Bitcoin biting the dust?

[Jarhyn]

A lot of money launderers and other criminals will be having a heyday for the next few years. Another argument for buying bitcoin!

Hypothetical situaton:
Another one of Cheato’s insane followers tries to put a little scratch on his other ear and accidentally blows his head off. Cheato had say, 10 billion worth of bitcoin at his time of expiration. What happens to its value over the following weeks?

Quite my point.

Granted, I'm not investing anything in it right now, because I don't believe that investing in it is ethical except through mining of the block chain, and even that is dubious.

But it isn't going anywhere for now and will go up quite a bit until Musk or someone else starts minting crypto-dollars whose contracts are guaranteed by a government with an army.

 

[bilby]

Except Bitcoin has no value. That is implicit based on how volatile the trading price for it is. Actual currency has value based on a very complicated myriad of processes, economics, supply and demand, etc... The value goes up and down generally based on some form of cause and effect, supply and demand.

So, exactly like all other currencies, then?

Bitcoin has the same value as any currency that people trade in (intrinsically none, but practically whatever expectation the market has today that someone, somewhere, will want some tomorrow - if only because the market expects that someone, somewhere, will still want some the day after tomorrow...).

What it lacks is the stability you get from having a large pool of guaranteed users, due to some entity with whom they do business (usually a government) accepting only BTC in payment (typically of taxes).

The value of any currency is mostly a feedback loop. For any fiat currency, it is only a feedback loop.

Stability is a function of how unlikely it is that a large new injection of money will occur, and of how likely it is that someone will want that particular currency more than any other.

When these two factors are balanced, a currency is stable. Demand for US Dollars has a hard floor, because Uncle Sam will accept no other currency in payment of taxes; It has a fairly smooth pattern above that floor, because the world trade in USD is fairly constant in the short to medium term; And the supply of USD is matched to the demand curve fairly well by the inflation management policies of the Federal Reserve. Indeed, "inflation management policies" is synonymous with "currency stability policies".

BTC is volatile because it lacks a hard demand floor, it is too small a player to have fairly smooth demand, and nobody is trying to match supply to demand.

The same would be true of gold, if not for the much larger demand pool for gold caused by its widespread use as a hedge against instability. And of that sounds circular, it's because it is. Gold is a good investment because everyone thinks that gold is a good investment.

If enough people are convinced (and remain convinced) that BTC is a good investment, then it is. If and when they stop being, it won't be.

Just like gold.

 

[bilby]

our government is a criminal enterprise in disguise

What disguise?

 

[bilby]

It is hard to imagine a scenario where gold was not convertible to any other currency.

It's very easy to imagine dozens of such scenarios:

FADE IN:

INT. REFUGEE CAMP, EVENING.

REFUGEE #1 has revealed that he has a tin of beans.

REFUGEE #2
If you give me that, I will give you this lovely shiny gold coin!

REFUGEE #1
Fuck off.​

 

[Jarhyn]

Interestingly bitcoins have value as well in that you don't need guns or banks or police to enforce contracts, because trust can be spread to any qualified group that both parties accept as an escrow holder.

This is built into user wallets in the form of "multi-sig", which means multiple signers need to operate a transaction, including the escrowing authorities, to complete it, but the escrow authority cannot receive the funds.

This is like Gleipnir, the ribbon that holds the fiercest beast, more powerful than chains, made of something that is nothing at all. It does not use power and weapons and threats to secure it, but math.

 

[bilby]

It does not use power and weapons and threats to secure it, but math.

So, it's forever beyond the understanding of most people, and will always be looked upon with a level of distrust veging on fear, then?

 

[Elixir]

It is hard to imagine a scenario where gold was not convertible to any other currency.

It's very easy to imagine dozens of such scenarios:

FADE IN:

INT. REFUGEE CAMP, EVENING.

REFUGEE #1 has revealed that he has a tin of beans.

REFUGEE #2
If you give me that, I will give you this lovely shiny gold coin!

REFUGEE #1
Fuck off.​

Necessities don’t count!

(Camp GUARD;
comes, confiscates gold and beans, calling them both contraband)

Yeah, even the most solid currency often loses “value” when the holder’s food, water or shelter are at stake.

