bitcoin has value because people perceive it to have value.
Basically, it went from like 10 people using it, where it was functionally worthless, to like 10 million people using it, where it’s value per bitcoin increased by one million fold.
net money in = net money out, the early investors are just reaping the rewards of other people investing their money into it (and then losing it)
bitcoin has value because people perceive it to have value.
Bitcoin has value because they think other people perceive it to have value. Same with dollars, euros, pesos, etc. It’s not like art where the value is in the eye of the beholder. It’s something where you have to be confident that other people will perceive it to have value too, so when you want to exchange it, there will be other people who will accept it.
Dollars, euros, pesos, etc. have value because they’re accepted in thousands of stores, and because you need them to pay your taxes. Even if you, personally, don’t think you’ll need to hold onto any pesos to pay your own taxes, you know that there are likely to be millions of other people who will need them for their taxes.
With bitcoin, there are essentially no places you can use it to pay taxes, except maybe El Salvador (I don’t know if they’re still doing that). You can’t use it to pay in many stores. Just about the only thing that keeps creating demand for bitcoin is that there aren’t many other ways to pay off ransomware demands. Unlike traditional currencies, Bitcoin really relies on the belief that someone else will continue to believe that Bitcoin is still valuable.
Will the bubble eventually burst? I think so. I just think it could stagger on for a few more decades before the belief it has value eventually collapses.
you’re thinking about it way too traditionally, bitcoin isn’t used to trade goods and services on the free market (Aside from illegal goods and services maybe)
It’s traditionally used as a “anonymous” or “non legal identity based” payment method, let’s say i wanted to wire you 20000 USD because you gave me some access to some highly illegal leaked government documents from the country of “oops all government corruption”
It’d be stupid for me to pay you in any form of traceable currency, bitcoin may be traceable, but unless you get access to the private keys, isn’t particularly meaningful, and even if you did, it’s highly unregulated, and there’s no clear path tracing when it comes to the actual money, like with USD for example, which is entirely serialized.
Certain VPN providers will actually accept bitcoin as payment, as it’s more secure than legally identifying payment information.
A lot of dark web services will also use crypto, again for security/anonymity.
I think given how big bitcoin currently is, the bubble may burst, but it will always exist, and it will always be around, for the trading of more illicit goods, or at the very least, more anonymous transfers of money.
Sure, occasionally Bitcoin is useful for paying for illegal things, or for paying ransom after a ransomware attack. The thing is, that that basically makes it a payment gateway. You convert your dollars into bitcoin and make the payment. There’s no reason to hold onto bitcoin. You get it and then you use it. For that purpose, it doesn’t matter if the exchange rate is $100k per bitcoin, or $1 per 100 k bitcoins. Since you’re spending it as soon as you get it, you don’t care.
The dollar value of bitcoin only matters to people who are holding it as some kind of “investment”. If those people become convinced that the next sucker is about to cash out, they might cash out before that sucker, and the price of bitcoin could plunge to zero.
Bitcoin might always exist, but it might always exist like old Italian Lira coins. They’re cool collectors items, but have almost no real value anymore.
Will the bubble eventually burst? I think so. I just think it could stagger on for a few more decades before the belief it has value eventually collapses.
I don’t think the belief in its value is going to collapse on its own. It is already accepted to have value by enough people, to sustain that belief. (A bit like a religion, if you think about it)
The downfall of bitcoin will lie in it’s technological design. The whole premise of the underlying blockchain technology relies heavily on Moore’s Law to keep working indefinitely. The complexity of the cryptographic calculations that have to be solved for each BTC transaction increases with each transaction, so it relies on exponential growth of computing power, or rather energy efficency of computing (which is a bit differen than Moore’s Law), to remain useful.
The more widely adopted the bitcoin becomes and the more it is traded, the greater the challenge to keep it operational. That is a very impractical limitation for it to be useful as an everyday currency. If, at some point, the time and or cost-efficiency of the crypto-calculations cannot keep up with the number of BTC transactions anymore, the operational cost (or inconvenience) will limit its use. And at that point, I think, the speculation bubble will collapse eventually.
