At first I was going to rebut this article for its old debunked claims and bush league conflation of Bitcoin with common crypto scams. But then the author goes and discredits himself with this… he wants to get you
“…free cash from the government…”
That’s all you need to know about him. Flim flam artist.
At first I was going to rebut this article for its old debunked claims and bush league conflation of Bitcoin with common crypto scams. But then the author goes and discredits himself with this… he wants to get you
“…free cash from the government…”
That’s all you need to know about him. Flim flam artist.
If quantum computing is eventually capable of cracking Bitcoin, wouldn’t it be able to get into ordinary bank accounts first? If quantum computing turns out to be that good, it would seem only cash and hard assets would be safe from it.
There’s a few problems with this piece. First irrespective of whether Bitcoin is $0.01 or $10M each coin is a unique chained history unlike fiat currency. You can swap Bitcoins with all the fluidity or money but each coin stores the transactions. Or to put it in a different way, Bitcoin is a promise always kept. Most blockchain coins are the same to varying degrees.
So the question is about perception and utility. Will there come a time when people demand their money is a promise always kept rather than currently where it is relatively kept but subject to dilution?
If we get digital money as in a coin the attacks on Bitcoin will go up. Because Bitcoin does not discriminate who owns it. CBDC’s will. And if shares and stocks are valued relative to CBDC which is in effect digital fiat, their values may go down due to lack of trust.
As for quantum computers the comparison with millions upon millions of years applies to brute force cracking a certain random bit number. If you increase the bits, it takes exponentially more time. Quantum computers haven’t solved P and Not P yet.
No, almost no one transacts in gold. Gold is not currency in any meaninful sense.
Bitcoin does not have the "fluidity of money" because it fundamentally isn't money. You don't hoarde money speculatively in the hope of it's value increasing. You don't need someone to sell money to to give you an exit, money generally produces a yield etc.
What you are doing is "Oh you're critical of apples? Well oranges are a fruit too!"
Gold, however, is money. Fiat isn’t. When currency was linked to a gold standard the currency could change hands quicker than the gold but it was built on the promise that you could claim the gold. Same as Bitcoin. Bitcoin transactions being slow just means faster transactions will be done on adjacent coins that can be claimed in Bitcoin. Which is what happens already to some extent. It all comes down to trust.
Gold is not money in any meaningful sense. If you want to test this take 5g of gold and go to your local supermarket and try to pay for your shopping with it.
Gold is money as it fulfils the definitions of money. It holds value, at least over the last 5000 years. What you are talking about is currency which originally were promises or IOUs based on the gold or assets of a nation. So Bitcoin does have a similar fluidity to gold (money). What we do transactions in i.e. currency can be linked to them in the same way as it currently linked to debt. The real point is what do people use when there is no faith in currency? History shows we put faith in tangible assets like land and gold. But if you have a digital asset that cannot be diluted and is robust then it can be used to. Thjs is actual money.
What will be the future of dollar bills in a digital economy? No more cash, no more freedom, just in from the Doge: "Do what I say or I cut your money", game over for you
It doesn't, I think you're confusing price and value. I know how it derives it's price, but how can you evaluate if that price is good or bad i.e. higher than it's value, or lower than it's value.
How do you determine the value of a bitcoin? Right now the *price* is like 82k USD but how do you tell if that is good value or bad value?
I've read your link, and the page on the same site on "why bitcoin has value" - neither contain any information about determining value vs price, or any fundamental analysis, or any means by which to do this.
you ask “how can you evaluate if that price is good or bad, i.e. higher or lower than its value,” however there is no objective standard/denomination of “value” that you can measure against price.
That's literally the point I'm making. With an equity I can calculate to the penny what it's *worth* then compare that to the *price*, this allows me to decide if I'm getting a good deal.
One way is to look at market indicators like the Stock-to-Flow (S2F) model, which compares Bitcoin’s existing supply to how much new BTC gets mined.Another angle is network value. Check the Market Value to Realized Value (MVRV) ratio—it compares Bitcoin’s market cap to the average price holders paid.Then there’s the cost of production. Miners need to break even, so if Bitcoin’s price dips below what it costs to mine (electricity, hardware, etc.), it might signal a floor.
What is there to oversimplify? It has no underlying assets, produces no income, it's impossible to fundamentaly analyse it or decide on a fair value for it.
