down with bitcoin

[powder]

Had not checked the price of bitcoin of a while and just saw that it is down around $230 (canadian) - when I started following it the price was around $800 if I remember correctly.  have been waiting to buy some, glad that I waited...  who knows the news on the coin?  

[fractional slacker]

Was $175 US couple of hours ago (now $195). From what I have read the price is depressed from, well basically too many folks converting bitcoin to fiat.

From what I understand, while transactions are increasing, merchants ain't holding. As soon as they get bitcoin, they convert it to fiat. Miners are also in a pickle as production costs are at or on verge of being higher than market price forcing them to sell coins ASAP.

[AynRand]

I only know what Molyneux has told me. https://www.youtube.com/playlist?list=PLMNj_r5bccUzhGeXF4EThVrc_iW9PcApr Sorry I can't be of more help.

[Alan C.]

I've never bought a Bitcoin and don't plan to.

 

In The Ethics of Money Production by Guido Hülsmann, he noted that, "...the monetary use of a commodity ultimately depends upon its non-monetary use..."

 

Rick Rule: "I don't have any way to express the utility of that labor excecpt in the ascribed value of a market for Bitcoin."

[Kevin Beal]

You can't know for sure about these things, but there is an enormous selling pressure since the feds are selling the 100k bitcoins they stole from Ulbricht and silk road 2.0 people. Also there was $5 million stolen from one of the exchanges recently (BitInstant?). Thefts like that make people lose confidence and sell.

 

The price has fallen low enough that a lot of miners won't turn on their machines because they won't make enough in rewards.

 

Alan is referring to the Regression theorem, originally conceived by Mises. I'm not an expert, but this is supposed to solve a supposed infinite regression problem about where the value of money originates. "Money is valuable because it's money" being a non-answer. I don't see how this jives with the fact that the value of goods is subjective (also Mises).

 

It's got to be valuable because it's backed by gold and other commodities, say the austrians. Gold is valuable as jewelry and in industrial applications, for example. I've never heard how this argument is supposed to work beyond what I've already told you. As far as I can tell, people simply assert that there is an infinite regression and that having non-monetary utility solves that problem. I'm very skeptical of both claims myself, but perhaps Alan can enlighten us. Also, bitcoin has many non-monetary applications as well. Austrians don't tend to understand that.

 

I'm holding all my bitcoin, personally. I don't think it's going anywhere. Bitcoin has survived worse things.

[shirgall]

"Money is valuable because it's money" is a simplification of the idea that money's utility comes from the perception (the confidence) that it can always be exchanged for other things of value. One thing that really undermines bitcoins value is the volatility of its value. Yes, it was valuable because it was money, but how valuable? Compared to what?

 

To me, bitcoin's value increased when there were more stores that accepted it as currency, but decreased when it was clear that most stores were immediately cashing it out. If, instead, a chain of businesses were exchanging bitcoins during the progress of a product from raw materials to finished product and other currencies were completely left out of it, that would justify more confidence in bitcoins as a medium of exchange.

[Kevin Beal]

One thing that really undermines bitcoins value is the volatility of its value. Yes, it was valuable because it was money, but how valuable? Compared to what?

Volatile as compared to the U.S. dollar. Valuable for the reason you stated, as compared to other currencies with different properties. Bitcoin has particular properties which make it frictionless, near infinitely divisible and provides an entirely new paradigm for the security of value.

 

To me, bitcoin's value increased when there were more stores that accepted it as currency, but decreased when it was clear that most stores were immediately cashing it out.

I'm sorry, I don't understand. You are mixing objective and subjective standards here and talking about them as if they are the same:

 

Subjective:

"money's utility comes from the perception (the confidence) that it can always be exchanged for other things of value"

and

"To me, bitcoin's value increased when there were more stores that accepted it as currency, but decreased when it was clear that most stores were immediately cashing it out."

 

Objective:

"One thing that really undermines bitcoins value is the volatility of its value"

and

"If, instead, a chain of businesses were exchanging bitcoins during the progress of a product from raw materials to finished product and other currencies were completely left out of it, that would justify more confidence in bitcoins as a medium of exchange"

 

And this is precisely my problem with this argument that it needs non-monetary utility in order to "justify" something. The value of money as a metaphysical property of money exists subjectively, that is, in a manner which is observer relative. It only has value because that's how we perceive it. There is no value objectively in nature. The standards we accept collectively for determining what should qualify as value can be bad, good, asinine, or whatever, but by definition, if we value something, it has value.

