It makes for a convenient headline, however I fail to see how Bitcoin takes that crown versus Cisco in March of 2000. It was overvalued by a solid $450 billion, and that's coming up on two decades ago (for inflation adjustment purposes).
Alternatively, there's PetroChina's trillion dollar valuation during the peak of the commodity bubble:
And if we're not talking about more individualized entities, the mother of all bubbles goes to the global real-estate market in 2004-2006. Or, possibly, the bond market today. The global real-estate market was overvalued by tens of trillions of dollars at its peak before the great recession. That rather comical gap between Bitcoin's value at the top and the overvaluation in just the US real-estate market in the Summer of 2005, speaks to the dramatic tone of the article existing solely for clickbait.
If Bitcoin goes to zero, it will not matter very much on a global economic basis. It impacts exceptionally few people, fortunately. When the real-estate bubble collapsed, it nearly took down the global economy. That nearly bankrupted half the largest banks on the planet. It has taken until just the last few years for much of the developed world to truly recover or begin properly recovering.
People seem to conflate Bitcoin with cryptocurrency as a whole. It has been clear for a long time that Bitcoin's pace is unsustainable, especially with the exorbitant transaction fees and mining costs.
But if you look at other cryptocurrencies like Etherium for example, you'll see an interesting differentiation. Not all cryptocurrency values are tied to Bitcoin. Etherium, at the time that I write this, is up 2.4% over a month ago while Bitcoin is down 37% over the same period.
So, while I do think Bitcoin especially is pretty much definitionally a bubble, crashes and volatility are the nature of the game right now. We should be careful to lump digital currency as a whole into the the same category as Bitcoin. Bitcoin was the first, but probably wont be the last and certainly isn't the best.
I think there is value in cryptocurrency that is difficult to see for many people past the black market stuff and the gambling aspect people put to it. If you've ever transferred Etherium to a friend to pay them back for the pizza they bought you, you'll feel that value in a small way.
I'm certain there is a reason these currencies exist beyond the sketchy reasons and I'm quite sure they are here to stay, bubble or not. There was a massive housing bubble, but we still have houses and they are, mostly, recovered above the peak of that bubble ten years later.
It's not hard to imagine a (near) future where cryptocurrencies are a primary means of monetary transactions.
I agree, Ethereum is an example of something that took the concepts underpinning Bitcoin: distributed immutable legder and verifiable trust and created an platform that I think can be very interesting for building decentralized marketplaces.
The technology is new so there are going to be hurdles but in terms of scaling and obviously a lot of speculation, but I think there are also a lot of socio/geopolitical factors that will continue to make cryptocurrencies a thing.
> If you've ever transferred Etherium to a friend to pay them back for the pizza they bought you, you'll feel that value in a small way.
I think it's hard for people to appreciate this because this is already a pretty trivial task using tools like Venmo (or whatever your choice might be).
> There was a massive housing bubble, but we still have houses and they are, mostly, recovered above the peak of that bubble ten years later.
There's not really an alternative to houses (assuming you include e.g. apartments under that umbrella). You have to live somewhere, you don't have to use cryptocurrencies.
I think a more apt analogy would be the dot-com bubble. If there truly is a use for cryptocurrencies (as there turned out to be for internet-based companies), they'll stick around and we'll see them again.
That said, I also think it's a bit dangerous to rely on historical bubbles for predicting the future here. There are plenty of "bubbles" that never recovered at all, and we just moved on to the next thing entirely. We tend to forget about them.
I think it's hard for people to appreciate this because this is already a pretty trivial task using tools like Venmo (or whatever your choice might be).
Venmo is great - for people in the US who only transact with others in the US. I had the same problem in Belgium - my local friends used Payconiq, which of course only works if you have a Belgian bank account.
Sure, and I think this problem of transferring small amounts of money internationally painlessly is probably the strongest case for cryptocurrencies. But:
1) I don't think that's what cryptocurrencies want to be relegated to (a forex market essentially)
2) This also seems like a way around currency controls and things like AML compliance. If that became a problem at some point, I have to imagine governments will start putting the screws on any major exchange that interacts with fiat (and to some extent they already have).
>Roubini said the sharp fall was the beginning of a crash that would see the value of the digital currency plummet “all the way down to zero”.
It's really hard to take someone seriously when they say the price is going to literally go to zero. It's possible to imagine crashes of 90% or even much worse for an asset like Bitcoin, but a market price of zero would suggest not a single person in the world is willing to pay anything at all for a Bitcoin. Absent a world-changing event like hashing being completely broken, the price will never be exactly zero. I can guarantee this since I myself would be willing to pay at least 1 cent for every BTC that exists, and I know that many would be eager to outbid me with that offer.
