Bitcoin blues

[Clitheroekid]

Is anyone else having difficulty watching the seemingly inexorable rise of Bitcoin and other cryptocurrencies? Bitcoin has risen in price (I deliberately avoid the word `value') by 183% over the past year.

I've spent decades carefully researching and making investments in companies that I thought were high quality, long term winners. I would imagine that I must have spent thousands of hours in my efforts. Admittedly, as it's something of a hobby as well as a means of providing for my dotage, it's hardly been blood, sweat and tears, but equally there are many other ways I could have spent my time that would have been at least equally enjoyable.

But as I gaze gloomily at the plodding performance of my investment portfolio, which I now belatedly realise is far too much based in UK small caps, and at the same time gaze even more gloomily at the Bitcoin chart, I can't help wondering just what the hell is going on in the world.

Whilst I still have little real understanding of cryptocurrencies what I do believe is that (1) they have essentially zero intrinsic value; and (2) they absorb a very substantial amount of energy to no purpose other than to provide a medium for speculation.

Nevertheless, a person with no knowledge of or interest in investment that bought cryptos over the past couple of years has seen their `investment' increase in price more than I - and, I'm guessing, most relatively conservative investors - have seen in the last 10 years.

I feel as though, with apologies for using a hackneyed phrase, the world's gone mad. I understand that a total of around $2.7 trillion is now held in cryptocurrencies, so even if, as I've always believed, it i just a speculative bubble, any collapse involving that much money is bound to have a really serious effect on the markets generally. So potentially I'll end up with the worst of both worlds - not only have I missed out on a quick fortune but my own humble investments are potentially at risk if the bubble does burst.

Any words of consolation gratefully received!

[UncleEbenezer]

Whilst I still have little real understanding of cryptocurrencies what I do believe is that (1) they have essentially zero intrinsic value; and (2) they absorb a very substantial amount of energy to no purpose other than to provide a medium for speculation.

Zero intrinsic value? Yep, like (for example), Sterling.

Actually individual cryptocurrencies have an intrinsic value that fiat currencies lack: they can't be debased at the whim of a ruler.

I agree about the energy (and don't play bitcoin myself), though it's a drop in the ocean compared to what gets squandered by engines that move people around, or warm peoples' homes.

[Urbandreamer]

I've been investing on the stock market for decades.

I've also been interested in bitcoin for some time and started buying it about two years ago.
We clearly have very different ideas of what it is as I consider it a money. I don't buy it for speculative reasons.

As I said, I consider it a form of money and last October I began valuing my stock portfolio in BTC. Believe me looking at the value of your stock portfolio in BTC is very grim.

I do recommend doing some research into BTC though, rather than blindly accepting what you read in the mainstream press. For example, what is the "intrinsic" value of the pound sterling, the US dollar, the Euro dollar, etc?

Have a look at Clark Moody's Bitcoin Dashboard for information about things like the amount held in corporate treasuries, amount issued, price in gold, etc.

Maybe read some books about Austrian economics.
Possibly this one published in 1976.
The book is still the subject of debate and study.
For example this paper and others.

Hayek's theory is supported by recent research suggesting that competitive currency
markets can lead to more stable and efficient monetary systems. For example, a study by Luther &
White (2008) found that the adoption of cryptocurrencies, such as Bitcoin, has the potential to
improve economic outcomes by providing individuals with greater choice and control over their
financial transactions. Similarly, Dowd & Hutchinson (2010) argue that competitive currency
markets could help mitigate the adverse effects of inflation and reduce the likelihood of financial
crises

[Mike4]

I know someone who was gifted 37 Bitcoin right at the get-go, when she knew someone involved in the initial project. They were giving them away apparently right at the start to get it off the ground.

She watched in amazement as they grew in popularity and value. She lost her nerve when they hit £3,500 each, she cashed in ns sold the lot. Must be sick as a dog about it now.... We've lost touch now so I can't ask her!

[scotia]

And the last monetary crash was due to our financial brains being unable to understand that combining lots of subprime mortgages which would never be repaid , and imagining the collection was gold plated and guaranteed to be repaid. I.E they had no idea how to sum related probabilities. And they kept exchanging these tokens at higher valuations - until it got through to some of them that they had no intrinsic value, and the panic started - and Lehman Brothers were slow off the mark, and went bankrupt - and our Government had to prop up our banks.
I understand that the major global banks are at it again - buying up Bitcoins with no intrinsic value. Now if some major countries feel like refusing to permit any trading in Bitcoins, we could see some second thoughts - and substantial instability. And where would it stop?

