bitcoin trading.

Aegis wrote: »

If the value is right for now, why would it not be wrong in two years if the price goes up? The asset doesn't produce any underlying income and has no real application other than as a token of exchange, and if the mining continues there will be a larger supply in two years rather than a smaller one. As such, if the value was correct now, you'd expect the price in two years to be lower due to the expanded supply, not higher.

The value will increase as the technology develops and more and more users want to get involved in it. This is potentially an entirely new asset class in it's early development. Every day there is more and more adoption occurring around the world new businesses/apps, etc. being created - it is very much a massively growing area.

You go on to explain your thoughts on "why", but they don't make sense from an investment perspective.

Please see above

This should only matter if there's a practical use for the asset in question and should only actually take place with reference to a currency which is inflating. In other words, if inflation runs at 3%, you would expect a scarce but tradable asset to increase each year broadly by inflation where the supply stays broadly constant (i.e. where utilisation and introduction of new supply are similar).

Currently the use is that of a means of storing value outside of the banking system, free from regulation (though exchanges will get regulated) and due to a finite supply with a system that makes bitcoin more and more rare as time goes on. That in itself to many people has value. There will only ever be 21 million (full) bitcoin ever in existence and they reckon that several millions of these have been lost forever. Supply is finite.

There are plenty of assets out there which are scarce, but they're not expected to increase in value enormously. Why is bitcoin the exception?

Please see above - there can only ever be 21 million in existence. Name me another asset where the entire supply in it's history is set at a particular number?

Why do you expect bitcoin to benefit from this transformation? Is it really at all likely that entire economies will switch from currencies they control to a decentralised system with ever-increasing costs to run the network, coupled with an inability to process anywhere near the number of transactions a second needed to replace even a small trading currency, let alone a significant number of them? Is it not more likely that - if blockchain genuinely is the future of finance - central banks will instead create their own?

Mainly because it has already established itself within the space and has also got all the very best developers working on it. I believe that in the future banks will go crypto and it will become the norm to use it - if bitcoin can capture even 2% of that then it's value will be vastly greater than it is now.

Blockchain is the technology. Bitcoin is a prototype demonstration of that technology. You can have blockchain without bitcoin, hence the number of cryptocurrencies now in circulation.

The problem with prototypes is that they are supplanted by better implementations of the technology.

Bitcoin has the best developers in the space working on it and it is an evolving technology - I expect most alt coins to have died with any with good features basically assimilated into Bitcoin - there are already developments planned that will increase privacy, deal with any scaling issues and make things quicker and more efficient - all with Bitcoin.

John-K wrote: »

But it has stopped. It’s been wandering down for months.

What the zealots pumping it never seem able to answer is why this particular incarnation should be worth any more than I is today. Even if it were used for every transaction on Earth, there’s no reason for it to appreciate.

The only possible reason to think that it will go up is that you think someone else will want to pay more for one in future than they do now.

You are thinking short term - I am thinking long term. Please see my post above as to why I believe the value will grow substantially over the coming years. You may disagree and that's fine but like I said in my previous post more and more people will want to get into it and yes that does mean people will be prepared to pay more for it.

hildosaver wrote: »

Aegis wrote: »

If the value is right for now, why would it not be wrong in two years if the price goes up? The asset doesn't produce any underlying income and has no real application other than as a token of exchange, and if the mining continues there will be a larger supply in two years rather than a smaller one. As such, if the value was correct now, you'd expect the price in two years to be lower due to the expanded supply, not higher.

The value will increase as the technology develops and more and more users want to get involved in it. This is potentially an entirely new asset class in it's early development. Every day there is more and more adoption occurring around the world new businesses/apps, etc. being created - it is very much a massively growing area.

How many more new users do you think there will be? Most people have heard of bitcoin by now, and have either decided to invest or to avoid it. Instead of converting new people from large numbers of people who know nothing about bitcoin, there's now the challenge of getting people interested who have decided for various reasons not to buy into the fad.

