How is it not a ponzi scheme? if the only demand for bitcoin is that it can rise in price, which requires more and more money, as soon as Bitcoin has hit its top, and it will only be down from here then there is no demand, bc the main demand was price appreciation, who is going to buy it then? Exactly. No one. The end of the Ponzi. Thats why we keep hearing these outrageous targets for Bitcoin like 10k. 20k, 50k 100k 1 Million, 100… and we need to keep raising it… Because if we eventually hit the top target, then there is no more demand…
Its just a very complicated one, thats all, so complicated it tricked many smart people, and yeah it can go on for a long time due to this reason.
and when I say only, I mean the main driver.
Everything in the economy is not a ponzi scheme… Like take Oil? Take a stock of a company? take a Home? I mean, these are real things… Again I am not saying Cryptocurrency cant have value, but they need a use, something that gives them demand apart from price speculation and Bitcoin does not fulfill that requirement - unless we see Bitcoin actually being adopted, then it starts gaining real value, Its highly unlikely, but it is theoretically possible even though it goes against history and every principle about money and we have no evidence that is starting to happen yet.
Sorry, I was referring to bitcoin as money (not currency and the mentioned economy that’s relating to money), and not as a commodity. And money should be defined by its function and not by its form.
And here, we can argue, whether bitcoin fulfil its ‘money function’ or not. I would say yes, but to tell the truth, a lot of experts (economist) are still arguing on this. I would say we will see in 10 to 30yrs.
Yes but a lot of these economist are Keynes and can be disregarded… But in the end It is not really up to debate, the market will decide… But it has never happened before we have had money that was not a commodity first, and Its unlikely we will ever have so, because there are good reasons for this, It goes against all the rules of what constitutes money. Theoretically yes it is possible, but the chances of it occurring is very very low, because Its something that logically and historically cannot work in practice. But yes if Bitcoin is around 30 years from now, things have to be rewritten. I am not betting on it though, because the risk/reward is just not in its favor.
I would asses it at like 99.99% its at practically 0 - 30 years from now.
If adoption starts to come, I would change my outlook on that, but as far as today, the adoption is at a irrelevant level.
But yes time will prove everything as you say. I would love Bitcoin to be around, dont get me wrong, I just dont see how Its possible and I will monitor it closely. Just on a last comment, most people who are considered economist (which is not a protected title) are absolutely useless, they know nothing about anything. Take Paul Krugman for an example, a nobel price winning economist.
Here you got a nobel prize winning economist… Absolute joke… and I understand the flawed theories he came to this conclusion with, which is also why I know they dont work, and it is just as absurd as it sounds on the surface.
It’s funny that you mention “stock of a company” as not a Ponzi scheme, going by the argument you present for bitcoin.
Ever wonder why people are willing to pay 20x, 30x or even much more for a stock in comparison to reported or expected earnings? The price/earnings ratio is insane for most of the successful companies. Clearly, the dividend earnings of the stock cannot recover the price paid for it. So then, the value of the stock in the eye of an investor is the expectation of being able to sell at a higher price at some future time.
In most cases not even all asset sale can make up for the market capitalization of a stock because a large part of the valuation is future expectations.
Stocks are still orders of magnitude more “sane” compared to derivatives. I could go on about the “insanity” of financial derivatives, but let me conclude this response by pointing you to the two main uses of derivatives: a) hedging risk and b) speculation. Now guess what is the most frequent and dangerous use case that dwarfs in value all actual wealth.
I didnt say that. That was a response to @_ilap saying everything was then a ponzi scheme.
Just because you overpaid for something doesn’t make it a ponzi scheme. A P/E of 10-20 is more than fair, depending on what type of company it is. a P/E of 10 would be a 10% return/year (if it can maintain Its situation)
But with a Stock, you own the a piece of That company, you dont have nothing. Unless that company is worth nothing of course.
You are right that most of the valuation is future expectation, but that doesn’t change anything, that makes totally sense it is that way. Because when you sell your stock, you are selling it to someone else.
Of course, before bitcoin, everything that became money (or just currencies) were objects that were scarce and easily exchangeable/transferable (except Rai stones) and we cannot get our head around that these digital currencies (wrong definition) are not and we are constantly trying to find their values.
Yes, it comes from a false assumption (cognitive bias) that if sbody is very good in one thing, then that means she/he must be very good in other things. That’s wrong, very very wrong. Luckily, I learned that when I was very young, but that’s not common.