[Urbandreamer]

And the last monetary crash was due to our financial brains being unable to understand that combining lots of subprime mortgages which would never be repaid , and imagining the collection was gold plated and guaranteed to be repaid. I.E they had no idea how to sum related probabilities. And they kept exchanging these tokens at higher valuations - until it got through to some of them that they had no intrinsic value, and the panic started - and Lehman Brothers were slow off the mark, and went bankrupt - and our Government had to prop up our banks.
I understand that the major global banks are at it again - buying up Bitcoins with no intrinsic value. Now if some major countries feel like refusing to permit any trading in Bitcoins, we could see some second thoughts - and substantial instability. And where would it stop?

May I point out that you have both bitcoin and fiat wrong.
Bitcoin, whatever you may think of it, has a fixed supply.
Fiat does not. Those subprime mortgages were fictional money created by fractional reserve lending.

PS you also don't know that China banned both bitcoin mining and trading in 2021.
Here is some old news.

[nimnarb]

Don't understand Bitcoin at all. Understand Nvidia though and thought I was very clever buying at $35.00 and selling at $250.00(about 60 shares, think it split 4/1 so not exactly a fortune in shares I had)Plus last year or the year before it spiralled downwards after one bad earnings report. A few months ago saw that it had reached $400.00 and just laughed. Have a look what it is today and what it's been doing the last few weeks. CK, remember telling you about this in 2017, just because I liked the new graphic card and thought it would do well with chips in general and sold AMD and Intel at the time. Could surpass Apple and Msft in the next few years, as could easily double or treble from here as the leader now by far in Artificial Intelligence.

Moral of the story, if you believe in something, just hold onto it through thick and thin and during 50-60% drops(naturally, I have never been able to do this.) But Bitcoin is simply something my head cannot compute, regardless of the price.

[JohnB]

Its bizarre as even if you like cryptocurrencies, bitcoin is not better than the others, indeed in many ways, like the energy consumption its worse. It would be easy for a rival scheme to be adopted leaving it stranded.

What it has is a brand, a reputation for rising in value that sucks in the cash. But while we all might regret not being the lesser fool who can now reap the rewards of selling to a greater one, are we sure that we won't be considered the greatest fools of all if we buy now. The big banks consider there are more fools to come, but so they did in 2008

[Urbandreamer]

Its bizarre as even if you like cryptocurrencies, bitcoin is not better than the others, indeed in many ways, like the energy consumption its worse. It would be easy for a rival scheme to be adopted leaving it stranded.

What it has is a brand, a reputation for rising in value that sucks in the cash. But while we all might regret not being the lesser fool who can now reap the rewards of selling to a greater one, are we sure that we won't be considered the greatest fools of all if we buy now. The big banks consider there are more fools to come, but so they did in 2008

Better? How do you define better?

It is the oldest, so has stood the test of time.
As per my CNBC link it has survived some pretty heavy attacks.
The fact that it is proof of work rather than proof of stake increases it's security, at the cost of energy consumption.
Proof of stake schemes are at risk of the validators (actual people) being captured (forced to act as desired) by governments.

You claim that a rival scheme could be adopted, such as possibly Ethereum or god forbid WorldCoin. Well they do exist, so possibly you are right and the likes of WorldCoin will take over in desirability.
It is after all proof of stake, which uses less energy.
Of course it's also highly intrusive.
https://www.independent.co.uk/news/worl ... 08260.html

The stated goal of Worldcoin is to give people a form of identification that could never be stolen or duplicated. It says the way it can do this is by creating a “World ID” by scanning someone’s eyeballs through “orbs” — a device that captures an image of their irises, the colored parts of the eyes.

In exchange, people who sign up get Worldcoin cryptocurrency.

Clearly a better crypto then the pseudonymity of bitcoin.

Why don't you sign up for some?
https://worldcoin.org/find-orb

[JohnB]

If I were a big player, a national government or bank, why would I try to buy into Bitcoin with a £1tn valuation, and so much baggage, when I could agree with my peers on a different product. Then bitcoin would be left with those who don't trust the Man, great if you want weapons, not so good for houses or taxes

Bitcoin is perhaps 0.3% of the world's money, peanuts unless you happen to be holding the parcel when the music stops.

[Urbandreamer]

If I were a big player, a national government or bank, why would I try to buy into Bitcoin with a £1tn valuation, and so much baggage, when I could agree with my peers on a different product. Then bitcoin would be left with those who don't trust the Man, great if you want weapons, not so good for houses or taxes

Bitcoin is perhaps 0.3% of the world's money, peanuts unless you happen to be holding the parcel when the music stops.

