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Crypto Bubble

How to buy, profit and invest in crypto currencies or NFTs
PeterGray
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Re: Crypto Bubble

#397652

Postby PeterGray » March 21st, 2021, 2:20 pm

Andy46 wrote:
Most people are just ignoring this, India have said it before. Some countries have already banned it and its more popular than ever. How on earth do you stop people trading what is essentialy a computer code.


The more difficult it is to use the less value it has. If it's limited in use by a country then your unlikey to be able to use it for small payments. And for example if you tried to buy a house with it in the UK ot would be easy to limit the use of crypto by preventing registration with the LR unless there is a clear source of funds which doesn't include crypto - so you cold be forced to convert to sterling, or local currency, first. And how would you do that in a verifiable way?

Crypro is currently in a speculative bubble. People are buying it because quoted prices are rising, not in the vast majority of cases because it's a useful payment method. But there is a limit to that unless it has a practicable use, and if that is mainly to avoid scrutiny and taxation it's unlikely to be made easy by governments.

TheMotorcycleBoy
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Re: Crypto Bubble

#397682

Postby TheMotorcycleBoy » March 21st, 2021, 4:19 pm

scrumpyjack wrote:Interesting that India are to bring in a law banning ownership of or dealing in cryptocurrencies.

https://www.independent.co.uk/asia/indi ... 17148.html

Maybe this idea will spread and save a lot of carbon emissions?

Not sure. Certainly the proposed ban has attracted it's fair share of controversy:

https://www.bloombergquint.com/business ... ble-volume
https://www.bloombergquint.com/opinion/ ... a-bad-idea

Matt

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Re: Crypto Bubble

#397725

Postby Urbandreamer » March 21st, 2021, 7:06 pm

PeterGray wrote:The more difficult it is to use the less value it has.


Err, are you sure? I could swear that Bitcoin is not the first thing to be made illegal (in some countries). I seem to recall an American philanthropist who paid for orphanages and soup kitchens. They put him away for tax evasion. You may know the name, Al' Capone. I think that he sold booze amongst other illegal things. There are more recent examples of philanthropists who made their money doing something "difficult", or even illegal.

Making something illegal is known to raise the profit margin on any product. Another way is to regulate or restrict those who can provide it. In my lifetime there has been a HUGE change in those who provide glasses. In my youth you had to pay hundreds of pounds for reading glasses, as you could only buy them from "the" optician. Likewise distance glasses. Today you can buy them over the internet for less than a cheap bottle of whisky.

I repeat, are you sure that making it difficult means that the price (value) goes down? History doesn't seem to support your argument.

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Re: Crypto Bubble

#397777

Postby absolutezero » March 21st, 2021, 10:12 pm

Lots of news in here but an indicator of general sentiment is missing.

What do fellow fools think?
Is crypto in a speculative bubble and it will all end in tears? Is it lockdown hysteria?
Or is this the start of a new technology? Central banks will be going in, Tesla etc are buying and now is the time to get in?

Bitcoin currently (as I type) $58,000
Where will it be in 12 months?

My suspicion.
We're in tulip bulb territory.
Adverts on the Internet about BUY CRYPTO and tales in the press of MY GRANDMA BOUGHT BITCOIN.
Classic bubble territory.
12 months? Less than now. Lots of people will get their fingers burnt.
Say. sub $10,000.

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Re: Crypto Bubble

#397779

Postby Mike4 » March 21st, 2021, 10:17 pm

Urbandreamer wrote:
PeterGray wrote:The more difficult it is to use the less value it has.


Err, are you sure? I could swear that Bitcoin is not the first thing to be made illegal (in some countries). I seem to recall an American philanthropist who paid for orphanages and soup kitchens. They put him away for tax evasion. You may know the name, Al' Capone. I think that he sold booze amongst other illegal things. There are more recent examples of philanthropists who made their money doing something "difficult", or even illegal.

Making something illegal is known to raise the profit margin on any product. Another way is to regulate or restrict those who can provide it. In my lifetime there has been a HUGE change in those who provide glasses. In my youth you had to pay hundreds of pounds for reading glasses, as you could only buy them from "the" optician. Likewise distance glasses. Today you can buy them over the internet for less than a cheap bottle of whisky.

