Economy Bitcoin Doubters, Come Eat Your Crow

[mike sherry]

I can guess, because the world order federal banks are going to inflate all fiat currency into the toilet while Bitcoin will maintain its value (even though right now it's less stable than 12 year girl after a 6 packs).

May as well buy gold, which is also a poor investment. Hedging against inflation and/or impending financial doom is not an investment strategy, saving resources into assets that will generate real wealth in the future is.

well. that is true.

but bitcoin has a hard limit of 24 million coins. once that limit is reached, there will be no more bitcoins. the continued use of the bitcoin in circulation will ensure the price will rise.

 

[Cubo de Sangre]

Buying into it to me would solely be the bet that I think people will follow after me while people before me continued to hold onto the currency and I could then sell it before others sold it. It all just seems like timing to me cause aside from the illegal activity, no one is really incentivized to actually use it. You hoard it instead and hope others think the same thing for you aren't the last in the line anymore.

My point with the value of the anonymity, it seems to only be very very valuable to the black market and really no others as much. Those users are ignoring the flaw in the currency because it's either use a deflationary or unstable currency that won't get them arrested or use a stable or slightly inflationary currency that will get them arrested. It isn't really a good push for Bitcoin IMO. It's just criminals using the only method they see will work. I actually bet the black market wishes the crypto currency that got popular was one which expanded in supply a certain amount as demand grew. Or maybe they are the ones benefiting because they are doing the prior example of making the product with cash and then selling it with Bitcoin?


I can't remember but I thought someone had a high degree in economics here. Could be wrong

Post #57 also mentions the minimal transaction fees. That's a huge incentive. But why worry about hording if it's deflationary?

The black market is huge. If you don't mind your every purchase being tracked then have at it. But not every investigator is the government and not everybody hiding something is a criminal. I'll reiterate, it sounds like bitcoin isn't for you (based on your vanilla purchasing habits and lack of appetite for risk).

So you're asking for people with graduate degrees in economics to speak on it?

 

[Cubo de Sangre]

I am and I have . You already have the concepts down. As a medium of exchanges it has pluses (ease of use, anonymous) and minuses (value not stable compared to any currency / or commodity) . It has a niche appeal.

It's value as an investment is either entirely speculative based on trying to time rapid fluctuations in demand (fools errand) or as a CT hedge against the impending financial doomsday cause by central banks (fools errand times 10). Ie from a pure fundamentals perspective, it's not a good investment, anymore that just buying any currency or commodity is. And given the volatility and that the value is not underwritten by legal,authority, it's actually riskier.

For anyone actually mining the coins I bet that it's proven to be a damn good investment (of time and effort).

 

[Gandhi]

For anyone actually mining the coins I bet that proven to be a damn good investment (of time and effort).

Mining the coins ? Sorry don't follow

 

[Cubo de Sangre]

Mining the coins ? Sorry don't follow

https://www.bitcoinmining.com/

 

[Bloody Pulp]

Shercoins are the future. I've been producing them in my basement for the last 7 years.

 

[xcvbn]

Here's a good summary of why comparing fiat deflation to crypto deflation is apples to oranges. The fourth paragraph in bold gives a solid albeit basic explanation.

http://www.newsbtc.com/2015/11/15/bitcoin-and-the-deflationary-spiral-a-double-edged-sword/

There have been multiple mentions of bitcoin ending up in a deflationary spiral on the long run. At a bird’s eye view for a layman, it sounds true. However, if one takes some time to study bitcoin and understand it in details, it will become obvious that the digital currency is quite different from conventional fiat currencies, and the deflationary spiral that seems perfectly applicable to fiat currency at certain circumstances doesn’t apply to its digital counterpart.

For those who do not know about deflationary spiral, it is an economic concept which states that continued deflationary trend will lead to reduced prices, increased production and increased value of the currency with respect to the purchasing power. The increasing value of currency, combined with reduced prices will lead to a fall in the circulation of currency and ultimately its demise.

