BITCOIN

aaj123

Frequentlyhere said:

An overwhelming % of us are using Visa/Mastercard/Amex/Cash for spending and using their bank/FX providers/3rd party txfer sites/Wise/Revolut etc for money transfers.  You know this, it's not something you can have your own personal truth on. 

Bitcoin doesn't need to be used for this nature of daily spending in order to be valuable. Its a wealth asset not a spending one. It could be used for spending when circumstances demand it but that's not its primary purpose and the driver of its demand. Frankly, whenever there is a choice between being able to pay with fiat vs paying with Bitcoin, its rational to part with the thing that will lose value over time i.e fiat. 

Money is not just stuff one spends or prefers to spend, its also what one prefers to use for storing wealth.

Linton

DannyCarey said:

aaj123 said:

bugbyte_2 said:

You call Bitcoin an Asset, but to be an asset it must therefore have something supporting its price other than sentiment. 

Yes, there very clearly is 'something' that causes Bitcoin to be of value. Rigid monetary policy resulting in absolutely defined supply and scarcity characteristic, ability to be transferred peer to peer and ability to be self custodied without storage costs, censorship resistance. 

Here are 10 somethings for you @bugbyte_2

1. Decentralisation: No government or central authority controls it. This gives Bitcoin a level of autonomy that many people believe will make it more resistant to inflation and economic crises.

2. Limited Supply: There is a finite amount of Bitcoin that can be mined (21 million), which means that it is scarce and many believe it will hold its value better than fiat currencies, that can be printed at will. The number of new participants and active addresses climbs every day also. 

3. Global Reach: Bitcoin can be sent and received anywhere in the world. This makes it an attractive alternative for people who need to transfer money across borders for next to no fees. 

4. Security: The blockchain that underpins Bitcoin is extremely secure, virtually impossible to hack or counterfeit.

5. Accessibility: Bitcoin can be bought and sold easily online, and it is increasingly being accepted as a form of payment by merchants around the world.

6. Low Transaction Fees: Bitcoin transactions are typically cheaper than traditional payment methods, which make it more attractive to people who want to avoid high fees...

7. Increasing Acceptance: Bitcoin is becoming more widely accepted by businesses and institutions around the world, which will increase its legitimacy as a form of payment and store of value.

8. Store of Value: Some people see Bitcoin as a digital gold, a store of value that can hedge against inflation and economic instability... like what we are seeing now with some Banks failing... again

9. Innovation: The technology behind Bitcoin is constantly evolving, with new features and improvements being added to the blockchain. This could make it more attractive to investors who want to invest in cutting-edge technology. Look at what Jack Dorsey is up to now...

10. Financial Freedom: Bitcoin offers users a level of financial freedom and privacy that is not available with traditional banking systems. This could make it more attractive to people who want to avoid government surveillance or control over their finances.

To answer some of those points....
1) Central management of currency is essential for a nation state to manage its own economy.
2) Very limited supply is a problem if you want an economy to grow and invest for the future, and the standard of living to increase. Research the Gold Standard in the 1930s.  Deflation is a far more serious problem than inflation. 
7) I will believe that Bitcoin is becoming more accepted when my local Tesco takes it.
8) Has Bitcoin provided a hedge against inflation and instability in the past few years?
9) I am not sure I want my stored value to be a technology test-bed. It should be simple.  That does not prevent technology and innovation in the use of the currency.  Consider what has happened without Bitcoin in the past 50 years.
10) That is why it is attractive to those stealing money from the rest of us by crime and tax evasion.  I want governments to be able to prevent this. AIUI bitcoin makes it much more difficult.

Will we need more than one "bitcoin"?  Are you proposing a world where any person, company, or country can create a new currency?  If so you will need to duplicate the current trading currency infrastructure with exchange rates continuously changing and vast quantities of money being moved from one to currency to another.  Wuuld the situation be any different than currently? If you are not proposing that who will police the  system across the world to ensure there is only one "true" bitcoin?

Frequentlyhere

aaj123 said:

Bitcoin doesn't need to be used for this nature of daily spending in order to be valuable. Its a wealth asset not a spending one.

That though just takes us back to @bugbyte_2 's point: "You call Bitcoin an asset, but to be an asset it must therefore have something supporting its price other than sentiment"

I'm actually less firm/technical in my view than bugbyte as to what can consitute an asset. Sentiment moves a lot of things beyond fundamentals. When a fine art painting valuation doubles from sale to sale, did it fundamentally become twice as attractive? 