[shirgall]

I'm sorry, I don't understand. You are mixing objective and subjective standards here and talking about them as if they are the same:

 

Subjective:

"money's utility comes from the perception (the confidence) that it can always be exchanged for other things of value"

and

"To me, bitcoin's value increased when there were more stores that accepted it as currency, but decreased when it was clear that most stores were immediately cashing it out."

 

Objective:

"One thing that really undermines bitcoins value is the volatility of its value"

and

"If, instead, a chain of businesses were exchanging bitcoins during the progress of a product from raw materials to finished product and other currencies were completely left out of it, that would justify more confidence in bitcoins as a medium of exchange"

 

And this is precisely my problem with this argument that it needs non-monetary utility in order to "justify" something. The value of money as a metaphysical property of money exists subjectively, that is, in a manner which is observer relative. It only has value because that's how we perceive it. There is no value objectively in nature. The standards we accept collectively for determining what should qualify as value can be bad, good, asinine, or whatever, but by definition, if we value something, it has value.

 

Value is subjective. Sorry if it seemed like I was equating subjective and objective terms, but I was stating why my confidence in bitcoin was low. That doesn't undermine the objective statement that bitcoin's value is based on people's confidence in it.

[Pelafina]

The value of money as a metaphysical property of money exists subjectively, that is, in a manner which is observer relative. It only has value because that's how we perceive it. There is no value objectively in nature. The standards we accept collectively for determining what should qualify as value can be bad, good, asinine, or whatever, but by definition, if we value something, it has value.

 

You can use this same argument to show that morality is subjective, and I would agree with that argument.

[J. D. Stembal]

You can't know for sure about these things, but there is an enormous selling pressure since the feds are selling the 100k bitcoins they stole from Ulbricht and silk road 2.0 people. Also there was $5 million stolen from one of the exchanges recently (BitInstant?). Thefts like that make people lose confidence and sell.

 

The price has fallen low enough that a lot of miners won't turn on their machines because they won't make enough in rewards.

 

Alan is referring to the Regression theorem, originally conceived by Mises. I'm not an expert, but this is supposed to solve a supposed infinite regression problem about where the value of money originates. "Money is valuable because it's money" being a non-answer. I don't see how this jives with the fact that the value of goods is subjective (also Mises).

 

It's got to be valuable because it's backed by gold and other commodities, say the austrians. Gold is valuable as jewelry and in industrial applications, for example. I've never heard how this argument is supposed to work beyond what I've already told you. As far as I can tell, people simply assert that there is an infinite regression and that having non-monetary utility solves that problem. I'm very skeptical of both claims myself, but perhaps Alan can enlighten us. Also, bitcoin has many non-monetary applications as well. Austrians don't tend to understand that.

 

I'm holding all my bitcoin, personally. I don't think it's going anywhere. Bitcoin has survived worse things.

 

I started buying BTC in May 2014, when the price was about $480. I will keep holding mine (and buying more!) because they have utility beyond a speculation tool. Imagine what is going to happen to the price of BTC when QE4 starts, as people start fleeing the US dollar, and the prices of everyday items starts exceeding reasonable levels.

 

Bitcoin needs a viable venue for buying and selling products via BTC without these transactions being taxed or regulated by the state. Every time someone has tried this, the Feds raid the company's servers and steal the coins. That is the true purpose and value of Bitcoin, and why it's such a threat to the establishment. When people can safely buy an unlicensed weapon tax-free from a complete stranger over the internet, we will know what economic freedom looks like.

 

(Enter the DarkMarket, a peer-to-peer tool for online free trade! http://www.wired.com/2014/04/darkmarket/)

 

I'm also not worried about the miners. Driving most of the miners out just means it will take longer to mine more coins, which means the price will face an upward pressure.

 

Here's what Schiff had to say about cryptocurrencies yesterday, timestamp 22:25, to show the arguments from the perspective of a gold bug. He's very bearish on cryptocurrency, if you didn't already know.

 

[Invicta]

Hi, I have some amateur thoughts on bitcoin that may be useful.  I'm also interested in any counter views from experienced investors.  I almost pulled the trigger and bought 200 bitcoins when they were at $5 because a friend much smarter than I was investing in them.  I unfortunately backed out and bought mining stocks... so yeah, amateur thoughts.