Theoretically, those who argue that bitcoin will go down the deflationary spiral, believe that with the number of bitcoins already fixed, its value over a period of time will be proportional to its demand within the same timeframe. With everyone believing it, they will end up hoarding bitcoin expecting the value to rise in the future. Mass hoarding will take bitcoin out of circulation leading to its collapse.

However, the rules that apply to fiat currency do not apply to bitcoin as it is fundamentally an asset compared to traditional currency which is based on debt. Bitcoin is a highly divisible currency and with an increase in the value of a bitcoin increases, the amount of bitcoin needed for transactions will reduce proportionally. At the same time, strengthening economy leads to stronger bitcoin in the midst of deflation, which is also good for it. The progressively increasing difficulty in bitcoin mining and reduction in rewards are designed to counter sudden deflationary effects.

Only 21 million bitcoins are ever going to be mined and this knowledge among the bitcoin users leads to controlled deflation without causing the deflationary spiral.

I do think people should remain cautious because this is a very new and very complex technology. I.E. Don't dump your entire savings into the current $800/BTC price. It still has a relatively low market cap- currently at $13bil(all time high) or about 1/3 the market cap of Target, 1/18 the market cap of Walmart. It's highly susceptible to market manipulation which has happened many times. Ethereum with its $700mil($1.2bil all time high) market cap has been thrashed around for 6 months due to developer mistakes, DDOS attacks, and angry rich people(or coordinated groups with massive quantities) that missed out on buying in at under $1, while it currently sits at $7.50, who flood the market with a few million in short sales in order to lower their overall entry price point.

 

[Gandhi]

well. that is true.

but bitcoin has a hard limit of 24 million coins. once that limit is reached, there will be no more bitcoins. the continued use of the bitcoin in circulation will ensure the price will rise.

That's not in anyway a given. The value of Bitcoin like any currency is going to be impacted by supply and demand. While the total supply is limited as you said, the demand is driven by what goods are available for sale Bitcoin economy vs. the non Bitcoin community. For example if demand from drugs go up relatively, you could have more poeple chasing bitcoins relative to the amount of bitcoins being transferred into say, US dollars.

But if Bitcoin holders, i.e. Those that were receiving payments in Bitcoin had no incentive to hold these coins and sold them for US dollars to purchase things like groceries then the Bitcoin value would not go up. Like all things as Bitcoin goes up in value, there is less incentive to buy and more incentive to sell.

Also there is nothing to start alternatives from cropping up, hampering bitcoins network effects.

 

[Cubo de Sangre]

Shercoins are the future. I've been producing them in my basement for the last 7 years.

Hopefully one of the denominations has enshrined this legend (in this pose).

Beats the fuck out of this.

 

[xcvbn]

Mining the coins ? Sorry don't follow

tldr; computers solve complex mathematical algorithms which help make up a blockchain
the reward for solving said algorithms are "cryptocoins"
these have inherent value because it takes massive computer power to solve the equations, meaning very high energy bills and loads of heat output by the computers

 

[tehend]

well. that is true.

but bitcoin has a hard limit of 24 million coins. once that limit is reached, there will be no more bitcoins. the continued use of the bitcoin in circulation will ensure the price will rise.

How is it limited?

 

[mike sherry]

How is it limited?

because it is hard coded to be limited that way.

 

[tehend]

because it is hard coded to be limited that way.

Can they be broken down further, or is 1 bitcoin stuck forever at 1?

 

[mike sherry]

Can they be broken down further, or is 1 bitcoin stuck forever at 1?

currently 1 bitcoin is divisible to 8 decimal places. this can be changed to a nearly unlimited amount of decimal places with the appropriate updates to the core software

 

[Gandhi]

Here's a good summary of why comparing fiat deflation to crypto deflation is apples to oranges. The fourth paragraph in bold gives a solid albeit basic explanation.

http://www.newsbtc.com/2015/11/15/bitcoin-and-the-deflationary-spiral-a-double-edged-sword/


I do think people should remain cautious because this is a very new and very complex technology. I.E. Don't dump your entire savings into the current $800/BTC price. It still has a relatively low market cap- currently at $13bil(all time high) or about 1/3 the market cap of Target, 1/18 the market cap of Walmart. It's highly susceptible to market manipulation which has happened many times. Ethereum with its $700mil($1.2bil all time high) market cap has been thrashed around for 6 months due to developer mistakes, DDOS attacks, and angry rich people(or coordinated groups with massive quantities) that missed out on buying in at under $1, while it currently sits at $7.50, who flood the market with a few million in short sales in order to lower their overall entry price point.