You obviously missed the news that one government has adopted it as legal tender, while another did then changed it's mind.

Look folks, if you have no interest then ignore the subject. If you have an interest, then pay attention when something is national/international news.

https://www.independent.co.uk/tech/bitc ... 06424.html

The president of El Salvador has said he has no plans to sell the country’s vast bitcoin holdings, despite seeing a profit of over 50 per cent.

The Central American country became the first in the world to adopt bitcoin as an official currency in 2021, while also investing state funds into the asset.

This is not really the right board to discuss the merits of crypto or alternatives to state money, Though I did provide links to academic economic thought on such matters. I also made the mistake of asking JohnB to explain what he meant by "better". Clearly he is not a fan of any crypto.

However I would hope that people frequenting this board at least were aware of things in the news.

[GrahamPlatt]

May I point out that you have both bitcoin and fiat wrong.
Bitcoin, whatever you may think of it, has a fixed supply.
Fiat does not.

Bitcoin may have a fixed supply, but there is an unlimited supply of cryptocurrencies.

[JohnB]

I assume Urbandreamer is a fan of bitcoin because he has a personal stake in it? I'd hope anyone boosting a particular asset on TLF rather than the class as whole declared their interest.

And El Salvador's dalliance with Bitcoin hasn't gone that well.

only 1.3% of El Salvadoran remittances during 2023 had been transferred using cryptocurrencies

...
By December 2023, it was reported that the bitcoin purchased by Bukele's administration had risen in value, and were worth US$3.7 million more than they had been purchased for. However, the Bukele administration had not yet recouped the expense of the adoption and promotion of cryptocurrency.

https://en.wikipedia.org/wiki/Bitcoin_i ... %80%932024

[Mike4]

May I point out that you have both bitcoin and fiat wrong.
Bitcoin, whatever you may think of it, has a fixed supply.
Fiat does not.

Bitcoin may have a fixed supply, but there is an unlimited supply of cryptocurrencies.

This is a point that has always struck me, a cryptomuppet rather than an expert.

What is there to stop Bitcoin2 being launched?

[Urbandreamer]

I assume Urbandreamer is a fan of bitcoin because he has a personal stake in it? I'd hope anyone boosting a particular asset on TLF rather than the class as whole declared their interest.

And I would hope that people might actually read the thread that they post in!

viewtopic.php?p=651716#p651716

I've also been interested in bitcoin for some time and started buying it about two years ago.

Mike4, re Bitcoin2, it exists. It's called "Bitcoin cash".
https://en.wikipedia.org/wiki/Bitcoin_Cash

I suspect that it's lack of popularity may explain why it is not mentioned in the news.

PS, I posted a link to F A Hayek's "Denationalization of Money" 1976. The economist suggests that the best way to avoid inflation is to have multiple competing moneys the wisdom of crowds leading to the better money being the most popular.

[XFool]

PS, I posted a link to F A Hayek's "Denationalization of Money" 1976. The economist suggests that the best way to avoid inflation is to have multiple competing moneys the wisdom of crowds leading to the better money being the most popular.

"the wisdom of crowds"? Um... Must say I'm not really sold on this overworked notion of the wisdom of crowds.

I know this is not a political thread but, was not DJT a product of the wisdom of crowds? And then there's this:

And the last monetary crash was due to our financial brains being unable to understand that combining lots of subprime mortgages which would never be repaid , and imagining the collection was gold plated and guaranteed to be repaid. I.E they had no idea how to sum related probabilities.

What was that but a financial application of the idea of the wisdom of crowds? What could go wrong?

[scotia]

And the last monetary crash was due to our financial brains being unable to understand that combining lots of subprime mortgages which would never be repaid , and imagining the collection was gold plated and guaranteed to be repaid. I.E they had no idea how to sum related probabilities. And they kept exchanging these tokens at higher valuations - until it got through to some of them that they had no intrinsic value, and the panic started - and Lehman Brothers were slow off the mark, and went bankrupt - and our Government had to prop up our banks.
I understand that the major global banks are at it again - buying up Bitcoins with no intrinsic value. Now if some major countries feel like refusing to permit any trading in Bitcoins, we could see some second thoughts - and substantial instability. And where would it stop?

May I point out that you have both bitcoin and fiat wrong.
Bitcoin, whatever you may think of it, has a fixed supply.
Fiat does not. Those subprime mortgages were fictional money created by fractional reserve lending.

PS you also don't know that China banned both bitcoin mining and trading in 2021.
Here is some old news.

