Bitcoin biting the dust?

[Wiploc]

Bitcoin hit a new high of $98k. November last year it was around $35k. Nice little earner.

Inflation is Bitcoins Spinach. Everyone herp derps over to crypto when they're seeking to hedge against inflation and other market woes. Whether it works or not is a different argument I'm not making.

Edit and by everyone I mean the people who invest in Crypto.

I don't think that is a good strategy. One could suffer very significant losses in a matter of days. I wouldn't consider buying Bitcoin at the current price.

Warren Buffet says not to buy things we don't understand. Almost nobody understands Bitcoin.

 

[TSwizzle]

Warren Buffet says not to buy things we don't understand. Almost nobody understands Bitcoin.

I think when it comes to investing Buffet is probably right. I don't understand Bitcoin but I still bought a little bit and made a little bit of money, about a $4k profit but there is no way I would invest a large amount of money in Bitcoin. I just like to dabble with money I can afford to lose. I have tried to understand what Bitcoin is all about and read a number of articles by "experts" but I am not convinced they understand it either.

 

[Wiploc]

Warren Buffet says not to buy things we don't understand. Almost nobody understands Bitcoin.

I think when it comes to investing Buffet is probably right. I don't understand Bitcoin but I still bought a little bit and made a little bit of money, about a $4k profit but there is no way I would invest a large amount of money in Bitcoin. I just like to dabble with money I can afford to lose. I have tried to understand what Bitcoin is all about and read a number of articles by "experts" but I am not convinced they understand it either.

I strongly recommend Going Infinite by Michael Lewis. It's fascinating. And it makes the point that most people in digital currency don't know any more about it than you and I do.

 

[Bomb#20]

I don't think that is a good strategy. One could suffer very significant losses in a matter of days. I wouldn't consider buying Bitcoin...

There is no known basement for Bitcoin. It could get up to $500k in 2 years... or be $15.91 in two years. There is no safe price to buy Bitcoin... at least, not without insider info.

Well, that's the beauty of a distributed blockchain. There's no mechanism by which anyone could have inside information. There are no insiders.

 

[Bullmoose Too]

Bitcoin hit a new high of $98k. November last year it was around $35k. Nice little earner. What givens bitcoin, or any cryptocurrency, it’s value?

What gives bitcoin, or any cryptocurrency, it’s value?

 

[southernhybrid]

https://www.investopedia.com/ask/answers/100314/why-do-bitcoins-have-value.asp

Sounds like a pile of bullshit. It's basically all about supply and demand. Weird. Plus crypto is bad for the environment. While I don't really understand exactly how it's mined. I've gotten the impression that it's an awful way to make currency.

A bitcoin has value because it can be exchanged for and used in place of fiat currency, but it maintains a high exchange rate primarily because it is in demand by investors interested in the possibility of returns.


Of course, many other factors influence Bitcoin's value. Read on to learn more about why Bitcoin has value.

KEY TAKEAWAYS​

• Bitcoin has value because it can function as a store of value and a unit of exchange. It also demonstrates six key attributes that enable its use in an economy.
• The definition of value in a currency has changed over centuries from physical attributes to the velocity of its use in an economy.
• Bitcoin demonstrates the attributes of a currency, but its primary source of value lies in its restricted supply and increasing demand.

As Bitcoin has also become accepted as a medium of exchange, stores value, and is recognized as a unit of account, it is considered money.


Two of the most influential factors behind Bitcoin's price volatility are greed and the fear of missing out on large returns. Greed is generally considered a negative trait, but in these modern (and expensive) times, it is natural for people to want more money. In fact, society and the businesses operating within it even encourage the desire for more.

 

[TSwizzle]

Bitcoin hit a new high of $98k. November last year it was around $35k. Nice little earner.

What gives bitcoin, or any cryptocurrency, it’s value?

I have no idea. I can't make sense of it.

 

[DBT]

Like Tulips, the perception that there is money to be made gives it value.

 

[bilby]

Bitcoin hit a new high of $98k. November last year it was around $35k. Nice little earner. What givens bitcoin, or any cryptocurrency, it’s value?

What gives bitcoin, or any cryptocurrency, it’s value?

The same thing that made shares in the South Sea Company valuable. The same thing that made tulip bulbs valuable. The same thing that makes gold valuable.

People either believe (incorrectly and absurdly) that these things are highly valuable; Or they believe (correctly, at least for a while) that they will be able to sell them at a higher price than they paid for them, to people who believe (incorrectly and absurdly) that these things are highly valuable.

Some bubbles last a long time. Gold lost its reason to be valued, as soon as major currencies dropped it as their base, but still the bubble keeps growing.

