[wpietri]

In one sense, it's already dead.

In theory, Bitcoin is supposed to be a payment system, digital cash. But that seems to be pretty much dead. Consider the opinion of Fred Wilson, a big Bitcoin booster, who has stopped using it for payments: http://avc.com/2017/08/store-of-value-vs-payment-system/

Merchant acceptance is actually in retreat: http://www.businessinsider.com/merchants-arent-accepting-bit...

It is still being used for speculation, of course. And for some crime. But the 2010 vision of a digital cash that replaces Western Union, Visa, etc? It certainly hasn't arrived, and it seems farther off than ever.

[espadrine]

It was set to die by design.

Bitcoin has a predetermined graph of coin production with time that converges soon. In 2022, 90% of all bitcoins will be produced, and the ideal inflation will be lower than most fiat currencies.

But inevitably, people die, and the knowledge of their private key with them, removing bitcoins from circulation. The amount of bitcoin will therefore decrease impredictably

All in all, it will be as volatile as currently traded gold (which is not as good a long-term store of value as fiat money as a result), and slower to use in transactions (in November, the European Central Bank will launch SCT Inst, a SEPA mechanism that provides transactions in less than 15 seconds, which is better than Bitcoin's recommended 2 hours).

Beating the improvements of traditional systems will require new cryptocurrency designs.

[xTrader]

> But inevitably, people die, and the knowledge of their private key with them, removing bitcoins from circulation. The amount of bitcoin will therefore decrease impredictably

Maybe a bit late, but you finally understood why Bitcoins get more valuable over time: their number grows slowly or maybe decreases, while the number of people wanting them increases.

That's why Bitcoin is the best Store Of Value ever devised.

[alexasmyths]

"their number grows slowly or maybe decreases, while the number of people wanting them increases."

Yes - you are right to point out that as BTC's disappear, it's not such a bad thing.

But why do you assume people would continue wanting them?

"That's why Bitcoin is the best Store Of Value ever devised."

It's currently one of the worst 'stores of value' possible.

It's massively volatile, and inherently risky: governments could decide to regulate it tomorrow - or even ban it. It's highly susceptible to popular whims. It has massive chunks owned by individual investors who could 'change their minds' on something.

If you have $X USD and want to 'diversify' and have 'strong store of value' - there are many other better options. Real estate being on the top of the list. Over the long-haul, there are innumerable places in the world where real estate will hold it's value for hundreds of years. Baskets of commodities, currencies, decent bonds.

Bitcoin is a very speculative asset, which makes it the 'opposite' of a 'store of value'. And if it's not a currency, then why are we using it again?

Let me put it differently:

In 200 years - do you think there will be demand for real estate in London? There has been for 1000 years. What about Tokyo? Shanghai? Of course there will. Maybe less, but certainly some, and probably more.

Will there be demand for BTC in 100 years? It's hard to say. Possibly, but there's a decent chance nobody will know what it is then.

[wpietri]

I'm not sure why this is being downvoted. It seems spot on to me. People argue that Bitcoin is a great investment because it's going to go up, up, up! And people argue that it's a good store of value. But they can't both be true.

Reward and risk are strongly related. Nobody should know that better than startup people.

[alexasmyths]

"I'm not sure why this is being downvoted. It seems spot on to me. "

Bitcoin is a religious subject among the tech crowd.

The most fascinating thing about BTC has nothing to do with 'block-chain' - it's the manner in which it has created hype among tech circles.

Techies look at it from a tech perspective, financial types from a financial perspective.

From a financial perspective, BTC is downright bizarre. Even the 'threat of disruption' aside, it doesn't make a whole lot of sense.

But from a tech perspective, is uber-cool.

So it's hard to have a discussion about BTC because almost nobody talks about it as a financial instrument - it's always about tech.

The amount of systematic hype is surreal - constant streams of articles etc. etc..

It's going to get bigger before it gets smaller as the hype is just starting to reach mainstream.

[wpietri]

Excellent point.

I am really impressed with it as a technology. It's absolutely brilliant.

But when I put on my business hat, I'm still not seeing it. For quite a number of years I've been asking for proof of daily use among significant market segments. For just as many years, I've been getting, "OMG THINK OF THE FUTURE!!!" as an answer.

I have some hope that we're at peak BTC hype, though. A lot of the enthusiasm (and the bigger scams) seem to have moved on to smart contracts, ICOs, etc. It's much harder now to ignore Bitcoin's years of not being very useful.