How do you know if the price you are paying for crypto is a good price?
Let me ask you a question: how do you value the dollars you own?
You can't, as currency does not gain its value from an underlying asset, but rather from belief in a system (with fiats it is mostly the obligation to pay taxes in it).
Euros, Dollars, or any other fiat currency is printed at an average rate of around 7% per year (that's M2 increase). Bitcoin limits to a finite value (21 million bitcoins), while all these other fiat currencies depreciate on an exponential level. If you understand that a dollar today is NOT a dollar tomorrow, you will start seeing value in crypto and other wealth-preserving types of assets. This is just a short answer; there are many more arguments, but if this no-value argument were true, crypto would have been worth zero many years ago. The fact that it is worth this price already says enough.
If you really want to start understanding the monetary world we live in, I recommend starting with this piece of mine:
Currency is valuable as a medium of exchange in a short window of time. Holding one's wealth in cash is not investing; your wealth will erode. Any argument that one should hold BTC instead of cash is silly. In 1994 I should have held beanie babies instead of cash by that argument. The only difference between beanie babies in the 90s and BTC now, is that BTC has the luster of technology and anti-centralization. But at least people could understand what a beanie baby was; the average person will never understand or trust digital currency on the blockchain. It's never going to be mainstream in a modern economy.
"...no-value argument were true, crypto would have been worth zero many years ago."
Exactly how many years? There's not a time limit on how long a bubble can last. There are several historical bubbles that lasted years. This one is driven by a number of forces but there is not a shred of evidence that somehow this is different.
Well, being that I am not in the US I value dollars vs my own local currency.
But you haven't answered my question: how do you decide what is a fair price for cypto if you can't perform fundamental analysis on it?
You can't value it based on future cashflow, because it doesn't produce income. You can't value it vs the risk-free-rate because it doesn't produce income.
I can't pay my taxes with bitcoin, or my mortgage, or any of my bills, so it has zero use value for me. Bitcoin is almost useless as currency because so few vendors accept it, and people can only ascribe it value relative to fiat, because in order for it to be any use to them they have to sell it to get fiat they can actually spend.
Given those conditions and the fact it doesn't produce income, and has no underlying assets which I could value to derive a fair price estimate, how am I to know if the price I am paying is fair?
Moreover it only has value so long as theres some "next guy" who is willing to pay you more than you paid on entry, whereas the companies I buy will produce income for the rest of my life even if I never sell, and can be held in tax advantaged accounts meaning I pay no tax on the income or the capital appreciation in the event of disposal.
I see you like DCFs, I do as well. Maybe it is interesting to look up the stock to flow model for Bitcoin, It has quite a good track record and uses fundamentals to value it. The most important thing is understanding monetary policy.
I think we might disagree on what constitute fundamentals. From my perspective BTC doesn’t have fundamentals, at least not in the sense that equity investors use the term.
The biggest issue with stock to flow is that it assumes demand is constant, which of couse it isn’t.
I have zero issue with people buying crypto, whatever they want. Where my opposition lies is the inclusion of crypto holding companies etc. in equity indicies and so on. I don’t wan’t the S&P if it means buying Microstrategy while they use bitcoin price rises to issue stocks to buy more bitcoin to issue more stocks.
That specificially, is a scam in my opinion and can only end in “investors” in Microstrategy losing their shirts.
To come back to the stock to flow model, my position is that ultimately when the new supply drops to zero it is pretty much guarenteed that a liquidity crisis will follow due to bitcoin deriving it’s price almost exclusively from speculative hoarding. Speculative hoarding is also what makes it near useless as a currency in the long term, a currency only works if people want to exchange it for goods and services, if people hoard it forever it’s not really a currency.
Let's say all the gold in the world gets mined, will its price go to zero as well? I am interested in your opinion on gold, to me these assets are quite similar and gold has also performed incredibly over the past decades.
Fiat currency gains its value in a number of ways. 1. It is the only form of money with which you can pay taxes (you will go to prison if you do not pay your taxes.) 2. It is a universally accepted form of exchange (unlike crypto, which is universally not accepted as a form of payment in the real world.) 3. It earns a guaranteed rate of interest when stored in a financial institution (Bitcoin pays no interest and can devalue at the drop of a hat.) 4. It is backed by the full faith and credit of your government, which uses it to provide the infrastructure, security, and services that make your life peaceful, prosperous, and safe (crypto knows no nation and provides none of this).
