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Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

nytimes.com

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Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#371

Post by nostrademons »

sserrot wrote: post #369
nostrademons wrote: post #337

Earlier quoted context omitted.

It does, and that's an assumption that probably doesn't hold. Most things in the economy work that way though - the total supply of hard currency in the economy is only $3.6T, so when you speak of the $18T US GDP or the $20T US national debt or the $524T value of the derivatives market, it necessarily accounts for the same dollar changing hands multiple times. That's what makes it a currency, that it can circulate an…

Saying the 'value' of the derivatives market is $524T is disingenuous. The notional value - sure, but that's like saying the value of the lottery 'market' is the jackpot times all the outstanding tickets - http://www.newsweek.com/600-trillion-derivatives-market-9227...

That's my point though - that there are a lot of things in the economy where the total dollar value may be high but it's largely the same participants trading amongst themselves, and the contracts net out to some much smaller value. Bitcoin volume and Bitcoin market cap are not unique in this regard.

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#372

Post by URSpider94 »

josu wrote: post #193
tomkarlo wrote: post #159

Earlier quoted context omitted.

Is the supply really "limited"? Sure, there's finite number of "coins" that can be generated. But unlike physical objects, there's not really any special property of that unit. Also, you can just generate a new currency of more units and similar utility (as has happened many times recently.) Objects in the real world have utility that's directly linked to their unit value. That's not necessarily true for Bitcoin... i…

I'd say that an analogy with diamonds works: There is an infinite supply of lab-made-diamonds, however they are not fungible with real diamonds. Them being substitute goods, lab-made-diamonds may have negatively impacted the price, but real diamonds are still considered scarce.

Diamonds aren’t scarce. They are just unevenly distributed, and a few cartels own the means of production. The resale market for all but the most valuable diamonds is complete crap, because deBeers keeps bringing enough new diamonds to market every year to meet demand.

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#373

Post by tuesdayrain »

latchkey wrote: post #324
copenja wrote: post #285

Earlier quoted context omitted.

That's an interesting question. Bernie Madoff’s Ponzi scheme is estimated to have lost clients $65 billion. The Bitcoin market cap is nearly double at $107 billion. But Bernie Madoff's $65 billion is all real dollars paid into the scheme. Bitcoin market cap doesn't track the amount of the money that has been paid into the current Bitcoin market. It simply estimates the current market price, then multiplies that numbe…

Thank you. More people need to realize that market cap is meaningless in the context of crypto. It is just a multiplier of two numbers which makes it sound like a big number and thus interesting (which it is not). You explained it perfectly.

It's not meaningless. It's still the only way to roughly compare the size of assets with different supplies.

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#374

Post by joejerryronnie »

spiorf wrote: post #366
joejerryronnie wrote: post #204

Earlier quoted context omitted.

If the world's financial stability is at risk due to crypto-currency, you will see how easy it is for the government to effectively shut down the internet. What good is the bitcoin blockchain when all ISPs have been locked down and the only internet traffic is going directly through military run equipment?

It would be an economic suicide for the first country that decides to disconnect itself from the internet. Or do you think that for the first time in history of mankind, every single government will come together against bitcoin? Besides, there are satellites beaming down bitcoin transactions, so...

I'm talking about the scenario where cryptocurrency is already threatening to destabilize the world financial system. And it's trivial for the world's governments to shut down all the satellites that might transmit bitcoin transactions. Now if a small group of people could figure out how to launch swarms of rogue satellites quicker than the gov could shut them down, that could be a way to keep crypto going.

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#375

Post by thecrazyone »

spinlock wrote: post #263
Bucephalus355 wrote: post #134

Earlier quoted context omitted.

Whenever some kind of good has a truly limited supply, that can fuel the most massive of bubbles by making the “bubble” look rational at first. The bubble hides itself under the guise of being about “supply and demand”. The one thing that leaps to mind is the Japanese real estate speculation in the 1980’s. Everyone claimed, very logically, that Japan is a mountainous island with very limited space, so real estate wou…

Why are you comparing regional prices to national income?

I'm an economics noob, but is `comparing regional prices to national income` in some way technically wrong or misleading in some way?

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#376

Post by thecrazyone »

deevolution wrote: post #211
josu wrote: post #193

Earlier quoted context omitted.

I'd say that an analogy with diamonds works: There is an infinite supply of lab-made-diamonds, however they are not fungible with real diamonds. Them being substitute goods, lab-made-diamonds may have negatively impacted the price, but real diamonds are still considered scarce.

This analogy isnt complete though because it doesnt take into account network health. Its easy to make a cryptocurrency, but hard to build a network large enough to defend against various attacks. There are many, man coins out there suseptible to double spending - bitcoin is the most secure, and this security adds some value in itself.

Maybe you're jumping to the conclusion too fast. Most coins don't have publicly declared vulnerabilities (ie there might be many 0days). But it might be untrue that bitcoin price is not being manipulated (an attack itself on the network) based on multiple articles on HN alone.

So bitcoin might not be too unique or valuable.

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#377

Post by thecrazyone »

King-Aaron wrote: post #319
outworlder wrote: post #289

Earlier quoted context omitted.

When I am playing a game, my computer's power consumption increases by a lot. I am using more energy and ultimately generating more entropy in the universe. Is it worth it?

Depends on the game.

> Depends on the game. lol

> When I am playing a game, my computer's power consumption increases by a lot. I am using more energy and ultimately generating more entropy in the universe. Is it worth it?

Yup, that's the right answer to a collectivist sentiment. Value is subjective

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#378

Post by thecrazyone »

robocat wrote: post #273
kaoD wrote: post #227

Earlier quoted context omitted.

And yet it isn't providing value to 0.05% of the world's population. Even if it did, the energy would go up (exponenially?) I'm not sure the tradeoff is worth it.

Mostly what we think others should spent their money on is irrelevant. For example the global pet care market has sales of approx $100 billion. Many people think that is a waste. H Other examples more than 0.05% simple to find!

> Mostly what we think others should spent their money on is irrelevant. Yup yup. One would think this is almost a tautology but sadly isn't

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#379

Post by thecrazyone »

vkou wrote: post #118
paulpauper wrote: post #58

Earlier quoted context omitted.

Bitcoin was clearly undervalued at the beginning of the year, when its price was around $1,000. how could such a determination be possible?

Spirit animals.

lol. That's a keynesian reference if anyone was wondering :)

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#380

Post by latchkey »

tuesdayrain wrote: post #373
latchkey wrote: post #324

Earlier quoted context omitted.

Thank you. More people need to realize that market cap is meaningless in the context of crypto. It is just a multiplier of two numbers which makes it sound like a big number and thus interesting (which it is not). You explained it perfectly.

It's not meaningless. It's still the only way to roughly compare the size of assets with different supplies.

"Market capitalization is just a fancy name for a straightforward concept: it is the market value of a company's outstanding shares. This figure is found by taking the stock price and multiplying it by the total number of shares outstanding."

At least with bitcoin, there is no company. So, all it is is price * shares outstanding (held shares).

Given that there is some portion of btc that is 'lost' as well as the fact that we don't know what people paid for what is held, I don't see how anyone can come to a conclusion about the "the size of assets with different supplies."

In fact, the definition of market cap says nothing about that conclusion. The description says that it was just a way of grouping companies of various sizes. So, we are back at square zero, bitcoin is not a company.

Maybe I'm totally wrong in my feelings about MC, but at the end of the day, this is not an indicator I would use for TA or popularity of a cryptocurrency. For example, Volume is a much more interesting high level number.

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