The economics of BitCoin

Windofchange

http://www.thedailymash.co.uk/news/business/a-guide-to-bitcoin-the-amazing-investment-based-on-dream-gold-invented-by-a-wizard-20171208140575

GreatApe

economic wrote: »

Would you buy btc based on this illegal demand?

I don't know, maybe to front run it

It will need to blend in with the legal for it to survive
If pension finds buy it as a store of value for instance then no way it it going to be shut down
It needs to become the digital cash. Used both for legitimate reasons as well as black market just as normal cash is

Yesterday I thought it was a huge ponzi bubble today I think it will have a purpose (maybe not bit coin maybe one of its many clones but likely to be bitcoin due to first moved network effects)

Determining a price is of course guess work

My first guess is $1,500 trillion wealth in the world. If 5% wants to be hidden that is $75 trillion. If bit coin takes 20% of the hidden market (offshore accounts paper cash gold art vintage cars etc still keep 80% of the hidden market). That would value bit coin at $15 trillion or a crazy $750,000 a coin

What more if it becomes established and becomes more stable (let's say it has volatility like the FTSE or a large FTSE company shares) then you might get people allocating money into it just for diversification in the same way that some people put 5-10% of their wealth into gold for a similar reason.

If it takes 20% of the hidden market and 2% of the open market that would be $15 trillion + $30 trillion = $45 trillion. Or $2.25 million per coin. Of course different assumptions would bring totally different values. If it takes 1% of hidden wealth 0% of open wealth and bitcoin takes 10% of the crypto market each coin would have a value of $7500 or half of today.

Just to note no one should take this as advise to buy bitcoin itself can go to Zero all I am saying is I think I've discovered some underlying value use cases I hadn't considered before.

All the arguments and debates I read about it displacing all the worlds currencies etc is of course Still nonsense but it makes sense it will survive as a potential asset for hidden wealth which will then form into an asset that acts like a currency and potentially store of open wealth for diversification

Very interesting

Relax

GreatApe wrote: »

It can't be that easy why do offshore secretive accounts exist if all people need to do is buy artwork and resell.

.

It is not " That easy " to dispose of items used to store wealth and it is because currency is that much easier than a commodity people will try to circumvent the law to keep it hidden.

Bit coin or diamonds for my hidden $30 million ~ Diamonds every time ~ if that offshore banking system gets dismantled.

GreatApe

Relax wrote: »

It is not " That easy " to dispose of items used to store wealth and it is because currency is that much easier than a commodity people will try to circumvent the law to keep it hidden.

Bit coin or diamonds for my hidden $30 million ~ Diamonds every time ~ if that offshore banking system gets dismantled.

Diamonds are probably also a store of hidden wealth. They have no real intrinsic value other than other peoples belief in it's value so in some sense they are similar.

I'd you just did a drug deal for $100m in coke.
Its surly safer for one party to bring the drugs and the other part to make a phone call to transfer some bitcoibs rather than one side bring coke and the other side bring diamonds or cash. The deal risk is cut in half. If anything the buyer of the drugs would be willing to pay more in bit coins as it cuts his risk to zero vs the cash or diamonds on his person.

Also your diamonds are not as liquid and presumably the spread on diamonds is quite large. You also can't divide your diamonds into a thousand pieces and only spend part of it

The diamonds are also more risk in every way.
Be stopped with $30 million in diamonds and see if you can get out of that
Be stopped with an encrypted SD card with $30 million in bitcoibs and nobody knows what it is.
You don't even need to carry the SD card with you just email the encrypted thing to yourself

GreatApe

economic wrote: »

yes agree.

i think it is quite well known that crypto can be used for dodgy money.

the question is is it possible for government to stop it?

Can government stop it?
For the legitimate market probably but not for the hidden market.
Its like trying to stop p2p file sharing hasn't proven possible yet.

It looks like it is going to become a new asset class
Some will hold it for hidden wealth
Others will just use it as a way to transfer 'money' converting to currency on both ends

If it gets legitimate uses it will become the cash of the net
There is something here it has peaked my interest for the last few days.

All the debate I've read elsewhere was stupid. Its not going to become the world one and only currency. Its not even going to take a large chunk of black market trade. However it could take a slice of hidden wealth both black grey and open market. That alone could value it at >$1 trillion


Just having another guess UK wealth is ~5x GDP
World GDP will soon be $100T so as a first order guess world wealth will soon be $500 trillion.
If 2% hidden wealth would be $10 trillion if crypto takes 10% of the hidden wealth market that is $1 trillion market cap. Total crypto market cap is about half of that as of now.

