By that logic, gold (or indeed any asset in case you throw the "gold has an industrial use" argument at me) has no value either. Or, come to think of it, a €20 note: try selling one for more than €20!
Bitcoin has subjective value - intrinsic value is irrelevant
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By that logic, gold (or indeed any asset in case you throw the "gold has an industrial use" argument at me) has no value either. Or, come to think of it, a €20 note: try selling one for more than €20!
TheBigShort
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Over last 10yrs US money supply has expanded by amounts greater than the supply expanded over the previous 80yrs. The economic system that harps on about how efficient markets are, is inefficient. Free market capitalisim is hostage to 'too big to fail' mantra. Meaning that it is open for fraudulent and corrupt business, or 'whatever it takes' QE. A cursory search for corrupt banking practices over the last decade puts the corrupt practices over the previous century into the ha'penny place.
The banks are the platform for all financial transactions. They are diseased.
Couple that with rising geopolitical tensions and the trajectory is one of increasing instability.
The perpetual debt based system has cracked. Either a massive write down of debt, devaluing everything you ever owned or, inflate the debt away through rising wages, proxy wars.
The option to transfer some of my money to a decentralised blockchain to hold my money is an intriguing idea and has appeal. Currently bitcoin is the chief crypto and to date, 9yrs on, has withstood all attempts to diminish its appeal - it is showing resilience.
There is limited amount of 'space' on this blockchain - 21m units at the max.
You want me to put a figure on it, by like an apartment in Leitrim, or wherever by way of a mathematical equation. But that is a waste of time, as your own example shows.
What is the point in 'calculating' the value if another calculation can show the opposite?
In other words, there is no mathematical formula or equation that can calculate the true 'intrinsic' value of anything. If there was there would never be price fluctuations.
But hey, I dont want to be a spoilsport, so here is a calculation if bitcoin 'takes over the world'!!!
All the money in the world / 21m units of bitcoin = $ 2,695,769.78 per unit of bitcoin.
Alternatively, 5% of that = $52,000 odd.
I have a conservative estimate of $40,000 in AAM valuation game!
Now, you're getting close to the truth, but probably not in the way you imagine. Of course you can issue your own currency, and people have done (e.g. in localised settings). If you can persuade people it has a value, you can use it to buy things or exchange for other currencies. It has a value in other words. Exactly the same as Bitcoin: all you need is a market of buyers and sellers to agree it has some value: what form it takes is irrelevant. It could be a piece of technology such as Bitcoin or a piece of paper with some clever printing on it or a bar of gold or, God forbid, tulip bulbs. The fact that someone sitting outside that market thinks it has no value and is shouting about emperors and clothes, or that the value may in fact collapse to zero at some point in the future is irrelevant. It does objectively have a value and saying it doesn't won't alter that.
Duke of Marmalade
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At last we are getting something Boss. Here is a methodology not unlike the one I cited from Investopedia. There are many theoretical objections to the methodology - velocity of circulation, store of value etc. but it is at least something. So can we agree for sake of future argument that if bitcoin eventually settles down as just another boring transactional currency it would be worth c. $ 10k per 1% of global penetration. It is obviously nowhere near that now and the current price should be seen as speculation on the final resting place, fair enough.
Nonetheless it is worth trying to guesstimate how far along that path it is now. We hear that it is possible to buy lattes in some joints. Would you say 1 in a million latte's are thus sold. If lattes were typical we would then have a current value of $2.69576978. But possibly that is unfair. We should look at bigger purchases. I understand that a builder in Larne will accept bitcoin for his appartments. I think also that a miner in Essex bought a house with bitcoin. Still looks in the 1 in 100,000 range, that's $26.95..... Another possible test of current penetration is how many folk earn their living in bitcoins. I think this is currently negligible, not even 1 in a million.