 

* I believe that bitcoin is the first in the future of the next worldwide currencies.  It will face strong competition through the next decade, the most threatening form coming from manipulated state run systems.  These state run systems will have a backdoor to manipulate supply, and over time a free market currency with a fixed supply will dominate world trade (current frontrunner bitcoin).  

 

* Bitcoin is still in the process of coming down off it's major hyper bubble.  Despite massive, unexpected, and expanding worldwide acceptance of the currency, the downward grind continues.  I believe this grind down is due to the low investor quality of individuals that inflated the bubble.  Bitcoin investors on average are young and inexperienced with market dynamics.  They are emotional, often first time, investors with a get rich quick attitude.  They lack understanding of current fiat currency war dynamics, and are ignorant of the fact that most global wealth is in older traditional hands that trust the very system bitcoin is usurping.  As a result, most bitcoin investors lack the patience and determination to weather the multi-year volatility bitcoin faces in the future.  Additionally, we're in a recession so if the market volatility doesn't cause a panic sell then financial need will often force the situation.  My sister wanted to buy bitcoins last year, I think at $800.  I told her it was a great idea; just not right then.  The fact that she even knew about bitcoin was personally a market saturation signal for me.  I explained my logic and convinced her to wait for all the weak hands to drop out.  Those hands are still dropping... despite unbelievably bullish acceptance of the currency by nations and retailers.

 

* Bitcoin Hacking/Stealing:

I really don't know what to think about this.  I understand that most of the bitcoin hacks occur due to the need for exchanges to provide speed and liquidity to their marketplace.  Buyers and sellers want to have instant transfers between parties, and the exchanges have to set up a pool of bitcoins available to be transferred.  My question, and I'm ok sounding like a Luddite: Is bitcoin stuck forever with 2009 sofware?  Is it's downfall guaranteed like an old operating system?

 

^ lol that MT.Gox was a magic the gathering trade site.  One of my roomates in college paid for a year of school, his rent, and living expenses selling off his Magic collection (kept his 40 dual lands set, sold the black lotus).  Yeah, he's still a boss today.  He's opening up a Cigar and Brandy shop next week, and liquor stores pay him to travel to breweries across the country to sample barrels of liquor for purchase.

 

* Bitcoin or the competitor that beats it will not last more than a decade as the primary currency.  Eventually, a currency with a low level of inflation built in will replace the fixed rate currency.  This currency will work for at time but the inflation rate will be too high or too low to match population levels and the smart money will lead the pack to a replacement currency.  Over time investors will move away from a reserve currency since establishing a fixed rate of inflation is impossible.  The end result will be a basket of competing currencies; many or all of which backed by commodities.

 

TL:DR, Basically my view is that bitcoin still has a long way down ahead, perhaps as low as $30.  One day, perhaps soon, will be a fantastic buying opportunity.  Most likely, the bitcoin low will be a leading indicator for the big market crash ahead.

 

Happy to be educated further, thanks

[Daniel Unplugged]

Bitcoins price is almost entirely determined by speculators (myself included). Its real (non speculative) demand and value increases every day. Everyday more people get wallets and fill them with bitcoins so they can purchase things. Every day more merchants begin accepting bitcoin. The huge price swings bitcoin has seen since its inception have been caused by huge fluctuations in speculative demand. Bubble. Pop. Bubble. Pop. Bubble. Pop. I hold bitcoins not because i want to take advantage of an irrational market, but because I believe that bitcoin's real (non speculative) demand in 20 years will greatly exceed its current level. If (its a big if) bitcoin reaches a critical mass of users, such that almost everybody is willing to accept it as payment, its value will be astronomical.

 

That, and I love the idea of sticking it up the fed and the government by doing exactly what they don't want me to do; get out of their currency as much as possible.

[st434u]

Is it impossible for bitcoin to be valued at = 25kg of gold (about 1 million dollars today) at some point in the future? No, it isn't. It may be extremely unlikely, but there's always a possibility. There's no telling how big a bubble will get.

 

What you need to understand is that, in the long term, bitcoin can't be worth anything of significance (say, enough to buy a stick of bubble gum), because the *only* value that bitcoin will ever have is speculative. From empty speculation that is, not the kind of speculation that gets you to buy stock in a company that may or may not perform well. Bitcoin can't perform well, because it doesn't produce anything. Nobody wants to consume a bitcoin, and nobody wants to employ them in the production of anything else which in turn has consumption demand.