Bitcoin was the first crypto currency - we now have lots of others, with investors dreaming that it is easy wealth-generating. There is no fixed supply.
Black Tulips? Subprime Mortgages? The Darien disaster? Confidence Tricks - and when the confidence disappears, so does the "value". And yes - as I indicated it took a long time before the global banks admitted that Subprime mortgages had no value, and then the collapse was spectacular.
I was aware of the Chinese mining cutdown - they had been the world's biggest and dirtiest (coal fired power stations) miners. And as the phrenetic race continues (elsewhere) more and more energy will be needlessly dissipated . Save the planet?

[Urbandreamer]

May I point out that you have both bitcoin and fiat wrong.
Bitcoin, whatever you may think of it, has a fixed supply.
Fiat does not. Those subprime mortgages were fictional money created by fractional reserve lending.

PS you also don't know that China banned both bitcoin mining and trading in 2021.
Here is some old news.

Bitcoin was the first crypto currency - we now have lots of others, with investors dreaming that it is easy wealth-generating. There is no fixed supply.
Black Tulips? Subprime Mortgages? The Darien disaster? Confidence Tricks - and when the confidence disappears, so does the "value". And yes - as I indicated it took a long time before the global banks admitted that Subprime mortgages had no value, and then the collapse was spectacular.
I was aware of the Chinese mining cutdown - they had been the world's biggest and dirtiest (coal fired power stations) miners. And as the phrenetic race continues (elsewhere) more and more energy will be needlessly dissipated . Save the planet?

Err no. Currently the supply of Bitcoin IS fixed. If you buy bitcoin, you are not buying Ethereum or WorldCoin. If you buy WorldCoin, you are not buying bitcoin. I have serious difficulty with anyone who doesn't understand that basic fact.

PLEASE explain how creating ScotiaCoin increases the supply of bitcoin!

Sure the "value" of ScotiaCoin may fall quickly to zero as demand for it does. Isn't that how things should be?

I think that had you bothered to do your research, you would have found that the miners in China used hydopower for the most part. You are claiming one of the many fallacies of bitcoin FUD put about by Mr de Vries. Because China has/had a lot of coal power, the bitcoin miners would use coal rather than the huge hydropower dams that were under utilized. The fact was otherwise.
https://www.theverge.com/2022/2/28/2295 ... -china-ban
Further research would have shown that immediately after the ban, much of the miners moved to Kazakhstan (18% of hashrate), where it was powered by coal. The most recent UN report assumes that those miners are still there, while in fact they are not and now much of the hash rate is in Texas using solar and wind power. I can't find the recent figures, but in 2023 Kazakhstan was 4% of hashrate.

Save the planet? Why not look at the real facts. Like running gas peak lopping generators rather than demand management produces more emissions.
Demand management, for those who don't know, entails turning off some loads when there is peak demand. Can you think of a good example of that.
Of course some would rather have the generators spinning, waiting for increased demand, than offer reduced prices for the ability to turn loads off.
https://www.utilitydive.com/news/warren ... se/634462/

Oh, for those who don't know Mr de Vries has a day job with the European central bank. Which may or may not influence his opinions.

[scotview]

Just out of interest, today 7 March 2024, the £ and $ are the lowest against gold they have ever been. Getting more worthless by the day. There's a finite amount of gold, unlike crypto and fiat.

[XFool]

Bitcoin was the first crypto currency - we now have lots of others, with investors dreaming that it is easy wealth-generating. There is no fixed supply.
Black Tulips? Subprime Mortgages? The Darien disaster? Confidence Tricks - and when the confidence disappears, so does the "value". And yes - as I indicated it took a long time before the global banks admitted that Subprime mortgages had no value, and then the collapse was spectacular

Err no. Currently the supply of Bitcoin IS fixed. If you buy bitcoin, you are not buying Ethereum or WorldCoin. If you buy WorldCoin, you are not buying bitcoin. I have serious difficulty with anyone who doesn't understand that basic fact.

PLEASE explain how creating ScotiaCoin increases the supply of bitcoin!

Sure the "value" of ScotiaCoin may fall quickly to zero as demand for it does. Isn't that how things should be?

Quite - if ScotCoin goes out of fashion, because of EireCoin, IsleOfWightCoin, WelshCoin, WhateverCoin. But isn't that the issue?

How likely is this scenario to happen with say the Dollar, or gold? (I am not a gold bug!)

That said, I am not convinced BitCoin will just disappear. After all, arms smugglers, drug cartels, money launderers, international criminals and Russian sanction busters won't be going anywhere soon, either.