But the real point is that it will never be allowed to achieve penetrations anything like the 1% implied by current prices. Why? Because one of the main objectives of the bitcoin community (that's what they call themselves) is to subvert the control of currency by central banks. Society will never let that happen.
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But I think Firefly in post # 20 made a good point, i.e. if significant use is made of cryptocurrencies to support criminal activities, and a quick trawl of the Internet indicates this may be happening, it adds an additional factor in evaluation a cryptos 'value'. Firefly said “If/when this [i.e. the intrinsic value will be limited to the value placed by those conducting illegal activity] happens, the price will plummet and those hoping to make a return on holding the currency itself will lose out and probably leave with what they can.” I think this is a valid point and if correct may well eliminate its USP, i.e. the lack of central bank control, which reasonably would influence its future price.
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You're suggesting that the only USP that crypto has is that it appeals to the criminal fraternity?
- It's programmable money
- It's value is not debased through the printing of money as with FIAT
- It can't be confiscated - by banks or government ...should someone decide that you will have to take a cut on your savings because the banks got greedy...or they or government mismanaged.
- It has major potential to upset the remittance industry.
I'm not doing it justice with that list - but those are some of the aspects that suggest a number of USP's.
Criminals have used cash for years - lets not throw the baby out with the bathwater.
TheBigShort
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Spot on!
Nothing like a bit of competition to rejuvenate, reconsider and reinvent, is there?
Isnt this what free-market capitalism is supposed to initiate and embrace?
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TheBigShort
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This is a book value of what has already been, correct?
This is subjective. Granted it is supported by facts and figures from various sources and their own mathematical analysis etc, but it is still a shot at predicting the future.
We can all predict, to some extent what will happen in the future, but it is never certain.
This is standard book accounting valuation. Accepted by investors and the broader financial industry. So it carries weight in influencing or determining whether a share price represents good or bad value overall. But it is not conclusive by any means.
For instance, trying to calculate the 'intrinsic' value using this method may produce a result that indicates a fair share price at that time. But if you were aware of impending strike-action by pilots how would you factor that in to such a calculation?
Inherent in that statement is an acceptance that such analysis and forecasts are inconclusive at best, and potentially wide-off the mark at worst.
If your analysis could calculate the true value of anything then there would be nothing to challenge.
E.g 2+2=4.
It is one way to value Ryanair as an investment. It is not without merit, granted, but it is inconclusive. As such, if Ryanair happened to fly direct to Moscow from London 10 times daily, I may factor in current political tensions and the uncertainty associated it as reasons to sell, what on the face of it, is a fair book price for the share.
On the otherhand I may determine that London and Moscow will resolve their difficulties soon enough and, with Brexit, cut a trade deal that will see more activity between the two cities, in turn adding value to that share price.
Either way or or, its all subjective.
Simply because you cannot apply a book accounting p/e ratio doesnt mean you cant value something, put a price on it.
Ditto my record collection in the attic, Da Vinci paintings of Christ, vintage Ferraris etc, etc.
Brendan Burgess
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Agree fully, so I have deleted the posts about what Bitcoiners detest about centralised currencies.
It would be helpful for everyone if people read the thread title and stuck to that, rather than discuss every issue in every thread.
If you respond to the intrinsic value point but then make an off-topic point, the entire post will be deleted.
Brendan
It comes down to proportionality.
Criminal activity accounts for a much higher proportion of total transactions by revenue in Bitcoin versus those with FIAT, I would imagine.
However....
Bitcoin is losing favor with cybercrooks, a Congressional hearing on terrorism financing was told Thursday.
Hackers are increasingly moving to Ethereum and other more moderately priced forms of cryptocurrency as Bitcoin has become too volatile for their tastes.
https://www.forbes.com/sites/tedknu...n-losing-favor-with-cybercrooks/#39eb397e4960
This will in turn lead to more drops in the price of Bitcoin.....
Yes, I take your proportionality argument on board. We don't have numbers but I'd guess that's likely at this early developmental stage.
