The value is purely a function of speculative demand. And while previously people anticipated the demand would go up "organically" because of actual real-world usage, you know to pay for stuff and such, that hasn't really materialized in the way we hoped. How many actually use BTC for things like that? At its BEST it has usage to purchase other coins - but that's about it.
It is digital gold, but with seemingly less IRL usage. When I started with BTC 12 years ago, the community was really optimistic on the potential use cases - but mostly the aspect of it replacing expensive wire transfers, potential for being a digital currency you could use in your daily life.
After each hype cycle that belief diminished, and it became more apparent that people only buy it to get richer by the means of speculation.
The days of BTC 1000x'ing are long gone. Even if 1 BTC is to go for $1MM, that's "only" a 21.5x increase, and it would mean that BTC alone has a 21 trillion cap. That's half of the entire S&P500 market cap. And you'd still have a slew of other safe coins that competes against BTC for the same money.
So, my point is: While BTC is still the king of crypto, it lives in a financial market that is mostly driven by speculation and expectations of huge returns. The very same investors can earn a lot more by gambling on "lesser" coins.
There's still money to be made, but that boils down to people buying and selling between the various boom and bust cycles. We're 15 years into this now.
> There is no underlying value. No intrinsic value.
I'm surprised this comment still shows up. The intrinsic value is literally all of the energy spent ensuring the validity of the blockchain via expensive PoW. If you want to point at something with no intrinsic value, look to the fiats.
Bitcoin has no day to day usage because of its volatility. The more ETFs like that appear, the lower it's volatility, and thus you will be able to see real world usage pop up.
Also, the more regulation, the easier it will be to hold and use BTC to buy stuff.
If you invest in a company that produces disinfectants, during a pandemic, you can reasonably assume that there's both demand, and that the value of the company is a function of their ability to produce disinfectant, how much inventory they have etc. - in fact, this can be measured / inferred through their financial reporting.
Likewise, if you invest in a pharma company that produces insulin, and there's a insulin shortage, same principle applies.
Or maybe you want to invest in some heavy machinery company, so naturally the valuation depends on how much their assets are worth. And how much they're making off their services in sales.
In any case, for all the above, there is some base value - some intrinsic value, which is possible to calculate.
Hell, even gold is predictable. If there's physical demand for gold (which there is), you can come up with how much physical gold is needed, at minimum.
But how do you calculate that for, say, bitcoin? I'm having a hard time coming up with anything. I can't point to any application which would require people to strictly use bitcoin, and thus driving up demand. No policies that require people to pay with bitcoin.
I guess one could argue that the hardware needed to mine bitcoin has a value, which could set some minimum for what miners are willing to sell BTC for - but otherwise it seems to be only supply and demand. It is the "demand" part which I find difficult.
I am only saying that there is no such thing as intrinsic value.
Or to put it differently, it is an idea that has little to no predictive power and therefore is of no great value.
There is only one very reliable principle to reason with in that space: supply and demand.
It has been observed to work every time for thousands of years, and therefore very much akin to what physicist like to call a postulate or a law (as in the second law of thermodynamics, yet to be actually proven from other principles, but observed to work every single time in the real world).
Go back to all of the examples you listed above, and dig deep enough, you will see that every single item's vaunted intrinsic value boils down to one thing : there is a demand for these things or the product they put out in the market, therefore they have value.
I repeat : there is no such thing as intrinsic value, there is just supply and demand.
Intrinsic value is a delusion.
And in the case of Bitcoin, there is clearly demand for it. Therefore it has value.
Why there is demand for it is not something you can easily analyze, because you'd have to get inside the brain of every market participant, each of which has followed a different line of reasoning to get to a conclusion about the value of Bitcoin. Some of these will be rational. Some won't. It doesn't matter. Only the aggregate outcome does matter.
You are trying to claim that you don't understand why there is a demand for Bitcoin and you don't because in your world, things have to have "intrinsic value" for there to be demand for it.
a) your premises are clearly incorrect: the current market price for Bitcoin clearly indicates that there is demand for it. Therefore it has value. Therefore the notion of "intrinsic value" is clearly of little practical use.
b) the *reason* why there is demand for it may very well be hard for you to understand based on *your* postulate that things must have "intrinsic value" (no such thing, remember?) for there to be demand for something.
Just abandon the idea that intrinsic value is a valuable concept, get back to supply and demand, and the world will start making sense again.
As more people understand its fundamental qualities (or even just see number go up) and save their wealth in it, it's value will become less volatile and it will become more useful as a unit of account and day-to-day medium of exchange. It will be >$10M/BTC before that'll start to happen though.
If we're going to look at it from a fundamental perspective - what drives people to purchase BTC?
I don't know about you, but close to 100% of everyone I know that have bought BTC (and other coins, for that matter) the past 5-10 years have done it in hopes of it going to the moon. The bitcoin maxis are at this point a fringe movement, a distant past, really.
If you put all your savings on index funds, there is some predictability and underlying assets to reason for. What is the best predictor for whether crypto goes up or down? How can you possibly predict what triggers its price, if there's little to none real-life usage?
Unless we see widespread adaption of some sort, for actual concrete applications, it is just going to be pure speculation.
But I agree on volatility - ETFs can certainly reduce volatility if there's enough growth.
I have all my savings stored in bitcoin. I do it because I've spent 100s of hours learning what money really is and can see that bitcoin is the best form of it, certainly the best long term store of value. I also know that the best long term store of value will ultimately be where the world's stored value is moved to.
