This claim is absurd. Bitcoin is patently bad as a store of value, and that's perhaps bitcoin's worse and and most ill-suited applications. Even ignoring the speculative pressures and value manioulation being conducted, just look at how much bitcoin's market value has been fluctuating. Even yesterday it suffered a 10% drop for no reason at all. Who in their right mind believes it's a good idea to store value in a highly volatile service subjected to such speculative pressures?
Nowadays bitcoin sounds a whole lot like a pump-and-dump scheme, where shills come out of the woodwork praising bitcoin's magic and supernatural properties to fool unsuspecting fools to keep pumping money into the fraud.
I think a lot of people hear "Digital Currency" and think 'something like Apple Pay', when Bitcoin's competition is closer to ACH/wire transfers.
It's not a tech that everyone needs to use, and most people will pay an expert to use it for them. But if successful, could be a valuable medium for receiving payments from low-trust entities.
For example, if a stock exchange accepted Bitcoin for funding accounts, you could get your account up, funded and ready to trade in less than an hour. Most stock exchanges now take several days for funds to clear.
If/when your stock exchange starts accepting bitcoins, they may still continue to take days to clear things.
I could see holding a portion as 'pending' until many confirmations, or perhaps until the Bitcoin can be liquidated on the market, but both of those seem like they could still resolve an order of magnitude faster than the 'competition'.
The reason you don’t get that as an end user is because of compliance, fraud, etc.
Could be an interesting aspect to look into?
I'm not so sure about that. You could have bought BTC anytime before the past week or so and it would have appreciated significantly, regardless of whether you bought it in a peak or trough. It's just a question of magnitude. E.g. if you bought 1 BTC at the lowest or highest price in 2015 you would still have outrageous returns on it today.
This is not to say it will continue being the case going forward but it's crazy to look back at.
This is gambling.
Oh I can do that. I expect it to be 100x or more greater than what it is today. The reason why it is 16 as opposed to 8 or 32 is simply the speed of the uptake. It is going up in value because it is in the process of deflating the fixed-asset debt bubble. The only real question is, how big is that bubble.
> I would also spend some time understanding what "investing"
Investing is understanding what the value proposition is, and investing accordingly. You don't, and that's fine. Don't assume that other people have your understanding of the asset class in question though.
The question you should be asking is, why do you think it's important when other people invest in things that you don't understand.
In your opinion, what is the intrinsic value of Bitcoin?
I use the 1:10000 rule (https://xkcd.com/1053/) for this argument. It is my opinion that the intrinsic value of bitcoin is far far greater than anyone really comprehends. People generally are too focused on people just buying and selling the asset, but not about the cryptographic proof, and incentive structure that perpetuates the network functioning. So when people like to ask what the intrinsic value of bitcoin is, I say :
You are thinking of the store of value property without the cryptographic property that secures it. You are talking about it as one would talk about valuable shells, and even shell sellers, and not the security that separates it from all forms of value exchange before it. To understand the intrinsic value of bitcoin it is good to use the analogy of an envelope. So i ask you : does an envelope have intrinsic value?
If I have a letter that I need to send securely, would I prefer to send it open, and ready to be read? Or would I prefer for it to be sent within the confines of an envelope? Now let's think... would I prefer to just leave an open envelope, or would I think it necessary to put some seal across it to ensure that it isn't opened, and read whilst en-route. Does a sealable envelope have more intrinsic value than an unsealable one? Hmm... but what if someone can counterfeit the seal? I need some method of ensuring that the message I want to get to that person isn't read, and preferably, isn't even identified as a message. That's when you need to get lawyers involved. Sounds expensive. There's obviously something intrinsically valuable about such a service, because many people pay oh-so-very-much money for it.
Now let's imagine we're not talking about letters, we're talking about money. Would you address a $100 note through the mail to your child for their birthday? You'd pay for a stamp at least. Would you encase it in an envelope that you paid for at the local post-shop? Hmm... bill in the envelope. Anyone will be able to see that it is money. Perhaps encase it in a card? What if it is $1000? $10,000? $10 million? Does the protection service of an envelope somehow decrease because the value of the contents of the package increases? It's the opposite, isn't it? Bitcoin is both the cryptographically sealed envelope, and the network to deliver it.
What say you? Is an envelope intrinsically valuable?
See? It's all speculative bullshit, where people who took a bet on bitcoin increasing price and expect to profit from this price increase are trolling other fools to keep pumping the bubble until they cash out.
Bitcoin is quite clearly a pump-and-dump scheme, and here we see some users cheering fools to keep on pumping the bubble with their cash.
The only intrinsic value that bitcoin has is it's use in money laundering deals, and only in short time scales. That's it. The rest is just speculative fraud.
PSA: I generally can't give you advice about specific crypto investments as much as I want to for multiple reasons related to my job.
This is my one statement on the market: It is loud.
Crypto is moving very quickly and I regard it as the riskiest asset class that is available today. To invest in crypto is to accept that currency can be narrative driven and that juxtaposition requires accepting that currency can be simultaneously worth any amount and no amount. The things that favor crypto as an asset class are that there is lots of positive news, a reasonable long-term narrative, and some of the largest assets are deflationary in design. The things that are unfavorable to crypto are that the pricing is uncorrelated to observable reality, the regulatory risk, and the cryptographic risk.
