[bufferoverflow]

There are different reasons for the rise. The main ones I see are:

1) speculation

2) attractive store of value due to the deflationary nature (note that not all cryptocurrencies are deflationary)

3) True limited supply that's mathematically guaranteed. Gold supply, for instance, is not limited in any practical sense, there are trillions of tons of it in our Galaxy, it's all a matter of technological advanvements of its extraction.

4) secure transactions that can't be reversed (though you can use escrows if you want the reverse option)

5) low transaction fees (except for bitcoin)

6) inability of anyone to stop you from moving the money in your possession. See 'paypal sucks' stories, civil forfeiture.

7) works extremely well on the internet

8) fast transaction settlement

9) works over almost any protocol, you can technically manage bitcoins with a dumb phone over SMS

10) banking for those who doesn't have access to banking

11) libertarian aspect - no government control

The Bitcoin price is justified by the free market. People want it, they are willing to pay for it. That's true of any currency value, btw, since there are no government currencies pegged to gold, it's all based on whether people believe in the currency. When they stop believing, we get Zimbabwean dollar, Venezuelan Bolivar, USSR Ruble, Argentinian peso.

[alexasmyths]

Points #1 and #2 are contradictory.

A speculative instrument is the opposite of a store of value.

A 'store of value' is like real estate - low-risk, probably low-return, but you can park your money there and in X years, it's going to mostly be there. US Bonds.

Your bank account, i.e. USD is a decent, though not great 'store of value'. Your USD is not going to go $0 overnight.

Speculative investments are there to generate return almost always involve more risk.

BTC could go to $0 tomorrow. Suppose the US Gov. makes everyone legally declare their BTC assets as assets and they are subject to taxation etc.. That might pull the plug on BTC, but worse, cause a stampede crash in a highly volatile situation. There are many reasons that a rush-to-exit could happen for BTC. So - speculation - not a 'store of value'

These other fetures of BTC may have been important early on but they are not what gives it value.

Because nobody is using BTC as a currency, almost none of those points are pragmatically relevant - yes - in theory, they need to exist to have gotten it off the ground.

[Rmilb]

>BTC could go to $0 tomorrow. Suppose the US Gov. makes everyone legally declare their BTC assets as assets and they are subject to taxation etc..

BTC is ALREADY taxed as an asset. If you buy $4 worth of BTC, price goes up 20% and the next day you buy a coffee for $5 that is a Taxable event that you need to record and submit a record of your 1$ gain to the IRS to be taxed. Currencies like the euro ect have an exemption for low dollar amounts of gains that BTC does not currently have. If you hold for a year, you can get the 15% long term capital gains.

>Because nobody is using BTC as a currency

People used to when there were low fees. We will get low fees again, but until then, it opens up the chance for other coins to take BTCs market share.

[paulhodge]

They're different narratives but I think they are both in play.

If you ask a Bitcoin investor about why they invested, then they might explain it as a store of value, "digital gold", or etc. With that narrative, Bitcoin makes sense in the world, and isn't just a fad. And the erratic price is just a growing pain, it'll stabilize eventually.

But of course, the real reason many people are buying BTC right now is because of the speculative nature, they want to get rich quick. If someone's investment in BTC is significantly larger than their investment in bonds, commodities, real estate, etc, then "it's a store of value" is probably not the real reason they're buying BTC.

[phoe17]

> If someone's investment in BTC is significantly larger than their investment in bonds, commodities, real estate, etc, then "it's a store of value" is probably not the real reason they're buying BTC.

Are there any good articles or blog posts analysing this trend?

[thisisit]

It seems real estate is not great example. If we look at 2008, wasn't it because there were people speculating on housing?

[arisAlexis]

Declaring BTC and paying taxes will not bring it down. It will legitimise it as an asset

[candiodari]

I feel like this might even be true now, but you forget 1) and 2) from a historical perspective.

1) interesting solution to the double spend problem, and therefore usable as a currency (just like gold coins, apple macbooks, rolexes, ... are usable as a currency)

2) The government "controls" spending on drugs by checking the payments made to suspicious parties, not by checking the contents of packages coming in. In other words, bitcoin is a "legal hack" that basically allows you to get heroin delivered to your door like an Amazon package. Or guns. Or poison. Or illegal medicine/performance enhancing drugs/...

3) untraceable or less traceable payments. Which are basically allowing for criminal acts to occur on more scalable levels like hostage taking, for computers and of course for real. [1]

1 is probably played out at this point, but 2 is very much alive. (e.g. [2])

[1] http://www.telegraph.co.uk/news/2017/05/12/nhs-hit-major-cyb...

[2] https://cointelegraph.com/news/bulgaria-seizes-enough-bitcoi...

[Rmilb]

>Or illegal medicine/performance enhancing drugs/...

Like overpriced medication that is unaffordable in the US.

[anywherenotes]

Just to add to your '2)', some of those drugs maybe illegal in US, but legal in other countries, so you could probably now get cheaper medicine which isn't FDA approved.

[johncolanduoni]

For 3), you could say the same about most of the crypto currencies’ mathematical groundings. The properties of hash functions like SHA256 are far from guaranteed, and are subject to the same advancements in analysis and computing capabilities as those that have led to the deprecation of SHA1, MD5, etc., albeit with a different desired weakness.

[bufferoverflow]

If these hashes are broken, most cryptocurrencies have a plan to switch to post-quantum cryptography. It can happen very quickly, within weeks.

Also consider that if they are actually broken, we will have much bigger problems - no secure banking, military data compromised, all kinds of hacking of all kinds of infrastructures, etc.

[zakk]

SHA is already quantum resistant. The problem is with public key encryption, i.e. bitcoin addresses.

[johncolanduoni]

The problem that Bitcoin relies on being hard (with regards to the proof of work, not addresses) is different from the one e.g. the standard PKI relies on being hard. It's not very likely the hashes would be broken by an advance in quantum computing; there are some sub-exponential speed ups that have been explored but nothing that would break the blockchain. It would be more akin to the movement from GPUs to ASICs.

[sincerely]

why not implement post-quantum crypto now if there’s already a plan in place? this seems like a situation where “better late than never” isn’t true

[johncolanduoni]

The post-quantum algorithms haven't been around very long and as a result don't have the same level of confidence. Most post-quantum implementations that are in or nearing production use both existing methods (e.g. DH) and a post-quantum counterpart (e.g. New Hope) and combine them in a way that requires both to fail for there to be an issue (e.g. XORing the produced secrets together).

[arisAlexis]

There is one launching check out theqrl.org

[walrus1066]

2) attractive store of value due to the deflationary nature (note that not all cryptocurrencies are deflationary)

Could you give an example of one of these non deflationary currencies?

[bufferoverflow]

Peercoin, Novacoin.

Even Ethereum to small degree, though Vitalik mentioned the possibility of capping the supply.

[walrus1066]

Peercoin and Novacoin have gone up by 2,000% and 1,000% in the last year.

That's an annual inflation rate of -95% and -90%. Which is nuts for a currency.

Even during the great depression USD deflation was -10% max. In Japan, where deflation is a symptom of it's two lost decades, inflation was around -1%, and their central bank is throwing the kitchen sink to try to get it to 2%.

In short, if any of these currencies were widely adopted, it would devastate the economies of those who use it, because everyone would be stuffing their coin under the digital mattress instead of spending it on goods and services.

[djellybeans]

Add Dogecoin also. It keeps producing blocks indefinitely adding 10,000 coins each time.