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The Bitcoin bubble – Greater fool theory

economist.com

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Re: The Bitcoin bubble – Greater fool theory

#151

Post by tom_mellior »

heifetz wrote: post #110
craigc wrote: post #84

Earlier quoted context omitted.

This same question could be asked about many technology startups. Why should Uber be valued higher than Lyft? That's a pretty crude comparison, but I'm just pointing out that just cause someone comes along and makes a clone of something doesn't mean it will be worth more than the original even if it is technologically superior. It's true that forking a cryptocurrency required much less work than starting a company, b…

except that Uber and Lyft are operating companies with revenue, expenses and earnings. Bitcoin is a "currency" without inherent value, or cashflow potential. I admit, Bitcoin may have some utility, but is that utility any different from another cryptocurrency? To rephrase my question, if someone was able to clone Gold, why should Gold be worth more than the clones?

> Bitcoin may have some utility, but is that utility any different from another cryptocurrency?

Yes. It's easier to find shops that accept Bitcoin than it is to find shops that accept other cryptocurrencies. That's the utility: Being able to use it to buy stuff.

This utility is not because Bitcoin made superior technical choices, it's simply due to first mover advantage and network effects. If every place that accepts Bitcoin today started accepting other cryptocurrencies, Bitcoin would be likely to lose against those with higher transaction capacity and cheaper/more transparent fees.

Re: The Bitcoin bubble – Greater fool theory

#152

Post by shalmanese »

porter wrote: post #4

Famous NYU valuation professor on how to value bitcoin: http://aswathdamodaran.blogspot.com/2017/10/the-bitcoin-boom...

This is the same NYU professor that valued Uber at $6B because his comparables were taxi companies: https://fivethirtyeight.com/features/uber-isnt-worth-17-bill...

Re: The Bitcoin bubble – Greater fool theory

#153

Post by cableshaft »

beefield wrote: post #98
omio wrote: post #80

Earlier quoted context omitted.

Bitcoin may be a finite supply but cryptocurrencies in general are infinite. So can you really say it is a fixed monetary system?

Each one of the cryptocurrencies I have encountered relies on the idea that the supply is somehow predefined. Give me a cryptocurrency whose supply is adjusted based on the needs of their users and I am interested. Give me a cryptocurrency that allows heavily negative interest rates for savings to embrace current consumption in the economy over hoarding of "money" and I am interested. But these are complete anathema…

There are cryptocurrencies out there that are inflationary, although it's a set inflationary amount. Ethereum and Dogecoin are two of them.

Re: The Bitcoin bubble – Greater fool theory

#154

Post by acdha »

qznc wrote: post #57
wickawic wrote: post #38

Earlier quoted context omitted.

question at this point though: If a crypto currency were to gain widespread adoption, why would it be Bitcoin?

First Mover Advantage.

This is why we all use AltaVista and Friendster from our PalmOS phones.

That line of reasoning is especially risky in finance: right now, very few people are invested in Bitcoin. If it became popular, all of the early users would become very rich. The major players all know this and I find it extremely unlikely that they wouldn't make a serious play to avoid that line of money going to someone else. Say a few major banks, Apple/Google/Square/Venmo, etc. setup a competitor: on day one it'd be accepted by orders of magnitude more vendors and they'd presumably have paid attention to the endemic security, reliability, and performance concerns. How many people have enough of a stake in Bitcoin that they wouldn't jump ship – hundreds, maybe thousands?

Re: The Bitcoin bubble – Greater fool theory

#155

Post by acdha »

deevolution wrote: post #109
flunhat wrote: post #93

Earlier quoted context omitted.

I want to believe this argument so badly, but it's been 7 years and we still don't have a widely used application related to it. How much longer do we have to wait? While we're on this topic, why are all Ethereum projects so damn meta? Like, the top dapps are all recursively related to Ethereum in some way (like wallets for ethereum, different ways of spending ethereum etc.) If a technology is new and exciting, shoul…

ARPANET adopted tcp/ip in 1983. That's a solid 16 years before the beginning of the internet bubble. Blockchain is far from being a mature technology.

That's a tricky comparison: network connections were expensive and computers which could run an operating system which supported TCP/IP cost more than your car until the 90s. In contrast, everything anyone in the world needs to use Bitcoin has been a commodity from the day it launched.

The difference is that the average person doesn't have a need which would motivate them to use it. As soon as networks became available, people jumped on them because there were tons of things they could do: download software, chat, shop, find a date, read the news, etc. Bitcoin hasn't found that draw yet — literally the only time I've heard a non-technical person mention it was because they'd heard about a VC investing in a startup and they were wondering whether they should buy some in case the price goes up.

Re: The Bitcoin bubble – Greater fool theory

#156

Post by tom_mellior »

jonex wrote: post #140
tom_mellior wrote: post #130

Earlier quoted context omitted.

> Google shares represent a stake in Google's revenue stream. It has an intrinsic value [...] I'm not up to date on Google specifically, but for a long time in its existence, it did not pay a dividend, so its shares did not represent a meaningful stake in Google's revenue stream. Did they have an intrinsic value anyway? But regardless of your answer to that, my statement stands. If everyone holding Google stocks sudd…

You buy stake in _future_ dividends. For companies that don't have any dividend currently you just have to compensate for the time delay when calculating the value. If everyone would race to sell Google stocks for no reason, the price would quickly drop to a level where it would make huge sense to start buying. Imaging having a dividend to price ratio of 1000%. Even with no dividend, buying stocks (preferably with vo…

> You buy stake in _future_ dividends.

So no intrinsic value then. Just the expectation of possible future earnings. That obviously cannot work!

> the price would quickly drop to a level where it would make huge sense to start buying

Like for Bitcoin. Yes, there would be enough Bitcoin fans who got rich enough on Bitcoin to have spare cash to start buying if it dropped a lot.

Thanks for playing.

Re: The Bitcoin bubble – Greater fool theory

#157

Post by mbrock »

rbanffy wrote: post #141
avyfain wrote: post #137

Earlier quoted context omitted.

You can print out a piece of paper that says "TEN US DOLLARS" on it, but if the corner store or the bank won't take it it isn't really the same as $10.

Will you buy pizza with BTC right now?

When you buy a pizza with USD, do you think "hmm, maybe I should invest this into BTC instead?"

Re: The Bitcoin bubble – Greater fool theory

#158

Post by abrkn »

jnordwick wrote: post #134
abrkn wrote: post #76

Earlier quoted context omitted.

As someone who gets paid in Bitcoin and only has Bitcoin I can explain how it works. I make purchases using Bitcoin or credit cards. I then sell enough Bitcoin to pay the credit card bills.

When you buy a pizza for $20 when does the FX transaction happen, at purchase time or at the time you pay your credit card bill? I would hate to be on the hook for btc denominated loan.

When I pay my credit car bill. With my San Francisco software engineer salary the FX risk of that $20 is acceptable.

Re: The Bitcoin bubble – Greater fool theory

#160

Post by Nursie »

mbrock wrote: post #91
Nursie wrote: post #73

Earlier quoted context omitted.

I'd spend dollars on the phone, because the same BTC might buy 10 phones in a few weeks.

It's the same opportunity cost whether you spend from your BTC account or your USD account! You're choosing between "should I buy a phone or 0.1 bitcoin with these dollars?" I think the presence in the market of an asset that many people believe is continually underpriced would have a general effect on spending, not just on the utility of that asset as a medium of exchange...

>> It's the same opportunity cost whether you spend from your BTC account or your USD account!

Only if obtaining BTC is frictionless and fee-free, something far from universal.

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