 

People who are saying "see, I told you so" because bitcoin went from $1200 to $200 -and they were making arguments similar to mine- are just trying to make hype. Bitcoin hasn't collapsed just because it went down by 85%. It could just as well rally to $10,000 within the next few months. When it takes 1000 bitcoins to buy a pizza, then I'll say "I told you so", because I really don't think bitcoin can ever recover from that sort of crash.

 

Two threads where I have explained this in detail and addressed the many counter-arguments of numerous bitcoin supporters:

 

https://board.freedomainradio.com/topic/38337-bitcoin-intrinsic-value-and-mises-regression-theorem/

 

https://board.freedomainradio.com/topic/39541-bitcoin-fanatics-say-the-darnedest-things/

[Sal9000]

Bitcoin has certain properties, like speed of transaction, difficulty of mining new ones and so on (lets assume for the sake of the argument that the description the btc supporters give are true; i doubt that). These properties are valued differently by different people and compared to other means of exchange. Since there is competition of different methods of exchange, people will chose the exchange that offers them the most bang for the buck. In addition to these properties there is another factor at play and that is the specific relation of this medium in regards to the network it is in.
You can have a medium of exchange with perfect properties that everyone agrees on are the best, but it's of no use as long as there is no network in which to trade with this medium. Lets imagine you are a genius coder in the 50s and you come up with the concept of e-mail. What is this worth? Not a lot, since the whole infrastructure is missing. There are few servers, no personal computers and so on.
As long as there is no big network, the properties of btc are not valued as much as they would be if there was one. There is an evolution going on and we are at the start. It is likely that btc will provide lessons on what to improve both to the properties of a btc and to the network in general.

[Daniel Unplugged]

What you need to understand is that, in the long term, bitcoin can't be worth anything of significance (say, enough to buy a stick of bubble gum), because the *only* value that bitcoin will ever have is speculative. From empty speculation that is, not the kind of speculation that gets you to buy stock in a company that may or may not perform well. Bitcoin can't perform well, because it doesn't produce anything. Nobody wants to consume a bitcoin, and nobody wants to employ them in the production of anything else which in turn has consumption demand.

Does bitcoin not have value for its usefullness as currency? The same can be said for US dollars. Both US dollars and bitcoin are intrinsically worthless, that is, they have (almost) no value other than their usefulness as currency.

[st434u]

Does bitcoin not have value for its usefullness as currency?

Read the threads I linked to. I don't want to have to repeat long explanations that I already typed many times.

 

The same can be said for US dollars. Both US dollars and bitcoin are intrinsically worthless

This part is entirely correct.

[Daniel Unplugged]

 

Note that a can opener has one use and one use only, but that fact does not make it worthless, until of course we all get replicators and canned food is rendered obsolete.

Read the threads I linked to

Those threads are so long. Sorry but my attention span is not quite there at the moment.

[st434u]

Note that a can opener has one use and one use only, but that fact does not make it worthless, until of course we all get replicators and canned food is rendered obsolete.

 

Note that a can opener has consumption demand (i.e. people who eat canned foods want to consume the can openers and are willing to give other things of value in exchange for them in order to consume them), and it also has production demand (demand coming from producers, i.e. restaurants).

[Daniel Unplugged]

Note that a can opener has consumption demand (i.e. people who eat canned foods want to consume the can openers and are willing to give other things of value in exchange for them in order to consume them), and it also has production demand (demand coming from producers, i.e. restaurants).

I disagree.

 

Can openers are not consumed. They are useful tools for achieving a goal (opening cans). Bitcoins are also useful 'tools' for achieving a goal too (facilitating trade). Neither are consumed when being used.

[st434u]

I disagree.

 

Can openers are not consumed. They are useful tools for achieving a goal (opening cans). Bitcoins are also useful 'tools' for achieving a goal too (facilitating trade). Neither are consumed when being used.

 

Well, I suggest you read more about what the term consumption means in economics.

 

If ever you get the attention span you said you lack, the answer to this is also explained in detail in the two threads I linked to.

[Daniel Unplugged]

 

Yes economists classify can openers as a consumption good, just like clothing, a washing machine and a lawnmower, but they are not consumed in the same way a loaf of bread is.

Well, I suggest you read more about what the term consumption means in economics.

 

If ever you get the attention span you said you lack, the answer to this is also explained in detail in the two threads I linked to.

You are insulting me now. I'm done here. Thanks for chatting anyway.

[Alan C.]