Now when that is going to happen, I cannot possibly know. I’d invest in leverage products against it, if I did.
Maybe progress in chip manufacturing will still continue to exceed my expectations. Maybe a breakthrough in quantum computing will enable the BTC to become a universally accepted currency or maybe it will break its underlying cryptography and kill it dead.
Whatvever it may be, but my prediction is, that if the bitcoin is to collapse, it will probably have a reason rooted in technology.
That’s not how the complexity of the mining works. It doesn’t increase with every block. It scales depending on how many miners there are (essentially). So if many people stopped mining, the complexity required would decrease.
I don’t think the belief in its value is going to collapse on its own. It is already accepted to have value by enough people, to sustain that belief.
These things change. People once believed that diamonds were a valuable rock and essential for proposing marriage, but now people are starting to think that’s BS. There was massive social pressure, plus expensive propaganda from deBeers trying to keep people buying diamonds. But, people woke up.
So much of crypto’s promise is that there will always be another sucker who will buy your bitcoin for more than you paid for it. But, if actual real currencies that people pay taxes with can collapse, crypto could collapse a whole lot faster than that.
Because actual money has sources and sinks. If you look at MMT for example, they talk about government spending not as being a way for the government to distribute money, but actually as a way the government creates money. When the government taxes money, it doesn’t just collect it, it destroys it.
So, based on how much a government is spending and taxing, it’s adjusting the supply of money in the economy. The fact that government spending is roughly the same year-to-year, and that taxes are roughly the same year-to-year gives a stability and flow to actual money. There’s a constant demand for it because every year the US government requires that people and businesses submit $4.5 trillion in taxes. There’s a constant supply because the US government spends more than $6 trillion.
Bitcoin doesn’t have those sources and sinks. There’s no constant demand for bitcoin every year to pay taxes. There’s no constant supply as a government spends bitcoin into the economy. The “realness” of money is intimately tied to taxes and government spending.
Sure, in the past people had gold for the same purpose. The difference is that gold has at least some intrinsic value. It can be made into beautiful jewelry. It has industrial uses. Bitcoin has no intrinsic value, so if people lose confidence it could drop to 0.
bitcoin has value because people perceive it to have value.
Basically, it went from like 10 people using it, where it was functionally worthless, to like 10 million people using it, where it’s value per bitcoin increased by one million fold.
net money in = net money out, the early investors are just reaping the rewards of other people investing their money into it (and then losing it)
Bitcoin has value because they think other people perceive it to have value. Same with dollars, euros, pesos, etc. It’s not like art where the value is in the eye of the beholder. It’s something where you have to be confident that other people will perceive it to have value too, so when you want to exchange it, there will be other people who will accept it.
Dollars, euros, pesos, etc. have value because they’re accepted in thousands of stores, and because you need them to pay your taxes. Even if you, personally, don’t think you’ll need to hold onto any pesos to pay your own taxes, you know that there are likely to be millions of other people who will need them for their taxes.
With bitcoin, there are essentially no places you can use it to pay taxes, except maybe El Salvador (I don’t know if they’re still doing that). You can’t use it to pay in many stores. Just about the only thing that keeps creating demand for bitcoin is that there aren’t many other ways to pay off ransomware demands. Unlike traditional currencies, Bitcoin really relies on the belief that someone else will continue to believe that Bitcoin is still valuable.
Will the bubble eventually burst? I think so. I just think it could stagger on for a few more decades before the belief it has value eventually collapses.
you’re thinking about it way too traditionally, bitcoin isn’t used to trade goods and services on the free market (Aside from illegal goods and services maybe)
It’s traditionally used as a “anonymous” or “non legal identity based” payment method, let’s say i wanted to wire you 20000 USD because you gave me some access to some highly illegal leaked government documents from the country of “oops all government corruption”
It’d be stupid for me to pay you in any form of traceable currency, bitcoin may be traceable, but unless you get access to the private keys, isn’t particularly meaningful, and even if you did, it’s highly unregulated, and there’s no clear path tracing when it comes to the actual money, like with USD for example, which is entirely serialized.
Certain VPN providers will actually accept bitcoin as payment, as it’s more secure than legally identifying payment information.