How significant remains to be seen. However, if criminals are less likely to use btc, there's a reason for it. Presumably, regulation is creeping in. Lightning Network has just been launched. Progress will be slow - but there's every reason to believe that btc can start to build again in terms of a transactional currency.
Having said all that, sure - I take your point that taking illicit use out of the equation may have an effect on btc pricing.
Circling back, we're saying then that btc gets its value from its usefulness. If that's the case - and it can pick up in terms of regular transactional use - then it will maintain value. If not, the project will fail..
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With respect I think it's a lot more than "likely".
I think this sums it up nicely for me:
"Coupled with Bitcoin’s popularity among ransomware extortionists and all manner of other cybercriminals, we must now face a chilling realization: the underlying value of Bitcoin really has little if nothing to do with its artificial scarcity or popularity as a medium of speculation.
On the contrary – the only reason Bitcoin has value to anyone is because of the underlying value as a medium of exchange for lawbreakers. If we could flip a switch and eliminate all illegal uses of Bitcoin, there would be nothing left of the cybercurrency."
https://www.forbes.com/sites/jasonb...ood-diamonds-of-the-digital-era/#5941bdd7492a
TheBigShort
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I really do think the criminal element with crypto and bitcoin in particular is way, way overplayed.
To my mind, the whole purpose of financial criminal behaviour is to make money - namely, cash.
So if someone forces me to transfer over my bitcoin to their wallet it will have zero impact on the btc price. If the purpose of forcing me to transfer is to simply hold btc then the impact on the price is zero.
But if the purpose of forcing me to transfer bitcoin is to cash it in and get €€€'s, then this criminal behaviour will reduce bitcoins price.
If the purpose of buying btc is to launder money, pushing up the price, then cashing in that btc will reduce the price in equal measure.
As mentioned in the forbes article above;
"He explained their identities can be exposed when they convert Bitcoin into cash."
- a downward pressure on the price
"Some crooks are posting pictures of expensive cars they are buying on social media, Ablon and Lewis said."
- unless the crooks are buying cars for btc, then they are cashing in (downward price pressure).
I really dont see how criminal activity is having such a impact on upward price pressure of btc if ultimately the purpose of criminal behaviour is to enrich oneself with material goods and services, and for that - cash is king!
To my mind, the whole purpose of financial criminal behaviour is to make money - namely, cash.
So if someone forces me to transfer over my bitcoin to their wallet it will have zero impact on the btc price. If the purpose of forcing me to transfer is to simply hold btc then the impact on the price is zero.
But if the purpose of forcing me to transfer bitcoin is to cash it in and get €€€'s, then this criminal behaviour will reduce bitcoins price.
If the purpose of buying btc is to launder money, pushing up the price, then cashing in that btc will reduce the price in equal measure.
As mentioned in the forbes article above;
"He explained their identities can be exposed when they convert Bitcoin into cash."
- a downward pressure on the price
"Some crooks are posting pictures of expensive cars they are buying on social media, Ablon and Lewis said."
- unless the crooks are buying cars for btc, then they are cashing in (downward price pressure).
I really dont see how criminal activity is having such a impact on upward price pressure of btc if ultimately the purpose of criminal behaviour is to enrich oneself with material goods and services, and for that - cash is king!
Proportionally - yes ...i'm quite happy to go with more than just likely. However, we really don't know - nor do Forbes ...nobody knows for sure. We don't have numbers.
However, it does seem like the proportion has dropped from what it was some years ago (again, no numbers - but some of it stands to reason). Despite the protests here, it had been grinding out a modest yet sustained uptick in use for transactional purposes. That hit a setback when it hit a scaling issue - with tx times and fees going through the roof. We now have Lightning Network, Shnorr signatures, Segwit, etc. - so my expectation is that we should see more progress on this once again. If we don't, bitcoin will fail.
