End of Bitcoins on 18th December 2017
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This is exactly what I have been thinking. SB'd. I don't know if it will become totally worthless but the efficiency provided by institutional investors will wreck the current value. What it ultimately goes down to remains to be seen. I wouldn't be surprised if it was below 1000 when it's all over.
This is what I don't understand--if Bitcoin values are "inefficient" then what should the price of a Bitcoin be? What multiple, for example, should Bitcoin trade at? "What do you mean by 'what multiple'?" you say. "What a stupid question." Exactly. Bitcoin has the same value as a fine art--a painting might have $10 in material and $50 million in value. Bitcoin has no intrinsic value so it trades at whatever people are willing to buy it for.
The "inefficiencies" I see in Bitcoin are the fact that different trading platforms could have price points for Bitcoin that are $1,000 or more different from one another. If the instutitions could find a way to bridge those gaps then the price of Bitcoin could be standardized, more or less, across platforms.
I agree on certain parts in your argument. First, I don't think Bitcoin will become "worthless" when Bitcoin Futures are opened in CME and CBOE. NASDAQ is planning to have Bitcoin price ticker in 2018.
It is true that 99% of Bitcoin transactions are by individuals not institutions. If institutions lay a hand on Bitcoin exchange sites like GDAX, which the New York Stock Exchange invested in, it'll create a whole new trading game for Bitcoin volatility.
When Silk Road was using Bitcoin for payment in the dark web, it was a "fuck you" to the government so they can't track payments for illegal drugs being bought and sold. I think the recent hypes were created because people got rich off of Bitcoin, not because most of us see it as a anti-capitalist tool.
There are many famous and intelligent people both supporting and rejecting Bitcoin and cryptocurrencies. Unless the U.S. government sets up strict digital asset compliance rules, this highly unregulated market is going to thrive.
We always tend to overestimate what happens in one year while underestimating what happens in 5-10 years. I feel as though Bitcoin going to "crash" by Dec 18, 2017 is quite an overstatement.
I think the point is that a lot of the current optimism in the market right now is about bitcoin being used for non-nefarious reasons. That doesn't seem like it will be happening. Online retailers have little to no incentive to accept bitcoin, especially since it is so volatile. And if it becomes less volatile? Well, then it's way less intriguing to speculators trying to make a quick buck.
Sure bitcoin will continue to thrive in the unregulated market but the current price is valuing future mainstream adoption, which I don't think is going to occur. If/when people realize this, the price will drop to the correct value.
Great discussion. But with futures contracts being traded, doesn't this become a viable alternative/medium of exchange for companies? Isn't there already ways to accept bitcoin and immediately turn that into fiat USD without having to take on that volatility risk?
Why does Overstock.com accept bitcoins if there is no incentive? What if Amazon starts accepting it?
What is your opinion of the correct value? I think that is really the hardest thing to measure since there is no underlying asset or FCF asset. The utility is in the network effects that bitcoin enjoys since it was basically the first to market that is reaching wider adoption. That is not a minor point.
As far as being a medium of exchange, it's more a hedge against inflation/store of wealth as I see it, but this rapid run-up may actually be bad for it in the short term. May we crash ~50-80% in the short-term, absolutely! But is there a lot of value to Bitcoin, the technology and cryptos in general? I would argue yes.
I agree that this supposed crash is going to be similar to when Amazon crashed in 2001, a minor blimp in an overwhelming trend upward. At the moment though, I personally think Bitcoin is a ticking time bomb, and when it goes off, a lot of investors are going to lose faith in the crypto space, at least in the short-term.
My advice is to invest in cryptos that have a real-world use case, and are actually objectively providing value. I'm not convinced there will be a crash, but I know that my money is, relatively speaking, a lot more safe in these types of cryptos, since they existed as successful companies before implementing crypto currencies to add value and innovate.
Walton, for example, is revolutionizing the supply chain logistics space, has partnerships with numerous businesses, who are going to implement their chain in order to track items, implement a cheaper and better alternative to mainstream logistic solutions, automate their retail stores, and store and track data. Similar companies in the RFID space are worth roughly $5 billion dollars, so the market cap has tons of room to grow, especially with so many subsidiary companies that have pledged to use their technology, and with the explicit support of the Chinese government.