[haywirez]

People also don't appreciate that Bitcoin is infinitely divisible, so the total numbers are meaningless. At the same time, inflation is super low and decreases over time, giving it more and more edge over nation-state currencies.

[wpietri]

Isn't inflation strongly negative? In the link I posted above, Fred Wilson exhibits behavior typical of deflationary times: people hoard the currency.

That's a strong disadvantage vs nation-state currencies, which have clear inflation targets (generally in the 0-2% range) and the ability to hit them. It may be great for speculation, but it's terrible for a medium of exchange. For that, you want the value to be constant or very slightly decreasing.

And I don't think that's fixable. If the Bitcoin supply is limited but those tokens are used in a world of continuous economic growth, then Bitcoin will always be deflationary.

[sidko]

Bitcoin is NOT infinitely divisible. Each Bitcoin is divisible into 10^8. There were reasons to choose this number and isn't arbitrary [1].

[1] https://bitcoin.stackexchange.com/questions/31933/why-is-bit...

[wwwtyro]

It is arbitrarily divisible. Fitting inside 64 bits is convenient, but hardly an insurmountable engineering challenge. There's libraries that handle this sort of thing with ease.

[brianwawok]

Ok put your entire life savings in BC, i will put mine in the SP500. Lets see how things look in 40 years?

[charlesdm]

Honestly, and this is coming from a Bitcoin bear, it will probably generate outsized returns in comparison to the S&P500 over the next 2 to 4 years. If it truly is a bubble then it will have a long way to run. The market cap at the moment is tiny, but probably too high to disregard now, and if institutional money starts buying in, it can probably easily go 10-20-30x again.

Don't forget it's still relatively hard for average folk to purchase crypto. But once you have acceptable ETFs and funds that you can purchase at a click of a button through your brokerage account -- a lot of people (and pension funds!) will probably allocate 1-2% of their portfolio to crypto. That is 1-2% of $300tn or so, or 30 to 60 times the amount of money in the space today (in terms of market cap).

If you think this bubble will run for a while, then I also think it's not unreasonable to assume you can multiple your initial investment by 10x by investing in either Bitcoin or Ethereum. But that's my opinion (and this is obviously not investment advice).

Whether it'll be around in 40+ years, I don't dare make that bet. But no one is saying you can't move money around to the better investment opportunity at a specific time.

[Fjolsvith]

How has the SP500 compared to BC since its inception in 2009?

[brianwawok]

That is the wrong measure. The counter argument to that is something like "How did going 100% all in to pets.com in 2000-2001 go?"

You cannot judge future performance by past results. That is the fundamental thing you need to understand before investing. Zoom in on the right part of 2000, and pets.com and a really nice upswing. There have been other stocks that had a nice and steady growth for years and years.. before exploding.

[alexasmyths]

The SP500 has been growing consistently, has for quite a long time, and it's a bet on the future growth of the American economy. There will be ups and downs, but by enlarge, steady growth.

BTC has been on a wild ride, and could evaporate at any moment. I don't think it will, but it could, since there's no reason for anyone anywhere to own it.

There's no question the safer bet is S&P 500.

Now - in the range of outcomes, admittedly, the BTC owns the higher end of the spectrum - no doubt, there are possibilities where BTC completely outraces the S&P, however, it also owns the lower end of the spectrum of outcomes, where a lot of those outcomes are 0.

[wpietri]

It surprises me to see this downvoted.

One fundamental of investing is that stocks represent an economically productive asset. In contrast, commodities just sit there. If I buy a chunk of a company, that company is working to become a bigger, more effective, more value-generating company. If I buy an ounce of gold, it stays an ounce of gold.

Index funds represent a broader bet still. Because they're composed of many things, volatility is lower and you're betting on whatever the common factors of the index are. So buying an SP500 index fund could easily be said to be a bet on the American economy.

And in many ways, Bitcoin is worse than gold. The historical value of gold is known. Bitcoin is new. Gold's floor price is set by the practical use value of it, both industrial and decorative. Bitcoin's floor price is that of bits. That is, zero. The gold market is broad, with producers and consumers all over the world, and open markets in many countries. Bitcoin is effectively controlled by a relatively small number of people and requires careful long-term cooperation of those people.

So it seems pretty obvious to me that Bitcoin is much higher risk. Which can mean higher reward. But as anybody who has shares in a failed startup knows, higher risk doesn't guarantee higher reward.

[koonsolo]

Having your life savings in BC is just as stupid as having no cryptocurrency at all.

[brianwawok]

Having your life savings in cold fusion juice presses is just as stupid as having no stock in the above at all.