If for the sake of argument we say yes Bitcoin is a wealth asset, then ok, but in my opinion it's a poor risk-adjusted investment because it has so few positives about it.

If I had to make a good faith case for investing in it, the only thing I can really see is that it's the focus of much speculation and so potentially could recapture people's imaginations and boost up in value for a short term trade. If I squint really hard perhaps I could imagine the bitcoin community improving the code further to expand use cases for it.

On the other side though:

- As discussed, there's nothing productive there. It's not generating cash/yield in any form.
- The utility of the thing is very low, it's not practical to use mostly, and people prefer to hold it for appreciation as you've said. So there's no reason for people to hold it unless they want to play the speculation game.
- It has been tainted by the perception of scams/lack of security that crypto entails - rightly or wrongly, it's tainted.
- It's had several rounds of speculation already and as above, it has something of a reputation now. Does it have enough traction to sustain another significant round? 
- It's a manipulated market currently, part of the reason a bitcoin spot ETF keeps beng denied.
- Regulation is making it far more difficult for people to speculate on it, even if they want to. If we're dependent on speculation for appreciation, that's a problem.
- Holding it safely is, if not impossible, then not straightforward - learning curve. To be honest, you can mock, but if I thought the upsides outweighed all the rest of the downsides, I'd still probably be too scared of doing something wrong to drop £100k in it.

Would you disagree with any of the above?

aaj123

Frequentlyhere said:

- Holding it safely is, if not impossible, then not straightforward - learning curve. To be honest, you can mock, but if I thought the upsides outweighed all the rest of the downsides, I'd still probably be too scared of doing something wrong to drop £100k in it.

Would you disagree with any of the above?

Let's get one thing out of the way - a common misconception. 1 BTC is just an arbitrary unit. There is nothing that requires one to stump up a minimum amount to be able to own some BTC. Most user friendly platforms allow buying even £10 of BTC. If everyone suddenly decided on a convention to quote BTC price in say mBTC (milliBTC), would it give you comfort to say that its priced only £20 a pop?

Frequentlyhere

aaj123 said:

Frequentlyhere said:

- Holding it safely is, if not impossible, then not straightforward - learning curve. To be honest, you can mock, but if I thought the upsides outweighed all the rest of the downsides, I'd still probably be too scared of doing something wrong to drop £100k in it.

Would you disagree with any of the above?

Let's get one thing out of the way - a common misconception. 1 BTC is just an arbitrary unit. There is nothing that requires one to stump up a minimum amount to be able to own some BTC. Most user friendly platforms allow buying even £10 of BTC. If everyone suddenly decided on a convention to quote BTC price in say mBTC (milliBTC), would it give you comfort to say that its priced only £20 a pop?

No, sorry, I didn't mean to imply that one couldn't.

All I meant was that to treat it as an investment it probably has to be a reasonably substantial sum to be worth doing. Perhaps £100k is unnecessarily high. Let's call it the S+S ISA limit of £20k. I'd still be very wary personally about safely storing that amount of BTC, unless it was in the form of the long sought after BTC ETF.  

(ignoring the point that to me it would seem somewhat ironic to be investing in bitcoin via a financially regulated ETF under the purview of the monetary authorities)

aaj123

Frequentlyhere said:

aaj123 said:

Frequentlyhere said:

- Holding it safely is, if not impossible, then not straightforward - learning curve. To be honest, you can mock, but if I thought the upsides outweighed all the rest of the downsides, I'd still probably be too scared of doing something wrong to drop £100k in it.

Would you disagree with any of the above?

Let's get one thing out of the way - a common misconception. 1 BTC is just an arbitrary unit. There is nothing that requires one to stump up a minimum amount to be able to own some BTC. Most user friendly platforms allow buying even £10 of BTC. If everyone suddenly decided on a convention to quote BTC price in say mBTC (milliBTC), would it give you comfort to say that its priced only £20 a pop?

No, sorry, I didn't mean to imply that one couldn't.

All I meant was that to treat it as an investment it probably has to be a reasonably substantial sum to be worth doing. Perhaps £100k is unnecessarily high. Let's call it the S+S ISA limit of £20k. I'd still be very wary personally about safely storing that amount of BTC, unless it was in the form of the long sought after BTC ETF.  