Will the market ever run out of useful idiots? If most of the copper that had ever been mined was sitting unused in storage in the form of ingots, the price of copper would be in the toilet - and copper is at least very useful for all kinds of things. But almost all of the gold ever mined is just sitting around in very expensive storage facilities, and it has very few uses.

So why is gold valuable? Because it is valued. And why is it valued? Because it's valuable.

Same for cryptocurrencies.

 

[ZiprHead]

Sounds like a pile of bullshit. It's basically all about supply and demand. Weird. Plus crypto is bad for the environment. While I don't really understand exactly how it's mined. I've gotten the impression that it's an awful way to make currency.

Basically a mining rig is a computer with multiple graphics cards attached solving math problems (as I understand it) to earn coins. For most people the energy used to run the systems costs more than what you can earn from the coins. Unless you're Russian oligarchs and get your power for free to run things like this:


Not to mention it's made the cost of graphics cards skyrocket. Which is probably why NVidia is so valuable now.

 

[Bronzeage]

Bitcoin hit a new high of $98k. November last year it was around $35k. Nice little earner. What givens bitcoin, or any cryptocurrency, it’s value?

What gives bitcoin, or any cryptocurrency, it’s value?

The same thing that made shares in the South Sea Company valuable. The same thing that made tulip bulbs valuable. The same thing that makes gold valuable.

People either believe (incorrectly and absurdly) that these things are highly valuable; Or they believe (correctly, at least for a while) that they will be able to sell them at a higher price than they paid for them, to people who believe (incorrectly and absurdly) that these things are highly valuable.

Some bubbles last a long time. Gold lost its reason to be valued, as soon as major currencies dropped it as their base, but still the bubble keeps growing.

Will the market ever run out of useful idiots? If most of the copper that had ever been mined was sitting unused in storage in the form of ingots, the price of copper would be in the toilet - and copper is at least very useful for all kinds of things. But almost all of the gold ever mined is just sitting around in very expensive storage facilities, and it has very few uses.

So why is gold valuable? Because it is valued. And why is it valued? Because it's valuable.

Same for cryptocurrencies.

The bizarre difference between valuable rocks and cryptocurrency is rocks are fairly easy to identify and weigh, while crypto's value is dependent on electrical power. A hard drive or any other cyber memory device looks like any other similar piece and there's no way to know what it contains, unless you have the infrastructure to open it.

I could have a billion dollars worth of bit coin, but unless some other billionaire is willing and able to provide a computer and an internet connection, it is worthless. I would be better off with a sack of rice and a jar of dried beans.

 

[Bomb#20]

Basically a mining rig is a computer with multiple graphics cards attached solving math problems (as I understand it) to earn coins. For most people the energy used to run the systems costs more than what you can earn from the coins. Unless you're Russian oligarchs and get your power for free to run things like this:
View attachment 48621

Not to mention it's made the cost of graphics cards skyrocket. Which is probably why NVidia is so valuable now.

That thinking is so 2018. Nvidia shot up and corrected in 2018 due to the fortunes of the bitcoin mining business. "Shot up" is a phrase that here means it peaked at $7 a share*. Today it's worth $136. Nvidia goes for that much now because its GPUs are used for training large language models. At this point bitcoin mining is a niche use, just like the video game graphics acceleration they take their name from.

(* Adjusted for stock splits.)

 

[ZiprHead]

Basically a mining rig is a computer with multiple graphics cards attached solving math problems (as I understand it) to earn coins. For most people the energy used to run the systems costs more than what you can earn from the coins. Unless you're Russian oligarchs and get your power for free to run things like this:
View attachment 48621

Not to mention it's made the cost of graphics cards skyrocket. Which is probably why NVidia is so valuable now.

That thinking is so 2018. Nvidia shot up and corrected in 2018 due to the fortunes of the bitcoin mining business. "Shot up" is a phrase that here means it peaked at $7 a share*. Today it's worth $136. Nvidia goes for that much now because its GPUs are used for training large language models. At this point bitcoin mining is a niche use, just like the video game graphics acceleration they take their name from.

(* Adjusted for stock splits.)

Thanks for the update. I did not know that.

I do know I wanted a new video card early last year and I couldn't afford anything close to what I wanted.

 

[Bomb#20]

Bitcoin hit a new high of $98k. November last year it was around $35k. Nice little earner.

What gives bitcoin, or any cryptocurrency, it’s value?

I have no idea. I can't make sense of it.

Same thing that causes people to value some ugly Jackson Pollock squiggle: the eminently rational judgment that other people will continue to value it for the same reason. It's a classic self-fulfilling prophecy.