More to the point, this isn't a rational reason for the asset value to change. Either an asset is correctly priced or it isn't - the number of people investing doesn't affect that fundamental calculation. What you're instead describing is "greater fool theory", namely the idea that something will continuously go up in value because there will always be someone who wants it at a greater price. This is the very definition of bubble formation, and if this is the reason why you are buying this asset, then you are buying in to the mania rather than to an asset which is increasing in value for rational reasons.

You go on to explain your thoughts on "why", but they don't make sense from an investment perspective.

Please see above

As mentioned, I don't think you've addressed this point any more than those who bought into limited edition Beanie Babies did during that mania.

This should only matter if there's a practical use for the asset in question and should only actually take place with reference to a currency which is inflating. In other words, if inflation runs at 3%, you would expect a scarce but tradable asset to increase each year broadly by inflation where the supply stays broadly constant (i.e. where utilisation and introduction of new supply are similar).

Currently the use is that of a means of storing value outside of the banking system, free from regulation (though exchanges will get regulated) and due to a finite supply with a system that makes bitcoin more and more rare as time goes on. That in itself to many people has value. There will only ever be 21 million (full) bitcoin ever in existence and they reckon that several millions of these have been lost forever. Supply is finite.

You've completely missed the point. If the supply was currently fixed, then you would expect the price to be relatively stable if the asset is rationally bought and sold according to known information. That pricing point would - if the asset remains useful - rise with inflation, but shouldn't be expected to increase in real price over and over again.

You've also got a problem in the claim that this is a store of value. It's not. The value fluctuates so much that you can't guarantee you'll have even 50% of your value remaining in a given week.

There are plenty of assets out there which are scarce, but they're not expected to increase in value enormously. Why is bitcoin the exception?

Please see above - there can only ever be 21 million in existence. Name me another asset where the entire supply in it's history is set at a particular number?

Limited edition Beanie Babies. Gold doubloons. For that matter, any precious metal.

If I create a random file on my computer and encrypt it strongly enough, it will be entirely unique. Does that give it value?

Why do you expect bitcoin to benefit from this transformation? Is it really at all likely that entire economies will switch from currencies they control to a decentralised system with ever-increasing costs to run the network, coupled with an inability to process anywhere near the number of transactions a second needed to replace even a small trading currency, let alone a significant number of them? Is it not more likely that - if blockchain genuinely is the future of finance - central banks will instead create their own?

Mainly because it has already established itself within the space and has also got all the very best developers working on it.

Much like Myspace then?

I believe that in the future banks will go crypto and it will become the norm to use it - if bitcoin can capture even 2% of that then it's value will be vastly greater than it is now.

Cryptocurrencies are a commodity, not a real currency, so why would banks choose to adopt them as the norm? To give them legitimacy, you'd have to have stable currencies within each jurisdiction, which means they will need to be centrally managed. As bitcoin in particular is designed to be decentralised, it doesn't fit that requirement. Even if bitcoin becomes more mainstream than it presently is, the fact that it can't be used to settle tax debts to countries in a fixed amount means that its future as an actual currency is impossible. No one government can take ownership of bitcoin without it failing as a decentralised currency, but it can't become a real currency until a government starts pricing everything in bitcoin, which they won't do unless they can control the currency. It's a vicious circle that can't be broken.

Not to mention the fact that bitcoin doesn't really have any advantages over existing currencies. Want to talk about established currencies? Modern fiat currencies have decades or centuries on bitcoin, so without a really compelling need, there is no chance whatsoever that they will be replaced. I just don't see that there's a need for bitcoin - GBP is perfectly suited to being used as a currency.

Blockchain is the technology. Bitcoin is a prototype demonstration of that technology. You can have blockchain without bitcoin, hence the number of cryptocurrencies now in circulation.

The problem with prototypes is that they are supplanted by better implementations of the technology.

Bitcoin has the best developers in the space working on it and it is an evolving technology - I expect most alt coins to have died with any with good features basically assimilated into Bitcoin - there are already developments planned that will increase privacy, deal with any scaling issues and make things quicker and more efficient - all with Bitcoin.

If blockchain survives as part of a modern currency, it will almost certainly be one developed by a country, not bitcoin.