(ignoring the point that to me it would seem somewhat ironic to be investing in bitcoin via a financially regulated ETF under the purview of the monetary authorities)

It's not that hard nor risky honestly to store BTC if one wants to. I understand though that many would still prefer to use custodians with some sort of regulatory oversight and that's why I am actually in favour of a regulatory framework for crypto ecosystem participants. Even in such a regulated ecosystem, the underlying asset retains the decentralised benefit of fixed supply, etc.

As for ETF, actually one called BTCE was accessible in UK and I still have that in ISA and SIPP. But for some strange reason, the FCA disallowed those kind of products to be sold to retail at the beginning of 2021 (ironically in the name of protecting retail)  so one can't add that now but can retain what we already had.
https://www.boerse-frankfurt.de/en/etf/de000a27z304-etc-issuance-gmbh-0-000

Linton

aaj123 said:

Frequentlyhere said:

- Holding it safely is, if not impossible, then not straightforward - learning curve. To be honest, you can mock, but if I thought the upsides outweighed all the rest of the downsides, I'd still probably be too scared of doing something wrong to drop £100k in it.

Would you disagree with any of the above?

Let's get one thing out of the way - a common misconception. 1 BTC is just an arbitrary unit. There is nothing that requires one to stump up a minimum amount to be able to own some BTC. Most user friendly platforms allow buying even £10 of BTC. If everyone suddenly decided on a convention to quote BTC price in say mBTC (milliBTC), would it give you comfort to say that its priced only £20 a pop?

I suggest you think through the implications of quoting prices in smaller subdivisions of a Bitcoin.  The effect is that as the usage of bitcoin increases there will be insufficient to go around without subdividing further, thus upping the effective value of existing holdings.  Great for the "haves", not so great for everyone else. 

With this happening there will be less incentive for the Bitcoin rich to invest since they are on an upward moving escalator anyway.  Any profits they make in the future will be small in current bitcoin terms. Classic deflation.

Deflation is a far greater problem for the economy as a whole than inflation.

aaj123

Linton said:

aaj123 said:

Frequentlyhere said:

- Holding it safely is, if not impossible, then not straightforward - learning curve. To be honest, you can mock, but if I thought the upsides outweighed all the rest of the downsides, I'd still probably be too scared of doing something wrong to drop £100k in it.

Would you disagree with any of the above?

Let's get one thing out of the way - a common misconception. 1 BTC is just an arbitrary unit. There is nothing that requires one to stump up a minimum amount to be able to own some BTC. Most user friendly platforms allow buying even £10 of BTC. If everyone suddenly decided on a convention to quote BTC price in say mBTC (milliBTC), would it give you comfort to say that its priced only £20 a pop?

I suggest you think through the implications of quoting prices in smaller subdivisions of a Bitcoin.  The effect is that as the usage of bitcoin increases there will be insufficient to go around without subdividing further, thus upping the effective value of existing holdings.  Great for the "haves", not so great for everyone else. 

With this happening there will be less incentive for the Bitcoin rich to invest since they are on an upward moving escalator anyway.  Any profits they make in the future will be small in current bitcoin terms. Classic deflation.

Deflation is a far greater problem for the economy as a whole than inflation.

I think you are confused. Bitcoin is already divisible into very small units. I only spoke about the convention adopted for quoting a price. How can just a change of price quoting convention change anything fundamental about Bitcoin? People can still buy whatever amount they want - small or large.

DannyCarey

Linton said:

DannyCarey said:

aaj123 said:

bugbyte_2 said:

You call Bitcoin an Asset, but to be an asset it must therefore have something supporting its price other than sentiment. 

Yes, there very clearly is 'something' that causes Bitcoin to be of value. Rigid monetary policy resulting in absolutely defined supply and scarcity characteristic, ability to be transferred peer to peer and ability to be self custodied without storage costs, censorship resistance. 

Here are 10 somethings for you @bugbyte_2

1. Decentralisation: No government or central authority controls it. This gives Bitcoin a level of autonomy that many people believe will make it more resistant to inflation and economic crises.

2. Limited Supply: There is a finite amount of Bitcoin that can be mined (21 million), which means that it is scarce and many believe it will hold its value better than fiat currencies, that can be printed at will. The number of new participants and active addresses climbs every day also. 

