[nabla9]

Bitcoin speculation is an almost pure Keynesian beauty contest. https://en.wikipedia.org/wiki/Keynesian_beauty_contest

As long as most people think everyone else thinks BTC is the prettiest girl, it can have substantial value and the sky is the limit.

It's a pure speculation asset. You don't need bitcoins to pay taxes. The value has a very weak link anchored to anything in the real economy (limited number of coins and the energy is meaningless nominal detail in this context).

[me_me_me]

BTC is a value store.

You can use it to exchange large values without traditional middleman.

Saying that BTC is just a hash, a virtual nothing and it has no intrinsic value is silly. Its not a tulip bulb.

Talking about pretty things, how come nobody gets railed up when a painting gets sold for millions and its a single color modernistic piece? Its literally just a hearsay that it has any value and no function apart from being expensive firestarter.

Bitcoin costs money to mine like it take money to mine gold. So there is 'work' involved creating it. It has built in mechanism for fighing inflation (finite source), and security for exchanging it. Try to liquidate 100k of gold.

Also its funny to me how people claim btc has no real value when over 20% of USD were printed last year. Out of thin air. Its all about confidence of people using it. If people were confident tulip bulbs have value of 100m per one we would be trading them to this day no matter how usless they are.

[esja]

I've just dug a hole in my back garden, and created 21 million tiny slices of air that now occupy that space. It took work to dig this hole, so it definitely has value. And I'm only digging one hole, ever, I promise.

I've also made a list of people who own the different bits of air in the hole. I'm using pencil and paper, but it works. If you give me some money I can write your name on there and you can "store value". Later if you tell me to write someone else's name, I can rub yours out and you can "exchange large values".

If you or your friends want the money back later, I can give it to you. Probably... mostly. But don't ask me for more money than you gave me in the first place, because I won't have it.

p.s. I lied when I said I dug the hole by myself. I really dug up a billion tonnes of coal and used it to power a microscopic spaghetti noodle which dug the hole. For some reason this gave a lot of people confidence that my hole is the One True Hole.

[me_me_me]

That's such a crude reductionist argument that I can smell the sent of arrogance and mockery, and I am not sure if response is warranted.

Especially since your simile has rather gaping holes in it.

Actually thinking about it... ironically your example is better description of fiat currency than btc.

Use low resource output to generate cheap tokens that will be loosely tracked by 'One True Government', and people agree that they have value. People can exchange it for goods and even can go back to the 'One True Government' to exchange their gold back token back to gold... oh wait... right we got rid of that whole gold backing while back...

[esja]

Is there a reason you believe Bitcoin has value, aside from "other people believe it has value"?

[me_me_me]

Is there a reason you believe USD, EUR etc. has value, aside from "other people believe it has value"?

Bitcoin at least has a utility built into it, facilitating transfers and 100% guarantee that limited amounts of btc can be created.

Fiat currencies and btc are not the same but the underlying principle is the same. Demand and supply. If there is no demand its value will plummet.

2007 crash cause swiss frank to sky rocket in value. For no other reason then international crowd started buying franks to store their wealth in it not USD.

[esja]

There are many obvious reasons to believe fiat currencies have value. But perhaps the most obvious one is that having and using fiat currency is required by 99.9% of people in order to stay alive. Staying alive is quite valuable.

[nabla9]

All assets have value store abilities. BTC is arguably bad value store. Value changes too much. When you need to withdraw the money you can lose or wing big.

TIPS (Treasury Inflation-Protected Securities) are good value store. You neither lose nor gain.

[alwillis]

You're definitely losing.

Inflation of things you actually want and need is 10-15% per year and if you're not keeping pace with that, you're losing. TIPS can't help you with real world inflation.

Look at housing, medical care, higher education, quality food—these items are increasing in cost every year by more than the fictitious 2% CPI the government aims for.

Being a store of value doesn't mean the value of something never changes or that there's no volatility; just that over the medium to long term, it will at least keep pace with inflation, so that you don't losing buying power.

Gold has traditionally been a reliable store of value, but now it's becoming bitcoin.

Bitcoin has never had a negative 5-year period, but the return on TIPS can be negative during a deflationary period, not to mention federal taxes that occur while you hold them [1].

