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China and the soaring price of Bitcoin
31–40 of 45 posts
Re: China and the soaring price of Bitcoin
#32This shows surprising naivety about what is happening in China. To generalise massively, Chinese aren't trying to move money out of China. Instead, they are trying to find any safe store of value, because they don't trust their banks. Chinese are desperate for any way to save money, because the four-grandparent policy (and no pension) means they need money in old age. The optimal solution for them is overseas real es…
This doesn't make sense to me. Bitcoin right now is an incredibly bad long term value store. Right now it's a speculative investment. Either it will succeed and demand for bitcoin will go even higher or it will fail and it will be worth nothing. It's like investing in some risky VC fund. It makes sense for people to have wildly different ideas about potential and risk, but it makes no sense to expect it to just stay…
It makes perfect sense -- but only if you look at it objectively. The speculators will trade on the hourly waxing and waning exchange rates, but the savers will look at 52-week moving averages.
If you judge BTC simply by the latter, and have the patience for re-evaluating your BTC finances annually or bi-annually, then you'd be in a pretty good spot.
Sure it fluctuates an uncomfortable amount on a regular basis, but it's a fairly consistent trend otherwise.
Re: China and the soaring price of Bitcoin
#33Earlier quoted context omitted.
This doesn't make sense to me. Bitcoin right now is an incredibly bad long term value store. Right now it's a speculative investment. Either it will succeed and demand for bitcoin will go even higher or it will fail and it will be worth nothing. It's like investing in some risky VC fund. It makes sense for people to have wildly different ideas about potential and risk, but it makes no sense to expect it to just stay…
> Bitcoin right now is an incredibly bad long term value store. It's a deflationary currency. Sure there may be rises and falls, but in the long term, the trend will only be in one direction.
That's a problem for a currency, no ? You are in effect rewarded for no spending it, or in other word not using it as a currency.
Seems like Bitcoin is instead becoming a new class of asset rather than a currency.
Re: China and the soaring price of Bitcoin
#34This shows surprising naivety about what is happening in China. To generalise massively, Chinese aren't trying to move money out of China. Instead, they are trying to find any safe store of value, because they don't trust their banks. Chinese are desperate for any way to save money, because the four-grandparent policy (and no pension) means they need money in old age. The optimal solution for them is overseas real es…
To add some additional context as to why Chinese don't trust their banks, Bloomberg did a long writeup on the credit bubble problems over there [1]. TLDR: Chinese banks have ~$6.6 Trillion of outstanding loans to Chinese businesses who are increasingly unable to service the loans due to weak demand, which threatens to turn into a banking crisis.
[1]: http://www.bloomberg.com/news/2013-11-18/credit-driven-china...
Re: China and the soaring price of Bitcoin
#35Earlier quoted context omitted.
This doesn't make sense to me. Bitcoin right now is an incredibly bad long term value store. Right now it's a speculative investment. Either it will succeed and demand for bitcoin will go even higher or it will fail and it will be worth nothing. It's like investing in some risky VC fund. It makes sense for people to have wildly different ideas about potential and risk, but it makes no sense to expect it to just stay…
It makes perfect sense -- but only if you look at it objectively. The speculators will trade on the hourly waxing and waning exchange rates, but the savers will look at 52-week moving averages. If you judge BTC simply by the latter, and have the patience for re-evaluating your BTC finances annually or bi-annually, then you'd be in a pretty good spot. Sure it fluctuates an uncomfortable amount on a regular basis, but…
I agree. I found myself going through different stages of thinking about bitcoin. I mined early in 2011 and almost sold all of my bitcoin thinking that it would crash any day. Having witnessed three supernova price movements and bitcoin coming quickly back each time settling on a higher value, it does not look like a "penny stock" anymore that would be dead after just one such run. It might be the single simple fact that BTC generation is predictable that creates a pull for people who are willing to bet part of their savings on it. If enough do that, bitcoin becomes a value storage system - self fulfilling prophecy. If that's the case we are just at the beginning.
Re: China and the soaring price of Bitcoin
#36Earlier quoted context omitted.
> Bitcoin right now is an incredibly bad long term value store. It's a deflationary currency. Sure there may be rises and falls, but in the long term, the trend will only be in one direction.
That's a problem for a currency, no ? You are in effect rewarded for no spending it, or in other word not using it as a currency. Seems like Bitcoin is instead becoming a new class of asset rather than a currency.
It was in the past, in less dynamic, less connected, less 'always on' economies. We've never seen what a deflationary currency will do in a modern, wired, 'speed-of-light/electricity' economy though.