Bitcoin's rapid rise was not due to the increase in productivity and labor-saving benefits that it conferred upon society, but rather due to hype, wishful thinking, and speculation. Peter Schiff referred to it as "Tulip Mania."

Society has been made better off by smartphones because they provide visible, tangible, labor-saving benefits. We know what a smartphone is worth because one can calculate opportunity cost of not having a smart phone.

What visible, tangible, labor-saving benefits has Bitcoin accorded? What is the opportunity cost of not using Bitcoin? When somebody answers that question then the real price of a Bitcoin will be discovered, and I think it will be too low to make it worthwhile.

[J. D. Stembal]

What visible, tangible, labor-saving benefits has Bitcoin accorded? What is the opportunity cost of not using Bitcoin? When somebody answers that question then the real price of a Bitcoin will be discovered, and I think it will be too low to make it worthwhile.

 

How would "too low" of a value make cryptocurrency not worthwhile? What is the threshold for "too low"? How do you define "worthwhile"? You must realize that other people will have completely differing definitions for these words you are using. I'm just curious what these words mean to you.

 

The most obvious benefit of cryptocurrency is a platform to accept global payments for goods and services with minimal overhead costs (~1%), and absolutely no inflation, regulation, taxation or oversight from the government. The opportunity cost of not using the currency is having to deal with these four cons of fiat.

 

Cryptocurrency is the perfect money laundering tool. Get paid in Bitcoins, don't report the income because you don't have to do so, convert it to gold or other precious metals via Peter Schiff's Euro Pacific Capital, and then back into fiat if it suits you. It's peculiar that Peter Schiff bad mouths Bitcoins when he accepts them in exchange for gold and other securities. It's as if he wants to openly trade gold for Bitcoins, but not let on as to why he does it. If he really thought Bitcoins were worthless (or not worthwhile), he wouldn't accept them as currency.

[TheRobin]

Bitcoin's rapid rise was not due to the increase in productivity and labor-saving benefits that it conferred upon society, but rather due to hype, wishful thinking, and speculation. Peter Schiff referred to it as "Tulip Mania."

 

Society has been made better off by smartphones because they provide visible, tangible, labor-saving benefits. We know what a smartphone is worth because one can calculate opportunity cost of not having a smart phone.

 

What visible, tangible, labor-saving benefits has Bitcoin accorded? What is the opportunity cost of not using Bitcoin? When somebody answers that question then the real price of a Bitcoin will be discovered, and I think it will be too low to make it worthwhile.

 

Well, as the argument would go, you can transfer 10 million dollars worth of bitcoins twenty times around the world in 5 minutes and for a few cents transaction costs. Isn't that some pretty tangible savings when you compare it to banking which not only has high fees but takes days if not weeks for some transactions?

[st434u]

It's peculiar that Peter Schiff bad mouths Bitcoins when he accepts them in exchange for gold and other securities. It's as if he wants to openly trade gold for Bitcoins, but not let on as to why he does it. If he really thought Bitcoins were worthless (or not worthwhile), he wouldn't accept them as currency.

 

Often when people accuse someone else of something without sufficient evidence, the criticism applies to the criticizer far more than to the criticized.

 

Peter Schiff wants to help people get rid of their bitcoins and trade them for something better. He realizes that a lot of people made a lot of money with this bubble, and he wants to help them make good investments with it. He doesn't want any bitcoins himself. In fact he has the transaction set up in a way that his business never even has to touch a single bitcoin. As soon as the payment is made, it is automatically converted to US dollars by a third party, and his business only gets the US dollars transaction after the conversion takes place. The client is really being billed in US Dollars, they're just able to pay with their bitcoins instead.

 

And he doesn't really hold any US dollars either. At any given point in time, his balance sheet in US Dollars is always negative.

[Jeff_NH]

I do not buy/own/use bitcoin as an investment per se (though I did decide to take some profits in Dec 13).

 

Bitcoin is technologically interesting

Bitcoin is socially interesting even when it eventually fails (everything in this world eventually fails). For this aspect, I  purchased some of the early casascius physical bitcoin.

Bitcoin is monetarily interesting in that it is the first meaningful voluntary form of money in many hundreds if not thousands of years.

 

Given the above, I want to be involved in the bitcoin economy and help it succeed. Other than the coins that I previously mentioned taking off the table, I've generally tried to hold a fairly constant number of coins but I spend/donate them regularly and then just replenish the what I spent from an exchange. In this way, the price fluctuations really have no impact on me.

