[charlesdm]

What is a crash though? Even at current levels, if it quadrupled and then crashes down 50%, is that a crash? Depending on when you acquired your initial position, you might not care much.

Apple added 250bn in market cap this year. The entire crypto space is about 250bn in market cap. That does put things into perspective. Given crypto is completely global, this space is still tiny. Visa has a $250bn market cap.

My assumption is, if it does end up being a massive bubble and mania, it will run high (like the .com bubble -- into the many trillions) but there will a major correction at some point.

But how likely is it that will be any time soon? And are todays prices still cheap then? I would wager digital gold is probably worth more than $150bn in total market cap, even after a major correction.

[kgwgk]

What would you rather own? All the shares of Visa Inc. or every cryptocurrency token in the world?

[charlesdm]

Not exactly the best comparison. Obviously you would pick the shares since they are less volatile -- if they could magically appear in your brokerage account.

However, say I had a net worth of $50m, then I'm quite certain I would rather own $5m in Bitcoin or Ethereum today than own $5m in Visa shares.

[kgwgk]

My point is that if you magically owned Visa tomorrow, you’d be very rich. If you magically owned all those cryptocurrencies tomorrow, would they be worth anything? Why would anyone want to buy them from you?

[jstanley]

Visa is a company and produces profit from people using it, and the people using it don't need to be shareholders, so if you're the only shareholder, you're not reducing the utility for anyone else.

If you own all of the cryptocurrency in the world, nobody else can use it. Obviously it becomes worthless. The same would be true of any currency. That's just a small part of what makes a currency different to a company.

[charlesdm]

Companies are different in comparison to commodities though. That said, you're right -- it is still early, and people aren't exactly sure how much exactly these things are worth. But part of the value derived comes from having a network of people using it.

If tomorrow you owned all the gold in the world and no one would be able to get or buy more gold -- that gold wouldn't be worth much.

[droidist2]

> If tomorrow you owned all the gold in the world and no one would be able to get or buy more gold -- that gold wouldn't be worth much.

Wouldn't it be worth a lot because you cornered the market on it?

[kgwgk]

I agree that gold is impossible to value (at least, the current valuation is impossible to justify). I always liked this argument by Buffett: http://www.businessinsider.com/buffett-on-gold-2012-2

But for bitcoin the situation is much worse. Gold would still be worth something. It is a physical object, a collection of atoms with some nice properties. It has industrial uses and the bling-bling factor wouldn’t disappear. If anyone needs or wants gold he would have to mine it, an expensive thing to do, or buy it from you. You could always sell it marginally cheaper.

Anyone could easily come up with an alternative cryptocurrency and what advantage would yours have over the others?

[charlesdm]

I can follow your reasoning, but: 1) just because something is digital does not make it worthless, 2) those gold use cases are really exaggerated when it comes to price setting. Gold derives its value mostly from the fact people say it is valuable, not from jewellery and industrial purposes.

One way to think about it: you have video games. There are marketplaces where people can buy and sell digital skins / clothes / gold etc. Every year, people buy and sell for more than $50bn in digital goods through these marketplaces. Ten years ago, I sold a top notch World of Warcraft character for a sizeable amount of money. Are all these people crazy? Maybe.

But how is value of these items set? Supply and demand and network effects. Why did a World of Warcraft character sell for €10,000 easily 10 years ago, and now it goes for a fraction of that? Less people are playing the game.

The same applies to cryptocurrencies -- you have two major cryptocurrencies: Bitcoin and Ethereum. Bitcoin has limited use cases, and yet, most of money flows into it, due to its network effect and brand recognition. It has all the properties of gold, that you also described. It was created in the image of gold.

You could create something similar no doubt. But would it get traction? Unlikely. These are for the most part winner takes all markets for a specific value proposition. For Bitcoin, it's digital gold. Ethereum is smart contracts, etc.

I'm not saying investing in crypto is a sure thing. It is very risky and speculative -- a bet on the future, with great upside if things work out. But at the current stage crypto is in (at least Bitcoin and Ethereum), in comparison to say a high risk investment in a startup or in a risky small cap stock, it seems (to me at least) to be a less riskier when looking at the potential upside.

If it doesn't end up being digital gold, it will most likely be worthless. But institutional money wouldn't be looking at buying in if they didn't think there was a decent chance of success.

Again, not investment advice, just a personal opinion.

[jstanley]

Pointless comparison:

Cryptocurrencies aren't very useful if you own the entire supply.

Visa is still useful even if only one person owns all of the shares.

More interesting would be "if you have $X to invest, at what value of X does it become preferable to buy Visa shares instead of cryptocurrency?"

[kgwgk]

I agree, comparing the total quantity of bitcoin or dogecoin or dentacoin in circulation with the market capitalization of a traded stock (or the valuation of a private company, for that matter) is pointless.