A lot of dark web services will also use crypto, again for security/anonymity.
I think given how big bitcoin currently is, the bubble may burst, but it will always exist, and it will always be around, for the trading of more illicit goods, or at the very least, more anonymous transfers of money.
Sure, occasionally Bitcoin is useful for paying for illegal things, or for paying ransom after a ransomware attack. The thing is, that that basically makes it a payment gateway. You convert your dollars into bitcoin and make the payment. There’s no reason to hold onto bitcoin. You get it and then you use it. For that purpose, it doesn’t matter if the exchange rate is $100k per bitcoin, or $1 per 100 k bitcoins. Since you’re spending it as soon as you get it, you don’t care.
The dollar value of bitcoin only matters to people who are holding it as some kind of “investment”. If those people become convinced that the next sucker is about to cash out, they might cash out before that sucker, and the price of bitcoin could plunge to zero.
Bitcoin might always exist, but it might always exist like old Italian Lira coins. They’re cool collectors items, but have almost no real value anymore.
I don’t think the belief in its value is going to collapse on its own. It is already accepted to have value by enough people, to sustain that belief. (A bit like a religion, if you think about it)
The downfall of bitcoin will lie in it’s technological design. The whole premise of the underlying blockchain technology relies heavily on Moore’s Law to keep working indefinitely. The complexity of the cryptographic calculations that have to be solved for each BTC transaction increases with each transaction, so it relies on exponential growth of computing power, or rather energy efficency of computing (which is a bit differen than Moore’s Law), to remain useful. The more widely adopted the bitcoin becomes and the more it is traded, the greater the challenge to keep it operational. That is a very impractical limitation for it to be useful as an everyday currency. If, at some point, the time and or cost-efficiency of the crypto-calculations cannot keep up with the number of BTC transactions anymore, the operational cost (or inconvenience) will limit its use. And at that point, I think, the speculation bubble will collapse eventually.
Now when that is going to happen, I cannot possibly know. I’d invest in leverage products against it, if I did.
Maybe progress in chip manufacturing will still continue to exceed my expectations. Maybe a breakthrough in quantum computing will enable the BTC to become a universally accepted currency or maybe it will break its underlying cryptography and kill it dead.
Whatvever it may be, but my prediction is, that if the bitcoin is to collapse, it will probably have a reason rooted in technology.
That’s not how the complexity of the mining works. It doesn’t increase with every block. It scales depending on how many miners there are (essentially). So if many people stopped mining, the complexity required would decrease.
These things change. People once believed that diamonds were a valuable rock and essential for proposing marriage, but now people are starting to think that’s BS. There was massive social pressure, plus expensive propaganda from deBeers trying to keep people buying diamonds. But, people woke up.
So much of crypto’s promise is that there will always be another sucker who will buy your bitcoin for more than you paid for it. But, if actual real currencies that people pay taxes with can collapse, crypto could collapse a whole lot faster than that.
I don’t know why you’re connecting paying taxes with a currency with it being legitimate. I don’t think those things are related
Because actual money has sources and sinks. If you look at MMT for example, they talk about government spending not as being a way for the government to distribute money, but actually as a way the government creates money. When the government taxes money, it doesn’t just collect it, it destroys it.
So, based on how much a government is spending and taxing, it’s adjusting the supply of money in the economy. The fact that government spending is roughly the same year-to-year, and that taxes are roughly the same year-to-year gives a stability and flow to actual money. There’s a constant demand for it because every year the US government requires that people and businesses submit $4.5 trillion in taxes. There’s a constant supply because the US government spends more than $6 trillion.
Bitcoin doesn’t have those sources and sinks. There’s no constant demand for bitcoin every year to pay taxes. There’s no constant supply as a government spends bitcoin into the economy. The “realness” of money is intimately tied to taxes and government spending.
The fact that Bitcoin works differently to fiat is what gives it value to some people. Being different is the point.
Sure, in the past people had gold for the same purpose. The difference is that gold has at least some intrinsic value. It can be made into beautiful jewelry. It has industrial uses. Bitcoin has no intrinsic value, so if people lose confidence it could drop to 0.