 

Peter Schiff is not the value god and plenty of people have lost money listening to him (and people have made money listening to him when his near constant advice happens to align with a gold bubble).

 

I am fairly certain that Peter Schiff's intentions in accepting bitcoin are not "He realizes that a lot of people made a lot of money with this bubble, and he wants to help them make good investments with it.". His intention is (and should be) to see a way to attract more customers and trade value for value in a win win free market exchange based on each parties subjective measure of the value of the items they are exchanging.

[shirgall]

I am fairly certain that Peter Schiff's intentions in accepting bitcoin are not "He realizes that a lot of people made a lot of money with this bubble, and he wants to help them make good investments with it.". His intention is (and should be) to see a way to attract more customers and trade value for value in a win win free market exchange based on each parties subjective measure of the value of the items they are exchanging.

 

Any businessman that does not make it as easy as possible to pay him is leaving money on the table. He'd accept payment in goat's milk if he could easily convert it into something he values (and so should anyone else).

[yagami]

I've read some stuff on this and what I think is going on is because bitcoin is being accepted in so many places the number of people selling the coins vs buying has gone through the roof. Think about it this way business as going to trade much more volume than the typical consumer. These business aren't buying bitcoin they are accepting the bitcoin and then selling the coins immediately. This is putting downward pressure on the market are there are now more sellers than buyers. Essentially these businesses that now accept bitcoin are taking money out of the bitcoin market buy selling them so quickly.

 

Essentially bitcoin is doing everything right. More and more people businesses and countries are interested in bitcoin and are accepting them. I dont think the low price is a problem at all. All this means is the current price of bitcoin is a reflection of it's widespread adoption. As the price of bitcoin goes down this will lower the barrier to entry for poorer countries to adobt. Once that's done this will probably cause more downward pressure as there will be new sellers(businesses) in the market selling the coin. Eventually the price will stabalize to reflect the number of people in the bitcoin market that are holding the coins as a store of value primarily. The price of bitcoin will begin to go up again when the amount of buyers (consumers) out number the amount of sellers (businesses). As it is now businesses are way ahead and will likely stay ahead for a little while as the drop in price for bitcoin has fallen so much many people will be scared out of the market im sure. 

[J. D. Stembal]

Any businessman that does not make it as easy as possible to pay him is leaving money on the table. He'd accept payment in goat's milk if he could easily convert it into something he values (and so should anyone else).

 

You touched on a good point.

 

While Schiff may not value Bitcoin in the short term, he is still accepting them which suggests that they are a functional currency with a tangible value. Whether specific individuals, companies, or investment groups will find that currency worthwhile to use, only the future will demonstrate.

 

Often when people accuse someone else of something without sufficient evidence, the criticism applies to the criticizer far more than to the criticized.

 

Peter Schiff wants to help people get rid of their bitcoins and trade them for something better. He realizes that a lot of people made a lot of money with this bubble, and he wants to help them make good investments with it. He doesn't want any bitcoins himself. In fact he has the transaction set up in a way that his business never even has to touch a single bitcoin. As soon as the payment is made, it is automatically converted to US dollars by a third party, and his business only gets the US dollars transaction after the conversion takes place. The client is really being billed in US Dollars, they're just able to pay with their bitcoins instead.

 

And he doesn't really hold any US dollars either. At any given point in time, his balance sheet in US Dollars is always negative.

 

Thanks for the clarification. Is this information on the Euro Pacific Capital website? I didn't dig deep enough.

 

While I'm far from the position to dictate how people use their cryptocurrency, taking coins and immediately cashing them out for fiat defeats the ultimate purpose (severing state control over central banking, i.e. ending the Fed) of the distributed currency platform, at least in the short term. In the future, I envision more people will be holding their assets in cryptocurrency, especially after the next impending financial collapse. The stage is already set for the next round of corporate tax supported bailouts.

 

For a comparison of overhead costs, Euro Pacific Capital charges a fee for the gold certificate fund:

 

A 2.25% service fee applies to non-model state residents and retirement accounts (3% service fee applies to model state** residents) and a $50 certificate fee.  A 1.25% service fee applies to liquidations.

 

When I buy Bitcoins for fiat on Coindesk, the fee is 1%. Which transaction is more efficient?

