There's cheap liquidity (ho ho ho said the FED and the ECB), there are institutions (pension funds) that are starting to buy in, and in comparison, the dot-com bubble (which was mainly a US led bubble, not global) went to $5.7tn to $1.7tn. Gold is worth $8tn globally. Why couldn't Bitcoin get to part of that level, e.g. $2tn?
It sure looks like a bubble, and it probably is, but it could literally be the largest bubble in our lives -- unlike one stock in the market, this is a global phenomenon + you only have a few currencies that matter.
To the extent that there is an analogous concept it's their utility as a means of exchange. Which outside of drugs and hard drive ransoms is minuscule at best.
They're different, which is why I used the term arguable--there's no clear reason afaik that bitcoin should be so valued relative to others, but I could be wrong.
- if 1 BTC were $100 trillion, then it's clearly passed the fundamentals of "being a unit of exchange between commercial entities", since it would be way more than what any form of exchange would ever require.
The truth behind the pedantic answer:
- if it's a store of value, then the "fundamental" value is the amount of fiat that's gone into the system so far. If all the exchanges have roughly $100 in USD deposits, the base value of their bitcoin deposits will be at least $100, roughly.
- If it's as a means of transactions, then the fundamentals are linked to how much transaction volume is going on. For example the flow of USD into BTC and vice-versa. BTC <-> BTC exchanges in that universe probably help to define things as well, as it would be used as an alternative to USD.
The dollars don't come from nowhere, so there's at least some base numbers you can think about. Thinking of it as "USD going into the ecosystem" and "USD going out" is a good proxy for now I think. Obviously very fluid, though.
Either way, someone ends up with cash CNY and the other person ends up with electronic USD or EUR or whatever.
The immediate limiting factor is the vulnerability of any in-person transaction to traditional law enforcement mechanisms, and the eventual limiting factor is that the exchange rate is going to be impacted by the demand for cash CNY. Eventually nobody is going to want to sell you USD (or whatever) for your cash-in-a-bag CNY, or will only do it at exorbitant rates.
You don’t have to make it totally safe, just safer compared to other methods of evading control.
Before you can move it out of the country, you have to get it out of the bank, and your bank will refuse to do that with currency control measures in effect.
It's the equivalent of you selling your BTC holdings at market rate and buying the car with USD.
The fact that “experienced” Bitcoin speculators are getting nervous is a sign the bubble is about to pop. Tether volumes are hockey-sticking up as a result. There has been enough technical analysis to show that USDT volume drives BTC price and not the other way around. USDT volume is hockey-sticking over the last few weeks. Feels like a Ponzi scheme and the whales are cashing out.
At some point there will be a correction. This velocity can't be maintained forever. But this is also a technology that heavily relies on going viral to become functional (payments/contracts) - and based on real world interactions I think crypto is heading towards an adoption curve that justifies its price.
Maybe other technologies will, but Bitcoin cannot.
1. http://www.comp.nus.edu.sg/~prateeks/papers/Bitcoin-scaling....
https://www.amazon.co.uk/This-Time-Different-Centuries-Finan...
-- said a million articles in 2000
If you buy in, buy in during a consolidation phase, when you see the price is stable. Ethereum had a huge run up, yet then consolidated for around 6+ months around $300. I would say that is healthy. Now it's heading higher. "Fundamentals" aside, of course.
edit: Oh you said "hope it is not" - my mistake.
Also, rich Saudis are scared shitless about losing their wealth when political winds change. They put their money into crypto and it's much, much harder to take it from them, provided they own the private key. This is the best mechanism of wealth storage yet created, provided the value holds, which as more around the globe believe in, it becomes more likely. Bitcoin could be digital gold, but we shall see.
That's not exactly trivial - how do you store a private key in such a way that it's safe, accessible to you and only you, cannot be destroyed by your enemies, and can be passed on to your heirs upon your death?
[1] yes, there's such a thing: https://www.goodreads.com/book/show/2211931.The_Bin_Ladens
In contrast, if you buy bitcoins, when you flee the country you can bring your wealth with a memorized 24-word code or a slip of hidden paper, and people in other places will accept your Bitcoin.
If you have enough trusted friends, that should work.
His dad runs quite a large traditional investment fund and knows of people in his network working at pension funds that are looking at putting money into Bitcoin / Ethereum and others. The family has done private equity deals together with some of these funds (mostly raising debt financing from them).
I'm not an extreme crypto bull, but I honestly think it's still early. But there will be massive volatility along the way.
Note: not investment advice, obviously. Just my opinion.
The problem with crypto-_currency_ is that it's not a productive asset. A share of a business pays dividends over time and thus has intrinsic value (and _some_ speculative value), while a currency does not. A currency transaction is a zero-sum game, which is good because it minimizes friction.
Buying cryptocurrency with the expectation of increases isn't investment, it's _speculation_.
Pension funds generally allocate up to 5% of their portfolio to alternatives, which could be smaller funds investing in art, watches, music royalty rights, farmland, wine, and the likes. This also includes crypto.