 

[ZiprHead]

our government is a criminal enterprise in disguise

What disguise?

And idiots just voted into office the biggest criminal that has ever been there.

 

[bilby]

Necessities don’t count!

Necessities are all that counts!

The rest is just in our heads.

All currencies are equally valueless. Value is an idea that we collectively project onto currencies. It exists in the mind, not in bits of paper or lumps of shiny metal.

 

[bilby]

Camp GUARD

Refugee camps don't usually have guards. They are not prisons.

People go to them because there is the provision of necessities, or the expectation (or at least hope) of that provision.

They may superficially resemble prison camps or concentration camps, but they are not the same thing.

It's not uncommon for a refugee camp to become a prison camp, when the locals decide they want to contain those filthy theiving refugees; But that's not how they typically start, nor their initial purpose.

 

[Jarhyn]

It does not use power and weapons and threats to secure it, but math.

So, it's forever beyond the understanding of most people, and will always be looked upon with a level of distrust veging on fear, then?

Well yes. And this is compounded by governmentally driven distaste for something outside their need to exist and oversight of control, for better or worse.

I instantly saw the value in a currency I didn't need to go to a bank with once I had it, cutting out "the man" from the transaction.

 

[Bomb#20]

Bitcoin is merely the software version of gold hardware.

No, it is the digital version of tulips.

... in some parallel universe where it's mathematically impossible to grow more than twenty-one million tulips.

 

[Jimmy Higgins]

Bitcoin is merely the software version of gold hardware.

No, it is the digital version of tulips.

... in some parallel universe where it's mathematically impossible to grow more than twenty-one million tulips.

First, you kidding? It wasn't just a Tulip, it was the color and rarity of the color that drove any particular tulip's value. Obviously, if they could be grown in massive quantities, their value would drop, like pearls when pearl farming began.

Second, can something be said to be limited, if it is divisible to the power of 10^-8? 21 million bitcoin, but with it divisible to the 10^-8, that is 2.1x10^14 units, which isn't particularly rare. If people couldn't buy a less than a penny fraction of a bitcoin, trades of bitcoin would be much more rare.

 

[Jarhyn]

Second, can something be said to be limited, if it is divisible to the power of 10^-8? 21 million bitcoin, but with it divisible to the 10^-8, that is 2.1x10^14 units, which isn't particularly rare. If people couldn't buy a less than a penny fraction of a bitcoin, trades of bitcoin would be much more rare.

Can the air in the room you are in be said to be limited if it is divisible to single molecules?

Yes. Yes it can.

Because limits of supply are about caps and holdings and rates, not about divisibility to smaller units.

 

[Jimmy Higgins]

Second, can something be said to be limited, if it is divisible to the power of 10^-8? 21 million bitcoin, but with it divisible to the 10^-8, that is 2.1x10^14 units, which isn't particularly rare. If people couldn't buy a less than a penny fraction of a bitcoin, trades of bitcoin would be much more rare.

Can the air in the room you are in be said to be limited if it is divisible to single molecules?

Please, don't give Musk the idea of monetizing air molecules.

Because limits of supply are about caps and holdings and rates, not about divisibility to smaller units.

Divisibility matters. A loaf of bread can only be sliced up so small. A "limited" supply of 21 million implies a scarcity that is wholely imaginary.

 

[Jarhyn]

Second, can something be said to be limited, if it is divisible to the power of 10^-8? 21 million bitcoin, but with it divisible to the 10^-8, that is 2.1x10^14 units, which isn't particularly rare. If people couldn't buy a less than a penny fraction of a bitcoin, trades of bitcoin would be much more rare.

Can the air in the room you are in be said to be limited if it is divisible to single molecules?

Please, don't give Musk the idea of monetizing air molecules.

Because limits of supply are about caps and holdings and rates, not about divisibility to smaller units.

Divisibility matters. A loaf of bread can only be sliced up so small. A "limited" supply of 21 million implies a scarcity that is wholely imaginary.

And yet the buying power of 1 doesn't change just because you can divide it a billion times. It's almost like it's about the trade value of 1, not the divisibility of 1, that matters...