[Think Free]

It seems that the value of Bitcoin was greatly inflated by the shenanigans that took place at MTGox. The price is probably still recovering. See this article: https://www.cryptocoinsnews.com/report-mtgox-fraud-led-to-1200-bitcoin-price/

While I am certainly no financial genius and nobody can know the future of finances with any certainty anyway, my personal recommendation is that nobody should buy Bitcoins at this point as a financial investment. While I believe cryptocurrency has huge potential to be the currency of the future, Bitcoin has a couple problems from a financial investment standpoint, as I see it: a) We don't know if Bitcoin will become the defacto cryptocurrency of the future or if it will be superseded by something else and fall off into irrelevance. It's too early to tell. b) I agree with Peter Schiff that, at this point, Bitcoin's value is primarily being driven by speculation, which would mean it's in a bubble and the value is likely to continue to decline. Hopefully in the future, more and more Bitcoins will will be owned and traded because of their utility, but for now it's mostly speculation.

However, I would recommend buying and spending Bitcoins for ideological reasons, to drive it's acceptance and usage, and hopefully push it from the realm of "get rich quick investment scheme" into the realm of actually used currency.

Also, I would recommend buying Bitcoin as part of a strategy to protect yourself from possible hyperinflation of the dollar (or other fiat currency). I wouldn't recommend more than a few Bitcoin for this purpose, because it's entirely possible that if the dollar hyperinflates demand for Bitcoin will evaporate (or it could skyrocket). The idea would be that if your fiat currency suddenly hyper-inflates, you'll want some kind of easily liquidatable asset that you can sell piecemeal when you need it to cover living expenses so that you are not forced to sell off other (hopefully still valuable) assets like real-estate just to get some cash. I hope that makes sense.

[Daniel Unplugged]

Bitcoin's value may be primarily determined by speculators, but that is no different to the US dollar. Anybody who holds bonds, cash or money on deposit is 'speculating' that those dollars will have value in the future, just like those who hold bitcoin.

[shirgall]

Bitcoin's value may be primarily determined by speculators, but that is no different to the US dollar. Anybody who holds bonds, cash or money on deposit is 'speculating' that those dollars will have value in the future, just like those who hold bitcoin.

 

The difference between dollars and bitcoins is that there are millions of transactions in terms of dollars every day, where people are exchanging it for a standard of something else, and are tracking the change in that price both in the short and long terms. People track milk, bread, gasoline, a night out for dinner, an oil change...

[Daniel Unplugged]

The difference between dollars and bitcoins is that there are millions of transactions in terms of dollars every day, where people are exchanging it for a standard of something else, and are tracking the change in that price both in the short and long terms. People track milk, bread, gasoline, a night out for dinner, an oil change...

Ok, but I think I'm missing the point of what you are trying to say. Can you elaborate or put it another way?

[st434u]

The difference between dollars and bitcoins is that there are millions of transactions in terms of dollars every day, where people are exchanging it for a standard of something else, and are tracking the change in that price both in the short and long terms. People track milk, bread, gasoline, a night out for dinner, an oil change...

 

No, the difference is that if you live in the US, or if you live in other countries and engage in several forms of international trade, you are forced to use US Dollars to transact and to pay taxes in. And even this has not been enough to force acceptance of the dollar in the first place, only to somewhat maintain it after the initial inception where it was redeemable in gold. Since leaving the gold standard the dollar has lost 98.5% of its value, even with all the force of the mightiest military in the world behind it, plus partially that of many other countries.

 

Bitcoin doesn't have this. Normally this would be a good thing. And it is in a way. Just don't fall into the trap of assuming that everything that is voluntary is good.

 

Both Bernie Madoff's investment scheme and social security are pyramidal investment schemes; but the second has vastly outlasted the first, precisely because there is force there being used to coerce people into participating. Bernie Madoff's plan only hurt a relatively small number of people who chose to participate of their own accord, while social security will hurt just about everybody in the countries where it is enacted. In this sense, Bernie Madoff's plan was less harmful. But you should fully realize that while social security is worse both in terms of morals and in terms of its underlying fundamentals, it's still temporarily a safer place to be in, because it has the force of government preventing investors from leaving, and forcing new investors to participate.

[shirgall]

Ok, but I think I'm missing the point of what you are trying to say. Can you elaborate or put it another way?

 

My point was that the value of the dollar is not primarily determined by speculators, but by the transactions that everyone makes in dollars every day. When bitcoin is used as a medium of exchange greatly in excess of its use as a hedge against other currencies then it's volatility will cease and it's long-term value will emerge.