Overall, it is a bizarre, whimsical space to be in right now, but it is also terrifying. Don't tread lightly, and please don't invest more than you can afford to lose.
Thar be Dragons.
______
For clarity, the reasonable long-term narrative is that bitcoin is easier to work with than existing banking infrastructure for some transactions. In particular, if you are a high net-worth individual negotiating with a nation state or a person of low means who conducts low-trust transactions, bitcoin serves you better than most other means of payment. For the vast majority of people who don't fit in those two categories, bitcoin isn't really useful.
Any truth-holder (on both side) is a blatant liar.
Sure it's cryptographically secure, but what is the difference between that and a regular bank using encryption on their money transfer network?
I think the reason it's hard to say whether or not Bitcoin is worthwhile is that there has never been a decentralized currency at this scale before, and for all we know, unless it can serve some kind of purpose that a regular currency issued by a country cannot serve, it's not that useful. This is why Bitcoin is used a lot by people from countries were their own currency is struggling.
But with the central banks of many first-world countries printing money uncontrollably, some even bringing about negative interest rates, many fear the collapse of large economies in the near future. If that happens, Bitcoin will be a way to store your wealth and prevent all your money from becoming worthless pieces of paper.
Other ways of doing the same would be buying gold or some other form of valuable goods and storing it in your house or have someone else store it for you somewhere, but obviously the fact that Bitcoin is digital makes it a much easier to use and viable option.
But, we don't know if that will ever happen. Bitcoin itself also has so many problems. It's also arbitrary as to which digital currency to use since there are so many to invest in, some more popular than others, some have evolved to fix problems with previous versions, so it's really hard to say if all of this will amount to something useful.
Bitcoin is the network to deliver it too. I say that right there.
You don't have to trust a bank. A bank can't interfere with your transactions.
There is intrinsic value in bitcoin. The two more important questions are:-
1. Can that value be measured?
2. Do the people buying bitcoin know the reasons behind why they are buying it? I think not.
I know so many of my friends who own bitcoin and they have no idea what the hell this thing is. They just bought it as it’s growing up in value. These are the people who would sell it when the value goes down and we all know how that ends...
Of course it can. Its price. Bitcoin is money. Its price is the only measure of value.
What I'm saying is that it doesn't matter what people want it for. It's money. It enables things. It is just better money, because it can't be seized, payments can be made to anyone, it can be transported anywhere easily and redeemed anywhere easily, and most of all, it can't be debased. Any of these reasons is enough to want to use it, and people might not know all of the details, but they certainly understand the effects on their wealth.
> 1. Can that value be measured?
Of course.
Strictly speaking "intrinsic value" does not exist, there is only subjective value placed on things based on their properties and usefulness to humans.
Gold only has "intrinsic value" because we value that we can use it to build machines or shiny jewellery. But that is only valuable because we value machines and shiny things. Even air is only valuable to us because we require it to survive, but anaerobic lifeforms don't care. So the value is not intrinsic, but only subjectively "intrinsic" because most people value staying alive.
So the subjective value of Bitcoin is based on its its properties. Humans happen to use money, and the properties of Bitcoin could theoretically make it "better" money than any money that has existed so far.
Anything can be money, but is judged on how "good" a money it is depending on several criteria such as:
1.) Scarcity: Only a select group can create money.
2.) Durability: Should be resistant to aging and natural elements.
3.) Divisibility: Can be divided into smaller sub-units.
4.) Transportability: Easy to transport and transact in.
5.) Recognizability: Should be difficult to counterfeit.
6.) Fungibility: Any $1 bill is equal to any other $1 bill.
Bitcoin could theoretically be better in every category.
However, it is still suffering from lots of problems.
Currently "portability" is often suffering due to network congestion and high fees, which also impacts "divisibility" as it becomes impractical to move small amounts.
However, there's still a good chance that either Bitcoin Core or Bitcoin Cash or any other of the current cryptocurrencies will find a way to scale and retain good portability and divisibility.
tl;dr Bitcoin has no "intrinsic value", nothing does, but the subjective value is that it could be better money than any other.
This is the reason why the price is exploding.
https://trends.google.com/trends/explore?date=all&geo=NG&q=b...
(it's for Nigeria)
And the global map for since 2004:
https://trends.google.com/trends/explore?date=all&q=bitcoin
With the search term being most popular in Nigeria.
My point is that there have been skeptics and people saying it's a bubble or too volatile for nearly all of Bitcoin's history. But if you bought BTC and held it--at any high or low, for any significant amount of time--you made a lot of money (either realized or unrealized, that doesn't matter).
This isn't entirely true. If you bought Bitcoin anywhere near the height of the late-2013 mania (which is of course a lot of people, since that's why the price was so high), you lost half your value within a month or two and then had to hold until 2017 before you started to break even. You lost 70% if you held for a year and a half and gave up.
The market from June to November 2011 was even more disastrous, falling from $29 to almost $2 and not recovering until February 2013.
