If Bitcoin was worth $1 each in 2011, why are they worth $12,000 each now?

Brendan Burgess

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They do have some useful features. But that does not make them worth $15,000 or $150.

Personally I would prefer a currency which is supported by Central Banks that one which is not supported by anything.

Brendan
 

tecate

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They do have some useful features. But that does not make them worth $15,000 or $150.
I honestly don't know on the price. At the end of the day, people dictate the price of anything. There is merit in the argument that the price continues to rise on the basis that BTC is finite and BTC is only scratching the surface. If institutions come in, then even a fraction of the pie would mean a higher price for bitcoin. Trading of BTC futures just started in the last hour on the CBOE.

Personally I would prefer a currency which is supported by Central Banks that one which is not supported by anything.
Supported or manipulated - and to whose gain or loss? Bear in mind the background which led to the writing of the BTC White Paper back in 2008.
 

landlord

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Personally I would prefer a currency which is supported by Central Banks that one which is not supported by anything.

What is ironic is that any whiff of central bank/government interference/regulation will more than likely cause Bitcoin to tank (initially). One of Bitcoins fundamental selling points for me and I suspect for others is its decentralized nature. After the financial crisis of 2008 many have queried the role of governments and world central banks for example propping up the fraudulent banks and their obscene employee bonuses at the expense of the average tax payer. I wonder if this was a driving force for Satoshi Nakamoto in 2009, a year after the financial crisis.
 

tecate

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After the financial crisis of 2008 many have queried the role of governments and world central banks for example propping up the fraudulent banks and their obscene employee bonuses at the expense of the average tax payer. I wonder if this was a driving force for Satoshi Nakamoto in 2009, a year after the financial crisis.

Its commonly acknowledged that Satoshi wrote that white paper in the aftermath of (and influenced by..) Leyman Brothers & the financial crisis. And you're quite right - it's decentralised nature is probably the primary attraction of the cryptocurrency.
 

Brendan Burgess

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An ETF will really open the door to hedge fund and institutional money.

It's possible, but very unlikely, that genuine institutions would buy Bitcoin. It's certainly likely that hedge funds would take huge bets against them.

Brendan
 

tecate

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One example ref. the interest of hedge funds in Bitcoin - once they have a means (a regulated entry point) to buy in.

Link

@Brendan: The link you provided goes back to June. The Crypto space is moving at a rate of noughts.....it's nigh on impossible to keep up with it.
 

Brendan Burgess

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The link you provided goes back to June.

Hi tecate

Investment principles remain the same. Bitcoin does not rewrite them. All of these arguments against are still valid:

some managers have suggested that their funds' own strict guidelines for investments were prohibitive when it came to the possibility of Bitcoin at this point.

Beyond these initial concerns, hedge funds seem to be uncertain about the security and volatiity of Bitcoin as an asset class. Louis Gargour of LNG Capital said that "Bitcoin's extreme volatility doesn't sit well with managers working on a risk-adjusted return basis. Furthermore, there are valid concerns that digital currency assets can be hacked or stolen."

One major way to improve Bitcoin's position would be for major banks around the world to provide services like settlement for Bitcoin and other digital currencies.
 

Firefly

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I read this morning in the Irish Times (they have a large article re: bitcoin today) that an investment of $1,000 in Bitcoin in July 2010 would today be worth $200m 200 million !!!!

If this is not a bubble can someone explain the rise? Was it just insanely undervalued in 2010 and if so, has the use of the currency exploded since then (or even expected to?).

The crazy valuations of companies like Pets.com or our own, beloved Baltimore Technologies never even approached this.

I think a short is the clever bet here, or else buy some gold as this is where the money will go when this whole thing comes crumbling down....


I've been trying to get my head around this explosion of the bitcoin price.

To put this into context, I've tried to compare it to one of the most successful companies and operators in history, Berkshire Hathaway.

Berkshire, as we all know, has been a very successful company since approx 1964, where time and again it has beaten the market. It holds some very successful investments as well as part/full ownership in a plethora of performing companies.

According to this article
https://www.businessinsider.com.au/warren-buffett-berkshire-hathaway-historical-returns-2015-3

$1,000 invested in Berkshire in 1964 would be worth about $11.6m today

But, $1,000 invested in Bitcoin in 2010 would be worth about $200m today

Can someone please explain how this growth can be justified?
Was Bitcoin so undervalued in 2010 or did billions of paying users appear, or is it based on future growth, or simply a bubble?
 
D

Dan Murray

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Was Bitcoin so undervalued in 2010 or did billions of paying users appear, or is it based on future growth, or simply a bubble?

Firefly,

The fact that someone of your standing is asking this question does not prove categorically one of my thoughts about BTC but it certainly adds significant validation!

The point in question relates to "clearly identifiable" part of the title. There are been several questions about this point by me and others and it has NEVER been answered! (Other than those who initially claimed BTC is worth as absolutely nothing, which then broadly became the more measured "more or less nothing".)

I would argue that BTC's arrival in bubble territory is not at all "clearly identifiable." This is why your question makes perfect sense! (If the answers you receive are along the lines: it's a bubble at pretty much all price points beyond practically zero, I suspect that your head-scratching activity is destined to continue, fellah!)