I repeat, are you sure that making it difficult means that the price (value) goes down? History doesn't seem to support your argument.



Are we not confusing value with price here, where crypto currencies are concerned?

Given that Bitcoin is as good as useless as a day-to-day currency, it's price seems way out of kilter with its value as a practical and useful currency to keep in one's digital pocket.

Until we can spend our Bitcoin over the counter in Tesco, it isn't really a currency is it? Or is that a different debate?

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Re: Crypto Bubble

#397789

Postby Urbandreamer » March 21st, 2021, 11:03 pm

Mike4 wrote:Are we not confusing value with price here, where crypto currencies are concerned?

Given that Bitcoin is as good as useless as a day-to-day currency, it's price seems way out of kilter with its value as a practical and useful currency to keep in one's digital pocket.

Until we can spend our Bitcoin over the counter in Tesco, it isn't really a currency is it? Or is that a different debate?


Yes, and no. I was associating value with price, in response to a specific post.

However as you say, value may differ. The question then is why?

Is something less or more valuable if people are willing to pay more or less for it?

Can you spend Krugerrand at Tesco, or for that matter US Dollars? What about Khrona or for that matter the Euro?

By your argument ALL currency other than £ stiring is false! Simply because it can't be spent at Tesco.

Does that make gold coins valueless?

The question really is if Bitcoin can either be spent (yes it can through limited outlets) or can it be converted to local currency.

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Re: Crypto Bubble

#397795

Postby Lootman » March 21st, 2021, 11:10 pm

Urbandreamer wrote:
PeterGray wrote:The more difficult it is to use the less value it has.

Making something illegal is known to raise the profit margin on any product.

I repeat, are you sure that making it difficult means that the price (value) goes down? History doesn't seem to support your argument.

The obvious examples are alcohol during prohibition in the US, and recreational drugs everywhere.

That said when governments legalise certain things, such as prostitution, gambling and cannabis, the price often does not decline because the government decides it wants to control the market and take a cut for itself via taxes and license fees.

I cannot really see how Crypto can effectively be made illegal given that it is totally anonymous. It would just drive the market further off the grid. Hawala was made illegal in the US after 9/11 but it still happens there.

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Re: Crypto Bubble

#397834

Postby PeterGray » March 22nd, 2021, 8:34 am

The obvious examples are alcohol during prohibition in the US, and recreational drugs everywhere.

This is a totally false example.

Alcohol and drugs have value because people make use of them, and are prepared to pay large sums to do so. Restricting access merely increases efforts made to supply, and the prices that can be charged.

What is the value of bitcoin based on? Mainly, currently
1. People by expecting the price to go up (classic bubble investing)
2. People using it for untraceable transactions - mostly illegal or for evasion of tax.

Use 2 is likely to lead to restrictions, and while it can will never be banned completely it's not hard to think of examples, I gave one or two, of ways in which its utility, and value can be severly undermined. That in turn is likely to lead to the "investment" bubble bursting quicker rather than later.

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Re: Crypto Bubble

#397871

Postby TheMotorcycleBoy » March 22nd, 2021, 9:56 am

PeterGray wrote:The obvious examples are alcohol during prohibition in the US, and recreational drugs everywhere.

This is a totally false example.

Alcohol and drugs have value because people make use of them, and are prepared to pay large sums to do so. Restricting access merely increases efforts made to supply, and the prices that can be charged.

What is the value of bitcoin based on? Mainly, currently
1. People by expecting the price to go up (classic bubble investing)
2. People using it for untraceable transactions - mostly illegal or for evasion of tax.

Use 2 is likely to lead to restrictions, and while it can will never be banned completely it's not hard to think of examples, I gave one or two, of ways in which its utility, and value can be severly undermined. That in turn is likely to lead to the "investment" bubble bursting quicker rather than later.

You've missed it's main attraction, i.e. an asset which the central cannot increase the supply of. At least that's how I'm reading it all.

Matt

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Re: Crypto Bubble

#397895

Postby absolutezero » March 22nd, 2021, 11:12 am

PeterGray wrote:What is the value of bitcoin based on? Mainly, currently
1. People by expecting the price to go up (classic bubble investing)
2. People using it for untraceable transactions - mostly illegal or for evasion of tax.