I like your courage, but you really should diversify. Life is long and none of us have a crystal ball. If you don't trust USD, get some other currencies, including crypto. Get some property. Gold. Bonds. Stocks. Savings. Shit happens and you need to defend your portfolio as well as maximise profits.
But I'm wondering - why wouldn't you invest in business? Business are, after all, the drivers of economy.
While cryptocurrencies could theoretically grow to "infinite" (finite supply and all. combined with fiat monetary policies), there must be some realistic limit to the growth, where the price starts to converge. For BTC, that price is somewhere in the single digit millions. Could make a long post of how I came up with that figure, but basically assume that everyone owning any assets in the world manage to liquidate those, and go all in on BTC, nothing else. Combined with investing newly minted fiat into BTC. (Never mind the economical consequences of public companies being worth close to zero $, and people only spending their money on BTC)
So let's say that BTC "only" has a theoretical maximum of, say, 100x increase from the current price. (but more realistically 10x-20x)
If you really wanted to make a killing, wouldn't it be better to also invest in revolutionary companies? NVIDIA has jumped 100x the past 10 years. There will likely be other NVIDIAs out there.
Obviously this wouldn't mean as much if you're a longtime holder, but from the perspective of a fresh investor, that's where one stands right now.
None of them offer the probability of bitcoin. It's the most asymmetrical bet I've ever seen.
The only reason it's not already $10M/BTC is that noone understands what it is - many people think they do, but they don't. As someone who has studied the subject for 100s of hours, I haven't come across a single valid argument for why it won't absorb all the stored value in the world over time. The hardest part is just being patient while everyone figures it out.
The supply halving every 4 years helps to bring it to their attention :)
For BTC to absorb all stored value in the world, it would need to be the only currency in the world. That is the only way all assets in the world are bought/sold with BTC.
But that alone is, IMO, a non-starter. It assumes that all countries in the world would more or less give up control of their own currency and economy - if BTC is the only currency worth anything, why would anyone own or get paid in anything other than BTC? Which brings me to the next point...
This is not directed at you, but I think the BTC maxis severely underestimate the power and control that governments hold over these things. They can (and will) force you to pay your faxes, fees, and whatever they want in their currency, and have to power to use force if you chose not to.
If crypto poses a legitimate threat to that power and control, it is much easier to remove the threat than to adapt your system to it.
> If crypto poses a legitimate threat to that power and control, it is much easier to remove the threat than to adapt your system to it.
In fact the opposite of this is happening. We are in a discussion about how the SEC was ordered by the courts to further integrate Bitcoin into the existing financial system. Despite their protests and attempts to impose their own will on the rights of the people.
It does pose an extremely legitimate threat to their power, but there is nothing they can do about it. They can't stop it. They either embrace bitcoin or suffer economic collapse.
The only reason there are so many fist currencies is because no country wants to be using a currency that another is printing for free.
With bitcoin, that's not an issue and countries like El Salvador, Argentina would happily use it as the basis for a currency and thrive because of it. Over time, societies that use the best money win.
Well, I certainly passionately believe in something that a lot of people think is garbage. I'll agree with that. The thing is, I used to think like them until I put in the time to seriously learn. Now I'm enlightened (yep, I just made it worse)
Personally I think it's one of mankind's most important discoveries. It will improve the world more than most people could imagine. And it's going up forever.
Are you hoping for it to remain the same or are you hoping for an increase compared to usd? Asking because you mentioned stored. What if you could buy shares with btc? If value just sits there and is not used in a productive way - things companies try to do - you're subscribing to a very static world view. It might make sense if you are close to retirement - where people usually move to stable assets - but generally you want your assets to be used in a productive way rather than hidden away.
If it remains the same value its USD price will increase at the rate of devaluation of the dollar which is 7% on average (value halves every decade)
If I wanted to make my bitcoin "productive", I could lend it to businesses and then receive interest on top - so bitcoin would go up in price at 7% and then I'd also receive back 5 to 10% more bitcoin per year.
No other asset will ever come close to this, without taking on risk or extra work. Which is why bitcoin will very likely also go up 2000% in value over the next decade.
That might have been interesting during ZIRP but these days many people have very non-zero interest on their savings account. If you hold Bitcoin its value may well go down not up. It's more like holding penny stocks than a saving account.
The value is purely a function of speculative demand. And while previously people anticipated the demand would go up "organically" because of actual real-world usage, you know to pay for stuff and such, that hasn't really materialized in the way we hoped. How many actually use BTC for things like that? At its BEST it has usage to purchase other coins - but that's about it.
It is digital gold, but with seemingly less IRL usage. When I started with BTC 12 years ago, the community was really optimistic on the potential use cases - but mostly the aspect of it replacing expensive wire transfers, potential for being a digital currency you could use in your daily life.
After each hype cycle that belief diminished, and it became more apparent that people only buy it to get richer by the means of speculation.
The days of BTC 1000x'ing are long gone. Even if 1 BTC is to go for $1MM, that's "only" a 21.5x increase, and it would mean that BTC alone has a 21 trillion cap. That's half of the entire S&P500 market cap. And you'd still have a slew of other safe coins that competes against BTC for the same money.
So, my point is: While BTC is still the king of crypto, it lives in a financial market that is mostly driven by speculation and expectations of huge returns. The very same investors can earn a lot more by gambling on "lesser" coins.
There's still money to be made, but that boils down to people buying and selling between the various boom and bust cycles. We're 15 years into this now.