I know you've gone into the prediction business (on another thread) - but I will confidently predict that your question will not be sensibly answered, nor will there be a proper explanation as to how this mystery is apparently so "clearly identifiable."!!

[I would also argue that it's not even a bubble in the traditional sense - but let's deal with one element at a time!]
 
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brianb

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But, $1,000 invested in Bitcoin in 2010 would be worth about $200m today

I wonder about the depth of liquidity for bitcoin. Would someone with $200m of bitcoins be able to sell them in a short space of time and realise their current potential, or would they quickly exceed the liquidity available in one or more brokers?

Are there any easy ways to look at the depth of liquidity of bitcoin?
 

Firefly

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[I would also argue that it's not even a bubble in the traditional sense

It's a fair point though. The last bubble that comes to mind was the dot.com bubble where, thanks for the advent of the internet, all sorts of companies sprung up, such as Pets.com. In fact, anything with the .com after its name seemed to join the share price rocket. People then had no idea idea what these companies were worth but we driven by the expectation that the companies would one day make lots of money once the whole e-commerce thing took off.

I'm stumped with Bitcoin though. Even if it used by more people for purchasing more things, how is its price increase justified on any level?

If the demand for Bitcoin was driven buy people trying to buy it, to in turn buy other stuff, I would get it. But as far as I can see people are just buying it to sell it on for more money.

And there there are reports of people mortgaging their homes to buy Bitcoin and buying Bitcoin using their credit card.
 

Firefly

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It seems like someone has invented something which people may use to a greater degree in the future (but who knows) but that very few people use today. The only redeeming feature is that it is in limited supply, but so what?
 

Firefly

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I wonder about the depth of liquidity for bitcoin. Would someone with $200m of bitcoins be able to sell them in a short space of time and realise their current potential, or would they quickly exceed the liquidity available in one or more brokers?

Are there any easy ways to look at the depth of liquidity of bitcoin?
True, but if they wait until next year they'll be worth 1bn so what's the rush? :rolleyes:
 

tecate

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Investment principles remain the same. Bitcoin does not rewrite them. All of these arguments against are still valid
I'm not going to go so far as to disagree 'strongly' with any of you guys. I don't come from an investing backround. I've never dabbled in that. The concept of bitcoin appealed to me back in 2013 and I invested on that basis.
I won't trawl through the web. However, I agree that there is a volume of naysayers - naysayers who are significant figures in wall street, establishment banking, etc. Having said that, there are also former hedge fund managers and other significant people who are of the opposite opinion.
Whose right...only time will tell. Can there be a correction - resulting in consolidation and bitcoin starting back up the way again? - I believe that's plausible (in my unqualified opinion).

Furthermore, there are valid concerns that digital currency assets can be hacked or stolen."
Yes, that's quite right. But if someone dabbles in Crypto, the first thing they learn is that you do NOT hold significant funds on a bitcoin exchange for any longer than is necessary. Funds can be held in cold storage - very, very securely. If you're prudent and responsible, this is a non-argument.


It's a fair point though. The last bubble that comes to mind was the dot.com bubble where, thanks for the advent of the internet, all sorts of companies sprung up, such as Pets.com. In fact, anything with the .com after its name seemed to join the share price rocket. People then had no idea idea what these companies were worth but we driven by the expectation that the companies would one day make lots of money once the whole e-commerce thing took off.

That analogy has been made ad-nauseum - over the past few weeks. It may well be right. A different type of 'investor' has gotten involved in BTC in recent months. Not sure if it's a good thing....I was quite happy with steady organic growth.


I'm stumped with Bitcoin though. Even if it used by more people for purchasing more things, how is its price increase justified on any level?
It was designed to be of a finite amount. Currently 16 million bitcoin in circulation (aside from those that have been lost) - although of those 16 million, many 'hodl' (they're keeping them and using them as a store of value). BTC has 8 places of decimal. There's still enough to go around - but with a finite amount (the maximum 21 million will only be realised by 2040), the price must go up.


I'm stumped with Bitcoin though. Even if it used by more people for purchasing more things, how is its price increase justified on any level?
Currently, it's being used as a 'store of value' - to compete with gold and such. When I first got involved (and I believe this was the mindset of many others), I was thinking in terms of it being the currency of the internet. However, it's been hit by teething problems;

1. Volatiliy
2. Issues with confirming transactions (delays, etc. - and also higher transaction costs than were ever envisaged).
3. It's still hard for ordinary people to get to grips with

Having said all that, it's a young and developing 'currency'. Work is being done by a very talented pool of developers. When 'lightening network' comes on stream, that's going to change things drastically. It *may* bring microtransactions back into the mix once more.

Governance is also an issue. Everything in bitcoin is done by consensus. However, due to vested interests between the varying groups (developers, miners, end users, etc.), this has led to very cumbersome decision making. I like the consensus based approach and I don't know what the solution is - but decision making has to be more agile to advance the project.

It seems like someone has invented something which people may use to a greater degree in the future (but who knows) but that very few people use today. The only redeeming feature is that it is in limited supply, but so what?

See above.
 
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