Key Post Bitcoin is a clearly identifiable economic bubble

Brendan Burgess

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Investing can take many forms!!
Investing can. But investing is different from gambling.

Investing creates wealth over time for the investors. Gambling creates wealth for the bookies.

If you buy shares or invest in property, there will be a source of income which should, on average, over the longer term give a return on your money, although, on occasions, you will lose.

If you back a horse, play roulette, or buy bitcoin, you will lose over the longer term, although, on occasions, you will win.

Brendan
 
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Bitcoin is a system that functions as a decentralised digital money.
That's the theory but not the reality.

Bitcoin is almost entirely not being used as a currency to buy goods. If this was happening, on any scale, then there would be a greater case to argue that Bitcoin has value.

People are buying Bitcoin to speculate. People are not buying Bitcoin to buy a currency that has real world currency use.
 

joe sod

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It looks like the believers in bitcoin don't want to debate on this thread, they ignore it and continue with other threads that concentrate on how to buy it. We are just the dumbos that dont understand it. I wonder is this something to do with the facebook generation only hearing and seeing stuff that agrees with their world view. If bitcoin is indeed groundbreaking there must be some precedent from the past , is it railways or the invention of electricity, however most investors lost their shirt on those even though they turned out to be groundbreaking.
 

elacsaplau

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I think I know what you mean.....
.....but you think it's ok to make out that I said the exact opposite of what I said?? - and without any apology or acknowledgement?

I have no idea why you think you have a positive expectation.
......again I am not saying this. You really should read posts properly. I said up to this year (i.e. when the price was between 1% and 10% of its current price) that I considered it an asymmetrical risk in my favour.

"Whether at this stage there's a positive or negative expectation" - of course, you've no idea about how to value bitcoins (....you have already said this and I have already agreed with you.) And, again in my post, I said I am not sure where it goes from here. ;)

I understand that you and many others believe that Bitcoin is in a bubble - that's fine and very possibly correct - but misrepresenting what I said does not advance your argument. As I mentioned, I sold most of my holdings throughout 2017 (due, in part, to the continued price appreciation).

Think we should leave it at that - this thread has become a little annoying!
 
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Brendan Burgess

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.....but you think it's ok to make out that I said the exact opposite of what I said??
Apologies, but I certainly did not intend to do that.

I find the language confusing
Do you not understand what "asymmetrical in my favour" means?
So,sorry if I don't understand it.

Or is it a question of timing? You believed, for some unspecified reason, that buyers of Bitcoin could have an expected positive outcome? Now, they may no longer have, so you are selling?

Why not sell them all or maybe you have done so?

Brendan
 

fpalb

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That's the theory but not the reality.

Bitcoin is almost entirely not being used as a currency to buy goods. If this was happening, on any scale, then there would be a greater case to argue that Bitcoin has value.

People are buying Bitcoin to speculate. People are not buying Bitcoin to buy a currency that has real world currency use.
You used the word currency, I did not. Bitcoin is used as money like gold is - more as a speculative store of value than an every-day currency. Of course you can directly spend bitcoin if you want to, it's just that people tend not to, which is just as well as right now bitcoin can't handle much more transactional volume on the blockchain.
 

fpalb

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Like elacsaplau I saw bitcoin to be a hugely asymmetrical bet, so much so that I couldn't understand why almost no one else seemed to be seeing the potential or to care. This made me second guess myself, as I'm actually quite risk averse in nature anyway. I wish I had more conviction in my analysis, but in any case bitcoin was and continues to be something I care about beyond making profit from it. Also like elacsaplau, I've been selling off some lately because I'm overweight in it and because the chance of a crash increases the more it rises.

I have no expectation of bitcoin going to zero any time soon though, and I like many of the others who are selling now will be buying back when/if it seems undervalued again.

I wonder is this something to do with the facebook generation only hearing and seeing stuff that agrees with their world view. If bitcoin is indeed groundbreaking there must be some precedent from the past , is it railways or the invention of electricity, however most investors lost their shirt on those even though they turned out to be groundbreaking.
I'm not part of the facebook generation, but I could make the same accusation that people here who aren't getting bitcoin are failing to grasp the usefulness of something outside their world view.

I think you ask a very interesting question about a precedent for this, about something to compare it to. We're living through the computer revolution, it's happening fast and it's changing the world. Look how quickly digital photography surpassed film, look how quickly smart phones became ubiquitous, Have companies ever grown to be some of the biggest in the world as quickly as Google and Facebook have? Is there a precedent for that? I like to consider the possible reasons: 1) software as a product can scale faster than any traditional production line. 2) software can be distributed globally cheaply and quickly. 3) Internet communication means good ideas spread faster than ever, network/viral effects lead to exponential adoption. 4) The internet has made investing more accessible to people who may not have ever done it directly before, globally.

