Key Post Bitcoin is a clearly identifiable economic bubble

cremeegg

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The total Market Capitalisation of Bitcoin (at a €10,000 price) is €21bn makes it equivalent to the 25th largest company. Just larger than VISA (funnily enough a payments company) and just smaller than Walmart.

So while it may be a bubble, and the fastest expanding bubble in history it is not (yet) a very large bubble.
 

elacsaplau

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Bitcoin soars over 20% after leading financial commentator calls it a bubble
  • The opening price on Saturday 25 October was $8,168. In just a few short days since Mr. Burgess published his comments, Bitcoin has continued, what others believe, is its inexorable rise and has now soared to an amazing $9,833 (having actually been even higher yesterday).
  • At current prices (which are unlikely to remain), since Saturday morning, and in spite of understandable widespread profit taking yesterday, markets have increased their valuation of the leading crypto by a staggering, in excess of, 20%.
I am sure that must be a selling opportunity.
 
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elacsaplau

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The total Market Capitalisation of Bitcoin (at a €10,000 price) is €21bn makes it equivalent to the 25th largest company. Just larger than VISA (funnily enough a payments company) and just smaller than Walmart.

So while it may be a bubble, and the fastest expanding bubble in history it is not (yet) a very large bubble.
Hi Cremeegg,

I think the €21bn market cap is a fair way out (......would have been right at some stage and not so long ago!). Of course, many around here believe it's just a matter of time before such mkt cap (and substantially lower) will be re-visited. Did you see that the price is up 20% since Saturday morning, though?;)
 
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cremeegg

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Hi Cremeegg,

I think the €21bn market cap is a fair way out (......would have been right at some stage towards the start of the year!). Of course, many around here believe it's just a matter of time before such mkt cap (and substantially lower) will be re-visited. Did you see that the price is up 20% since Saturday morning, though?;)
Sorry my typo, 21 million bit coin at €10k each is of course €210bn. Which figure does put it between Visa and Walmart in terms of market cap.
 

Jim2007

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I would be interested in hearing how you have concluded that it is a gamble and not an investment?
At very very best it is currency speculation and that hardly ever works out well for the average Joe. But unlike any other currency there is absolutely nothing whatsoever behind it other than believe and greed. If someone was to come up with a better Bitcoin tomorrow and it gained traction, what would your Bitcoin be worth then???

Or if it was revealed that a bug in some of the basic validation algorithms had a allowed hackers to release millions of new coinage into the system and that an up coming bug fix would clearly identify if the coinage held by an individual was valid or not... how fast do you thing people would start dumping their coinage in case it was fake and what would it be worth then.

Advanced math is a very dangerous thing in finance, because it is creates the illusion one safety when there really is none there.
 

argolis

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This is a good discussion.

I have to disagree with the idea that there's no intrinsic value in Bitcoin and digital currencies. The intrinsic value/utility is that they can and will enable low-cost online transactions. I believe they'll eventually support proper micropayments, bringing seamless and safe ways to pay your way online, which would be a huge boost to the online economy. Sure, it's not there yet but it's still early days.

Cash has no intrinsic value either, people were initially skeptical about passing around bits of paper, but because the governments who wanted it to be used said it was good for paying taxes, people came around to accept it. Some info on the intrinsic value argument here:

https://www.wired.com/story/bitcoin-has-no-intrinsic-value-neither-does-a-dollar1-bill/

It's worth saying that Bitcoin transaction costs are getting so high that it's losing its intrinsic value compared to other blockchain currencies and it might eventually fail if it doesn't evolve and other better currencies take its place. This is the reason for the recent split creating Bitcoin Cash, where the goal is to get back to super low cost transactions and one of the reasons that other currencies spring up. It hasn't sunk in with the speculating public that Bitcoin is getting riskier because it's the posterboy for the whole shebang and most people are treating the currency as an asset and speculatively piling in.
 

elacsaplau

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I accept most people believe that Bitcoin is in a bubble. [Disclosure: I have been an aggressive seller myself this year. I also have an open mind on the subject and am not evangelical about cryptos like some of my acquaintances. If we are reaching the proverbial shoe shine boy moment, presumably there's a pile of cash (as in hard currency!) to be made on the way down].

I think this is an important debate and agree with including unambiguous warnings.

So in the spirit of debate, Brendan's thesis is that bitcoin is in a "clearly identifiable economic bubble".

After 68 posts, I'm still unclear when the price became clearly identifiable as a bubble.

Was it in a bubble when the price hit:

a) $1
b) $10
c) $100
d) $1,000
e) Some other amount

All I'm asking is for posters to please advise when you feel the price reached bubble levels and why? [People have been telling me it's a bubble for a very long time!]

[There is a related but very different question - what is the maximum upside in Bitcoin's price that people can envisage from here? Again, I'd appreciate your reasons.]
 
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MrEarl

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....All I'm asking is for posters to please advise when you feel the price reached bubble levels and why? ....

[There is a related but very different question - what is the maximum upside in Bitcoin's price that people can envisage from here? Again, I'd appreciate your reasons.]
Hi,

While you may be more interested in the logic behind peoples thinking, I don't think it's really appropriate to proceed with those questions as they are currently presented. :)

We don't discuss the price of individual equities here, so it seems to be that this is getting into similar territory (although I'm happy to be corrected).

