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The Bitcoin bubble – Greater fool theory

economist.com

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Re: The Bitcoin bubble – Greater fool theory

#51

Post by omio »

HorizonXP wrote: post #21

The article makes a valid point. Everyone can not possibly sell all of their Bitcoin, and if they tried, it would be defined as a crash. I would be lying if I said I wasn’t worried about this. But I think it’s wrong to think of Bitcoin as a commodity, or that it needs some killer application. I really think Bitcoin is best thought of as a currency. Fiat currencies work because as a whole, we agree on its value. Usual…

I think bitcoin and others are way beyond being a currency or commodity. We should think of it as an entirely new kind of asset that needs new definitions and theories. People are trying to fit this new tech in their old definitions or theories and it's not working.

Re: The Bitcoin bubble – Greater fool theory

#52

Post by andrewmutz »

wickawic wrote: post #38
andrewmutz wrote: post #14

Both can be true: - that bitcoin is an important tech that will eventually gain widespread adoption - current high price of bitcoin is due to speculation and is a "bubble"

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

It would be bitcoin because of the strong network effects of currencies.

Re: The Bitcoin bubble – Greater fool theory

#53

Post by [deleted] »

ufo wrote: post #34
SirensOfTitan wrote: post #24

I really love Ethereum and have been invested in it for a while. I think @vbuterin and crew have a clear idea as to how to move past problems, and I find it exciting to watch the Ethereum foundation execute their vision well. Bitcoin, on the other hand, doesn't perform its simple functions well in the short term, and seems to have very little idea on how to scale long term: 1. Transactions are still pretty expensive…

Smart contracts are an inusual programming environment, both in termos of what you are doing (managing state transitions, etc) and computing resources available (CPU and RAM are very expensive). I suspect that this is better solved by more domain specific languages instead of an existing FP language

[deleted]

Re: The Bitcoin bubble – Greater fool theory

#54

Post by gedrap »

I don't think that anything new could be said about bitcoins right now, and it's been like that since summer, really.

Some people do indeed believe in them, whether for technical reasons or for simply being invested, while others just keep thinking that it will crash. Both sides have a point, and majority of the people are convinced that they are right, but there's no way to predict the future.

Let's just see what happens.

Re: The Bitcoin bubble – Greater fool theory

#56

Post by quickben »

wickawic wrote: post #38
andrewmutz wrote: post #14

Both can be true: - that bitcoin is an important tech that will eventually gain widespread adoption - current high price of bitcoin is due to speculation and is a "bubble"

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

Probably wouldn't. You need something that scales if all are to use it. Bitcoin, in the current form doesn't at a level to replace Visa tap pay. For example, for a country of 20 million buying bagels on their way to work.

Re: The Bitcoin bubble – Greater fool theory

#57

Post by qznc »

wickawic wrote: post #38
andrewmutz wrote: post #14

Both can be true: - that bitcoin is an important tech that will eventually gain widespread adoption - current high price of bitcoin is due to speculation and is a "bubble"

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

First Mover Advantage.

Re: The Bitcoin bubble – Greater fool theory

#58

Post by marcosdumay »

nxsynonym wrote: post #15
simias wrote: post #9

The article is perfectly right when it describe what drives the current Bitcoin craze and its insane valuation but the conclusion is frankly a bit lazy: >When the crash comes, and it cannot be too far away, it will be dramatic. People have been saying that Bitcoin was going to crash for years now. And it has, multiple times, but always recovered so far. Seems like there's no shortage of "fools" willing to pump the cu…

Yeah I'm pretty disappointing in the quality of this article, especially considering its coming from the Economist. The summary is a coin flip in essence. It did, however, get me to think about this question: Is there a point where enough "fools" get involved that Bitcoin becomes "too big to fail"?

Well, people with no idea about how computers operate have been stopping me to ask my opinions on BTC recently. If there's a point where enough "fools" get involved for anything to happen that's a symptom this point is near.

But the way more usual outcome is that a bubble pops, not that it is lifted into infrastructural status. (But yeah, both happen, just with widely different rates.)

Re: The Bitcoin bubble – Greater fool theory

#59

Post by beefield »

brndnmtthws wrote: post #11

Frankly I'm astounded by the vitriol toward Bitcoin on HN. Bitcoin has the potential to actually change the world (unlike most of the BS startups coming out of SV), and yet all these voices on HN poo-pooing Bitcoin appear (to me at least) to outweigh those who are willing to give it a shot. Why is this? Do people fear what they don't understand? Are they mad because they feel like they missed out? Does Bitcoin's succ…

The problem is that it has potential to change world for the worse, not the better. Fixed supply monetary systems have been tried in the history and there are reasons other than evil bankers wanting to get power for their dismissal.

And claiming that bitcoin's success would be bankers loss indicates that you don't quite get what is the utility finance sector creates. One of the main things banks do is they convert short term deposits to long term loans. There is nothing in bitcoin that reduces the need for that service in our economy. There were banks at gold standard times and there will be banks in the extremely unlikely world where bitcoin is main currency in a society.

There is no mechanism in bitcoin that would manage the volatility of the currency (against the price of bread and butter, not other currencies) That in itself makes it DOA as a proper currency. Further, even if that was sorted out and a society would want to have bitcoin as their currency, why the f*ck (pardon my french) the society would want to give the seignorage to bunch of cryptonerds? It is not like it is difficult to make a fork.

I am not mad about missing one more tulip bubble/ponzi scheme. I am mad that people never seem to learn.

Modern money is debt. It is a marker who in the society is owed and how much. Thinking that those markers should have fixed supply is just not smart.

Re: The Bitcoin bubble – Greater fool theory

#60

Post by cletus »

So I've been giving this a lot of thought. I mean after I lick my wounds about not buying any Bitcoin at any point ever. But alas...

I honestly don't see any cryptocurrency being used as a currency possibly ever but at least not until it stabilizes in value. You have to look no further than the real world to see what happens with unstable currencies. In countries like Venezuela for example a secondary economy forms around something stable like the US dollar.

The big problem with cryptocurrency is one of the things that many advocates claim as an advantage: there's no central bank who can affect the money supply. As much as people might, say, criticize the Fed for QE policies and central banks in general for "printing money", these things are actually necessary.

Bitcoin (et al) are like "digital gold". Gold as a currency had its place but there are huge problems with it and good reasons why the world went the way of fiat currencies.

So I see these coins being used ephemerally. For example: seller converts USD to BTC, spends that BTC on something. The seller immediately converts it back to USD so neither party has a holding period of BTC as there's too much risk attached.

That's all fine and there are definitely use cases for that. Unfortunately many of them are illegal so even though the tech is agnostic to such things, illegal uses are and will continue to be a big driver in cryptocurrency usage. This too will hurt widespread adoption.

As for the stellar rise in Bitcoin, I do think it will settle at some point for this reason: there has been a proliferation of other coins. At some point people are going to realize that these are interchangeable so you can just use whichever one you need to (again, ephemerally). New coins will fill the demand and they'll simply become another commodity.

Maybe that's the solution to the central bank problem.

Still, I can't help but wish I'd bought some Bitcoin at some point.

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