3. The future value of Blockchain technology.

Whilst this is not unique to Bitcoin, this is the easiest way to get exposure to the tech.

PeterGray
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Re: Crypto Bubble

#397909

Postby PeterGray » March 22nd, 2021, 11:37 am

I'm happy to agree that bitchain tech may have some value, and maybe investable. But the fact that bitcoin uses it does not make that any more investable. BTC would be a poor route to invest the blockchain tech.

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Re: Crypto Bubble

#397911

Postby PeterGray » March 22nd, 2021, 11:40 am

TheMotorcycleBoy wrote:You've missed it's main attraction, i.e. an asset which the central cannot increase the supply of. At least that's how I'm reading it all.

Matt


That's only an attraction is people want to buy it! That's the issue I'm questioning.

Special tulips existed in very limited supply, and that certainly helped drive the price rises, but it didn't help much once the value of owning them at those prices got questioned.

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Re: Crypto Bubble

#397968

Postby Lootman » March 22nd, 2021, 1:35 pm

PeterGray wrote:The obvious examples are alcohol during prohibition in the US, and recreational drugs everywhere.

This is a totally false example.

Alcohol and drugs have value because people make use of them, and are prepared to pay large sums to do so. Restricting access merely increases efforts made to supply, and the prices that can be charged.

I disagree. The only thing that matters is that the item is in demand. If it is, and is then made illegal, the demand doesn't go away. It just means that it is supplied by the black market. And that typically means a higher price because the criminals engaged in that business have additional costs and risks that must be compensated for.

Whether it is something that is instantly consumed (booze, pot, hookers) or whether it is a longer-term store of value (gold, diamonds, bitcoin) doesn't really matter.

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Re: Crypto Bubble

#397989

Postby PeterGray » March 22nd, 2021, 2:31 pm

What we are discussing here is the nature of the demand. The demand for BTC is highly dependent how easy it is to use and access. Restrictions on use will make it less useful or valued. The same is not true of alcohol. It's not a useful store of value if all you can do is hold onto it.

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Re: Crypto Bubble

#397992

Postby Lootman » March 22nd, 2021, 2:43 pm

PeterGray wrote:What we are discussing here is the nature of the demand. The demand for BTC is highly dependent how easy it is to use and access. Restrictions on use will make it less useful or valued. The same is not true of alcohol. It's not a useful store of value if all you can do is hold onto it.

I still don't agree. One does not "use" bitcoin any more than one uses gold. All that matters with either is that you can, at some future point, sell it.

So not only is it not true that "It's not a useful store of value if all you can do is hold onto it". The exact opposite is true - all you can do with a store of value is hold it. It is the entire purpose of a store of value.

But all we are really doing here is disagreeing about its suitability as an investment. And as with gold, diamonds etc., there will be different opinions about it, since that is what makes a market. The price of bitcoin merely measures the balance between people who value it and people like you who do not. If the price goes to zero you will have been right, but there is no sign of that right now, quite the opposite in fact.

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Re: Crypto Bubble

#399499

Postby justfisk » March 27th, 2021, 1:21 pm

PeterGray wrote:
What is the value of bitcoin based on? Mainly, currently
1. People by expecting the price to go up (classic bubble investing)
2. People using it for untraceable transactions - mostly illegal or for evasion of tax.



1. People do expect the value to go up. However just because prices go up does not necessarily mean anything is a bubble.
2. The use of Bitcoin for untraceable transactions is an outdated way of thinking. This constitutes a minute part of the uses of Bitcoin. As a transparent full public ledger, it is certainly not the best use for Bitcoin. Transactions are easily tracked on the public ledger as crooks found out about 5 years ago. Due to its transparent pubic nature, its use in illicit activities is easily appraised as written here: http://shorturl.at/qABIV
TLDR: In 2019, Criminal activity represented 2.1% of all cryptocurrency transaction volume (roughly $21.4 billion worth of transfers). In 2020, the criminal share of all cryptocurrency activity fell to just 0.34% ($10.0 billion in transaction volume).
I attribute this to the regulation and KYC laws in the space in the past 5 years. Also as I said crooks have gotten wiser now and know that Bitcoin is NOT anonymous. Many high profile arrests attest to this (eg the fall of The silk road.)