Perhaps we could discuss the "why" without getting into the price though ?
 

Brendan Burgess

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You asked a similarish question here:

If I asked you to buy 100 bitcoins right now on the condition that you must hold on to them for 1 year - what is the maximum that would you would be prepared to offer. As it's the weekend, I'll make it easy for you!!

a) Not interested at any price
b) €100
c) €1,000
d) €10,000
e) €100,000
f) somewhere north of €100,000
Bitcoin is worthless. It has no intrinsic economic value.

Tulips had an economic value close to zero in 17th Century Holland.

If I could have sold Bitcoin short at €100, I would have done so.

Likewise, €10,000 is just about €10,000 too high.

But you can't explain that to people. Remember that scam a few years ago where women used to meet and bring a load of cash. It was a straightforward pyramid scheme. But you couldn't tell people that. Once a crowd of believers get together, that's it. They ignore the evidence and reason.

So, it was overvalued at $10. But unless you bought a material amount of them, it didn't really matter.

Brendan
 

MrEarl

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....They ignore the evidence and reason.

Brendan
Hello Mr. Burgess,

The obvious flip side of that coin though, is that if we accepted the evidence and reason every time then we wouldn't be able to get on a plane and take a flight etc.

The large majority of people have forgotten that Bitcoin is an efficient, cheap, and independently trustworthy method of international payment. There's a value in having a service along those lines (although it's clearly nothing like the current speculative price being applied to Bitcoin).
 

elacsaplau

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Fair enough, Brendan

If I understand you correctly - Bitcoin has no value whatsoever and anything above zero is over-priced.

Let's see if there are alternate views out there on my first question.

Still also interested in question 2.
 

elacsaplau

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Thanks Merowig,

Some interesting links as well - interesting to see Novogratz's is a bullish as ever.
 

fpalb

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Bitcoin is worthless. It has no intrinsic economic value.
I've said it before, but looking for intrinsic value in things that are digital makes no sense. If I were to offer you ownership of the domain name google.com for 100 would you buy it? Domain names are potentially infinite in supply and have no intrinsic value so any day now they'll all be worth 0 on the open market right?
 

24601

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Hello Mr. Burgess,

The obvious flip side of that coin though, is that if we accepted the evidence and reason every time then we wouldn't be able to get on a plane and take a flight etc.
Probably not a very good comparison given that air travel is vastly safer than most other forms of conventional transport. Evidence and reason actually proves that a fear of flying is wholly irrational when compared with the ease at which people hop into car. Risk is a line, not a point in time. Bitcoin is quite clearly an extremely risky punt for a wide range of reasons. The likelihood of an extreme correction in price is almost certain and the impact could be similarly significant. Anyone who believes otherwise is just as well to find themselves a roulette table and have a go.
 

TheBigShort

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But unlike any other currency there is absolutely nothing whatsoever behind it other than believe and greed. If someone was to come up with a better Bitcoin tomorrow and it gained traction, what would your Bitcoin be worth then???
I don't think there is anything backing the euro, dollar, sterling, yen, etc, other than confidence. Confidence that buyers and sellers will accept those currencies, either in paper form or electronic form. It is the same for bitcoin.

Or if it was revealed that a bug in some of the basic validation algorithms had a allowed hackers to release millions of new coinage into the system and that an up coming bug fix would clearly identify if the coinage held by an individual was valid or not
Ditto forgery of currencies. If some forger figures out a way to forge paper currency, they can release millions of notes into the system. (Arguably the money-printing scam of QE is as close to devaluing fiat currencies as anything).
Ditto electronic fiat currency - in fact, my credit card was hacked once before and it is an on-going problem for banks to ensure electronic bank accounts and payments remain secure.

Don't get me wrong, I'm not entirely convinced by Bitcoin. I have a small amount, it has almost quadrupled in price over last six months (if I cashed in I would have a very merry Christmas indeed, but that is the extent of my holding), but if I try to buy something with it there are very few to non-existent retailers to trade with.
On the other hand should that ever change....then the monetary system as we know will have been turned on its head.
 

fpalb

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Ditto forgery of currencies. If some forger figures out a way to forge paper currency, they can release millions of notes into the system. (Arguably the money-printing scam of QE is as close to devaluing fiat currencies as anything).
You say if they figure it out, but we know there are already detectable forgeries and we don't/won't know if there are undetectable forgeries. We have no way of verifying how much of any national currency exists in circulation, at least with bitcoin that aspect is transparent.
 

Jim2007

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I don't think there is anything backing the euro, dollar, sterling, yen, etc, other than confidence. Confidence that buyers and sellers will accept those currencies, either in paper form or electronic form. It is the same for bitcoin.
But then you don't invest in the Euro, the Dollar or Sterling either - You speculate. You also have major economies, regulation and central banks managing the currencies. If any thing goes wrong with the Euro you can expect the ECB and the SNB (Swiss National Bank) to conduct market operations, the will not happen with bitcoin. The only difference between a tulip and bitcoin is that today no one thing a tulip has any value beyond it's value as a seed.
 
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