 

[Jimmy Higgins]

Second, can something be said to be limited, if it is divisible to the power of 10^-8? 21 million bitcoin, but with it divisible to the 10^-8, that is 2.1x10^14 units, which isn't particularly rare. If people couldn't buy a less than a penny fraction of a bitcoin, trades of bitcoin would be much more rare.

Can the air in the room you are in be said to be limited if it is divisible to single molecules?

Please, don't give Musk the idea of monetizing air molecules.

Because limits of supply are about caps and holdings and rates, not about divisibility to smaller units.

Divisibility matters. A loaf of bread can only be sliced up so small. A "limited" supply of 21 million implies a scarcity that is wholely imaginary.

And yet the buying power of 1 doesn't change just because you can divide it a billion times. It's almost like it's about the trade value of 1, not the divisibility of 1, that matters...

Yes it does. If you could only buy whole bitcoins, only the uber-wealthy and large organizations could buy them now.

 

[Jarhyn]

Second, can something be said to be limited, if it is divisible to the power of 10^-8? 21 million bitcoin, but with it divisible to the 10^-8, that is 2.1x10^14 units, which isn't particularly rare. If people couldn't buy a less than a penny fraction of a bitcoin, trades of bitcoin would be much more rare.

Can the air in the room you are in be said to be limited if it is divisible to single molecules?

Please, don't give Musk the idea of monetizing air molecules.

Because limits of supply are about caps and holdings and rates, not about divisibility to smaller units.

Divisibility matters. A loaf of bread can only be sliced up so small. A "limited" supply of 21 million implies a scarcity that is wholely imaginary.

And yet the buying power of 1 doesn't change just because you can divide it a billion times. It's almost like it's about the trade value of 1, not the divisibility of 1, that matters...

Yes it does. If you could only buy whole bitcoins, only the uber-wealthy and large organizations could buy them now.

And then people would trade on partial derivatives.

When pennies were too big for transactions people used to literally cut them. Like, with a scissors.

You seriously do not seem to understand money.

 

[Elixir]

Berkshire Hathaway has been trading around the $700,000/share level. Berkshire Hathaway itself does not sell partial shares. However, fractional shares of Berkshire Hathaway stock, including Class A and Class B shares, are available through brokers.
Funny how few people have 700k to dump on one share of one issue. More funny, is the fact the there are so many who CAN do that without putting any significant fraction of their portfolios at risk.
Still, cutting “pennies” is big business.

 

[Bomb#20]

Bitcoin is merely the software version of gold hardware.

No, it is the digital version of tulips.

... in some parallel universe where it's mathematically impossible to grow more than twenty-one million tulips.

First, you kidding? It wasn't just a Tulip, it was the color and rarity of the color that drove any particular tulip's value.

Whereas bitcoins are all alike, which is another reason equating them with tulips doesn't make any sense.

Obviously, if they could be grown in massive quantities, their value would drop, like pearls when pearl farming began.

Um, they can be grown in massive quantities and their value did drop. The Netherlands produces four billion tulip bulbs a year. When the color and rarity of the color drove some particular tulip's value high, people bought them, planted them, and produced more with that rare color, making it no longer rare. Investing in tulips because you expected the price to go up was always bound to be a short-term strategy. The tulip business was always doomed to transition into conventional farming. Bitcoin can't do that, and if it could the whole point of the exercise would be lost -- it would be like investing in the plainest and commonest tulips.

Second, can something be said to be limited, if it is divisible to the power of 10^-8? 21 million bitcoin, but with it divisible to the 10^-8, that is 2.1x10^14 units, which isn't particularly rare. If people couldn't buy a less than a penny fraction of a bitcoin, trades of bitcoin would be much more rare.

So? Nobody's paying $100,000 for a one hundred millionth of a bitcoin. Now that business is conducted electronically and no longer depends on physical pennies, there's no reason but tradition not to use double-precision floating-point math for trading dollars. Do you think if the U.S. government stamped its approval on transactions in billionths of pennies, and banks followed suit, and the IRS allowed people to calculate and pay their $3141.5926535897932 income tax bill, then the dollar-to-Swiss Franc exchange rate would collapse from U.S. money no longer being in such short supply?