It could lead to increased capital formation (savings) and less frivolous spending, eg spending only on necessities and appreciating assets, and less on throwaway, planned obsolete junk, while still maintaining enough velocity not to stall the economy. Leaner but still viable. Of course, getting from here to there will not be painless.
Who knows, jury's still out on it imho, will have to watch and see. Front-row seats to one of the greatest economic experiments of history, for better or worse.
Re: China and the soaring price of Bitcoin
#37Earlier quoted context omitted.
> Bitcoin right now is an incredibly bad long term value store. It's a deflationary currency. Sure there may be rises and falls, but in the long term, the trend will only be in one direction.
That's a problem for a currency, no ? You are in effect rewarded for no spending it, or in other word not using it as a currency. Seems like Bitcoin is instead becoming a new class of asset rather than a currency.
It simply changes how much people are willing to spend. The question becomes "Does buying this thing now have more utility to me than having several times this thing's value in a few years?" The answer is sometimes "yes".
Re: China and the soaring price of Bitcoin
#38"If you are long Bitcoin for any appreciable amount of time, it seems you are betting that the Chinese economy will do poorly and capital controls will remain. Then more people will be increasingly desperate to get more money out of the country. Or you may be betting that the Chinese use of Bitcoin to launder money will increase due to the mere spread of the idea, through social contagion." That's kind of silly. Bitc…
None of the other uses really justify the current price though. That's the point. Clearly the value of a Bitcoin is not $0. He's not claiming that. He's claiming that if you think it is worth more than the current price of $680, then you are essentially betting on Bitcoin's current Chinese swell to continue.
Bitcoin is a asymmetric bet[1], your cost of buying is known (price you pay relative to local currency when you purchase BTC), and it will either go to 0 or could return x100 or x1000 in the longer term. It's somewhat analogous to spotting the subprime mortgage madness early prior to 2007 and placing asymmetrical bets via credit default swaps on mortgage backed bonds[2].
There could be a fatal flaw uncovered with Bitcoin making it go to zero, Satoshi Nakamoto's true motives could be revealed to be sinister etc., or it could become a major commodity/currency for much of the world's population so the current price is dirt cheap. That's what makes it so intriguing.
I personally think of Bitcoin as like Napster. Revolutionary idea, scared the establishment shitless, but was ultimately crushed. However, P2P file sharing exploded in popularity afterward, and has proved impossible to stamp out since. I think whatever comes after Bitcoin will be ultra-resilient, will learn from Bitcoin's flaws, and will change how we think about economics, commerce and currencies.
[1] https://news.ycombinator.com/item?id=6753060
[2] http://www.vanityfair.com/business/features/2010/04/wall-str...
Re: China and the soaring price of Bitcoin
#39Earlier quoted context omitted.
This doesn't make sense to me. Bitcoin right now is an incredibly bad long term value store. Right now it's a speculative investment. Either it will succeed and demand for bitcoin will go even higher or it will fail and it will be worth nothing. It's like investing in some risky VC fund. It makes sense for people to have wildly different ideas about potential and risk, but it makes no sense to expect it to just stay…
It makes perfect sense -- but only if you look at it objectively. The speculators will trade on the hourly waxing and waning exchange rates, but the savers will look at 52-week moving averages. If you judge BTC simply by the latter, and have the patience for re-evaluating your BTC finances annually or bi-annually, then you'd be in a pretty good spot. Sure it fluctuates an uncomfortable amount on a regular basis, but…
Not at all, if "...or it will fail and it will be worth nothing" is a possible scenario. If you buy every week, any catastrophic event that makes bitcoin worthless would still wipe out your retirement savings before your bi-annual reevaluation is due.
Re: China and the soaring price of Bitcoin
#40Earlier quoted context omitted.
> I'm pretty sure that the Chinese have well polished ways and means of getting money out of China What makes you "pretty sure"? Certainly some Chinese have sophisticated methods of exiting money, through overseas corporations and the like. However most Chinese do not, and there are many, many financially unsophisticated rich Chinese. The evidence is pretty clear that you are wrong. The 20-30% premium Chinese pay for…
If the Chinese regulators are so smart and capital controls are so tight, then how would the Chinese get money out via bitcoin ? What about the entire paper trail: a) from bank deposits/tenpay deposits to BTC China where they convert to bitcoins b) and then allegedly sell on a foreign exchange (bitstamp, maybe ?) c) following which they withdraw to an overseas bank account ? If we're talking about illegal money (not…
Nobody knows or understands why the Chinese government is allowing so much purchase of bitcoin. I suspect they will not continue to allow it.
I did not say that Chinese were buying other currencies with their bitcoin en masse although I'd be surprised if many were not. Perhaps they are just diversifying. Some may have no account in place to sell bitcoin for other currencies.