You need to think of the reason for an investment. If you are set for life, and want to gamble on it... cool, buy BC. You could also go to vegas, or bet on horses, or start a HFT trading shop. All are reasonable ways to gamble for fun and possibly profit.

If you are looking to build a nest egg to retire when you are old, it is very unlikely that BTC is a good route for that ;)

[koonsolo]

Investing in BTC is like investing in startups. And a lot of people are making money with that. And so are a lot of people in BTC.

Please don't compare this to Vegas, where the odds are known to be against you.

Have a small/tiny % of your investment in cryptocurrency is a smart move.

[cirgue]

Deflationary assets can be good investments but are terrible mediums of exchange. The Fed has an inflation target and not a deflation target for a reason. Or did I miss the sarcasm here?

[pointsphere]

Yes, the number of coins in circulation decreases over time.

But the precision can be increased from the current 8 decimals. Even if all but 1 Satoshi/0.00000001 BTC is lost, it could still be split into smaller units, or used to bootstrap a chain with higher precision. It can be fixed as required.

Volatility decreases as the number of users and therefore liquidity increases. It should decline further with rising use of the network for payments instead of a pure store of value.

I agree that "viability as a payment system" is where Bitcoin is stuck right now, but scaling the system is the stated goal of all current Bitcoin developer groups. One of them will get it right eventually.

[mrb]

«Merchant acceptance is actually in retreat»

Wrong. Bitcoin payments processors report growth, eg. BitPay processes $1 billion in payments per year, up 328%! https://blog.bitpay.com/bitpay-growth-2017/

The source you quoted is laughably bad: it tries to estimate payment growth by looking at how many of 500 retailers accept Bitcoin. That's like saying "out of 500 persons only 3 own (not bought) a Porsche this year compared to 4 last year, so worldwide Porsche sales are down."

[wpietri]

No, they are looking at merchant growth by looking at use among top retailers. It's a perfectly fine metric if what you care about is daily consumer use for common transactions.

If you're saying, as the blog post says, that it's getting used more for other things than typical ecommerce, that's a different argument.

[mrb]

Yes there is a difference between acceptance and payment use. However they extrapolate that it's declining based on a way too small sample size: 2 retailers stopped accepting BTC so they infer global acceptance is declining... That's just ridiculous.

For all we know the JPMorgan report making this claim could be wrong, as it doesn't even list which 500 retailers it studied, and which are the 2 that dropped Bitcoin. I wouldn't expect quality Bitcoin research coming from JPMorgan anyway, as their CEO is staunchly anti-Bitcoin, so their analysts are probably not enticed or instructed to spend that much time and effort studying it.

[wpietri]

The largest 500 retailers is an excellent representation of the largest 500 retailers. I think it's also a fine proxy for mainstream ecommerce.

That's certainly a metric that Bitcoin advocates would have been happy with, say, 5 years ago. Then they were agitating for major retailers to accept it as the obvious coming thing.

The fact that new major merchants are not joining and old merchants are going to the trouble of taking it out is a sign that earlier vision was flawed.

[mrb]

The largest 500 retailers are a poor representation of all retailers. Especially because Bitcoin tends to be more often accepted at small—as opposed to large—retailers.

And again the sample size is way too small. Two (2!) retailers dropping it means nothing, in particular because other larger more significant data points contradict this small sample size: BitPay doing 1B/yr at +328% growth... hardly a sign the "vision was flawed".

[wpietri]

You seem to be working very hard not to understand their point. Or mine.

The largest 500 retailers is an excellent representation of major retailers. It's also a reasonable indicator to use for general consumer behavior, because what makes retailers the largest is their use by consumers.

You could claim that a loss of 2 retailers isn't significant proof of decline, although since it's 2 of 5, a 40% decline seems notable to me. But regardless, having less than 1% market penetration in this segment (and declining) is a pretty good sign that it is not currently successful. If you pitched some VC partners with that as proof of traction, they'd laugh you out of the room.

The BitPay post is definitely interesting, but they're cagey enough about their numbers that it's hard to tell what's actually growing. You might be able to use it to make an argument that BitPay is succeeding in some other segment. But it definitely doesn't prove mainstream consumer ecommerce success. Which apparently isn't interesting to you, but to major ecommerce companies, it's very interesting indeed.

[michaelscott]

This might still change, but you're likely right; as a payment system it's probably not going anywhere anytime soon.

It's other description, as a form of digital gold, applies now more than ever though and I think that's how the market is treating it: largely as a hedge and store of fungible value.