If someone is so good at calling the exact extent of this crash, then they should place a short on Bitcoin. You don't have an excuse anymore. It's on regulated markets, unrelated markets, and everything in between. If you really think it's going to zero then put all of your money in a short and make sure not to close it until it gets there. Options are also available for some investors, which should be even more lucrative for you.
A lot of people just made money shorting bitcoin... it literally just dropped 50%. Are you trying to say that that wasn't a crash? Or that it's not a bubble? Doubling in value then losing half of it within two months seems like the very definition of a bubble popping.
All I'm stating is that I do not think the price will reach exactly zero. Of course it's a crash, and of course shorting it is profitable during this, I was short myself in it for a bit.
But the bubble has supposedly popped many times, keep in mind Bitcoin has had crashes far greater than just 50% before (closer to 90% has happened multiple times, see https://en.wikipedia.org/wiki/History_of_bitcoin#Prices_and_...). So if this is 'the' bubble pop, rather than just another large crash, will remain an open question for quite some time.
Sure, it was a bubble popping, but it's the overall trajectory that's important. After the dotcom bubble, investment in the web dropped for a noticeable period of time. It's too early to tell if this current drop has shaken investors in the same way.
What seems apparent to me is that all the Bitcoin miners that have invested heavily in mining equipment want to see it continue to grow. The market may only slow down once miners no longer see a return on further investment (when the increasing price of electricity + mining equipment, combined with the steady rise of hashing difficulty, no longer makes it profitable), or when the transaction fees and transaction speed become too much of an issue. In other words, it's the technical limitations that seem most likely to stop the rise of Bitcoin (in my opinion).
The difference between your first two examples and the final one is that Bitcoin is decentralized. It only takes a single miner to keep the Bitcoin network functioning (in practice you'd need to wait for difficulty adjustment and it wouldn't work out very well, but the point is you don't need to rely on any single entity not going bankrupt).
It's true that is the price goes low enough mining would decrease significantly, but after difficulty adjustment it would still exist to a nonzero extent.
Bitcoin can absolutely still function as a system even if 95% or even 99% of all miners end up quitting it over the next few years.
BitTorrent is truly decentralized. So long as there's one seed of something you can repopulate the network, you can rebuild from that singular copy. Even N partial copies could do it so long as the sum of all those parts is at least one complete copy. This is because all you care about is data, and data can be copied easily.
Bitcoin isn't. It's merely distributed and it depends on having a singular, healthy, functioning consensus network. Where that network splits you suddenly have more than one blockchain, as is the case with Bitcoin Gold, and Bitcoin Cash.
It also depends on having a healthy balance of mining power in that network so that no one entity can take control and start to dictate terms.
If all that's left is a single miner then four other miners can easily take charge of that network and effectively destroy it.
> Bitcoin can absolutely still function....
The blockchain component of Bitcoin can technically function, sure, there's no problem there, but as a unit of value, as a unit of exchange, it's functionally useless. You can't trust it, you can't use it for anything.
There is, by design, one blockchain. When that assumption fails, the network has to work to achieve consensus, and if that can't be achieved it splits. That can be fine with things like IRC networks or peer-to-peer exchanges, you can always do a messy reconciliation later, but with something that's supposed to represent a medium of exchange that's a problem.
don't you think that eventually people will basically only use a couple of coins, and that bitcoin could not be one of them? this is what most crypto guys i've talked to say. at most i can see one coin used for anonymous transactions and another for more legitimized purposes, and then maybe some with unique effects like filecoin could also be used. but bitcoin only has network effects and entrenched users, that's it.
retired currencies like yen from the 1900s have a novelty collectors value because they're physical objects. coins don't have that, so a dead coin has literally zero value.
I think you are lacking imagination here, would you still pay 1 cent for BTC that everyone has completely abandoned and doesn't care about any more? I am pretty confident this will happen at some point in the (maybe distant) future.
Everyone wont completely abandon it and not care anymore. That is basically beyond the realm of reality. I bet the majority of the people reading this would jump on buying thousands of bitcoin at that price, thus raising the price. It is very difficult, nigh impossible to actually imagine bitcoin not being worth anything.
Why not? There's plenty of other dead currencies that can't be practically exchanged for money. Or if they are, it's because they're interesting looking enough to attract collectors, which is not something that could be said for Bitcoins.
Non-negligible value of BTC also depends on constant investment of electricity in mining more Bitcoins and companies dedicating resources to maintaining payment/exchange infrastructure
This is a really interesting point, and I could see the parallel with currencies such as Confederate or Deseret money, or pre-Euro/pre-WWII currencies, but even those have insane values now that they are defunct. Look at the price of this old Utah territory money that existed as long as their own language (not very long) http://www.rustcoin.com/Deseret-Currency/
I can imagine a situation where it would completely collapse and fail to have a market price at all, but it takes a lot more than just "people selling it because it's going down". I can imagine similar scenarios for other assets like gold or the euro, but they are very far-fetched and I don't expect them to ever happen.