Like Tulips, the perception that there is money to be made gives it value.

Not like tulips. The supply of bitcoins is permanently limited, just like the supply of Jackson Pollock squiggles is, just like the supply of tulips isn't. Relying on self-fulfilling prophecy as an investment strategy comes with a baked-in fatal flaw if you do it with tulips.

 

[DBT]

Bitcoin hit a new high of $98k. November last year it was around $35k. Nice little earner.

What gives bitcoin, or any cryptocurrency, it’s value?

I have no idea. I can't make sense of it.

Same thing that causes people to value some ugly Jackson Pollock squiggle: the eminently rational judgment that other people will continue to value it for the same reason. It's a classic self-fulfilling prophecy.

Like Tulips, the perception that there is money to be made gives it value.

Not like tulips. The supply of bitcoins is permanently limited, just like the supply of Jackson Pollock squiggles is, just like the supply of tulips isn't. Relying on self-fulfilling prophecy as an investment strategy comes with a baked-in fatal flaw if you do it with tulips.

My point was that the value of an investment is a matter of a desire or need for profit, money to be made. I know bitcoin is not the same as tulips....except for the idea of making a lot of money by buying into it.

 

[Bomb#20]

I do know I wanted a new video card early last year and I couldn't afford anything close to what I wanted.

Yeah, the people who used gasoline as a cleaning fluid back when it was an otherwise-discarded byproduct of kerosene manufacturing were probably pretty ticked off when all those rich men with their "motorcars" started bidding up the price.

 

[Bomb#20]

What gives bitcoin, or any cryptocurrency, it’s value?

The same thing that made shares in the South Sea Company valuable. The same thing that made tulip bulbs valuable. The same thing that makes gold valuable.

The South Sea Company was fraudulent from the get-go.

People either believe (incorrectly and absurdly) that these things are highly valuable; Or they believe (correctly, at least for a while) that they will be able to sell them at a higher price than they paid for them, to people who believe (incorrectly and absurdly) that these things are highly valuable.

Some bubbles last a long time. Gold lost its reason to be valued, as soon as major currencies dropped it as their base, but still the bubble keeps growing.

Will the market ever run out of useful idiots? If most of the copper that had ever been mined was sitting unused in storage in the form of ingots, the price of copper would be in the toilet - and copper is at least very useful for all kinds of things. But almost all of the gold ever mined is just sitting around in very expensive storage facilities, and it has very few uses.

So why is gold valuable? Because it is valued. And why is it valued? Because it's valuable.

You're contradicting yourself. It's a fact that it's valued. And as you point out, it's valuable because of that. Therefore the people whom "they" believe (correctly, at least for a while) that they will be able to sell them at a higher price than they paid for them to, who believe that gold is highly valuable, are correct, and their belief is not absurd. It's rational. The circumstance that everyone is relying recursively on everyone else to keep valuing it only looks absurd to those in the grip of the delusion that value isn't subjective. Valuing gold is a social convention, just as compiling code into x86 instructions is a social convention. People keep building and buying x86 processors because that's what everyone compiles to, and everyone compiles to x86 instructions because that's what people have on their desks. The original reason for the popularity of x86 can go away, just like the original reason for the popularity of gold can go away, without anyone's belief in the wisdom of betting on the continuation of the social convention ever becoming absurd, or even incorrect. Social conventions are every bit as much elements of reality as the brains that underlie them. Accusing people of being useful idiots because it's inefficient to store gold in vaults instead of gold seams makes as much sense as accusing them of being useful idiots for buying inefficient x86 processors instead of the more optimal CPU of your dreams. They don't reject the superior bilby-instruction-set because they're idiots, but because they can't buy a bazillion apps that run on it. Cry me a river.

Same for cryptocurrencies.

The logic of this argument implies there's a good chance that bitcoin will end up being as safe an investment as a commodity like copper that's useful for all kinds of things. But Ethereum, Dogecoin et al., not so much -- x86 they aren't, and new cryptocurrencies can sprout like tulips.

(But, all that said, gold didn't lose its reason to be valued as soon as major currencies dropped it as their base. Since time immemorial, major currencies have periodically fallen into the hands of irresponsible governments and had their theoretical superiority to gold killed like the goose that lays gold eggs that it is. Countries cycle between hard and soft money, and when the switch to hard money inevitably happens, those who hedged against it by buying gold typically get through the transition with less pain. Say what you like about gold, nobody is going to destroy it by printing too much. Of course, you can always bet that the dollar is going to escape the usual fate of major currencies because America has finally exorcised the ghost of Arthur Burns once and for all and discovered the long-sought formula for permanent monetary responsibility. But that's an even more speculative gamble than buying into a gold bubble.)