An interesting consequence of this (and I'm not even just talking about bitcoin here) is that if you consider those 4 reasons, we've the potential to have both unprecedented growth (in software related investments) AND unprecedented bubbles, maybe distinctly, or maybe even both at the same time :)
 
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cremeegg

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The fact that you got in early in this bubble and have got out early is good luck. And fair play to you.
Why should it be luck.

It wasn't luck that lead him to be aware of Bitcoin, it was reading the financial press or whatever. It wasn't luck that prompted him to buy Bitcoin, (I am deliberately avoiding the word invest). It was a decision, rational or otherwise, he made his decision to buy.

It wasn't luck that prompted him to sell, again it was his decision. He may have made more if he held on, it isn't bad luck if it turns out that way, its the consequence of his decision, he made have lost all the paper gains if he held on, that wouldn't be luck either it would be the consequence of that decision.

It is much closer to speculating in gold than betting on horses.
 

MrEarl

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...It is much closer to speculating in gold than betting on horses.
I would agree.

It's demand -vs- supply driven, rather than a pure bet on a win or lose scenario.

That said, much of the demand is probably driven by speculation, rather than a practical requirement for Bitcoins - but is that any different to the FX markets, where I think only something like 15% of trades relate to an actual transaction for goods or services ?

There is obviously a practical use for Bitcoin as a medium of exchange for goods and services and we are stating to see more online retailers accept it as a means of payment. However, that said it also appears to be a popular method of transferring wealth between unscrupulous types, if we are to believe all that we read. From a practical point of view, that takes it in the direction of a currency - notwithstanding the fact that it's a currency without the support of a central bank.

RTE's latest article: Bitcoin Keeps Central Bankers on Edge

Japan recognising Bitcoin as legal tender earlier this year was a very interesting move. The requirement for exchanges to register with the Bank of Japan was shrewd, as it helped to ensure that the Bank of Japan could keep an eye on them and I imagine, have some influence over them.
 

Brendan Burgess

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Why should it be luck.
Hi Cremeegg

If he paid real money for something which has no value and he subsequently sold it for more than he paid for it, that is luck.

No one has the skill to forecast the direction and timing of bubbles. That bubble could easily of burst shortly after he bought the bitcoins.

In general, when things turn out well, we attribute them to our skill. But when they turn out badly we attribute them to luck.

Brendan
 

Brendan Burgess

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If you back a horse, play roulette, or buy bitcoin, you will lose over the longer term, although, on occasions, you will win.
On reflection, if I back a horse on the betfair exchange, there is probably an expectation of a 5% loss. Some people would be able to overcome that disadvantage through luck or skill.

With Bitcoin, the expectation of loss is 100%.

Brendan
 

cremeegg

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Hi Cremeegg

If he paid real money for something which has no value and he subsequently sold it for more than he paid for it, that is luck.
If he bought it because he thought it was a fashionable thing and he thought that fashion had further to run that is not luck. Thats is backing your understanding of the mood of the market. Not the same as backing your understanding of the value of bitcoin, but just as valid.

No one has the skill to forecast the direction and timing of bubbles.
Makket history has lots of examples of people doing just that. George Soros and the GBP is the most famous example I can think of immediately.
 

cremeegg

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No one has the skill to forecast the direction and timing of bubbles.
Sorry I had to come back to this again. Lots of people think that this is what the stock market is all about.

There is even a stock market adage to cover it. "When the last bear says buy, it's time to sell" There are still plenty of bitcoin bears about.
 

Brendan Burgess

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Lots of people think that this is what the stock market is all about.
If they do, they are wrong.

The stockmarket has intrinsic value. It rises and falls. It may even go into bubble territory, but with really rare exceptions e.g. the dot.com bubble, it's not possible at the time to tell that it is a bubble.

Sure, there are some rare exceptions e.g. Soros.

But they applies valuation methodologies to the stockmarket and concluded it was overvalued.

Bitcoin is worthless, yet people are prepared to pay thousands for each Bitcoin. It's bonkers stuff. Sure it might well get more bonkers, but that doesn't mean it's not bonkers.

Brendan
 

ant dee

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Bitcoin is worthless :D:D

On a serious note, those that are interested, devote some time and listen what Andreas Antonopoulos has to say, he is good at talking, good at explaining things.
He has many speeches on his youtube channel, or you can find collections of speeches on his books.
For us, the financially privileged, all bitcoin has to offer is speculation. Not all are like us, in fact we are the minority.
 

MrEarl

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Hi Mr. Burgess,

That is true - but there may be a justifiable premium to be paid for Bitcoin in return for the convenience of being able to make instant worldwide payments, with no currency conversions etc. Obviously, I am not suggesting that the premium should be in the $8k-$10k per Bitcoin range :)
 
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