Gold has a history of being a currency as long as civilization so it probably will always be accepted as valuable, and it has actual uses as well, but mainly history. Euro Governments will always accept Euros for taxes, so they will always be useful, and if they stop they will still have a transition plan so you can turn your Euros into something they will accept. At this point if Bitcoin's value isn't going up a lot of people will use interest since honestly that has been its main appeal. And if it isn't technically better than some other cryptocurrencies out there there isn't a reason to think anyone will be using it long term.
"Ah, surely this professional, educated economist has not studied bitcoin and doesn't understand crypto and the value of unregulated currency as well as me, your local pothead with no economics or tech education! And in any case, surely Etherium doesn't suffer from the same problems despite being fundamentally similar!"
Pattern matching logic fails for both educated people and potheads alike. Bitcoin is unlike anything seen before and no one knows what’s going to happen with it.
> “Policymakers and regulators are getting worried. Pretty much every G20 policymaker is talking about a crackdown,” Roubini told Bloomberg Television. “We can’t allow it to become the next Swiss bank account for use by criminals and people evading tax.”
I've heard the "prevent the next Swiss bank account" thing a few times now, and it still looks like the most baldly corrupt aspect of this whole show. Actual Swiss bank accounts are still a thing people have, and are still being used by the wealthy to avoid taxes on a routine basis, and everyone knows it. But actual Swiss bank accounts have a stable legal status and no one's really going after them.
What's the difference between "the next Swiss bank accounts" and the current ones? Perhaps it's that Bitcoin is available to much less wealthy classes of people. Or perhaps the right people have big Swiss accounts and haven't gotten around to diversifying into crypto yet. But I haven't seen a good account of the difference.
Recent drops in cryptocurrency valuation coincide with futures settlements dates on CBOE and the other exchange. Perhaps someone is gaming the market and exploiting arb opportunity?
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[ 24.9 ms ] story [ 1561 ms ] threadAlternatively, there's PetroChina's trillion dollar valuation during the peak of the commodity bubble:
http://www.nytimes.com/2007/11/05/business/worldbusiness/05i...
And if we're not talking about more individualized entities, the mother of all bubbles goes to the global real-estate market in 2004-2006. Or, possibly, the bond market today. The global real-estate market was overvalued by tens of trillions of dollars at its peak before the great recession. That rather comical gap between Bitcoin's value at the top and the overvaluation in just the US real-estate market in the Summer of 2005, speaks to the dramatic tone of the article existing solely for clickbait.
If Bitcoin goes to zero, it will not matter very much on a global economic basis. It impacts exceptionally few people, fortunately. When the real-estate bubble collapsed, it nearly took down the global economy. That nearly bankrupted half the largest banks on the planet. It has taken until just the last few years for much of the developed world to truly recover or begin properly recovering.
But if you look at other cryptocurrencies like Etherium for example, you'll see an interesting differentiation. Not all cryptocurrency values are tied to Bitcoin. Etherium, at the time that I write this, is up 2.4% over a month ago while Bitcoin is down 37% over the same period.
So, while I do think Bitcoin especially is pretty much definitionally a bubble, crashes and volatility are the nature of the game right now. We should be careful to lump digital currency as a whole into the the same category as Bitcoin. Bitcoin was the first, but probably wont be the last and certainly isn't the best.
I think there is value in cryptocurrency that is difficult to see for many people past the black market stuff and the gambling aspect people put to it. If you've ever transferred Etherium to a friend to pay them back for the pizza they bought you, you'll feel that value in a small way.
I'm certain there is a reason these currencies exist beyond the sketchy reasons and I'm quite sure they are here to stay, bubble or not. There was a massive housing bubble, but we still have houses and they are, mostly, recovered above the peak of that bubble ten years later.
It's not hard to imagine a (near) future where cryptocurrencies are a primary means of monetary transactions.
The technology is new so there are going to be hurdles but in terms of scaling and obviously a lot of speculation, but I think there are also a lot of socio/geopolitical factors that will continue to make cryptocurrencies a thing.
I think it's hard for people to appreciate this because this is already a pretty trivial task using tools like Venmo (or whatever your choice might be).
> There was a massive housing bubble, but we still have houses and they are, mostly, recovered above the peak of that bubble ten years later.
There's not really an alternative to houses (assuming you include e.g. apartments under that umbrella). You have to live somewhere, you don't have to use cryptocurrencies.
