1 upvotes, 1 direct replies (showing 1)
View submission: Don't invest recklessly
You seem like a smart guy who works in finance but you’re connecting dots that shouldn’t be connected and also are not getting the idea of value.
The market IS assigning value to Apple by trading, it is actively figuring this out. The price swings up and down because there is CONSTANT speculation of the market value. IE - Apple announces tomorrow that it had 500 trillion in q4 earnings...well guess what, the market will go apeshit as it reassigns a more correct value to reflect this.
Your second fallacy, much like a lot of people within the space, is to compare bitcoins movement to that of a stock. This is not a stock. It is not a company, so forget price earnings and all of that other nonsense.
Where did the wealth come from?
It came from people purchasing it on the open market, they are WILLING to pay said price for bitcoin. You can interpret it this however which way you please...but people are basically voting with their fiat to say that bitcoin is worth x amount.
Do you know what gives money its value? It’s from participation. You get a group of people who believe something has value and BOOM, it has value.
Gold is just a rare metal but because we collectively agree to this idea that it has value, then it has value. Same as money.
Same as bitcoin.
Comment by awoeoc at 03/12/2017 at 05:39 UTC
1 upvotes, 1 direct replies
It seems you're mixing up two concepts, value and wealth. Apple had wealth, that was what I was describing if no one wanted stock anymore and it was liquidated this moment, what's left over is its "wealth". Its value is greater than its wealth but only about 3x as much.
Bitcoin however has no wealth, only value. Fiat has no wealth only value. Wealth is material goods, and the means of production. What a $1 bill is is a debt. When I have $1 the world owes me $1 worth of work. When I spend my time working and get paid $1 by my employer, that $1 is an I.O.U. The world now owes me back $1 worth of work.
When I buy food with that $1 I'm cashing in my I.O.U. Someone else takes that $1 as an I.O.U. to the next guy that they need something from.
Bitcoin is much the same, bitcoin is a token value of wealth, I can right now give you a bitcoin and you'll give me $11,000 worth of work.
Total inflows into bitcoin has been under $10billion, assuming that there are only 10 million bitcoin that aren't lost that means we currently have $100 billion in "wealth" that has been created out of thin air. Who did that much work? There are now $100billion in outstanding I.O.Us. It means if the price of bitcoin was "real" then out of nowhere a ton of work is owed to holders of Bitcoin.
Where did this debt of work come from?
Do you know what gives money its value? It’s from participation. You get a group of people who believe something has value and BOOM, it has value.
If this was true, then why can't we all just create a "human" coin, evenly spread it out so everyone Human gets an equal share of human coins, then all collectively decide we each now have $1 trillion in wealth in the form of Human coins?
If we all believe it has that much value, would we not have just solved poverty, inequality, world hunger? If we all believe in the human coin and spread it out to everyone we'd all be rich.
You seem like a smart guy who works in finance
I don't work in finance but I do read a ton about many subjects. I first put money into bitcoin in 2013 because I believed in its value as a transactional currency and its merits. I made a lot of money off bitcoin from a very small investment and I understand the technology very well. I think Bitcoin's main value is as a currency, however all this hype around it has made many get into a "get rich quick" mindset by most people "investing" into it. Bitcoin's worth is in its usability as a currency, and right now I doubt even $1billion in transaction occur in a year with bitcoin directly for goods. Yet it's taking over $1billion a year just to run the network. It's current price isn't a reflection of Bitcoin's utility, but a reflection of dollar signs in people's eyes. If Bitcoin's current value was closer to $2-4k I could believe the price reflects people's hopes and dreams of a future currency, but currently it's people's hopes and dreams that they can multiply their money. I would be surprised if even 10% of the inflows to bitcoin were from people who want to see it as a currency and not just trying to make some "free money".
I'm not trying to be negative I'm trying to be real. Bitcoin could still go up another 10x, 100x, who knows. But it's important to understand that currently the price of bitcoin is going up, because people want it to go up so they make more money. Meaning people in mass can never exit their positions because there's no underlying asset. Unless Bitcoin becomes a usable currency for everyday transactions, everyone cannot use up their Bitcoins at once without crashing the price, this gives bitcoin a pretty awful velocity of money which isn't good for a currency.