Quote:
Originally Posted by ToothSoother
Mortgages are completely different. They're a wealth producing asset, as well as having tight bounds and predictable returns. On wealth producing assets with inherent value (i.e. the opposite of bitcoin), a fair value can be roughly agreed, and big money adjusts/prices in changes to that fair value quite efficiently.
Yes, there are differences. The idea is you can account for something that takes place in the future, you discount the future value, and you have a price now.
With Bitcoin, it's a bit different in that you have time horizons you care about, end game scenarios, and can look at how many coins will be around then (you know the schedule), and roughly work out value, discounting for future value and risk. But yes, there's a ton more unknowns.
Quote:
Originally Posted by ToothSoother
I think you're not quite understanding what happens in something like bitcoin. Price movements are caused by daily sell/buy pressure. It's not like people with wealth are going "the fair price including inflation is $350, I'll buy if it drops below". That's the mechanism that's needed, and it exists in the market (due to things like P/E ratios, dividend returns, etc), but it doesn't exist in bitcoin. Something like bitcoin (and many other instruments) are determined by daily buy/sell pressure. A sell pressure (inflation) needs to be met by the influx of new money from sources outside the ecosystem, or the value declines relative to other instruments (say, the USD). You can see this with currencies and QE. The market never priced in USD trending to zero over decades. It simply did. That's inflation, and it's a real time thing that can't be "priced in" except in wealth producing assets. That's why the USD continues to go down relative to tangible things. If the market "priced in" inflation, it wouldn't move. The market doesn't price in inflation (at least, small/mediumish inflation) in currencies, which is what bitcoin is.
People who are holding coins know those future coins are coming and have accounted for it. They aren't surprised by this. Currencies with QE are different, in that you don't know what future monetary policy will be. People price in expected future QE and not, and when things different, you see big swings.
Quote:
Originally Posted by ToothSoother
Why would anyone choose bitcoin over stocks (of 30+ countries), gold, a foreign currency bank account, or something else? I simply don't see it happening. Russia and Argentina are going nuts and the bitcoin price is declining. Russians are technically sophisticated and have lots of wealth to hide/protect against currency decline. bitcoin hasn't moved in the last few months except down. Simarly for Japan, when the yen has been sliding like crazy with QE. Yet money flows into bitcoin are negligible and less than the cashouts/inflation. No one seems to be using bitcoin for what you think they are/will.
Why would they choose it? Because it's something that's in the early adoption phase (or earlier), and has the potential to be much more valuable in the future. Why aren't people going into it? Because it's not easy, it's still unknown, and is primarily speculative now. Those other use cases aren't built because it takes time and money to build them. I'm not at all shocked these use cases aren't there yet.
A lot of the price now being "down" is that it bubbled up due to the fake money on Gox bidding up the price, and the subsequent crash, and returning to a normal level.
Quote:
Originally Posted by ToothSoother
bitcoin is fascinating as pure speculation (thanks for the correction). That's the only thing I see moving it apart from illegality, and why I'll likely buy if an ETF comes out. Fresh money is needed and growth in illegal activity (probably the only thing propping bitcoin up these days) seems insufficient at this market cap.
Black market is still extremely low in Bitcoin right now and has huge potential. Even capturing 1% of that would be huge.
The one thing that's missing is how Bitcoin can be used in unexpected ways. Really Bitcoin's true value comes from two main use cases - solving problems of trust and solving problems of censorship. These will be the basis of creating use cases that simply don't exist now, rather than replacing an existing use case.