Bitcoin is only taxable when you sell, which, if you're smart, you never actually have to do, since you can borrow dollars using bitcoin as collateral [2].

[1] https://www.thebalance.com/how-do-tips-work-417128

[2] https://news.bitcoin.com/10-loan-providers-taking-crypto-as-...

[esja]

And what sort of rates will you pay on those loans? Quite a bit more than 2%, I would imagine. And what happens to those loans if the price of Bitcoin falls dramatically, as it has done quite frequently?

[danans]

> The value has a very weak link anchored to anything in the real economy

I think it has a pretty strong link to the degree of fear in the real economy (just like gold at the margin) and more fundamentally the degree of loss of confidence in governing institutions.

In that way it's useful as a hedge, but within limits. If the economy and governing institutions totally collapse, Bitcoin won't be very useful because most of our modern large scale and complex society, including security, shared infrastructure, and the goods and services we consume are built on the foundation provided by those institutions.

Bitcoin has no answer for the needs provided by those (admittedly imperfect) institutions, and it seems to have the historical goal of deconstructing them. Indeed, it can only exist if those institutions exist.

[xorcist]

That's true, but it's true for gold and a whole lot of other things too.

[nabla9]

Gold used in manufacturing is significant fraction of annual production. There is real demand for gold.

[eloff]

I don't think fiat currency has terribly much more going for it, in terms of intrinsic value, other than you do need it day to day because there aren't alternatives for buying things and paying your taxes.

If here in Canada the US dollar became legal tender and I could use it for all my transactions, would the Canadian dollar hold its value? I don't think so.

[nabla9]

Liquidity matters. Cash is king because it's the most liquid asset. You can sell $100s million dollars worth USD/EUR/JPY/GBP in a day without affecting the price those currencies. Bitcoin is the polar opposite of liquidity. Bitcoin markets are notoriously thin. If you try to by or sell large amounts the price either collapses or skyrockets.

Bitcoin is like water tower where you can move water level (price) up or down by adding or removing 10-20 cubic meters of water. Fiat money is like a big lake or a sea. You can take or put 100 cubic meters per second and it's not visibly moving.

Once BTC price rises to the level that enough people feel rich and start buying things, the price will drop suddenly. Panic hits the markets and the price drops like a stone.

[alwillis]

Bitcoin is the polar opposite of liquidity. Bitcoin markets are notoriously thin.

This hasn't been true for a while, especially lately, as tens of billions of dollars flows through bitcoin exchanges everyday.

[leppr]

It is still true. The latest buying by Microstrategy doubled the price (and more as more buyers piled on after the announcement), and they had to accumulate it over months.

That's how a fixed supply asset works, the price reacts to supply and demand, and sell-side liquidity dries up with expected increase in demand.

[anonymouse008]

At least the 'pretty girl' in this example can point guns when she's a fiat - so she definitely gets a few bonus points for that.

[eloff]

Does that benefit the currency of Canada at all? I don't think so.

Maybe with the US currency, but that's also special because it's currently the reserve currency of the world.

[graeme]

1. You can use dollars to pay taxes. Big difference from bitcoin

2. No one expects fiat currency to be an investment asset!

Why anyone expects the value of bitcoin to increase like stock ownership of a corporation is beyond me. And it has no intrinsic value like gold.

[eloff]

Gold doesn't have that much intrinsic value either. It's hard to obtain, but so is bitcoin. Gold has the advantage that it has some use in personal adornments - but I believe that's a marginal use. Bitcoin is easier to buy, sell, and store. I've said many times that the best description for bitcoin is electronic gold, not a currency.

[leppr]

Not all demand for an asset is tied to states. Most activity around Bitcoin is actually precisely about evading state controls.

[octocop]

I am human, I like shiny, do you have shiny?

[cambalache]

> It's pure speculation asset.

> The value has very weak link anchored to anything in real economy

So like dollars but without the big-ass nukes backing it?

BTW kids, dont invest on bitcoin, or for that matter on any crypto-anything.

[OGWhales]

No, he quite clearly said the difference was one is needed to pay taxes.

[kolbe]

Those big ass nukes have a lot of power to extract value. Hence the value of the dollars they create to make you pay taxes with.