In answer to the original question one way its value is based on is its scarcity:
Plan B has 2 models on valuing Bitcoin based on scarcity here:
The S2F Model: http://shorturl.at/bsN05
with further reading of this model here: http://shorturl.at/kmEJ5
The S2FX Model: http://shorturl.at/yGT89


I'm happy to agree that bitchain tech may have some value, and maybe investable. But the fact that bitcoin uses it does not make that any more investable. BTC would be a poor route to invest the blockchain tech.


This is precisely wrong. Blockchain technology is only useful with Bitcoin. Hence why after a decade of its invention, the only commercially viable blockchain application is Bitcoin. If one thinks logically about it, Blockchains are horrible as a technology. They are slow, due to their decentralized nature and they have difficulty scaling.
This was at the heart of the civil war regarding the future design of Bitcoin in 2017.
The reason for the use of a blockchain in Bitcoin is only due to what it solves.
It solves the problem of needing trusted third parties. The only way one has been successful testing this is with this monetary blockchain. Blockchains make no sense in virtually anything else eg Land titles (where there is an "efficient" central authority. Thank Goodness!)
For most other use cases apart from Bitcoin, as a mental model, replace the word "Blockchain" with "Database" and most likely you would discover either that the project advertising its "blockchain" is scam, or that the project would do better using a Central Database instead of a Blockchain (Here is looking at you IBM!). Its a great buzzword to sound edgy and innovative though, so I expect to still see this buzzword being milked.


Is crypto in a speculative bubble and it will all end in tears?

My take is Bitcoin is not in a bubble. Other cryptocurrencies are in a bubble though, because of Bitcoins success and speculators push them into bubble territory due to Bitcoins natural halving Cycle which "shocks" the market every 4 years by halving the amount of Bitcoin mined per validated block. Most other cryptocurrencies are either outright scams with "Owners" of the cryptocurrency pre-mining tokens and releasing only a percentage of the tokens to the public in order to get rich, or have zero use cases that make any practical sense.

Interesting that India are to bring in a law banning ownership of or dealing in cryptocurrencies.

Another test bed is Nigeria. Authorities there have banned all Crypto exchanges so banks should not be used to buy crypto. This has led to an explosion in the use of decentralized P2P exchanges and Bitcoin there currently trades at a 45% premium.


thanks
JF

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Re: Crypto Bubble

#399509

Postby justfisk » March 27th, 2021, 1:40 pm

Blockchains are horrible as a technology. They are slow, due to their decentralized nature and they have difficulty scaling.


To add context to this. Bitcoins solution to this is actually inspired by the Fiat system.
Bitcoin has proven itself by transferring large amounts of transactions $4Trillion around the world without needing any trusted 3rd party (Govt, Bank or corporation)
The trade-off has been that the number of transactions it can process is not huge: 3.3 and 7 transactions per second

The solution to this scaling problem is to use second-layer technology and to use On-Chain layer as a Settlement layer.
This means the frequent and small payments (buying cup of coffee) is encouraged to take place primarily over payment networks, such as Bitcoins own 2nd layer solution called Lightning.

In this sense, the base protocol can be considered the final settlement layer — the layer on which larger transactions tend to occur — whereas the secondary layers will cater to recurring and smaller payments.

This is compared to the the Fiat system where Starbucks cup of coffee transactions are borne by the company itself but actual settlement completed in bulk weeks later.

thanks,
JF

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Re: Crypto Bubble

#399533

Postby Urbandreamer » March 27th, 2021, 2:38 pm

justfisk wrote:To add context to this. Bitcoins solution to this is actually inspired by the Fiat system.
JF


I think that we may have to disagree upon this.

Fiat:
an arbitrary decree or pronouncement, especially by a person or group of persons having absolute authority to enforce it:

https://www.dictionary.com/browse/fiat

Last I checked no state, government or authority was REQUIRING the use of Bitcoin.

Possibly you confuse the current fiat money system that is not based upon intrinsic value with earlier fiat ones that were based upon intrinsic value.
"Render unto Ceaser" was talking about a silver coin, the dictated coin used and the tax that Romans demanded.