MOD, as another example, is partnering with pharmaceutical companies to do away with expensive refrigerated trucks and employees who report data, and expensive logistic services, and using their working hardware tested by the University of Zurich, which will save the pharmaceutical industry 60% in shipping and logistics per year. MOD is using block chain technology to anonymously, more accurately, and more cheaply report data.
I would suggest adding IOTA in your altcoin list. All the money in the cryptocurrency world is all-eyes-on-Bitcoin with it reaching ATH every hour. Once it corrects or drops, which it led to GDAX crashing few hours ago, people are going to panic sell Bitcoin again and move their money back into altcoins.
Bitcoin only has brand value and popularity since it's the talk of the town. But once people realize there are better coins out there, Bitcoin will drop in value .
what?! bitcoin is like amazon...you my friend have been drinking the kool-aid. amazon, while overvalued, is a consumer commerce & logistics company with real assets, real sales, real cash flows, land, facilities, technologies, etc. bitcoin is a currency, don't forget that. a currency only has value because people agree it has value (since we're off the gold standard). amazon and other equities have value because those shares of ownership are legal claims on profits, cash flows, property, dividends, etc.
don't confuse this for a stock, it is not. that doesn't mean bitcoin will crash (I think it will, but not before it rockets to the moon and crushes short sellers), but that does mean your analogy is incorrect and misinformed.
Why does gold have value? Because we all agree it does....
If you guys are so confident, why not put your money where your mouth is and short it once the futures exchanges go live?
Because 18 year olds can't get approved for margin, and/or don't have the initial margin to trade futures.
The market can stay irrational longer than you can stay solvent.
I haven't been around long enough to personally experience many bubbles, but I know from reading about past ones that every stock has it's ceiling price after which it's drastically overvalued and people want liquidity. To that effect, stocks carry potential energy just like a rock, if you throw a rock up in the air (depending on the velocity, it can go very high), but at some point in the future the price gets so high that it squeezes demand and has to come back to down to earth.
I'm not sure if the 18th will do bitcoin in, but surely at some point this (rock)etship has to come back down to earth.
As I've said before, Bitcoin is "overvalued" the way Monet's art is "overvalued"--an asset without intrinsic economic value can be neither over- nor undervalued.
That's a pretty profound quote and after longer contemplation it changed my thought process fairly significantly on this subject. You present the classic difference between subjective and objective value.
Bankers love subjective value because there is no artificial ceiling on price, it is theoretically infinite depending on how much value people see in an opportunity. With objective value, the price is based off of the intrinsic economic value (assets, comps, revenues etc.); its harder to fudge objective value and easier to define the asset as "overpriced" or "Underpriced". HOWEVER, the main problem I see with Subjective value is that the value is completely in the "eye of beholder" and can be taken away instantaneously, where objective value requires the devaluation of a broader asset classes in order to lose value.
For Monet, if the market for impressionist paintings tanks the wood frame, canvass, and oil paints will still have residual value.
Food for thought: Would futures trading begin to objectify the value of bitcoin? It presents the opportunity for the market to become more developed and bitcoin to be defined as overpriced or underpriced.
Although intended to be a currency, Bitcoin is a store of value. From a technical implementation standpoint, it is not designed to a be a currency. There are other technical implementations (XRP) that closely resemble what an actual currency would look like (Not endorsing XRP as I think it's shit, but it has technical characteristics that more closely resemble what a "crypto currency" would look like (e.g. extremely low fees, inflationary)). In the future, you'll sell your BTC for a widely accepted "crypto currency" for micro-payments and everyday transactions.
2nd what picklemonkey said about 4% control control 96% -- Bitcoin Exchanges
The futures markets that are coming out (CBOE on the 10th, CME on the 18th, NASDAQ next year) only means increased exposure for institutional and traditional investors. Approval of these future products lends credence to the SEC's future decision on a BTC ETF. This leads to improved price discovery and increased capital inflows. All of this, further cementing Bitcoin legitimacy.
Calling this the end of Bitcoin? You haven't been here long enough. I'd love to see a nice 40% correction since everyone and their dog jumped in after their 18 year old son told them to invest over Thanksgiving, but that's wishful thinking.
I'd always say that nobody can truly predict the future of the Bitcoin and the current cryptos. But if there's one thing for sure, the blockchain technology is valuable.
