The economics of BitCoin

GreatApe

As bit coin hits $17,000 :eek: I am sitting here wondering how this has come to pass.
Nearly $300 billion market cap which is bigger than the biggest bank on the FTSE100 and almost the same as Bank of America the #2 USA bank

I am concerned that with the introduction on some big exchanges like the futures for CME group and possibly the nasdaq supposedly so 'institutional investors' can get in I hope this is not something that will ultimately lose the public a lot of money as their fund/pension managers decide to buy in just because its going up

The ultra bulls are suggesting it is going to go to >$1 million per coin supposedly by replacing all the worlds currencies. That is absurd for multiple reasons but then getting to $17,000 is absurd and here it is

I dont have a good feeling about this one.
If they pump it up and draw the public in I dont think it will be forgiveable

It is a technology that solves a lot of problems no one has.
Like zero/low transfer fees: I send thousands of transfers yearly and my fees are already zero.
Transfer 'money' abroad with no/low fees: Not a big problem as things stand but bitcoin does not solve this unless you expect both your home country and your destination country to abandon their currencies and use bitcoin exclusively. If I have to double convert currency -->bitcoin --> currency that advantage is totally lost
Government cant seize your money: When was the last time that happened in the UK. Hackers, fire, theft, flood, bad-memory forgetting your log in details on the other hand can wipe your bitcoins for good
It is the new gold: :rotfl:

Interesting none the less

economic

The futures market should provide for the first time a way of shorting in a liquid manner. This introduces a two way market which will increase the likelihood of the price of BTC falling.

Herzlos

It also introduces a whole host of new problems:
It fluctuates too wildly to be used as real currency (so you can't really use it).
Almost nowhere takes it as currency (so it's hard to get rid of).
The exchanges are unregulated (so can do whatever they want).
There's no legal path to recovery (if stolen).
There's no backup/reproduction (if lost).

It's still going to go up for a while, but it's a high risk bubble - once people realize that it can't do anything, the value will plummet like a rock as everyone does their best to offload.

If you want high risk, high gains, then it's still worth investing.

Like all bubbles, the time to get in on it was 10 years ago. Now my dad knows about it, it's too late for the safe money.

Eric_the_half_a_bee

My Bitcoins shot up in value and I used them to buy some tulip bulbs.

bobbymotors

It will end badly......

System

I think the Zimbabwean dollar has more future as a stable international currency.

michaels

IT is very much digital gold: so the advantages of digital but the disadvantages of no physical form.

Presumably there is an equilibrium price for such a product but no one has a clue where that might be.

DiggerUK

At least with a tulip bulb, you ended up with something tangible. But with bitcon you can only end up with what you started with.....nothing but an onscreen image, if it goes fubar.

It has many uses, and the technology, though claimed as new, is just a revised accounting and trading procedure. There is, I believe, every possibility that blockchain will continue to be utilised for other financial transactions, no matter what the end game for crypto currencies is.

I begin to believe that the too big to fail banks might be meeting their nemesis with blockchain, and explains their enthusiasm to get to grips with the blockchain.
We’ll see..._

Eric_the_half_a_bee

michaels wrote: »

IT is very much digital gold: so the advantages of digital but the disadvantages of no physical form.

It's lost 30% of its value in less than 24 hours. Does gold often do that?

DiggerUK

Eric_the_half_a_bee wrote: »

It's lost 30% of its value in less than 24 hours. Does gold often do that?

Rounded off, gold went from £1200 an ounce in Sep 2011, to £700 an ounce in Dec 2015. About 40% drop. But that was over four years, not four hours.

Gold and bitcoin are the new apples and oranges in that scenario..._

GreatApe

economic wrote: »

The futures market should provide for the first time a way of shorting in a liquid manner. This introduces a two way market which will increase the likelihood of the price of BTC falling.

How?

Who is going to lend their bit coin for it to be shorted?
One of the aspects of this 'currency' is that a lot of the owners are rightfully paranoid in losing their coins or having them stolen.
Also how do the futures exchanges even find the people who own the coins to borrow from them to short?

From my understanding these futures exchanges are going to act as glorified spread betting platforms. I can see how they can hedge if they have net longs they just buy more bitcoin to hedge. But how do they hedge if they have net shorts unless the exchanges already own a lot of coins they can sell into the market. Maybe this is part of the price ramp the exchanges trying to buy 5% of the coins to give them the ability to do net shorts. There are two exchanges going live within days and Nasdaq wanting to get in.