Currency has to perform three functions: Store of value, medium of exchange, and unit of account. One could argue that bitcoin fails on at least two of those. It’s a terrible medium of exchange (unless you’re a drug or weapons dealer), and its unit of account is measured in dollars.
Growth in money supply isn’t a bad thing as long as the economy is also growing. Central banks target 2% inflation to roughly match that, and more importantly to prevent hoarding, which can exacerbate deflationary spirals; “use it or (albeit slowly) lose it”. When money is spent, there are also positive velocity of money and multiplier effects from fractional reserve banking and lending.
“Fiat currency” is a convenient bogey man term, but it works. Gold and bitcoin really don’t, as they’re hoarded.
Fine art has also been used for money laundering for centuries, as it has constrained supply and totally capricious valuations.
I would highly recommend educating yourself on modern monetary policy, fiats in essence are fake, they get printed on an exponential level of around 7% a year. Further we agree, currency is a believe, appearantly a lot of people value bitcoin. Instead of denying this revolution, you can also see why people value this form of currency in the first place. Maybe you dont see it, but millions (maybe even billions) of people do.
You are right, M2 also includes debt, thinking it will ever get paid back, that is another story. Still have a look at the M1 money supply for me, which does not include debt, this actually paints an even scarier picture...... (If you dont want to do the math, it is around 9% a year since FRED started tracking, https://fred.stlouisfed.org/series/M1SL).
At first I was going to rebut this article for its old debunked claims and bush league conflation of Bitcoin with common crypto scams. But then the author goes and discredits himself with this… he wants to get you
“…free cash from the government…”
That’s all you need to know about him. Flim flam artist.
You don't need to have a SIPP if you don't want one. But those of us who have them are pretty happy with that 25% match from the govt.
Do you wear a day glow yellow suit decorated with green $ signs? 🤣
At first I was going to rebut this article for its old debunked claims and bush league conflation of Bitcoin with common crypto scams. But then the author goes and discredits himself with this… he wants to get you
“…free cash from the government…”
That’s all you need to know about him. Flim flam artist.
If quantum computing is eventually capable of cracking Bitcoin, wouldn’t it be able to get into ordinary bank accounts first? If quantum computing turns out to be that good, it would seem only cash and hard assets would be safe from it.
There’s a few problems with this piece. First irrespective of whether Bitcoin is $0.01 or $10M each coin is a unique chained history unlike fiat currency. You can swap Bitcoins with all the fluidity or money but each coin stores the transactions. Or to put it in a different way, Bitcoin is a promise always kept. Most blockchain coins are the same to varying degrees.
So the question is about perception and utility. Will there come a time when people demand their money is a promise always kept rather than currently where it is relatively kept but subject to dilution?
If we get digital money as in a coin the attacks on Bitcoin will go up. Because Bitcoin does not discriminate who owns it. CBDC’s will. And if shares and stocks are valued relative to CBDC which is in effect digital fiat, their values may go down due to lack of trust.
As for quantum computers the comparison with millions upon millions of years applies to brute force cracking a certain random bit number. If you increase the bits, it takes exponentially more time. Quantum computers haven’t solved P and Not P yet.
"with all the fluidity of money"
Bitcoin can process what, 5 to 10 transactions per second globally?
How long does gold take to transact? Gold is money too isn’t it?
No, almost no one transacts in gold. Gold is not currency in any meaninful sense.
Bitcoin does not have the "fluidity of money" because it fundamentally isn't money. You don't hoarde money speculatively in the hope of it's value increasing. You don't need someone to sell money to to give you an exit, money generally produces a yield etc.
What you are doing is "Oh you're critical of apples? Well oranges are a fruit too!"
Gold, however, is money. Fiat isn’t. When currency was linked to a gold standard the currency could change hands quicker than the gold but it was built on the promise that you could claim the gold. Same as Bitcoin. Bitcoin transactions being slow just means faster transactions will be done on adjacent coins that can be claimed in Bitcoin. Which is what happens already to some extent. It all comes down to trust.
Gold is not money in any meaningful sense. If you want to test this take 5g of gold and go to your local supermarket and try to pay for your shopping with it.
