I'm with you there -- I just don't see the actual value as being worth that much. Stocks, bonds, commodities, government-backed currencies, they all have clear value other than their speculative value assigned by the current craze of the time. Bitcoin of course has some value, but $6,000 for one unit is certainly inflated. And what's worse, its value fluctuations make it unlikely to be used for what it was designed for: paying for things.

At least with a stock you are a part owner of the company, and you get the rights inherent with that.

Bitcoin has been through at least 3-4 major "run ups" already. Those who do not look at the log chart think that "this time it's different" and Bitcoin will surely die for good. Later it'll crash from $250K to $50K and then it will certainly be the end.

2011: $1->$30->$3.

2012: $5->$15->$10.

2013: $10->$270->$80.

2013-14: $100->$1100->$250.

2016-2018: $500->$20000->$6000 (so far).

Consider how much money had to enter the market for the price to reach $1000.

Consider how much money had to enter the market for the price to reach $20,000.

Now consider how much money will have to enter the market, after everyday “normal” people from outside of tech have lost hundreds or thousands, for the price to reach $250,000.

The price is the last price paid for the coin. So by definition, if nobody sold any coin, it would only take 250000-6000 dollars for the price to reach 250k.

Its not so much about how much money enters the market, but supply/demand for the underlying asset.

Just look at the valuation of the dot-com bubble, which was mostly US driven. The market went up to about $10tn (in todays dollars).

We saw $800bn for crypto at the height, and it's down to about $200bn at the moment.

Your data shows that it's reasonably possible for it to spike again.

However the sort of mockery of people who do think that it's different this time (and I see it all the time, it's not just you) is sort of funny. As if people who don't have faith in Bitcoin are somehow the naive ones. As if it's established wisdom by now, proven time and again through the ages, that Bitcoin always bounces back and outdoes itself by a factor of 10.

Again, it's quite possible that it will. I'll likely buy in when I get around to it. But this attitude is just a little silly.

"Bitcoin always bounces back" is also silly. It could, or it could not.

Yep, that was a subset of my point. Maybe I wasn't totally clear.

That looks like skillful manipulation to me. There is an important difference with the most recent bubble -- now bitcoin is a household name. Where is the next pool of gamblers coming from?

Greater fool theory works great until you run out of fools! With the amount of attention that bitcoin got, I feel we are close to tapping into the last of the fools.

Institutional investors via Bitcoin futures ETFs[0].

It will likely result in a lot of money flowing into the market via funds and investment houses where investors seek to diversify their investments.

That will probably bring the cryptocurrency market back up to $20K and above. It probably won't happen until 2019 or 2020, though. The SEC is still on the fence about it, but I see it as an eventual inevitability.

[0]: https://www.coindesk.com/sec-bitcoin-futures-etf/

Good grief, I hope that does not happen. I think any professional financial services people who blatantly speculate with clients' funds should be on the hook for criminal penalties. It's one thing for Joe Blow to play the speculation game with his own money, it's entirely different for a professional to do it with everyone else's.

Don't worry, the SEC has now declined to approve two separate attempts at a Bitcoin-based ETF, both times citing the extensive manipulation of Bitcoin markets as one of the reasons. I don't see them changing their attitude given that rampant market manipulation is the main thing keeping Bitcoin alive at all right now.

Trouble is Joe Blow often wants it. You say you want to invest in this thingy that seems to go up 100% a year or nice sensible bonds and quite a few will want the thingy.

Bitcoin does not maintain the higher value due to "more gamblers", it only has value due to "more holders". Gamblers can come and go and affect only the volatility. But people who stay and hold for years and sell only a small fraction to pay the bills.

Sidenote: that last statement is often confused with "rent seeking", which is not the case at all with Bitcoin. Because it's virtually impossible to make more Bitcoin with your Bitcoin. There's no any sort of business that can give you a better return at the lower risk. So you don't live on the "rent", instead you live off "wasting your savings", although if you were patient enough for them to appreciate a lot and you spend <10% a year, you have a decent chance to keep the total value growing and not shrinking as time goes by. But you need to be frugal.

Past performance is not indicative of future results.

Then why do people say "invest in the stock market for the long run by buying an index fund?"

> Then why do people say "invest in the stock market for the long run by buying an index fund?"

Because the American economy has historically grown. Buying an index of Austrian stocks on the eve of WWI would have been about as effective as buying cryptocurrencies.

Considering that US is getting into debt on an accelerated schedule and runs wars all over the world non-stop since WW2, and has biggest military budget, and otherwise resembles the roman empire at its peak, do you think that musical chairs game will never end?

IOW, taking past performance as indicative of future returns.

Because of minimizing risk, and minimizing transaction fees.

If you buy 100 stocks and 10 of them go to 0 you are out 10%. However, if the other 90 stocks are up more than 15% then you have gained a little money.

But, if you buy 100 different stocks by hand then you pay 100 different transaction fees and have to keep track of them independently for tax etc.

I'm pretty sure you still need to pay taxes on the dividends even if you're reinvesting them.

Sorry, your right.

There are tax advantages, but it's more complex than simply not paying short term capital gains on dividends.

If it's an IRA, there's no tax unless withdrawing.

Because over time, stocks tend to increase in value, because you are investing in a company that is producing something of value. You have a reason to believe that stocks will increase in value over a long period of time, other than just historical information.

Because the fees are the lowest and it's been proven over and over again that the number 1 headwind against long-term equity growth is the fee structure.

Index funds require no special knowledge to build...just buy the S&P100 stocks in equal amounts and boom, so the fees for such a fund can be super low.

Amazingly only one of the three replies you got so far understood the point of your comparison.

Past performance doesn't guarantee similar future results.

If you think it's not indicative, then you're rejecting induction, the cornerstone of learning.

And it'll keep going to quadrillions of dollars, right? Obviously there's a limit somewhere. It seems reasonable to think that $20k is already pushing it.

The limit is somewhere near M2 of planet Earth. Thats quite a high number! something like $10M USD/coin. Would be nice.

due to the mining aspect of bitcoin, unlike a stock, it does a a sort of floor, but that too can eventually fail

How does mining set a floor?

let's assume it costs $4k to mine a bitcoin. If the price were to fall to $10 or some extreme low value, the miners would see no reason to mine. Therefore all activity would stop. But in order for existing bitcoin holders and merchants to use bitcoin, they need transactions confirmed. So this will lead to the price rising to an equilibrium where the miners will mine at a loss and merchants and hodlers will sell at a loss which is optimal for both than if the price is too low.

cost to hash, in electricity. If the cost of mining is greater than the price of the coin, the miners turn off their hashboards. Some like to think of this as a floor, however if everyone turned off their miners the system would fail to produce blocks. The network difficulty will take 2 weeks to adjust, and the miners will start mining again if it is profitable.

If the difficulty adjusts down to make mining profitable, that's because the miner is earning more coins, but each coin is still worth less than before.

Not necessarily. While there is a positive correlation to hashrate and price, the market sets the value of the coin.

Just because miners are making more or less coins does not make them worth less or more. Miners choose when and if they release the coins to the market.

It doesn't, it's the other way around. Price sets a floor on hash rate.