No it doesn't apply to them. This is a popular argument from libertarians but unfortunately it is a purely ideological argument that has no basis in reality. The aforementioned currencies are backed by the value of their issuer's economies, those economies are real.

Establish the means by which my having a million dollars' worth of bills in my hand, can get at the value of the USA economy. If I can buy an item from Amazon or Overstock.com via Bitcoin or via Yen or via USD, explain how there is an actual difference.

You have to pay your taxes with USD, so there's always a base demand for USD. Bitcoin has no intrinsic demand. It can go to zero because nobody needs it.

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#42

Post by Alex3917 »

michaelbuckbee wrote: post #27
baddox wrote: post #5

Don’t all of the complaints about exchange rate and market cap apply to virtually any other item that is traded? Spread exists in forex and stock markets. Market cap is extremely commonly cited for stock markets. Sure, the effects may be stronger in Bitcoin due to its higher volatility, lower volume, etc., but that should be the author’s argument, instead of “if you don’t know the basic Finance 101 definitions of som…

Here's what "thin" means in practice. Imagine two different sets of digital objects: AlphaCoins and BetaCoins - they're identical in the say way physics professors say "imagine an infinite frictionless plane". Both have a 1000 in circulation. Both are worth $10 each. Both have a market cap of $10,000 US Dollars. But the market for AlphaCoins is "thin" (small changes in supply and demand make for really big price swin…

To give a real life example, the other day I bought about $2,000 worth of a crypto asset, which caused a ~20% spike in price and raised the market cap by ~$5M.

I'd say what the asset is, but I can't because if literally only one other person reading this decided to buy some then I effectively wouldn't have the option to buy more of it.

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#43

Post by greglindahl »

kentt wrote: post #29

edit: removing because I don't enjoy getting into internet arguments. All the best to you.

"replace bitcoin with gold" and you'd have a different article. One of the two has a many-thousand-year history of liquidity, and a lot more market demand and trading (on regulated exchanges) today.

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#44

Post by voidmain »

Edmond wrote: post #32
patrickg_zill wrote: post #25

Earlier quoted context omitted.

Of course the problem is that major parts of your argument apply to the Federal Reserve system also, as well as nearly all other fiat currencies such as the Euro, Pound, Yuan etc. So exchanging fiat Euros for fiat Bitcoin means what, exactly?

No it doesn't apply to them. This is a popular argument from libertarians but unfortunately it is a purely ideological argument that has no basis in reality. The aforementioned currencies are backed by the value of their issuer's economies, those economies are real.

@patrick

Every American participating in that economy must pay taxes every year on their income. The taxes must be paid in US dollars, even if the economic activity uses a different currency or barter. Therefore Americans must come up with a quantity of USD proportional to the size of the American economy every year (or "go to prison"), and provided that the total amount of USD in existence is bounded (this part is the job of central banks) this places a floor on the value of USD. This story is necessarily simplified but I think essentially true.

There is an old saying that a language is a dialect with an army and a navy. Likewise, a fiat currency is a currency with a taxing authority.

Gold, on the other hand, is just valuable because it is expensive to produce and has a long history of being valuable. So that model can work.

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#45

Post by icc97 »

scott00 wrote: post #40
davidgerard wrote: post #10

Earlier quoted context omitted.

(author here) This is targeted to the general public, who do actually need Finance 101, because they really don't know what they're getting lured into by the mindlessly positive articles and headlines in the mainstream press. Mostly written by people who don't understand either. I actually consider it seriously unethical to market cryptos as an investment to retail investors - they just do not understand the insane l…

Crypto market cap doesn't mean the same thing as the market cap of a stock, but that doesn't mean it's meaningless. It approximates the total amount of wealth currently held in the form of a particular crypto, which is interesting to know in comparison to more traditional asset classes (stocks, bonds, gold, etc) as well as to other cryptos. If you also have some knowledge or an assumption about the velocity of money…

'approximate' is the key word as it's averaged over exchanges which is a big difference to standard market prices, as mentioned in the article:

> Quoting a number like “$19699.46” to seven significant figures when your data’s got a 5% spread would get your high school physics teacher slapping you upside the head. It’s entirely deceptive. It should say something like “$19,700 plus or minus $500 depending,” and that line graph should be a thick grey bar.

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#46

Post by bognition »

Alex3917 wrote: post #42
michaelbuckbee wrote: post #27

Earlier quoted context omitted.

Here's what "thin" means in practice. Imagine two different sets of digital objects: AlphaCoins and BetaCoins - they're identical in the say way physics professors say "imagine an infinite frictionless plane". Both have a 1000 in circulation. Both are worth $10 each. Both have a market cap of $10,000 US Dollars. But the market for AlphaCoins is "thin" (small changes in supply and demand make for really big price swin…

To give a real life example, the other day I bought about $2,000 worth of a crypto asset, which caused a ~20% spike in price and raised the market cap by ~$5M. I'd say what the asset is, but I can't because if literally only one other person reading this decided to buy some then I effectively wouldn't have the option to buy more of it.

Why are you buying something that can't support multiple simultaneous buyers?

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#47

Post by patrickg_zill »

dragonwriter wrote: post #35
patrickg_zill wrote: post #25

Earlier quoted context omitted.

Of course the problem is that major parts of your argument apply to the Federal Reserve system also, as well as nearly all other fiat currencies such as the Euro, Pound, Yuan etc. So exchanging fiat Euros for fiat Bitcoin means what, exactly?

Bitcoin is not fiat; a fist currency is one whose value is based on its backing by a government (“fiat” specifically refers to the authoritative dictate of the State giving the currency value.)

The FT lexicon says:

Paper money or coins of little or no intrinsic value in themselves and not convertible into gold or silver, but made legal tender by fiat (order) of the government. [1]

Fiat money is an intrinsically worthless object, such as paper money, that is deemed to be money by law.

----

I will say that when Japan agreed to accept payment of taxes, with Bitcoin, they deemed it to be money.

Probably I could find examples in the U.S. government prosecutions of criminals who used Bitcoin, that had government lawyers advancing arguments that treated Bitcoin as money, but, I don't have them to hand.

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#49

Post by smokeyj »

Alex3917 wrote: post #42
michaelbuckbee wrote: post #27

Earlier quoted context omitted.

Here's what "thin" means in practice. Imagine two different sets of digital objects: AlphaCoins and BetaCoins - they're identical in the say way physics professors say "imagine an infinite frictionless plane". Both have a 1000 in circulation. Both are worth $10 each. Both have a market cap of $10,000 US Dollars. But the market for AlphaCoins is "thin" (small changes in supply and demand make for really big price swin…

To give a real life example, the other day I bought about $2,000 worth of a crypto asset, which caused a ~20% spike in price and raised the market cap by ~$5M. I'd say what the asset is, but I can't because if literally only one other person reading this decided to buy some then I effectively wouldn't have the option to buy more of it.

So the market cap is you. This doesn’t apply to bitcoin.

Re: Why you can’t cash out part 1: Bitcoin’s “price” is largely fictional

#50

Post by sillysaurus3 »

bognition wrote: post #46
Alex3917 wrote: post #42

Earlier quoted context omitted.

To give a real life example, the other day I bought about $2,000 worth of a crypto asset, which caused a ~20% spike in price and raised the market cap by ~$5M. I'd say what the asset is, but I can't because if literally only one other person reading this decided to buy some then I effectively wouldn't have the option to buy more of it.

Why are you buying something that can't support multiple simultaneous buyers?

That's the best time to speculate.
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