Gold is money as it fulfils the definitions of money. It holds value, at least over the last 5000 years. What you are talking about is currency which originally were promises or IOUs based on the gold or assets of a nation. So Bitcoin does have a similar fluidity to gold (money). What we do transactions in i.e. currency can be linked to them in the same way as it currently linked to debt. The real point is what do people use when there is no faith in currency? History shows we put faith in tangible assets like land and gold. But if you have a digital asset that cannot be diluted and is robust then it can be used to. Thjs is actual money.
Watching on the sidelines and eating 🍿🍿
What will be the future of dollar bills in a digital economy? No more cash, no more freedom, just in from the Doge: "Do what I say or I cut your money", game over for you
LOL 😂 keep missing out on the best performing asset of the last decade that has survived multiple 80% drawdowns 🤣
Can you explain how you value Bitcoin? On any given day how do you decide if the price is a good price or a bad price?
https://river.com/learn/how-is-the-bitcoin-price-determined/
Lmk if this doesn’t answer ur question
It doesn't, I think you're confusing price and value. I know how it derives it's price, but how can you evaluate if that price is good or bad i.e. higher than it's value, or lower than it's value.
How do you determine the value of a bitcoin? Right now the *price* is like 82k USD but how do you tell if that is good value or bad value?
I've read your link, and the page on the same site on "why bitcoin has value" - neither contain any information about determining value vs price, or any fundamental analysis, or any means by which to do this.
you ask “how can you evaluate if that price is good or bad, i.e. higher or lower than its value,” however there is no objective standard/denomination of “value” that you can measure against price.
That's literally the point I'm making. With an equity I can calculate to the penny what it's *worth* then compare that to the *price*, this allows me to decide if I'm getting a good deal.
How do you do that with Bitcoin?
One way is to look at market indicators like the Stock-to-Flow (S2F) model, which compares Bitcoin’s existing supply to how much new BTC gets mined.Another angle is network value. Check the Market Value to Realized Value (MVRV) ratio—it compares Bitcoin’s market cap to the average price holders paid.Then there’s the cost of production. Miners need to break even, so if Bitcoin’s price dips below what it costs to mine (electricity, hardware, etc.), it might signal a floor.
Good morning!
This oversimplifies crypto, not a good piece.
What is there to oversimplify? It has no underlying assets, produces no income, it's impossible to fundamentaly analyse it or decide on a fair value for it.
How do you know if the price you are paying for crypto is a good price?
Let me ask you a question: how do you value the dollars you own?
You can't, as currency does not gain its value from an underlying asset, but rather from belief in a system (with fiats it is mostly the obligation to pay taxes in it).
Euros, Dollars, or any other fiat currency is printed at an average rate of around 7% per year (that's M2 increase). Bitcoin limits to a finite value (21 million bitcoins), while all these other fiat currencies depreciate on an exponential level. If you understand that a dollar today is NOT a dollar tomorrow, you will start seeing value in crypto and other wealth-preserving types of assets. This is just a short answer; there are many more arguments, but if this no-value argument were true, crypto would have been worth zero many years ago. The fact that it is worth this price already says enough.
If you really want to start understanding the monetary world we live in, I recommend starting with this piece of mine:
https://open.substack.com/pub/futurefunds/p/the-destroyer-of-your-capital?r=4ize1c&utm_campaign=post&utm_medium=web&showWelcomeOnShare=false
Currency is valuable as a medium of exchange in a short window of time. Holding one's wealth in cash is not investing; your wealth will erode. Any argument that one should hold BTC instead of cash is silly. In 1994 I should have held beanie babies instead of cash by that argument. The only difference between beanie babies in the 90s and BTC now, is that BTC has the luster of technology and anti-centralization. But at least people could understand what a beanie baby was; the average person will never understand or trust digital currency on the blockchain. It's never going to be mainstream in a modern economy.
"...no-value argument were true, crypto would have been worth zero many years ago."
Exactly how many years? There's not a time limit on how long a bubble can last. There are several historical bubbles that lasted years. This one is driven by a number of forces but there is not a shred of evidence that somehow this is different.
Well, being that I am not in the US I value dollars vs my own local currency.
But you haven't answered my question: how do you decide what is a fair price for cypto if you can't perform fundamental analysis on it?