Thrugelmir

GreatApe wrote: »

I'd you just did a drug deal for $100m in coke.
Its surly safer for one party to bring the drugs and the other part to make a phone call to transfer some bitcoibs rather than one side bring coke and the other side bring diamonds or cash. The deal risk is cut in half. If anything the buyer of the drugs would be willing to pay more in bit coins as it cuts his risk to zero vs the cash or diamonds on his person.

Why bitcoins though? At least cash can be put on deposit or lent. Bitcoins have a fluctuating value. Not the basis for a large business transaction.

GreatApe

Thrugelmir wrote: »

Why bitcoins though? At least cash can be put on deposit or lent. Bitcoins have a fluctuating value. Not the basis for a large business transaction.

There are no advantage for legitimate business to use bit coin over bank accounts
Just like there are no legitimate business advantage to using cash or gold or diamonds for transactions.

But cash gold diamonds are used for illegitimate business
Does bitcoin (or one of its clones) offer advantages over cash/gold/diamonds?
Well yes for one you can send it remotely rather than have to meet face to face to transfer gold or diamonds or cash. Second is security a encrypted SD card in a bank vault or hidden somewhere is a lot safer than $10 million hidden in the walls. And it offers joint or better ways to hide yourself. If you can send bit coins to buy a truck load of AK47s that's a dam signt safer than meeting face to face with some blood diamonds.

I think it's already proven itself useful for black market activities but the first phase people probably only used it for transmission. That is to say they didn't see it as a store of wealth so converted to Fiat money on both ends.

As bigger black market players get in it will be used more and more until some stage its trusted enough that the gangsters use it to store their wealth rather than just transmission.

It won't be just drug lords it will be anyone who now uses methods to hide wealth. Why open an offshore account with dollars which can be forced to give up your details when you can just buy bit coin.

Oddly the feature of this commodity makes it nkre valuable the more valuable it is.
Back when it was 1/100th the price you couldn't use it to store all that much wealth. Now at $250 billion market cap it is useful you can dump £500 million in or pull £500 million out without crashing the market. Its dollar liquidity has gone up 1000x with its price.

Very very interesting

GreatApe

From a high of $17,000 to a low of $13,000 in a 24 hour period which is a 25% crash from top to bottom

That would make me think the volumes are small but the exchanges are reporting volumes in excess of $10 billion daily. Something doesn't add up, or I just dont know what I am talking about which is quite likely too.

economic

GreatApe

If i were to buy coke from you for a million dollars, i would pay you in BTC worth a million on deliver of the coke to me.

You would be safe from the authorities (for now) as the transaction is completely anonymous.

But how did i get the million in BTC to pay you? I would have had to buy the BTC prior to our drug deal. This means i would use the exchange to do so so my side of the transaction wouldn't be anonymous. I could still get into trouble, specially if the authorities were watching me (highly likely as no doubt i would probably be on their radar). Of course i could take the coke i had bought from you, snort it and load up on ammo to use on the authorities (aka Scarface).

But surely if i did get caught, the authorities would cut a deal with me if i gave your details as the drug dealer. Then you would be screwed.

With physical cash you have none of these problems - its completely off the radar.

GreatApe

economic wrote: »

But how did i get the million in BTC to pay you? I would have had to buy the BTC prior to our drug deal. This means i would use the exchange to do so so my side of the transaction wouldn't be anonymous.

Not necessarily
You could sell something you own for bitcoin like a house
You could purchase coins for cash at the local coins for cash exchange
Those might be legal actual shops if the coins become accepted legitimately
Or it might be the local gangster who set up a local exchange for cash. Buys bit coins for $10,000 and sells them for $10,500. You go to him and buy your coins at $10,500 and he gets rid of them to others for $10,000. Why would bit coin owners sell to this gangster rather than an exchange? Maybe to avoid taxes etc. Or of course there might be electronic exchanges in countries that do not share the details of their customers maybe they do not even keep the records they delete them instantly so no records to hand over.

I could still get into trouble, specially if the authorities were watching me (highly likely as no doubt i would probably be on their radar).

As the seller you are in no additional risk, it is very low risk for you. You get an encrypted email saying please send 1kg of coke to address xyz here is your payment of 1 coin. You send to address xyz no one knows who you are. If your goods are good quality/value you will get repeat business.

But surely if i did get caught, the authorities would cut a deal with me if i gave your details as the drug dealer. Then you would be screwed.

Doesnt work like that, all you have of the buyer is an address. Its not like they send you a photocopy of their passport or add you on facebook. They can use any address and even bounce it a few times or even forward directly to the end users.

With physical cash you have none of these problems - its completely off the radar.

Face to face dealings are surely much less safe in every way.