I don't think any of us really like speculative transactional activity but nonetheless, that's going to account for a bigger proportion of overall transactions over the past 6 months.
In the context of this discussion, again you're saying that use case is what is relevant. If you're saying that illicit activity accounts for a large proportion of overall activity to the point, that remains to be seen but for arguments sake lets say you are right.
At the end of the day, bitcoins future lies elsewhere. A switch by all those involved in illicit activity to another medium may set the price back. So long as bitcoin comes through as a transactional medium for ordinary people (or at least tech savvy people to begin with), then it doesn't matter.
Long story short, I'm not going to argue with you - but we're probably on the periphery of the topic here in terms of what fundamentally gives bitcoin value as opposed to euro, dollar, yen, gbp, etc.
Duke of Marmalade
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There is nothing at all natural about retail transactions in bitcoin at this point of time. It is the community trying desperately to give it a use case, or simply flaunting their Shortie Syndrome. Until there are people whose earnings are in bitcoin it will never be a natural retail currency.
For it to have a genuine transactional use case it will need to be better than the natural currency of the transactor at achieving some objective. Speed of transfer has been mentioned. I suggest that this of only real value to speculators who need to act quickly to exploit arbs. Secrecy has also been mentioned though this would seem to be mainly a requirement of our criminal brethren and sisters. Store of value against the inevitable inflation of fiat - certainly not today and IMHO never, as to be a store of value requires the value to be intrinsic.
There seems to be little doubt that current activity is overwhelmingly speculative. But speculation cannot of itself be a long term use case.
I note that Lightening Network has come to fruition. I think it was fpalb who said that this would be a game changer. Possibly that is true in terms of infrastructure but the zero impact on the price of this development suggests to me that the majority of the speculators are not in the least interested in fundamentals. To them this is a game of supply and demand devoid of any connect to use values or anything else.
For it to have a genuine transactional use case it will need to be better than the natural currency of the transactor at achieving some objective. Speed of transfer has been mentioned. I suggest that this of only real value to speculators who need to act quickly to exploit arbs. Secrecy has also been mentioned though this would seem to be mainly a requirement of our criminal brethren and sisters. Store of value against the inevitable inflation of fiat - certainly not today and IMHO never, as to be a store of value requires the value to be intrinsic.
There seems to be little doubt that current activity is overwhelmingly speculative. But speculation cannot of itself be a long term use case.
I note that Lightening Network has come to fruition. I think it was fpalb who said that this would be a game changer. Possibly that is true in terms of infrastructure but the zero impact on the price of this development suggests to me that the majority of the speculators are not in the least interested in fundamentals. To them this is a game of supply and demand devoid of any connect to use values or anything else.
I'll just deal with this snippet seeing as we're just supposed to be addressing Intrinsic value.
People keep savings in FIAT - both short and long term. However it has no Intrinsic value or at least no moreso than crypto.
I've just been reading through the various posts in this thread, and this one - in response to a point I'd made - just lept out. I'm the one getting confused??? Because I refer to what the word actually means? But aparently, what words mean doesn't actually matter.....
No might about it - he is wrong. The only case where he would be right is if trading in Bitcoin, or using Bitcoin to buy goods and services stopped and nobody was willing to exchange other items of value for it. That hasn't happened (yet): if it ever does, its value will then be zero.
The term "intrinsic value" is used to refer to the idea that something has a value in-and-of-itself, and in particular is applied to something that can generate cash such as a company share. However, it's of no relevance to Bitcoin. Whether Bitcoin is a currency or not is irrelevant to this point; a Picasso painting for example has the same attributes: it's something that can be bought and sold and hence has a value attached to it. It has no "intrinsic value" however, as again you'll be a long time waiting for any cash to magically appear from it.
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Just an additional thought: is it possible to place Bitcoin on deposit and earn interest? (This is a genuine question: I don't know the answer). If it is, then it would have some intrinsic value. However, I suspect it isn't, if only because of the volatility in its price.