Both UK £'s and Bitcoin have no intrinsic value, but only one can be described as Fiat.

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Re: Crypto Bubble

#399540

Postby PeterGray » March 27th, 2021, 3:12 pm

justfisk wrote:
PeterGray wrote:
What is the value of bitcoin based on? Mainly, currently
1. People by expecting the price to go up (classic bubble investing)
2. People using it for untraceable transactions - mostly illegal or for evasion of tax.



1. People do expect the value to go up. However just because prices go up does not necessarily mean anything is a bubble.
2. The use of Bitcoin for untraceable transactions is an outdated way of thinking. This constitutes a minute part of the uses of Bitcoin. .....

In answer to the original question one way its value is based on is its scarcity:
.....
thanks
JF


So if 2. is a minor issue, and I'll accept that. Then is there any other use, or is it essentially based on 1?

Saying value is based on scarcity doesn't wash. Lots of things are scarce. Special tulips were scarce in the 17th C.

Scarcity is not a basis for a valuation, it can only be a factor in it. That only works if a lot of people agree the value is "real" - as they did with tulips for a while. But for that to continue it's got to be a useful and useable store of value. Unless govts find ways of taking control of uses, allowing tracing, taxation etc then they will seek to control it. Those attempts may not be 100% effective. But they don't need to be to hit current prices hard, and to raise serious questions for those using BTC as a value store.

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Re: Crypto Bubble

#399579

Postby justfisk » March 27th, 2021, 5:16 pm

Both UK £'s and Bitcoin have no intrinsic value, but only one can be described as Fiat.

I agree much with what is in your Message.
Pardon me if my last post was unclear as it was typed in a rush.

My point was Bitcoins solution to scaling was to have a settlement layer as well as a payment transaction layer.
I mentioned this was inspired by Fiat because Fiat also has a settlement layer (eg in US this is the Fedwire, In UK maybe BACS) as well as a payment layer (eg Paypal). In Fiat Final Settlement occurs much slower than transactional payment systems. In the US I understand it takes weeks.

Possibly you confuse the current fiat money system that is not based upon intrinsic value with earlier fiat ones that were based upon intrinsic value

I agree with much of what you said about intrinsic value. Fiat certainly has no intrinsic value, as is the case with Bitcoin.
The use of Gold was used in the past despite it having intrinsic value.
In humanity's search for money and what money is, intrinsic value is actually a detriment to the merits of money.
This is because money constitutes a monetary good.
Tobacco/Cigarettes, Barley, Oil. All these may have intrinsic value, however as history has shown, they make for horrible money or stores of wealth. For different reasons.
The reason for the success of Gold as Hard Money for hundreds of years was not its intrinsic value.
Rather there are certain properties of Gold that made it the preferred store of value: Durability, Divisibility, Scarcity, Portability, Frangibility and its Verifiability.

Then is there any other use, or is it essentially based on 1?

There is Bitcoin the Asset and Bitcoin the Network.
For Bitcoin the Asset:
The Price going Up is a huge deal! It attracts more people to look at Bitcoin and to use Bitcoin and to try to understand Bitcoin. Price going up shows it helps store wealth. Ask people in Venezuela, Argentina, many parts of Africa about their loss of value due to runaway inflation.
Here is Bitcoins return for each year over the last 10 years compared to every other Asset class:
https://pasteboard.co/JUzYuF1.jpg

This also grows the Bitcoin the network. From day 1 many people have used the Network for low friction remittances across borders. Using the Network just shows how archaic the traditional Banking system can be.
As mentioned in my earlier post, Lightning also makes use of Bitcoin the Network to basically transfer value across countries instantly and at zero cost. In the US the company Strike is making use of this and in the UK Bottlepay has just launched also using similar technology (albeit not yet across borders)

For more on comparisons between Bitcoin and Fiat and currencies this has been a polpular place to start:
http://shorturl.at/mpGHS

Bitcoin allows us to teleport any amount of value instantly and at near zero cost across the entire world.
It is like Gold but better as it is without the problems of storage, weight, size and centralization.
Again, forgive the rushed Post, Family beckons.

JF


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