You can't value it based on future cashflow, because it doesn't produce income. You can't value it vs the risk-free-rate because it doesn't produce income.
I can't pay my taxes with bitcoin, or my mortgage, or any of my bills, so it has zero use value for me. Bitcoin is almost useless as currency because so few vendors accept it, and people can only ascribe it value relative to fiat, because in order for it to be any use to them they have to sell it to get fiat they can actually spend.
Given those conditions and the fact it doesn't produce income, and has no underlying assets which I could value to derive a fair price estimate, how am I to know if the price I am paying is fair?
Moreover it only has value so long as theres some "next guy" who is willing to pay you more than you paid on entry, whereas the companies I buy will produce income for the rest of my life even if I never sell, and can be held in tax advantaged accounts meaning I pay no tax on the income or the capital appreciation in the event of disposal.
I see you like DCFs, I do as well. Maybe it is interesting to look up the stock to flow model for Bitcoin, It has quite a good track record and uses fundamentals to value it. The most important thing is understanding monetary policy.
I think we might disagree on what constitute fundamentals. From my perspective BTC doesn’t have fundamentals, at least not in the sense that equity investors use the term.
The biggest issue with stock to flow is that it assumes demand is constant, which of couse it isn’t.
I have zero issue with people buying crypto, whatever they want. Where my opposition lies is the inclusion of crypto holding companies etc. in equity indicies and so on. I don’t wan’t the S&P if it means buying Microstrategy while they use bitcoin price rises to issue stocks to buy more bitcoin to issue more stocks.
That specificially, is a scam in my opinion and can only end in “investors” in Microstrategy losing their shirts.
To come back to the stock to flow model, my position is that ultimately when the new supply drops to zero it is pretty much guarenteed that a liquidity crisis will follow due to bitcoin deriving it’s price almost exclusively from speculative hoarding. Speculative hoarding is also what makes it near useless as a currency in the long term, a currency only works if people want to exchange it for goods and services, if people hoard it forever it’s not really a currency.
Let's say all the gold in the world gets mined, will its price go to zero as well? I am interested in your opinion on gold, to me these assets are quite similar and gold has also performed incredibly over the past decades.
This is an excellent comment.
Fiat currency gains its value in a number of ways. 1. It is the only form of money with which you can pay taxes (you will go to prison if you do not pay your taxes.) 2. It is a universally accepted form of exchange (unlike crypto, which is universally not accepted as a form of payment in the real world.) 3. It earns a guaranteed rate of interest when stored in a financial institution (Bitcoin pays no interest and can devalue at the drop of a hat.) 4. It is backed by the full faith and credit of your government, which uses it to provide the infrastructure, security, and services that make your life peaceful, prosperous, and safe (crypto knows no nation and provides none of this).
Currency has to perform three functions: Store of value, medium of exchange, and unit of account. One could argue that bitcoin fails on at least two of those. It’s a terrible medium of exchange (unless you’re a drug or weapons dealer), and its unit of account is measured in dollars.
Growth in money supply isn’t a bad thing as long as the economy is also growing. Central banks target 2% inflation to roughly match that, and more importantly to prevent hoarding, which can exacerbate deflationary spirals; “use it or (albeit slowly) lose it”. When money is spent, there are also positive velocity of money and multiplier effects from fractional reserve banking and lending.
“Fiat currency” is a convenient bogey man term, but it works. Gold and bitcoin really don’t, as they’re hoarded.
Fine art has also been used for money laundering for centuries, as it has constrained supply and totally capricious valuations.
I would highly recommend educating yourself on modern monetary policy, fiats in essence are fake, they get printed on an exponential level of around 7% a year. Further we agree, currency is a believe, appearantly a lot of people value bitcoin. Instead of denying this revolution, you can also see why people value this form of currency in the first place. Maybe you dont see it, but millions (maybe even billions) of people do.
A lot of people valued tulip bulbs too.
They are not getting "printed". It is a debt that someone has to pay back. This at least the idea and it is a big difference vs. "being just printed".
You are right, M2 also includes debt, thinking it will ever get paid back, that is another story. Still have a look at the M1 money supply for me, which does not include debt, this actually paints an even scarier picture...... (If you dont want to do the math, it is around 9% a year since FRED started tracking, https://fred.stlouisfed.org/series/M1SL).