If you're an investment manager, it isn't necessarily crazy to allocate 0.2 or 0.5% of your portfolio to crypto and try to capture some of those gains.
Even without perfect timing of the market, it's a pretty easy decision for a portfolio manager to look at this and say: "While, like any other asset, past performance isn't an indicator of future performance, given the price history and increasing trading volume over time, the risk/reward balance skews heavily in favor of putting at least some tiny bit of money into crypto for all but the most risk-averse."
The analysis presented is a bit disingenuous. If you put money into every thing that could pop 400x, you’d have no money. Pension funds in particular need to be conservative and even if they’re doing “risky” things like venture capital for example, they would want late stage funds — lower returns, lower risk.
Everyone is talking about what if scenarios where huge offshore money or sovereign wealth or whatever comes into Bitcoin YUGE. Well, ok, do you think that money is just parked somewhere or is actually invested somewhere in a productive business?
Most dollars which aren't spent on consumption are converted into equity in productive businesses. In this case, dollars are merely the unit of account. You aren't invested in dollars, you are invested in businesses that produce the things that people need and those investments are measured in dollars.
Like real-estate?
To draw a parallel to the stock market is not appropriate, but those who bought into MSFT or AMZN even during the peak of the dot com bubble have nothing to regret today.
Sometimes its easier to describe this in terms of words, than numbers and symbols.
In the end, if it goes another 30x from where we're at today, and then has an 80% correction, you'll still be up 6x. It only makes sense to exit if you think such a correction is imminent, or you believe the entire space is going to zero.
Drawing comparisons between gold and a fiat currency (BTC) is completely confusing.
Gold is a tangible commodity. I’ve been in the cryptoasset space for a while and I’m still not exactly sure how to cleanly classify it.
I can relate. If I'd done the exact paired trades i did this month (only between btc, bch, eth, and usd), only at different times than i did, i would have doubled my money yet another time, for a life-changing sum.
Instead I've been sleeping well every night for a month on a healthy exit. Even with hindsight, I don't have any regrets.
I didn't get into the space to get rich and sweat at night, I got in to socialize monetary control. Now crypto doesn't even want to be money. Once this bubble cools off I can start dreaming again.
They are doing it willingly to get rich.
But what about all the non-fiat purposes of crypto currency? It seems that is what’s currently getting lost in the conversation.
For example, I simply want a way to accept electronic payments from people without dealing with middle men.
I want merchants and the general public to become aware of the inherent value in some blockchain by itself as a way for us all to spend “money” and get “paid” in a peer-to-peer manner.
I hope the people who are buying into this bubble come to see this. But I’m afraid if they do get burned, they will have missed the whole point.
Personally, I think many are extremely overbought (BTC, LTC, ETH, etc) but can't help but feel that those with real utility and industry value are (relatively) undervalued.
Buy: 300 LTC @ 241 = $72,300 + 1.49% fee ($1077) = $73,377 cost basis
Sell: 300 LTC @ 251 = $75,300 - 1.49% fee ($1122) = $74,178 gross
$74,178 - $73,377 = $801 net
and that's before accounting for taxes. What am I missing here?
Even if you don’t plan to trade, it might be a good idea to buy/sell through GDAX rather than Coinbase to avoid the fees.
I've just been told that hodl means "hold on for dear life".
LOL
Bitcoin Lightning currently works on testnet ... give it a few months and those problems will be solved. The price is exploding in anticipation of events like this.
https://play.google.com/store/apps/details?id=fr.acinq.eclai...
I was just like wow, this is going to be pulling in a lot of people that have no idea what they are doing. Everything seems irrational. Who knows though.
The exchanges have an export history feature, which I'm planning to put into a spreadsheet to calculate profit. That's gonna be a fun weekend project.
The entire thing is absolutely stupid, and isn't going to last forever. People are way too bullish on it. People who have no business investing in it are taking on debt to do so, with no clear exit strategy other than "the moon." A lot of people who don't have any money are going to get absolutely toasted when the pendulum swings the other way. They're in it to get rich. They have no idea what blockchains are. They just think they're buying magic internet money people get rich from.
To put a little perspective on how ridiculous this all is: Last night after Coinbase came back from maintenance, there was the (expected) sell-off, so I figured I'd make a quick buck and bought 300 LTC for about $241 each, then sold it a few minutes later for $251 after the instant rebound and went to bed with a nice $3k profit. I woke up this morning and was astonished to see that LTC was about $380. This was in the course of about 5 hours. Had I not sold it last night, I would have made almost $40k. I'm a little annoyed about that, but again: this is a stupid, irrational bubble that makes absolutely no sense. It's entirely speculative.
I think crypto and blockchain has a future, but it has to solve a few problems first (transaction fees/time and anonymity). None of the big three currencies do that well enough yet. This bubble is going to pop soon and I'm worried that a lot of people are going to get impacted badly.