Bitcoin doesn't have fundamentals. Stocks are a claim on assets, buildings, inventories, and future profits. Real shit, like a parking lot full of trucks or something. Those are the fundamentals. Cryptocurrencies dont have anything like that.
To the extent that there is an analogous concept it's their utility as a means of exchange. Which outside of drugs and hard drive ransoms is minuscule at best.
Bitcoin has fundamentals though. Per the whitepaper it was designed to be just a means for individuals to transfer money to each other digitally without much friction. The further it gets from that the more we're asking the network to stretch to meet demands it was never designed to.
This only works if the value of BTC is pegged to one or more fiat currencies. As it is, people are basically speculating on blockchain address space on BTC.
And looking at this fundamental value, other cryptocurrencies have arguable superceded it in terms of better tech/efficiency, so the value seems incredibly hard to justify.
Look into DASH, it has a fundamentally different architecture than bitcoin. The biggest pros are instantSend, privateSend, and the DAO (A governance system).
In addition to the other response, another example is ethereum's ability to offer smart contracts, which is not possible with bitcoin. Transaction rate limits and power consumption also are more efficiently handled.
They're different, which is why I used the term arguable--there's no clear reason afaik that bitcoin should be so valued relative to others, but I could be wrong.
- if 1 BTC were $100 trillion, then it's clearly passed the fundamentals of "being a unit of exchange between commercial entities", since it would be way more than what any form of exchange would ever require.
The truth behind the pedantic answer:
- if it's a store of value, then the "fundamental" value is the amount of fiat that's gone into the system so far. If all the exchanges have roughly $100 in USD deposits, the base value of their bitcoin deposits will be at least $100, roughly.
- If it's as a means of transactions, then the fundamentals are linked to how much transaction volume is going on. For example the flow of USD into BTC and vice-versa. BTC <-> BTC exchanges in that universe probably help to define things as well, as it would be used as an alternative to USD.
The dollars don't come from nowhere, so there's at least some base numbers you can think about. Thinking of it as "USD going into the ecosystem" and "USD going out" is a good proxy for now I think. Obviously very fluid, though.
You’re forgetting currency control evasion. If a businessman from a country with tight controls wants to move money out of the country he would buy bitcoin and then sell it the other side of the border. This sort of activity is going on all the time, and it creates demand for crypto currencies.
If you have to do that, it doesn't seem particularly advantageous over existing methods. You're meeting in person, exchanging cash illicitly, etc. If someone is willing to do that, why not just buy USD in a foreign bank account directly? (That's my understanding of the current system; people with clean histories open accounts with varying amounts of money in USD / EUR / JPY jurisdictions, then transfer control of those accounts to someone else, for a small profit margin, who then transfers them again, in exchange for cash at a significant margin, in, say, China.)
Either way, someone ends up with cash CNY and the other person ends up with electronic USD or EUR or whatever.
The immediate limiting factor is the vulnerability of any in-person transaction to traditional law enforcement mechanisms, and the eventual limiting factor is that the exchange rate is going to be impacted by the demand for cash CNY. Eventually nobody is going to want to sell you USD (or whatever) for your cash-in-a-bag CNY, or will only do it at exorbitant rates.
I don't disagree with this, but if true, then it means that the value of cryptocurrency comes at the expense of other currencies. Every time someone in china sells their renminbi to buy bitcoin, bitcoin's value increases while the value of renminbi decreases. If that is the case, then bitcoin does indeed have value, and will reflect the differential of the cost of renminbi vis-a-vis its value on the world market.
Easy enough to rob someone for this amount of money too. As Eric Schmidt said (in the context of a hostile government, but it works here too): no passcode in the world is going to protect you from a man holding a gun to your head and demanding said passcode.
Split your loot into 100 pieces and convert to BC one by one. So you get robbed five time out of a hundred, no big deal. Eventually find a reliable trader and take your business to him.
You don’t have to make it totally safe, just safer compared to other methods of evading control.
> You’re forgetting currency control evasion. If a businessman from a country with tight controls wants to move money out of the country
Before you can move it out of the country, you have to get it out of the bank, and your bank will refuse to do that with currency control measures in effect.
What I don’t get is that you can’t buy a car with bitcoin. So surely this should also create a selling pressure, unless they just buy bitcoins with the intent to transfer money at a later stage.
The fundamentals are at the current price of $17,000/btc bitcoin mining costs are about $14.5B annually(144 blocks of 12.5 btc/block plus ~3.8 btc/block in fees) in electricity expenses due to paying off miners which is about on par with the 8th largest company in the world Facebook. Bitcoin's revenue/year is however much money people feel like FOMOing in + however much tether money bitfinex feels like printing which right now is more than the mining costs. Once this figure changes, the price will decline. For reference, Facebook has ~$24B in revenue/year.
It isn't crazy to imagine crypto becoming adopted for actual transactions. Even if people are currently speculating, they're still downloading wallets they can spend from and loading it up with currency. For all these users there is now nearly zero obstacles to spending. This isn't even to say bitcoin is the transaction layer, but bitcoin still provides liquidity to any alt/2nd layer solution.
The vast majority of novice speculators are using Coinbase. They at least attempt to maintain the appearance of compliance; but I suspect a large market run would wipe them out of USD fairly quickly.
The fact that “experienced” Bitcoin speculators are getting nervous is a sign the bubble is about to pop. Tether volumes are hockey-sticking up as a result. There has been enough technical analysis to show that USDT volume drives BTC price and not the other way around. USDT volume is hockey-sticking over the last few weeks. Feels like a Ponzi scheme and the whales are cashing out.
The price of one bitcoin is arbitrary. $1 is no more crazy than $1 million. It's all crazy. But the question is, what's the supply and what's the demand.
At some point there will be a correction. This velocity can't be maintained forever. But this is also a technology that heavily relies on going viral to become functional (payments/contracts) - and based on real world interactions I think crypto is heading towards an adoption curve that justifies its price.
I’d be interested in seeing evidence that USDT “drives” the USD-BTC exchange rate. I do think it’s a good indicator of sentiment about the exchange rate. Typically it’s within $0.02 of its supposed $1.00 value, but today it reached at least $1.08 and is still at $1.06. That means people are willing to pay a 6% premium just to be able to cash out of BTC today.
But how far? Corrections of 30% in say Bitcoin are common. Does this matter? I would say not -- it's not something I lose sleep over. It's fine, boom and bust.
If you buy in, buy in during a consolidation phase, when you see the price is stable. Ethereum had a huge run up, yet then consolidated for around 6+ months around $300. I would say that is healthy. Now it's heading higher. "Fundamentals" aside, of course.
It's not that I love banks; it's that we rolled back all the banking regulation that kept that stuff in check prior to 2008. Replacing that with a system with zero regulation does not seem like progress...
To the extent that there is an analogous concept it's their utility as a means of exchange. Which outside of drugs and hard drive ransoms is minuscule at best.