Why Bitcoin is guaranteed to be a crappy investment(greyenlightenment.com)
greyenlightenment.com
Why Bitcoin is guaranteed to be a crappy investment
http://greyenlightenment.com/these-people-are-not-that-smart/
25 comments
Have you looked into the so-called "DeFi" space? Compound, MakerDAO, Synthetix, and others have some very interesting and surprising product offerings with incredible potential.
Celo and others are working on Libra alternatives.
Arweave has probably the most compelling decentralized but economically thoughtful web-friendly storage system I've seen — and it's launched, live, now.
They certainly "do" things, although they're in early days. And none of them are Bitcoin.
Celo and others are working on Libra alternatives.
Arweave has probably the most compelling decentralized but economically thoughtful web-friendly storage system I've seen — and it's launched, live, now.
They certainly "do" things, although they're in early days. And none of them are Bitcoin.
Arweave looks promising at first, but by reading their yellow paper [1], we realize they want the storage to be permanent and immutable. It seems interesting for archives that are not gigantic in size, but for websites...
[1] https://www.arweave.org/files/arweave-yellowpaper.pdf
[1] https://www.arweave.org/files/arweave-yellowpaper.pdf
Sounds like you got caught up in Blockchain hype, not Bitcoin hype.
Read up the Deutsche bank latest report and you will feel better if you didn't sell
Link to the report: https://www.dbresearch.com/PROD/RPS_EN-PROD/PROD000000000050...
Ah Cryptocurrencies. Like trading in bits of paper that say 'IOU some paperclips'.
I have a different theory. There will be a capped total of 21m BTC. In say 10 years, there will be a number of BTC "users". By "users" I mean people who in their ordinary business use BTC for value exchange. To facilitate that use, we need to have a certain freely available amount of BTC per user at any time, say $1000 in USD equivalent. Call this "float"
Then, assuming no BTC lost or locked in long term storage (I suspect these cause upward corrections of 5-10x from below estimates), the price of BTC will be btc_px ~= float * users / 21m.
I do not know how to estimate "float". For users there are two scenarios:
1. Low adoption/high government restrictions, BTC is used for mostly illicit transactions: say 50,000 users worldwide
2. High adoption, legal use: perhaps 50m users worldwide.
Assuming my float = 1000 USD we get btc_px ~$20 for scenario 1 and ~$20,000 for scenario 2. I may be off by an order of magnitude in the "float" assumption. Would love to hear your thoughts.
Then, assuming no BTC lost or locked in long term storage (I suspect these cause upward corrections of 5-10x from below estimates), the price of BTC will be btc_px ~= float * users / 21m.
I do not know how to estimate "float". For users there are two scenarios:
1. Low adoption/high government restrictions, BTC is used for mostly illicit transactions: say 50,000 users worldwide
2. High adoption, legal use: perhaps 50m users worldwide.
Assuming my float = 1000 USD we get btc_px ~$20 for scenario 1 and ~$20,000 for scenario 2. I may be off by an order of magnitude in the "float" assumption. Would love to hear your thoughts.
What do you imagine would be the incentive for users to use BTC, rather than later-generation alternatives?
What do you imagine would be the incentive for users to use later-generation alternatives, rather than BTC?
The benefits of alternative cryptocurrencies are faster, cheaper, and potentially anonymous transactions. Bitcoin's use of PoW and limited supply means that transaction fees will always be necessary to provide miners with rewards once all the coins have been mined. In my opinion that is a tradeoff that will cause most people to use BTC as a digital store of value rather than a form of payment. I think that if a cryptocurrency ever becomes widely used for payments, it will be one that uses Proof of Stake/an inflationary supply and can therefore avoid relying on transaction fees.
something that is not limited perhaps?
there is growth everywhere, every day millions of people create new value, if limited bitcoin were to represent it then it would have to rise in value - but that makes it a bad deal to spend the bitcoin if you know tomorrow will rise in value
there is growth everywhere, every day millions of people create new value, if limited bitcoin were to represent it then it would have to rise in value - but that makes it a bad deal to spend the bitcoin if you know tomorrow will rise in value
amusingly, the long term the availability of bitcoin will be zero.
every day someone loses their passcode, backups are lost, people die and forget to share the information etc ... eventually, over a long enough time horizon, everyone will make a mistake or be struck down by a series of unfortunate events, thus long term the number of bitcoins available to a transaction will be zero, all will be locked away and lost forever
(this is a joke, but worth considering hypotetically)
every day someone loses their passcode, backups are lost, people die and forget to share the information etc ... eventually, over a long enough time horizon, everyone will make a mistake or be struck down by a series of unfortunate events, thus long term the number of bitcoins available to a transaction will be zero, all will be locked away and lost forever
(this is a joke, but worth considering hypotetically)
GPT2-bot should autogenerate an essay like this once a month... it would be guaranteed to get attention each time.
