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The Fair Price of a Bitcoin is Zero

neweconomicperspectives.org

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Re: The Fair Price of a Bitcoin is Zero

#31

Post by dragonwriter »

msandford wrote: post #29
voyou wrote: post #20

Earlier quoted context omitted.

So what can you make out of your bitcoins when you melt them down? The argument of the post is that gold-as-money is worth more than gold-as-commodity, and, if gold doesn't have an issuer, its value falls to that of the physical commodity. Because bitcoin, unlike gold, has no use except as a medium of exchange, if a bitcoin's value fell in the same way in the absence of an issuer, unlike gold, bitcoin's value would f…

One definition of money is "the most marketable commodity" and bitcoin does tend to pass that test. It's rapidly becoming a marketable commodity as so many people will accept it for goods or services. My point wasn't so much that money has to be a commodity with an underlying value. It was to point out that the notion that "money is an asset to the holder and a liability to the issuer" might be the author's definitio…

> One definition of money is "the most marketable commodity" and bitcoin does tend to pass that test. It's rapidly becoming a marketable commodity as so many people will accept it for goods or services.

"Rapidly becoming a marketable commodity" is vastly different than being "the most marketable commodity".

Re: The Fair Price of a Bitcoin is Zero

#32

Post by ademarre »

As I grow tired of journalists publishing their shortsighted opinions of Bitcoin, it is refreshing to see a critic employ a model to make his point. I don't know anything about Modern Monetary Theory, and I'm not sure that it's even a valid model for Bitcoin, but at the very least it resembles the type of thinking we need more of (i.e. thinking with models).

Cryptocurrency is a brilliant thing, but we need a better way to model its place in our world. I'd like to see someone develop a first-principles model to help us better understand the consequences of decentralized cryptocurrency. The right model could highlight the areas where more development or reform are needed.

Re: The Fair Price of a Bitcoin is Zero

#33

Post by Rimpinths »

Lazare wrote: post #27

...does "new economic perspectives" mean wrong ones? This article is lunacy. I started to skim it, but after the fifth or sixth ridiculously wrong assertion in as many sentences, I stopped. This article is so, so wrong. It's littered with idiosyncratic phrases and simply incorrect definitions. For example: > Second, all financial instruments have a fair value that is defined as the discount value of future streams of…

> And so on, and so forth. The author makes a big point of arguing that they aren't financial instruments so much as they are real assets. There's some truth to this; if I own a bitcoin nobody is obligated to give me anything in exchange; it doesn't exist as a liability on anyone's balance sheet. And? The same is true of a gold ingot. Or, largely, or a share of Apple stock; nobody is obligated to give you anything for that share. By the same logic, the "fair" value of gold (or Apple stock) is zero.

Gold has some intrinsic value. If nothing else, it has some industrial uses. Bitcoin has no comparable intrinsic value.

Owning a share of AAPL common stock has value. You get voting rights in the company. You also have a claim to Apple's assets, although with a lower priority than any bondholders or other creditors. So owning AAPL shares does come with obligations from Apple.

Euros (or dollars) also have some value as fiat currencies. You can pay debts and taxes in euros. The government has an obligation to accept euros as payment for taxes. So essentially these currencies are your ticket to stay out of jail.

Bitcoin doesn't share any of these qualities with gold, AAPL, or euros. That was the author's point and it still stands.

Re: The Fair Price of a Bitcoin is Zero

#34

Post by maaku »

voyou wrote: post #22
fragsworth wrote: post #12

Earlier quoted context omitted.

These posts are entirely the result of authors who didn't buy bitcoins when they were cheap. They want it to fail, and try to find any flaws in it that they can, because if it succeeds then they'll really feel like shit because they missed out. There is extreme bias in the news community (on both sides) because of their investment (or lack thereof)... And possibly a certain amount of attempted market manipulation as…

"These posts are entirely the result of authors who didn't buy bitcoins when they were cheap." That's nonsense. The post is a result of applying a particular economic theory of how money works to something that is apparently trying to be a form of money. This theory of money might be wrong in general, or it might for some reason not apply to bitcoin specifically. But to dismiss it simply as "bias" is willed stupidity…

Furthermore, theories in economics are descriptive. One should not expect with certainty an innovative currency to succeed or fail based on how well it matches a particular theory. When we are in new territory, we should expect a few surprises.

Re: The Fair Price of a Bitcoin is Zero

#35

Post by jeza »

Lazare wrote: post #27

...does "new economic perspectives" mean wrong ones? This article is lunacy. I started to skim it, but after the fifth or sixth ridiculously wrong assertion in as many sentences, I stopped. This article is so, so wrong. It's littered with idiosyncratic phrases and simply incorrect definitions. For example: > Second, all financial instruments have a fair value that is defined as the discount value of future streams of…

You can't claim that the Euro isn't a financial instrument just because you don't live in Europe. They are issued by the European Central Bank and national central banks of Eurosystem members, who in turn share the liability (explained briefly here: http://en.wikipedia.org/wiki/Euro#Issuing_modalities_for_ban...).