3. Global Reach: Bitcoin can be sent and received anywhere in the world. This makes it an attractive alternative for people who need to transfer money across borders for next to no fees. 

4. Security: The blockchain that underpins Bitcoin is extremely secure, virtually impossible to hack or counterfeit.

5. Accessibility: Bitcoin can be bought and sold easily online, and it is increasingly being accepted as a form of payment by merchants around the world.

6. Low Transaction Fees: Bitcoin transactions are typically cheaper than traditional payment methods, which make it more attractive to people who want to avoid high fees...

7. Increasing Acceptance: Bitcoin is becoming more widely accepted by businesses and institutions around the world, which will increase its legitimacy as a form of payment and store of value.

8. Store of Value: Some people see Bitcoin as a digital gold, a store of value that can hedge against inflation and economic instability... like what we are seeing now with some Banks failing... again

9. Innovation: The technology behind Bitcoin is constantly evolving, with new features and improvements being added to the blockchain. This could make it more attractive to investors who want to invest in cutting-edge technology. Look at what Jack Dorsey is up to now...

10. Financial Freedom: Bitcoin offers users a level of financial freedom and privacy that is not available with traditional banking systems. This could make it more attractive to people who want to avoid government surveillance or control over their finances.

To answer some of those points....
1) Central management of currency is essential for a nation state to manage its own economy.
2) Very limited supply is a problem if you want an economy to grow and invest for the future, and the standard of living to increase. Research the Gold Standard in the 1930s.  Deflation is a far more serious problem than inflation. 
7) I will believe that Bitcoin is becoming more accepted when my local Tesco takes it.
8) Has Bitcoin provided a hedge against inflation and instability in the past few years?
9) I am not sure I want my stored value to be a technology test-bed. It should be simple.  That does not prevent technology and innovation in the use of the currency.  Consider what has happened without Bitcoin in the past 50 years.
10) That is why it is attractive to those stealing money from the rest of us by crime and tax evasion.  I want governments to be able to prevent this. AIUI bitcoin makes it much more difficult.

Will we need more than one "bitcoin"?  Are you proposing a world where any person, company, or country can create a new currency?  If so you will need to duplicate the current trading currency infrastructure with exchange rates continuously changing and vast quantities of money being moved from one to currency to another.  Wuuld the situation be any different than currently? If you are not proposing that who will police the  system across the world to ensure there is only one "true" bitcoin?

1 - Is it? Maybe in the past it had to be that way... in the future, that remains to be seen... but perhaps fiat currency will always be here in some capacity... although one could argue that a decentralised system, such as Bitcoin could have the potential to provide greater transparency, security, and efficiency in managing a nation's economy. It's also fairly obvious that central management of currency can lead to corruption and misuse of power. When a small group of individuals controls the currency of a nation, they can often use their power to benefit themselves or their allies rather than the overall economy. Fiat currency is a 100 year old experiment after all. Money used to be pegged to something like gold, now it's only backed by words and the threat of military violence. Then there's the endless bailing out of banks, which of course means mass money printing, diluting spending power, hurting all citizens... but eventually, the world changes. 



2. There's enough Bitcoin to go around, one Bitcoin can be divided into 100,000,000 units, and more again if that's deemed not enough... Since you are asking me to research I can return the ask and recommend a good book "The Price of Tomorrow" by Jeff Booth, he argues for deflation. Makes some interesting points but I don't agree with everything...

7. Ok 

8. Yeah, its up 356.68% over the last 5 years, not bad eh? 

9. Ok

10. You are aware that the vast majority of organised crime today happens with virtually traceless paper money, right?



Anyone can copy the bitcoin code and swing up an alt coin / sh*t coin, it doesn't mean anyone will use it.There are 19,000 alt coins and none are anywhere near bitcoin in terms of size, market cap, users etc. It was allowed to grow organically without a figure head and that's why it will always be number one. There is no second best.

The Network effect is also everything. If I copy a chess board and change the rules, you won't get billions of chess players wanting to play my poor copy. 

"..you are not proposing that who will police the  system across the world to ensure there is only one "true" bitcoin?"

The people running Bitcoin nodes right now which verify the Bitcoin blockchain will do that. Right now there are around 40,000 independent nodes doing that for no other reason but to verify the blockchain is 100%. 

Qubit

Tick tock.....