The article is generally factually correct. Bitcoin is a commodity; in some ways investing in Bitcoin is no different from investing in Euros (if you live in the US).
I think what wiggle room there is is in this statement:
> These astronomical early Bitcoin gains can be treated as an anomaly arising from a price discovery process that will never be repeated.
I think there have been numerous price discovery phases in the Bitcoin price history, and that's reflective of the wild ramp-ups and following crashes, but it's by no means certain that we've passed the last of the price discovery phases. Looking only at performance over a cherry-picked timeframe is not a great way to evaluate the overall quality of a security.
I think what wiggle room there is is in this statement:
> These astronomical early Bitcoin gains can be treated as an anomaly arising from a price discovery process that will never be repeated.
I think there have been numerous price discovery phases in the Bitcoin price history, and that's reflective of the wild ramp-ups and following crashes, but it's by no means certain that we've passed the last of the price discovery phases. Looking only at performance over a cherry-picked timeframe is not a great way to evaluate the overall quality of a security.
Bitcoin by design is not meant to be an investment. Its a bank account, that cannot be seized. It cannot be inflated. That's the solution to the worlds endless debt cycle. Although it does not do a fantastic job at day to day transactions it has other attributes that make it the most amazing technological breakthrough of our lifetime.
It makes more sense if Bitcoin is viewed as an insurance rather than an investment or a commodity.
It's an insurance against the whole world falling apart. Why would the whole world of finance fall apart? Same reason Roman empire fell part and lost its significance.
Long back 1000$ was a lot of money, later a million $ was a lot of money and then billion $ was a lot of money. In today's news, people are describing events in trillion $ costs. If you extrapolate this trend, money as we know will be losing its value exponentially.
Bitcoin is a money system that is defined very clearly in terms of quantity, creation process and exchange etc. This is a good minimum viable product. It definitely has value just like a commodity. It also has people working on improving it as if it were an ipo'd company.
Just like language and law, bitcoin is a product of "spontaneous order" and our knowledge of traditional finance may not have enough mental tools to value it like another financial product. Some people certainly value it more than other people. Over a long period of time take span of 100 years, it becomes easy to imagine having a bitcoin like digital currency with standardized rules for money creation not controlled by any single party.
It's an insurance against the whole world falling apart. Why would the whole world of finance fall apart? Same reason Roman empire fell part and lost its significance.
Long back 1000$ was a lot of money, later a million $ was a lot of money and then billion $ was a lot of money. In today's news, people are describing events in trillion $ costs. If you extrapolate this trend, money as we know will be losing its value exponentially.
Bitcoin is a money system that is defined very clearly in terms of quantity, creation process and exchange etc. This is a good minimum viable product. It definitely has value just like a commodity. It also has people working on improving it as if it were an ipo'd company.
Just like language and law, bitcoin is a product of "spontaneous order" and our knowledge of traditional finance may not have enough mental tools to value it like another financial product. Some people certainly value it more than other people. Over a long period of time take span of 100 years, it becomes easy to imagine having a bitcoin like digital currency with standardized rules for money creation not controlled by any single party.
Sorry, it's not insurance against the world falling apart because cryptocurrencies (Ccs) have no intrinsic worth. With no internet access, no internet or no miners, you can't conduct trades (unless you give wallet PK, but then it still doesn't have worth beyond what you can actually buy with it in a post-internet world).
OTOH, vital, scarce commodities and property have intrinsic worth because they can be used or are valued. Gold, silver, platinum, diesel fuel, guns, knives, equipment, huge tracks o' land
From the begging and until now, Ccs only make sense as a transactional money analog, not an investment other than an extremely speculative (volatile) one that could lose most/all of its value anytime.
