Are we in a cryptocurrency bubble? A comparison with the 2000 dotcom bubble • Hacker News Board

Re: Are we in a cryptocurrency bubble? A comparison with the 2000 dotcom bubble

#11

Post by _Chief » Wed, Dec 06, 2017, 4:36 AM UTC

tfmatt wrote: post #2

Allow me to save you sometime, the author basically sums it up with this: Conclusion: It’s obviously a simplified model and you can play around with the numbers and get marginally different results, but the key insight is that even if you’re a fervent crypto believer, if you think there is a nonzero chance a crash might happen then in order to maximize your EV (i.e. make the most money) you should keep some % of your…

Sorry, trying to read this was so painful and time wasting on mobile.

For anyone else not interested in scrolling:

Conclusion: It’s obviously a simplified model and you can play around with the numbers and get marginally different results, but the key insight is that even if you’re a fervent crypto believer, if you think there is a nonzero chance a crash might happen then in order to maximize your EV (i.e. make the most money) you should keep some % of your money on the sidelines to invest once the bubble pops and lower your average buy-in cost. The higher the probability you assign to a crash, the more money you should keep on the sidelines and vice versa

Re: Are we in a cryptocurrency bubble? A comparison with the 2000 dotcom bubble

#12

Post by User23 » Wed, Dec 06, 2017, 7:36 PM UTC

jimmygatz wrote: post #6

User23 wrote: post #3

The speculation about cryptocurrency valuations is a great example of how bad people are at dealing with radical novelties. People spout meaningless analogies, be they about decades old market crashes or centuries old speculative frenzies like tulip bulbs, as if they apply here when clearly they cannot.

Appreciate the feedback! Is there any example from history you think could be used as an analogy or do you think there's no way of comparing this to anything that's happened before? If so, how do you think about cryptocurrency valuation?

As far as I know there is no historical precedent for cryptographically secure ledgers with distributed consensus. I'm not trying to poo-poo the article, sometimes we really do have to admit that here be dragons.

Re: Are we in a cryptocurrency bubble? A comparison with the 2000 dotcom bubble

#13

Post by User23 » Wed, Dec 06, 2017, 7:39 PM UTC

jimmygatz wrote: post #10

astrodust wrote: post #9

Earlier quoted context omitted.

This is the first time we've had a bubble around an asset with zero intrinsic value. Even tulips, or "worthless" Weimar Republic bills had negligible value. When Bitcoin implodes the value of your Bitcoin collectable merchandise will vastly exceed the value of your BTC. Those physical coins will slowly increase over time as their obscurity and notoriety grows.

I hear this argument a lot and I'm never really sure what is meant by "intrinsic value"? Why do you think bitcoins have zero intrinsic value but tulips and weimar republic bills do? Bitcoin has many uses, but for the sake of argument let's take its often stated use of acting as digital gold. If gold is "intrinsically valuable" which I presume you think it is, then so is bitcoin. Gold is valuable because it is a good…

Good luck transacting in gold, because it can't be done efficiently due to assaying costs. You can transact in metal bars stamped by Credit Suisse or another bank, or coins minted by some sovereign or other trusted authority, but nobody in their right mind is going to accept plain gold for any transaction. Without the imprimatur of some authority, it's simply not trustworthy.

Re: Are we in a cryptocurrency bubble? A comparison with the 2000 dotcom bubble

#14

Post by astrodust » Thu, Dec 07, 2017, 5:18 PM UTC

jimmygatz wrote: post #10

astrodust wrote: post #9

Earlier quoted context omitted.

This is the first time we've had a bubble around an asset with zero intrinsic value. Even tulips, or "worthless" Weimar Republic bills had negligible value. When Bitcoin implodes the value of your Bitcoin collectable merchandise will vastly exceed the value of your BTC. Those physical coins will slowly increase over time as their obscurity and notoriety grows.

I hear this argument a lot and I'm never really sure what is meant by "intrinsic value"? Why do you think bitcoins have zero intrinsic value but tulips and weimar republic bills do? Bitcoin has many uses, but for the sake of argument let's take its often stated use of acting as digital gold. If gold is "intrinsically valuable" which I presume you think it is, then so is bitcoin. Gold is valuable because it is a good…

You can eat tulips. You can burn bills.

Gold has been used for various things since it was discovered. It's an essential component in many electronics, and if nothing else, it looks nice.

> Bitcoin is all these things too and in fact is a much better store of value than gold.

Bitcoin is none of those things. The moment the Bitcoin network collapses you have nothing but a bunch of random numbers, all of which are absolutely worthless.

Bitcoin has been around less than ten years. Gold has been around for billions. You've got a long way to go to prove Bitcoin can be as durable as gold, which given it's an atomic element, is probably impossible.

I'm not saying that gold is the best store of value, but it's a hell of a lot better than Bitcoin.

Re: Are we in a cryptocurrency bubble? A comparison with the 2000 dotcom bubble

#15

Post by astrodust » Thu, Dec 07, 2017, 5:19 PM UTC

User23 wrote: post #13

jimmygatz wrote: post #10

Earlier quoted context omitted.

I hear this argument a lot and I'm never really sure what is meant by "intrinsic value"? Why do you think bitcoins have zero intrinsic value but tulips and weimar republic bills do? Bitcoin has many uses, but for the sake of argument let's take its often stated use of acting as digital gold. If gold is "intrinsically valuable" which I presume you think it is, then so is bitcoin. Gold is valuable because it is a good…

Good luck transacting in gold, because it can't be done efficiently due to assaying costs. You can transact in metal bars stamped by Credit Suisse or another bank, or coins minted by some sovereign or other trusted authority, but nobody in their right mind is going to accept plain gold for any transaction. Without the imprimatur of some authority, it's simply not trustworthy.

When Argentina's economy collapsed people would frequently transact in gold. It wasn't bars, but just junk gold, something that a simple chemical test could prove was gold if necessary.