 

[Swammerdami]

Some comments about BitCoin:

The Tulip Bubble started from the idea that Tulips were pretty. The BitCoin Bubble started from the idea that illegal transactions (e.g. purchases of large amounts of heroin) could be hidden from law enforcement. Period.

Of course most purchasers of BitCoins don't intend to buy heroin. They buy BitCoins in hopes that some other person will want the coins to buy heroin. Or, more accurately, they buy the Coins hoping some other "investor" will hope that yet a third investor will hope that yet a fourth investor will hope that ... yet a 99th investor will hope someone wants heroin. Much like the Tulip frenzy of 1636.

In fact I don't think BitCoin transactions are really hidden! Police may know that User #197396625 transacted with a known criminal and can deduce #197396625's identity by studying other transactions.

BitCoin touts pretend that the public blockchain is more secure than bank ledgers. But in addition to other flaws, cannot the whole BitCoin Blockchain be subverted by any entity which controls some 50+% of the bit-mining power? Is there not a clever algorithm to subvert the blockchain with only 30+% of bit-coining power? And of course should some quantum-program suddenly achieve a breakthrough on the blockchain encryption --- Whooosh!, your Bitcoin holdings disappear.

And note that the huge cost in electricity to "mine" BitCoins is not a bug, but a feature.

None of which is an argument to sell your cryptocurrencies. The big boys keep 5% or 10% of their assets in cryptocurrencies, and I won't argue with them.

Was it the "painting" pictured below that recently sold for $6.24 million? Instant profit: Spend the $6 million; photograph yourself eating the precious banana, and sell that photo for a few million. Then, when the fuss has died down replace the missing banana with a spoiled one from the market; make another few million. ??

 

[Swammerdami]

Some comments about gold.

Precious metals -- silver and gold specifically -- were the money of most advanced nations for five thousand years. At least two languages (French and Thai) use exactly the same word for 'silver' as for 'money.' Silver and especially gold are valued for jewelry; people would wear even more gold jewelry than they already do except for the fact that gold is very expensive.

Gold is valuable because it is rare. Rhodium is rarer than gold, and is even more expensive. Admittedly rhodium has uses, primarily as a catalyst in automotive catalytic converters; but Gold has uses too! Gold would have a large number of applications if it weren't so expensive.

Can the present high price of gold be regarded as a possible "Bubble"? You betcha! I've no urge to add to our modest gold hoard at the present price. OTOH I'm in no hurry to sell this hedge beyond recent profit-taking to keep the hedge at less than 10% of our family's wealth. (I'd have been happy to invest some of this hedge money in cryptos instead if that seemed convenient ... and not nerve-wracking!)

(But, all that said, gold didn't lose its reason to be valued as soon as major currencies dropped it as their base. Since time immemorial, major currencies have periodically fallen into the hands of irresponsible governments and had their theoretical superiority to gold killed like the goose that lays gold eggs that it is.

Most of the early issuances of paper money were advertised as promises to pay silver or gold, and failed only when those promises could not be met. Even France's "Mississippi Scheme", inspiration for England's South-Sea Bubble, had this character. From 1933 to 1971, the U.S. Dollar replaced gold as the underlying money, but only because of a U.S. promise to sell gold to central banks at the fixed rate of $35/ounce.
Thus the present regime of paper money backed by nothing has been around for only 53 years, just 1/100 as long as precious metals were money.

Countries cycle between hard and soft money, and when the switch to hard money inevitably happens, those who hedged against it by buying gold typically get through the transition with less pain. Say what you like about gold, nobody is going to destroy it by printing too much. Of course, you can always bet that the dollar is going to escape the usual fate of major currencies because America has finally exorcised the ghost of Arthur Burns once and for all and discovered the long-sought formula for permanent monetary responsibility. But that's an even more speculative gamble than buying into a gold bubble.)

I will NOT recommend gold purchase at the present price, but the idea that holding gold is stupid is itself a stupidity. There are various ways that financial collapse or dollar devaluation may happen; and in some scenarios gold may also lose much of its value. But the advice frequently heard on message-boards -- "holding rice or bullets is much better than holding gold if you're worried about financial collapse" -- is just silly.

 

[southernhybrid]

Thanks for all the explanations about bitcoin, not that a tech idiot like me, understood all of it, but back to the article I linked, it does seem that it's all about supply and demand. There is currently more demand than there is supply, or at least that's how it appears based on my limited amount of reading on this topic.