These are obviously cherry-picked dates, and you'd clearly have made a profit eventually if you kept holding, but it's still very possible to hold Bitcoin for years and lose money.
Ponzi schemes are similarly profitable but for some reason they are frowned upon.
Even so, I don't believe that it's a Ponzi scheme. Maybe someone controlling Mt Gox accounts orchestrated the 2013-2014 bubble. Mt Gox had huge market share back then. But now, I doubt that any player dominates enough to run a Ponzi scheme.
It's got a pretty short, volatile history to be deciding that.
Seriously! A digital key is NOT easier to secure than a physical one. If anything, it's harder.
Gold only becomes hard to store if we're talking about huge quantities
Or etch the key on a piece of metal, seal it in plastic, and throw THAT in the ground, if your are that way inclined!
I don't see the difficulty.
The advantage of bitcoin is you can encrypt it and store it offline in as many locations as you want.
no reason it stores value outside of the fact that we all agree that it does, and we all accept it for curreny. Bitcoin is at that point. It's turning into digital gold.
I agree with the original commenter. Looking at Bitcoin as a currency with terrible UX kept me from investing for the past years. Now it's going past inflection point - it's a store of value that will be acceptable everywhere soon.
https://www.statista.com/statistics/274684/global-demand-for...
Gold has been valued from time immemorial for its unique aesthetic and practical properties entirely aside from its value as a currency.
That's clearly distinct from, say, paper dollars, which indeed have value only because we agree that they do (and because they're backed by the robust efforts of a government, of course).
As an example of the difference, look at oil or bananas. Demand for those is significant, but because storage is inconvenient, holdings are low compared with total commodity flow.
Transactions are necessary but insufficient for something to become a store of value. For example, steel is sold in great amount, but it is not a store of value.
For example, let's suppose that I made a deal with Porche to buy the first car off their assembly line each year. I take it and store it away as an investment. Is there an existing reserve of 2018 Porches? No, I have the first one. Does anybody else do this? Doesn't matter. It's still a good store of value as long as people keep wanting 2018 Porches.
People could use steel as a store of value; it's just an inconvenient commodity to deal with because the value per gram is so low. You need to store a lot of it. But rarer metals will do fine.
Actually more than 10^6: http://bitcoin.zorinaq.com/price/
Just because a physical thing changes state doesn't mean it weights more.
It does to your left and your right. If I have a piece of paper with a one on it, and another one with a zero on it, and I exchange them. Do they weigh differently?
Its a bit surprising that I'm being downvoted on a tech forum for asserting that information doesn't have weight.
You are being downvoted for espousing an erroneous definition of the word "physical".
If you printed 50 new blank ledgers, they wouldn't have value because they don't have the history and our mutual agreement.
Bitcoin is the worldwide ledger (WWL).
POS coins on the other hand, are a different animal. If you own a POS coin, you get paid transaction fees for helping verify transactions. Thus, POS coins make fundamental sense, can be valued accordingly and create a reason to actually own the coin - and should, therefore, prove a better store of value than POW coins. Of course, POS is somewhat theoretical, but if Ethereum can pull it off, it should supersede bitcoin. Now, ELI5 why I am wrong, please.
http://www.truthcoin.info/blog/pow-cheapest/
Definitely not ELI5 material though.
The incentives of a pow coin align with the users, not the owners, so there's no reason any user would prefer to use another incentive structure.
> There is a reason, independent of speculation, to own a POS coin.
It is not trustless. You are reliant upon the owners not re-writing the consensus rules to your detriment.
For example, if you own the most of a particular POW coin, it is not in your interest to corrupt the ledger because you will suffer the loss of faith in the currency worse than anyone.
Biggest owner wins. That's why it is not trustless. The only long-term game-theory outcome for the system is a monopoly. Owners own the miners, and dictate the rules to the users. Otherwise known as our world financial system.
> In the POW case, what underpins the value of the coin?
The network effect of the decentralization, i.e. the nodes. It is the nodes that are peers in the peer-to-peer cash of bitcoin. It is they who hold the blockchain, validate transactions, and validate blocks. Because there are so many of them (185,000 and counting) unless you can effectively convince all of those nodes to adopt consensus changes, the existing consensus rules apply.
PoW alone doesn't make something valuable. Its successful implementation does.
Biggest owner can steal smallest owners money because biggest owner controls the consensus rules. So no, the incentives aren't aligned.
> what is the force
The only one that matters : Supply and demand, and no ability to cheat the system. The only thing that is happening is more and more people are recognizing it.
This entire episode over the past year has demonstrated this again and again. Miners talk a big game, but in the end, they do as they're told.
Bitcoin is perhaps the most commonly stolen store of value the world has ever seen. It has its advantages, but being difficult to steal (or lose permanently!) is not one of them.
That's pretty much the definition of a pump-and-dump scheme.
As a non-physical thing, it's a good place to go when you're not sure about where to put your money. That used to be the role of the dollar, but this is a good alternative that has cheaper forex fees.
I think the long-term value of bitcoin will not be buying groceries, but storing money while you wait for your the storm your grocery stores currency is in to subside. Probably not relevant to Americans right now, but I'm sure some people in Latin America can see the value.