I think a more apt analogy would be the dot-com bubble. If there truly is a use for cryptocurrencies (as there turned out to be for internet-based companies), they'll stick around and we'll see them again.
That said, I also think it's a bit dangerous to rely on historical bubbles for predicting the future here. There are plenty of "bubbles" that never recovered at all, and we just moved on to the next thing entirely. We tend to forget about them.
Venmo is great - for people in the US who only transact with others in the US. I had the same problem in Belgium - my local friends used Payconiq, which of course only works if you have a Belgian bank account.
1) I don't think that's what cryptocurrencies want to be relegated to (a forex market essentially)
2) This also seems like a way around currency controls and things like AML compliance. If that became a problem at some point, I have to imagine governments will start putting the screws on any major exchange that interacts with fiat (and to some extent they already have).
It's really hard to take someone seriously when they say the price is going to literally go to zero. It's possible to imagine crashes of 90% or even much worse for an asset like Bitcoin, but a market price of zero would suggest not a single person in the world is willing to pay anything at all for a Bitcoin. Absent a world-changing event like hashing being completely broken, the price will never be exactly zero. I can guarantee this since I myself would be willing to pay at least 1 cent for every BTC that exists, and I know that many would be eager to outbid me with that offer.
If someone is so good at calling the exact extent of this crash, then they should place a short on Bitcoin. You don't have an excuse anymore. It's on regulated markets, unrelated markets, and everything in between. If you really think it's going to zero then put all of your money in a short and make sure not to close it until it gets there. Options are also available for some investors, which should be even more lucrative for you.
You can know that bitcoin is doomed to fail, but that doesn't help you if there's a temporary price spike and you get a margin call.
But the bubble has supposedly popped many times, keep in mind Bitcoin has had crashes far greater than just 50% before (closer to 90% has happened multiple times, see https://en.wikipedia.org/wiki/History_of_bitcoin#Prices_and_...). So if this is 'the' bubble pop, rather than just another large crash, will remain an open question for quite some time.
What seems apparent to me is that all the Bitcoin miners that have invested heavily in mining equipment want to see it continue to grow. The market may only slow down once miners no longer see a return on further investment (when the increasing price of electricity + mining equipment, combined with the steady rise of hashing difficulty, no longer makes it profitable), or when the transaction fees and transaction speed become too much of an issue. In other words, it's the technical limitations that seem most likely to stop the rise of Bitcoin (in my opinion).
(this will have occurred in the scenario where a few (or few hundred) bidders matter)
How much money would World of Warcraft gold be worth when that game eventually shuts down?
How much money will any amount of Bitcoin be worth when the Bitcoin network frays apart and ceases to function?
It's true that is the price goes low enough mining would decrease significantly, but after difficulty adjustment it would still exist to a nonzero extent. Bitcoin can absolutely still function as a system even if 95% or even 99% of all miners end up quitting it over the next few years.
Bitcoin isn't. It's merely distributed and it depends on having a singular, healthy, functioning consensus network. Where that network splits you suddenly have more than one blockchain, as is the case with Bitcoin Gold, and Bitcoin Cash.
It also depends on having a healthy balance of mining power in that network so that no one entity can take control and start to dictate terms.
If all that's left is a single miner then four other miners can easily take charge of that network and effectively destroy it.
> Bitcoin can absolutely still function....
The blockchain component of Bitcoin can technically function, sure, there's no problem there, but as a unit of value, as a unit of exchange, it's functionally useless. You can't trust it, you can't use it for anything.
There is, by design, one blockchain. When that assumption fails, the network has to work to achieve consensus, and if that can't be achieved it splits. That can be fine with things like IRC networks or peer-to-peer exchanges, you can always do a messy reconciliation later, but with something that's supposed to represent a medium of exchange that's a problem.
retired currencies like yen from the 1900s have a novelty collectors value because they're physical objects. coins don't have that, so a dead coin has literally zero value.
Non-negligible value of BTC also depends on constant investment of electricity in mining more Bitcoins and companies dedicating resources to maintaining payment/exchange infrastructure
The biggest bubble in history? Compared to the mortgage and banking meltdown in 2008?
History must be short.
I've heard the "prevent the next Swiss bank account" thing a few times now, and it still looks like the most baldly corrupt aspect of this whole show. Actual Swiss bank accounts are still a thing people have, and are still being used by the wealthy to avoid taxes on a routine basis, and everyone knows it. But actual Swiss bank accounts have a stable legal status and no one's really going after them.
What's the difference between "the next Swiss bank accounts" and the current ones? Perhaps it's that Bitcoin is available to much less wealthy classes of people. Or perhaps the right people have big Swiss accounts and haven't gotten around to diversifying into crypto yet. But I haven't seen a good account of the difference.