If you want to hide money for a couple of days, do some money laundering (j/k), buy some drugs (j/k^2) or send money anonymously, Ccs are great. Please don't put the bulk/large amount of your savings into Cc unless you're leaving a repressive regime or want to give it all to me to avoid taxes. }:D
OTOH, vital, scarce commodities and property have intrinsic worth because they can be used or are valued. Gold, silver, platinum, diesel fuel, guns, knives, equipment, huge tracks o' land
From the begging and until now, Ccs only make sense as a transactional money analog, not an investment other than an extremely speculative (volatile) one that could lose most/all of its value anytime.
If you want to hide money for a couple of days, do some money laundering (j/k), buy some drugs (j/k^2) or send money anonymously, Ccs are great. Please don't put the bulk/large amount of your savings into Cc unless you're leaving a repressive regime or want to give it all to me to avoid taxes. }:D
Nothing has intrinsic value. When you say something can be used or has value, you are speaking subjectively.
To be valuable economically, something just needs to be both scarce and sought after. Just because they are valuable to a specific set of persons does not mean they have intrinsic value.
Pricing of goods and services is emergent in nature, based on demand, scarcity and rate of consumption.
The 'bitcoin hype' is exactly what you are describing when you say:
> Ccs only make sense as a transactional money analog
Bitcoin was designed to just be a general accounting ledger that can't be forged. It is supposed to be a transactional money analog.
The 'value' that you should be investing in when talking about bitcoin is not its price in dollars, but rather that the idea:
The 'value' in bitcoin is that non-mutable accounting ledgers will be more reliable and provide a better account of economic activity over some duration than its pre-existing counterpart. The only way it will lose this is if the security of the system breaks.
To be valuable economically, something just needs to be both scarce and sought after. Just because they are valuable to a specific set of persons does not mean they have intrinsic value.
Pricing of goods and services is emergent in nature, based on demand, scarcity and rate of consumption.
The 'bitcoin hype' is exactly what you are describing when you say:
> Ccs only make sense as a transactional money analog
Bitcoin was designed to just be a general accounting ledger that can't be forged. It is supposed to be a transactional money analog.
The 'value' that you should be investing in when talking about bitcoin is not its price in dollars, but rather that the idea:
The 'value' in bitcoin is that non-mutable accounting ledgers will be more reliable and provide a better account of economic activity over some duration than its pre-existing counterpart. The only way it will lose this is if the security of the system breaks.
You're not making an honest argument while making a sweeping generalization and a strawman about something else. Money has value if you can buy things with it. Gasoline has value if you need it. Bitcoin has no value if no one will accept it or trade it. That's reality, not hypotheticals.
I believe you are missing the point I was trying to make.
I was stating that nothing, not even bitcoin or money or gold or water has intrinsic value. Anything can have value to a person who is in need of a seller's goods. That was not my argument. Things have subjective value. Things do not have some mystic intrinsic property that makes them inherently valuable.
I was stating that nothing, not even bitcoin or money or gold or water has intrinsic value. Anything can have value to a person who is in need of a seller's goods. That was not my argument. Things have subjective value. Things do not have some mystic intrinsic property that makes them inherently valuable.
I think the point you are making here is that money is legal tender. That puts it into a different category than stuff that is simply valuable.
Haven't seen a BTC hate post for a while here. Anyway, bitcoin is the best investment of the new century so far and that is the fact. Anything else is speculation and biased.
>Commodities over the long-run track inflation and do not produce the sort of inflation-adjusted excess returns that stocks do. This means that Bitcoin, in spite of large gains from 2010-2013 and from 2015-2017, is guaranteed to be a shitty investment.
So commodities are bad investments, and the author deems Bitcoin a commodity, therefore Bitcoin is a bad investment? I don't find this logic very convincing. Bitcoin has numerous properties that traditional commodities do not have, which makes all the difference.
So commodities are bad investments, and the author deems Bitcoin a commodity, therefore Bitcoin is a bad investment? I don't find this logic very convincing. Bitcoin has numerous properties that traditional commodities do not have, which makes all the difference.
I was interested in a coin called MedicalChain which promised to store your medical records in the blockchain, but it seems to be vaporware (lost a little bit on that one!).
When Libra came along I thought that it would be 'the one'. Finally, a blockchain that could reach the mass market and actually be usable. Just a shame it's Facebook...