Does that mean that Bitcoin has intrinsic value (i.e. due to the blockchain technology)? Well, not quite. Let's go back to basics: gold is considered to have intrinsic value because it itself has other uses such as jewelry, electronics, and even dental filings. If you are to be technical about it, gold is valuable for it's conductivity (conducting heat and electricity), malleability (can be easily molded), and ductility (turned into wires).
I have no doubt that blockchain is here to stay because you can use it for a myriad of applications such as real estate or logistics. But worst case scenario, can you use your Bitcoins per se for anything else? The same way you can melt your gold bars and coins for other uses?
Think about it from a technical perspective. I'm not a programmer, but it seems that it's less difficult to create a new blockchain altogether for non-currency usage than converting the Bitcoin blockchain (like building a new boat vs patching up an old, hole-riddled one).
And not to mention the sheer "replicability" of the Bitcoin and the whimsicality of network effects that currently supports the Bitcoin! What do I mean?
For replicability, look at the forks, Bitcoin forking to create Bitcoin cash, and there's a second one looming. For all you know Bitcoin cash could outperform Bitcoin in the long run (if at all) because of better technical capacity. But then again, there could be BCH 2.0 and BCH 3.0 and so on. So where does it end? It's like the federal reserve introducing a new dollar the moment the current one is no longer sustainable. Like Greenback 2.0 and Greenback 3.0. Well, central banks do issue new notes but they demonetize the old ones maintaining only one form of legal tender.
As for the network effects, they might last a while, but they'll move on to a new one eventually. Remember Myspace? I was in high school when my friends were crazed over it, only to be replaced by Facebook. You might say Bitcoin has the first mover advantage, but what if there's a second mover advantage (lol)? The tech space has been known for ruthlessly out-innovating competitors (Think Nokia early 2000's vs now) so there's no guarantee Bitcoin will be the "gold standard" of crypto if at all.
And let's not forget: regulation. Just because the blockchain is decentralized doesn't mean that governments can't have some considerable influence over it. If you think about it, the internet is decentralized, but look at China and their censorship policy: the majority of social media sites that we enjoy are blocked there.
And there's another threat looming in the internet: Net neutrality. With net neutrality, all forms of data over the net are considered equal whether they're from Facebook or some shady-ass website. But without it, telecoms and data providers can charge you separately for data plans (which has already happened in other countries). So while governments might not entirely "kill" cryptos, they can definitely enforce restrictions. And who's to say central banks won't create their own (which seems oxymoronic) but Russia considered it!
Another possible fate of the cryptos is that it will simply be an efficient means of transferring money (not exchanging goods or storing value) like what we do in online banking. So the odds are stacked against Bitcoin being the new "global" currency.
So overall, I'd say we humans tend to predict in extremes, all doom and gloom vs frenzied pipe dreams.
On one camp there are those who glorify crypto as the ultimate savior from the banking system that "failed" us and on the other you have those who sneer and vilify it as some nerd's anti-capitalist fantasy toy.
But in reality, I think it's in the middle of somewhere. Will Bitcoin crash in Dec. 18? Perhaps not, a significant dip at most, nobody knows for sure. But eventually blockchain will become part of everyday life and we will look at it with no more familiarity than we do with the internet, television, and automobiles.
About 7 years ago I had the chance to get in on some Bitcoins but I decided to pass. The problem was they were asking for about 10K investment and I thought that was a lot of money for such an unproven currency. My analysis was sound but sometimes I wish I had bought about 100 bucks worth of bitcoin - would be worth about $400m now! Other than that, I am still very skeptical of this currency. Gold keeps falling of a cliff but this intangible asset with no other anchor for it's value keeps soaring? Hell even MBS has something, however shit it was, backing them. I think the reason why the price is going so high now has to do with the supply as OP said and that once the market concentration evens out the price corrections on the way there will be huge. For that reason I think it's beyond risky to get into it now and hold for too long as it's too expensive and could crash anytime.
18th Dec, nothing happened.
Run kids, run.
I even went to check the BTC futures on CME, dead boring day, awful instrument, with huge lots. Future traders will stay the fuck away from it. It's not compatible with most strategies. It's extremely high risk, requires huge margins. Fuck that.