Everything we have had before, had a use, people needed the commodity for something not as money. That is what gave it intrinsic value. We have never had any successful money, that wasn’t a commodity first.
Then we got FIAT, and Its usecase is taxes - if you didn’t have to pay taxes in FIAT, it would drop to 0 aswell. We didnt have FIAT back in time, every time we did, it went to 0, because the power of the government/monarch was not strong enough to force people to use them… and any unbacked currency is worth 0, which is exactly what the market priced them at every… single… time… and this has been repeated thousands of times.
Bitcoin is no commodity as it has no inherent use, and the one thing that would give it use has been taken away since there are a unlimited supply of competitors. Nobody needs a Bitcoin for anything other than exchanging it for something else and thats the problem.
As I said before, because everything such as shells in mountains, were scarce objects that had some value (in some cases it did not and still does not need to have any intrinsic value) in which the community agreed on e.g. shells were money, but only on mountains and not on the beaches.
It does not matter if Bitcoin has millions of forks or altcoins, as not all painter’s paints are valuable even they paint in Picasso’s style, but only those few in which (repeating myself) a certain community agrees on.
Anyway, I do not want to convince you even myself, I am just trying to be open-minded (not easy, really) and doubt in almost everything in Bitcoin either, and trying to constantly learn (yeah, that’s the hard way) as I am not good at following the Rational ignorance.
But… Shells failed as money… Because again, it wasn’t a commodity. It went to 0.
Because it is not what people “agree” on, this is simply a myth… It is demand for the commodity that gives it value, and then the monetary demand comes after.
Gold was a success…
Silver was a success…
5000 years later, and you can buy stuff with it. That is money and that is what the free market has chosen.
Cows could be money, but the problem is, cows didn’t have other properties that made gold and silver better in earlier days - but today we could commodities them, so we could easily have a currency backed by cows through futures contracts… Because cows have value… Again, a basket of commodities could back a currency… But again, you cant have money based on nothing, we have never seen this… Your shell example is a example of this. Sure you can try it, but it always fails and goes to 0 like Bitcoin will.
and that meant it had no value… It was a valueless commodity… Which meant it was priced at its true price, which is 0…
I guess you could argue it is a commodity, I dont know… If there is no marketable demand for it, Its questionable. Perhaps its just a shell… I mean if it has no market price in any substantial volume… I wouldnt call it a commodity…
Back in time there might have been a market for them… But again, I guess it wasn’t substantial enough. If it was, shells could have worked as money… Though the problem is, its not very accurate… 1 shell, its hardly divisible… Would be hard to price anything in “shells” I mean can we break them up? I guess it would have to be whole shells… etc…
So there are many reasons why shells back in time, was not a good form of money.
With Gold you can go to exact amount of weight, and you can carry it around a lot easier and gold was the same always. Each shell is different. So even if we agree it was a commodity at its time, it had horrible properties for being money.
Bitcoin has all the properties money need, except for being a store of value, or having intrinsic value. It fits the bill on everything else - and in many ways it is superior because it is decentralized… this would be awesome for the free market.
Just give a second thought to it, and try to be rational means pls avoid cognitive dissonance as the first part of the sentence (before …) is completely against of the second part one, because demand means: agree on something’s value and therefore it generates demand, if nobody would agree on it, it would not generate any demand. This is a simple market dynamics in which the demand and supply must be in some equilibrium, cos both of them could affect the value.
Because it is marketable demand that determines things, not a individual or a collective agreement, it is the action of a purchase and a action of a sale. It is not what people collective think… It is the “action” there is no need for any social agreement, since the market delivers this by action. We can sit down and agree Bitcoin should be 2000, but our opinion means nothing, the market prices this in real time.
Nobody needs to believe bitcoin has value or not, the market prices it after action of supply and demand, its the action of the participants that determines this, not thoughts…
Of course if no one believed bitcoin had value, no one would pay for it, and it would be 0… But the point is. bitcoin is backed by belief, which is why it cant work… Belief has no intrinsic market value… You cant believe something has value, either it has value or it doesn’t, and the market determines that.