Yes you can't inflate away the value of a Bitcoin by printing more money (which is what the Fed is doing, the creation of debt is little more than an accounting entry). But it's value is still intrinsically tied to,whatever basket of goods/services can be purchased with it, which drives purchases and sales of any currency over the long term, the rest is zero sum speculation.

You also can't use it as a collateral with the fed to make new loans, but then we are back to an argument over the best structure of the monetary banking system, which absent the libertarian wet dream about impending financial collapse, is not about the merit of Bitcoin as an investment or medium of exchange.

 

[Bloody Pulp]

Hopefully one of the denominations has enshrined this legend (in this pose).

Beats the fuck out of this.

Rest assured, Shadface and Bisping are cornerstones of our currency.

 

[Cubo de Sangre]

Yes you can't inflate away the value of a Bitcoin by printing more money (which is what the Fed is doing, the creation of debt is little more than an accounting entry). But it's value is still intrinsically tied to,whatever basket of goods/services can be purchased with it, which drives purchases and sales of any currency over the long term, the rest is zero sum speculation.

You also can't use it as a collateral with the fed to make new loans, but then we are back to an argument over the best structure of the monetary banking system, which absent the libertarian wet dream about impending financial collapse, is not about the merit of Bitcoin as an investment or medium of exchange.

Bitcoin is globalism without that political assurance. Let's call it Libertarian.

 

[Gandhi]

tldr; computers solve complex mathematical algorithms which help make up a blockchain
the reward for solving said algorithms are "cryptocoins"
these have inherent value because it takes massive computer power to solve the equations, meaning very high energy bills and loads of heat output by the computers

Ok I did not know if he was talking about creating bit coins or hard, thanks. Adding supply from nothing - i.e. the same as printing money, means more bitcoins chasing the same basket of goods, which is inflationary. Why would that make it a better investment, quite the opposite.

Again the value will be based on the basket of goods,available in bitcoins compared to other currencies. This just takes away some of bitcoins deflationary advantage to the favor of those with big PCs.

 

[Gandhi]

Bitcoin is globalism without that political assurance. Let's call it Libertarian.

If the investment strategy is to buy commidities or digital currencies and wait for the sky to fall, you can call it an anarcho fascist communist propertarianism if you like, it's crai crai.

 

[xcvbn]

That's not in anyway a given. The value of Bitcoin like any currency is going to be impacted by supply and demand. While the total supply is limited as you said, the demand is driven by what goods are available for sale Bitcoin economy vs. the non Bitcoin community. For example if demand from drugs go up relatively, you could have more poeple chasing bitcoins relative to the amount of bitcoins being transferred into say, US dollars.

But if Bitcoin holders, i.e. Those that were receiving payments in Bitcoin had no incentive to hold these coins and sold them for US dollars to purchase things like groceries then the Bitcoin value would not go up. Like all things as Bitcoin goes up in value, there is less incentive to buy and more incentive to sell.

Also there is nothing to start alternatives from cropping up, hampering bitcoins network effects.

There have been many cryptocurrencies that have popped up in Bitcoins' 7 year history and only one has managed to break the $1bil market cap(Ethereum, different tech with different utilization). Bitcoin certainly isn't perfect but it's a living technology and is given periodic updates called forks which strengthen security and can even add features.

Many of the myriad of cryptocurrencies were merely pump n dump schemes- the exact same kind you see in penny stocks.

Some graphs/charts for you guys to look at: https://coinmarketcap.com/