Facebook went 10x, from $50bn to $500bn, after it was added to the S&P500. A similar pattern can generally be seen for other stocks being added to the index. That's one company / stock.
There is only one Bitcoin. There is only one Ethereum. You have investors globally buying mostly those two assets. Want to buy the asset class? You buy one of those two (or both)
Pension funds manage around $300tn. If those allocate 1 or 2% to crypto, a sparkly new asset class, you'll have a $3-6tn market cap. Which they might, given the above average returns it's been generating.
Gold is worth $8.2tn globally. Bitcoin in my view qualifies as digital gold. Why was gold originally picked as a store of value? You could've picked other metals. Or diamonds, etc. But someone decided gold was the one. Gold in itself isn't very useful. It's been given its value by people, because they believe it to be a store of value. (I'm not a gold bug and I personally don't think gold is worth holding) But think about this: how high could gold and silver go in a speculative bubble? $13tn? $16tn? Higher?
There will be 20-30-40% corrections along the way, but in my view, it's going much much higher -- very much like the .com bubble (which went up to approx. $5.6tn). Wouldn't be surprised if this entire space achieves a multi trillion market cap ($2-4tn) over the next few years, with most of that ending up in Bitcoin and Ethereum.
Note: this is not investment advice. Do your own research and make up your own mind.
Gold still has that value even though it’s price has been inflated and corrected many times.
Bitcoin on the other hand has no real world value outside of crime because it never evolved to a real currency. Which means that the only way to gain a net value on your investment, is for orher people to come in and buy bitcoin after you.
Which means you’ll also have to sell it before those people too.
I’m not telling you not to buy bitcoin. It’ll probably go much higher than it is now, but it will some day go to zero because it lacks any innate value.
Not true. Gold has its value mostly because it is rare. Jewelry can be made of silver, copper, and any number of other metals. Its "real" value exists because people believe in its "intrinsic" value, not practical value.
Now, what that means for the price is nothing really. Speculation commodities (like Bitcoin and gold) go up and they go down without a whole lot of rhyme or reason. But the analogy to gold is valid.
You’re right that you need to expend bitcoin to trade it, but this is more a weakness than a strength. It gives you a banking system of sorts, in that you’re guaranteed someone will handle your transaction for money. This also means that if the value of bitcoin drops then nobody will be around to do the calculations required to do transactions, making it an inherent risk.
You can downvote it all you want, but the value of the transaction is directly tied to the value of Bitcoin. This makes it profitable on the way up, and an outright danger in the way down because it'll prohibit you from selling your bitcoin when the value crashes.
Like I said, invest all you want, there are plenty of money to be made still, but at least be aware of the risks.
But at the same time I don't think the comparison to Facebook or any other listed stock is apt - they trade at a multiple of earnings, you can base the valuation on some underlying fundamental. That is not the case with bitcoin
I'm certainly willing to believe anyone at those times. But... everyone's been quite wrong.
I make a weekly purchase of a small basket of cryptocurrency (mostly BTC) and I actually mine XMR with some leftover hardware since it's price efficient currently. No different than hedging your retirement portfolio with commodities and other non-correlated assets with your equities basket.
Cryptocurrency isn't going anywhere anytime soon, that's about the only thing we can say for sure.
I'm worried people will lose money seeing all these gains in crypto and taking statements like yours at face value. Just because someone out there made 50x their initial investment in crypto from times t1 to t2 doesn't mean anybody will make this much money after t2.
Cryptocurrency might not go anywhere in general, but there's no reason coin X on chain Y will be worth anything in 10 years. Miners are already pretty ruthless about switching chains to whichever makes them the most money.
Was this foreshadowing? Because this statement absolutely is:
>>The same could be said of any bubble in history. Even though tulips reached $X, they still crashed in the end.
You've neglected to include every other asset appreciation model like the DJIA, NASDAQ, Nikkei, etc, solely to focus on... tulips.
BTC may very well be a bubble, just like real estate (or is it?), but like you cannot tell if you are in a bubble while you're in it, nor can you tell if it IS a bubble either. If you are authoritatively stating that we are in a BTC bubble, your opinion is worse than mine, which is to say it is inconclusive and the person I responded to - had they had any conviction to bet against BTC at $500 or other price points where his same argument was trotted out - would have lost his entire stake, or close to it.
>>but there's no reason coin X on chain Y will be worth anything in 10 years
If you could quote from my comment where I said BTC would be worth anything in 10 years, this statement would make more sense. As it is, you just knocked down a strawman. I specifically said I am willing to believe that BTC will go to zero USD tomorrow. Because it's totally possible that it will.
It just hasn't, yet, and anyone saying that it will has the same amount of information as the people saying it will go to $50,000: None.
With Bitcoin, your "asset appreciation model" relies on people continually buying bitcoin at a larger rate to usd. There is no underlying asset (a business) that has intrinsic worth that may drive the price. You could argue that there are some analogues, for example, the mining hash rate or the strength of the blockchain, but the actual value of these is extremely hard to define. That is why Bitcoin may be in a bubble, people may be overestimating how these intangibles may be affecting price; it is hard to say what the value may truly be.
I am not authoritatively stating that we are in a BTC bubble, just that I would be very cautious with bitcoin and think a bubble is likely. Nobody knows what will happen, but we certainly can't say that Bitcoin isn't in a bubble (as you seemed to originally suggested), and in my opinion bitcoin resembles a bubble, though I respect that it may not to you.
If BTC was the stock market, then it has crashed at one of those numbers. It gradually went from $1000 down to about $200. If the stock market did that, everyone would be in a panic.
If you don't want to do that, maybe it isn't quite as certain as you suggest.
Even if bitcoin is certain to crash, without a deep understanding of when (and by extension, how) a naive futures trader still runs a good chance of being eaten alive, or making poor returns.
Stating bitcoin will crash is a bit like the conventional wisdom that smoking is bad for your health. One can reasonably be very confident in the truth of it without being confident in specific odds on any bad outcome.
Edit: Found it. https://rhsfinancial.com/2017/06/line-aggressive-crazy/
I hope you really think about applying the Kelly Criterion to trading bitcoin futures and hope you realize that the person completely ignores friction(transaction costs),and does not show a sharpe ratio( who cares if you beat a benchmark with 10x the risk).
"[In November 2000.] Those kinds of times… when everyone is running around like a chicken with its head cut off, that's pretty good for us… "~Jim Simons (https://en.wikipedia.org/wiki/Renaissance_Technologies)
If you're able to associate some timeframe to the idea that with p = 1 Bitcoin will be at half the value it currently is, the Kelly criterion suggests you should be quite a bit of the farm. Applying the Kelly criterion in supposed p = 1 situations (e.g. "Like it or not, [the market will crash]") is pretty invalid.
If the comment only suggested that the true value of Bitcoin is lower than the currently traded rate (and made no mention of what the market value would do), this particular observation would be relevant.
The funny thing about this is when the real smart ones get there hands on this contract (quants), watch out. Goodbye free lunch and hello very efficient pricing.(Low vol)
What I meant was, how they plan on "replicating", constructing the index value ,in which ,they( the CME) will base the value of bitcoin to be.
It is detailed here. https://www.cmegroup.com/trading/files/bitcoin-reference-rat...
CNBC stated that it is a weighted average of 4 index's in the video, but could not find anything of the sort in the article (https://www.cnbc.com/2017/10/31/cme-plans-to-launch-bitcoin-...)
http://www.cmegroup.com/media-room/press-releases/2017/10/31...
I didn’t, and I consider the profit I’ve made to be a satisfying amount of “free money”, so I’m just going to keep watching from the sidelines.
No judgement, I’m just out.