This makes the Euro a traditional currency which bitcoin isn't. That's not to say bitcoin is worthless, since its value is really whatever someone is willing to pay for it.

Re: The Fair Price of a Bitcoin is Zero

#37

Post by Rimpinths »

jacob019 wrote: post #21

Seems all currency is a ponzi scheme. Even gold is valuable only due to scarcity and peoples desire to have it. It's been currency for thousands of years and only recently has it been used in industry. That said, I keep expecting this bitcoin bubble to burst and it keeps going up. Could it stabilize as a true global currency, I doubt it, but maybe.

Gold become desirable because it is an ideal metal to use for jewelry. That came first and its use as a currency came second. In that sense, it has been used in industry longer that it has been a currency.

Re: The Fair Price of a Bitcoin is Zero

#38

Post by thothamon »

Hmm, "Death of the Internet Predicted"? Seriously, are there one or two succinct points to this article? Is it saying:

- The author thinks Bitcoin users are either irrelevant crackpots (anarchists/libertarians) or criminals?

- Gold is valuable and Bitcoins are not because digging in the ground is fundamentally more valuable than discovering large prime factors of numbers?

- The author doesn’t like the properties of Bitcoin, or Bitcoin is not useful to national governments because they can’t control it (not a monetary instrument, can’t reduce supply, etc)?

- The author believes Bitcoin is doomed to collapse to essentially no value?

- The author believes people who engage in Bitcoin trading are involved in a Ponzi scheme?

I’m not sure what the point is, but to be fair, I’m not sure it matters. Bitcoin is useful for those who value its properties, and there are many people who do. No one can wave off these people by labeling them as money launderers, anarchists, or Ponzi schemers (which I don’t think is even true); nor will such statements, or analyses such as this article, prevent anyone from trading Bitcoin, buying or selling with Bitcoin, or holding Bitcoin. And since Bitcoins are fungible and becoming ever more so as time goes on, regulations and laws will prove difficult-to-impossible to enforce, in a manner very similar to P2P file-sharing (but with all the technical lessons of P2P sharing now learned).

You might bet against Bitcoin specifically because of one or more technical flaws, but digital currencies in some form, and specifically currencies not controlled by any nation or corporation, are here to stay.

Re: The Fair Price of a Bitcoin is Zero

#39

Post by bobbles »

dingaling wrote: post #8
bobbles wrote: post #4

So you have people exclaiming that bitcoins are worthless. Well... there are plenty of people right now spending bitcoins and receiving goods and services in exchange for those bitcoins. Plenty of things in the world can be considered worthless if you aren't interested in them. I'm quite happy for people to continue living in a world where sending money goes through several 3rd parties, all taking a cut and adding de…

Your third sentence could just as easily apply to the Bitcoin network. Miners ( third parties ) take their cut ( transaction fees ) and the processing time is dependent upon the generosity of the fee-payer ( low-fee transactions are left out of blocks until finally swept after hours or days ). You don't have a way to pay someone else BTC without participating in the system at least once. I'm excited by Bitcoin but it…

You're correct, but the fees are so low and the delay is so small as to be negligible (in comparison).

Re: The Fair Price of a Bitcoin is Zero

#40

Post by msandford »

dragonwriter wrote: post #31
msandford wrote: post #29

Earlier quoted context omitted.

One definition of money is "the most marketable commodity" and bitcoin does tend to pass that test. It's rapidly becoming a marketable commodity as so many people will accept it for goods or services. My point wasn't so much that money has to be a commodity with an underlying value. It was to point out that the notion that "money is an asset to the holder and a liability to the issuer" might be the author's definitio…

> One definition of money is "the most marketable commodity" and bitcoin does tend to pass that test. It's rapidly becoming a marketable commodity as so many people will accept it for goods or services. "Rapidly becoming a marketable commodity" is vastly different than being "the most marketable commodity".

Agreed, but the definition of money isn't constant worldwide nor for all groups of people even in the same country, and it's definitely not constant through time.

In Nazi Germany everyone used the Reichsmark except for American POWs there, who used cigarettes. Right now in Argentina they use pesos and dollars. Furthermore the official exchange rate set by the government isn't the true exchange rate that you can get on the street. http://en.wikipedia.org/wiki/Prisoner-of-war_camp and http://en.wikipedia.org/wiki/Argentine_peso

Even here in the US there are plenty of people willing to trade or barter or accept slightly alternative currencies. I might argue that something's money-ness is related to it's acceptance as a medium of exchange. Probably not linearly, but in some way. There are network effects for money just the same as everything else that humans do.

At home I've got US coins that are labelled as dimes but I can take them to quite a few places and exchange them for at least $1.25 in today's paper dollars. Why? They're pre-1965 dimes and they've got some silver and that makes them worth more.

To try and pin down "money" as "absolutely this one thing always and forever" is a bit of a fool's errand because money is as one friend of mine put it a "shared delusion". It's a decidedly human construct and while you can pass laws, you can't actually control people's behavior. If everyone decides that bitcoin is money it doesn't matter what the law says about dollars, they'll be just as worthless as this author thinks bitcoin is now.

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