If the real value is 0, it will eventually go to 0, in the short to medium term, it can go anywhere. If the real value is 1 trillion, it will go to 1 trillion and stay there, it doesn’t matter what anyone believes. The market determines this by supply and demand, actions, and these actions are formed by peoples actions in the economy. We dont want bitcoin for the sake of bitcoin, if it was to become money, we want to use it as a intermediary and this is what would give it value in the marketplace, not because we want to, but because we have to. The market would have said, Bitcoin was the most efficient money (if it won) and that is because money is a tool for the economy. Nobody wants money, for the sake of money. (that is why belief is not a factor in determining intrinsic value)
People would use Bitcoin because they have to, or it was the best choice, not due to belief but due to reality and this will reflect in the supply and demand, because reality determines supply and demand not belief. If a lambo cost 300K to make, then the absolute min price of lambo would be 300k, no one can change this by belief, because it is reality.
The reason I dont like that statement, is that people say silver has value because people think it has value… and thats not true… Silver has value because their is marketable demand to use it in production, that is why it has a price/value, people need/want it, but dont care about silver, but they need it as a commodity to use for something else they want…
You see the difference? If people say Gold, or Silver has value because people think it has value, or believe in it, that is wrong… That is why they misunderstand why Bitcoin cant be money, they believe that if people believe bitcoin can be money, it can be money… Because they think FIAT, or Gold is money only because people “believe it”… and this is not how things work…
the USD has value because we have to pay taxes in USD… That gives it demand and value… There is no belief involved (to a certain extent unless extreme situations)… Just market mechanics… If the USD was based on faith or belief it would go to 0 very quick… Because its just a useless piece of paper.
Demand comes from needing or wanting something - you dont need to agree on needing something - either you need something, or you dont need it. And if you want or need something, it has a price that you are willing to offer (if you can afford it)
The only place where belief of intrinsic value means anything, is with personal items, where you have a subjective value implanted to them. But with fungible items, commodities, money, etc. this means nothing.
I know you might not have meant this when you disagreed with my word “agree” but that is what I meant with the myth of social agreement… The “belief factor” I could have been more clear on that… We might not disagree on the above, I do agree with you that yes, you need to agree to a value to make an action… But that was not what I meant, even though I understand it could be interpreted that way.
I think that summary is the key. D/S = V in Price, and D is related to a certain community or group of ppl w/ at least 1 member that believe or agree that thing has value.
It does not matter what I or anybody else out of that group (social bubble or whatever we call it) think about that thing’s value, it will always have value for that certain group until they’re agreed on it consciously or unconsciously.
The valuation of the USD is not solely drive by demand. Yes the USD is in high demand compared to most fiat currencies, but the reason the USD is so valuable is because the US has the largest gold supply in the world. THAT is why the USD is the world’s reserve. Fiat currency acts as intermediate to transfer value with easy.
I highly recommend this video, and to anyone on this thread. Explanation of fiat currency, and where cryptos could fall in the economy.
You are wrong about this… The gold reserve has nothing to do with the value of USD… The USD backing of gold is long gone lol… Perhaps there is a small pricing for this, in the chance they would reback it if it would crash, but the pricing of it is irrelevant really. Since it wouldn’t be a high chance they would do this, and if they did, it would be at dramatically lower prices.
Canada has no gold yet they their currency still has value, because they have to pay taxes in it, and that forces their businesses and people to use it… Its that simple…
The same goes for USD and every other FIAT currency on the planet… Yes their are valuations on their currency-reserves to but thats just fiat on fiat… So its the same conclusion…
To everyone in this thread, I would not bother with that video, the author does not take the supply side into the equation and makes lots of false assumptions, many of which are only problems in a government run economy.
AFAIK, The USD dollars are not backed by Gold since ~1933 but are backed by the “full faith and credit” of the U.S. Government (means military and power) as every FIAT (by the relevant government). Ask Nixon (take our paper dollars or don’t.)
Also, all the Gold on earth only worth less than ~1% of the Global economy around 1tn while USD is around 75tn (M3 form), so how can it be backed by Gold then?
Anyway, I have not watched the video yet but will when I get home.
Its worth some more than 1 Trillion though, but yeh it couldn’t be backed unless the dollar was devalued in terms of gold, then it could… also they could just back the base money, M3 includes also includes debt generated through a fractional reserve system… But yeah that would probably require a entire reset… But yeah thats another story…
New to the forum and here are my predictions… ADA will bottom out at about 0.08 usd and long term prediction is 0.4 usd. Sorry but thise who think it will even get to 10.0 usd have been drinking too much cool aid.
Yes, it comes from a false assumption (cognitive bias) that if sbody is very good in one thing, then that means she/he must be very good in other things. That’s wrong, very very wrong. Luckily, I learned that when I was very young, but that’s not common.
