Cryptocurrencies

[Liberty]

If you want to see how an implementation of the lightning network wallet could look like check out the videos in the following twitter thread. He shows how you can add a payment contact (i.e. open a payment channel) and how to send, request and receive payments. I guess it will still take a few months until the bitcoin network has fully rolled out lightning, but it's great to glimpse how it might look like for users.

 

 

Would you pay with a currency that could move 10 or 20% a day?

[SharperDingaan]

 

 

Technically a $1 bill is a bearer bond issued by the central bank, backed by the full faith and credit of the sovereign. The credit being supported by the sovereign ability to charge and collect on taxes, rents, etc. The store of value is 'dynamic', rather than a 'static' asset either sitting in a vault, or in the ground.

 

SD

 

I don't understand what point you're trying to make.   

 

I don't think it can be disputed that $1 will buy you far less milk or eggs or bacon or subway rides or movie tickets today than $1 would have bought you 100 years ago.  See, e.g., https://www.bls.gov/opub/btn/volume-2/average-food-prices-a-snapshot-of-how-much-has-changed-over-a-century.htm 

 

The link illustrates why I think USD is not a good store of value.  If you think it's a good store of value, then I suspect we're using "store of value" to mean different things.

 

 

The store TODAY is the claim on TODAYs tax stream of sovereign X. Tomorrow the value may be lower because there are more claims ($ bills) on the same tax stream, or a lower tax stream;either of which would 'devalue' the claim. Fiat currencies devalue because we increase the money supply (number of claims) every year.

 

Gold devalues as well - by the new amount mined plus the net change in inventory reserves (bullion+jewelry+industry). But as it typically devalues at a slower rate than fiat does, it appears to increase in value over the years.

 

SD

 

[sjh]

If you want to see how an implementation of the lightning network wallet could look like check out the videos in the following twitter thread. He shows how you can add a payment contact (i.e. open a payment channel) and how to send, request and receive payments. I guess it will still take a few months until the bitcoin network has fully rolled out lightning, but it's great to glimpse how it might look like for users.

 

 

Would you pay with a currency that could move 10 or 20% a day?

 

I think volatility will go down as market cap increases. Bitcoin is like a micro cap stock compared to the amount of capital that is flowing in and out today. Obviously we see a lot of price movement.

 

The lightning network enables many things like off-chain transactions from a bitcoin wallet (lightning enabled) to wallets denominated in other cryptocurrencies (e.g. litecoin) without using an exchange. So you basically only need your bitcoin lightning wallet and can transact in all crypto currencies, which support this feature (it's called atomic swaps and has already been tested

)

 

99% of transactions will be done off-chain, maybe once or twice a year you will want to close the payment channels to update your current balance in the blockchain.

 

Or maybe we will still use good old USD and EUR bills in 20 years and this was just a nice idea. Who knows, we all live and learn.  :)

 

[rkbabang]

Is bitcoin a code made of numbers and letters that I can vuisially see or is a barcode image that you can scan with a scanner?

 

Both.  Your private key is made up of numbers and letters and your public address is also made up of different numbers and letters.  But they can both be made into a QR code which can be scanned by a smartphone camera.    Any string of numbers and letters can be made into a QR code, that includes website addresses, bitcoin addresses, or anything else.

 

 

After buying on coinbase, how do you transfer to Jaxx? Can it not be simply downloaded on a USB and saved on your hard drive? If so, would that be not most secure? Jaxx is a third party app and can be hacked.

 

After buying on Coinbase go to your account and select "send", you will fill out a form which needs the amount to send and the address to send to.  Fill in the amount to send, then go to jaxx and find your receive address, copy it, then paste it into the form on coinbase.  Then hit the send button.

It is pretty easy.  Jaxx is an application that runs on your computer or phone, but it doesn't send any info off of your device.  But yes if someone got control of your device they could steal your bitcoin from you.  This is the same if you kept your private key on your hard drive, if someone hacked your computer they could steal your bitcoin.  If you have a substantial amount and you are afraid of someone hacking your device you don't have to keep the Jaxx software on your device.  The best way to learn this I think is to actually do it.  My recommendation would be to take $100 to experiment with for educational purposes.

 

1) Set up a Coinbase account and buy $100 worth of Bitcoin.

2) Download the Jaxx app to your phone.

3) Run the Jaxx app and set up a new wallet.

 

    IMPORTANT: Write down the 12 word backup phrase that you are given and save it somewhere secure.

 

4) Once you have your Bitcoin available in Coinbase send it to your Jaxx wallet.

  a) In Coinbase select "Send".

  b) Put in the amount to send (the max amount).

  c) In Jaxx copy the receive address.

  d) in Coinbase paste your jaxx receive address in the address to send to. And hit the send button.

  e) Wait until your Bitcoin shows up in Jaxx.  This could be as quick as 2 min or as long as an hour.  But will probably be within 10 min.

 

5) Now that you have Bitcoin in your private Jaxx wallet.  You can remove the Jaxx app from your phone.  Just uninstall the app completely. It is now gone and no one can get your Bitcoin by hacking into your phone.  The only way anyone could steal your Bitcoin from you now would be to somehow get a hold of your 12 word backup phrase which you wrote down when setting up Jaxx.

 

6) Now to restore your wallet you simply re-install Jaxx and instead of creating a new wallet select restore wallet the first time you run it.  It will ask you for your backup phrase. Type it in and your wallet containing your Bitcoins will be available for you to use.  You can do this to check the balance or to make a transaction. Then you can uninstall Jaxx again to have your wallet exist nowhere but on paper again.

 

[clutch]

Is bitcoin a code made of numbers and letters that I can vuisially see or is a barcode image that you can scan with a scanner?

 

Both.  Your private key is made up of numbers and letters and your public address is also made up of different numbers and letters.  But they can both be made into a QR code which can be scanned by a smartphone camera.    Any string of numbers and letters can be made into a QR code, that includes website addresses, bitcoin addresses, or anything else.

 

 

After buying on coinbase, how do you transfer to Jaxx? Can it not be simply downloaded on a USB and saved on your hard drive? If so, would that be not most secure? Jaxx is a third party app and can be hacked.

 

After buying on Coinbase go to your account and select "send", you will fill out a form which needs the amount to send and the address to send to.  Fill in the amount to send, then go to jaxx and find your receive address, copy it, then paste it into the form on coinbase.  Then hit the send button.

It is pretty easy.  Jaxx is an application that runs on your computer or phone, but it doesn't send any info off of your device.  But yes if someone got control of your device they could steal your bitcoin from you.  This is the same if you kept your private key on your hard drive, if someone hacked your computer they could steal your bitcoin.  If you have a substantial amount and you are afraid of someone hacking your device you don't have to keep the Jaxx software on your device.  The best way to learn this I think is to actually do it.  My recommendation would be to take $100 to experiment with for educational purposes.

 

1) Set up a Coinbase account and buy $100 worth of Bitcoin.

2) Download the Jaxx app to your phone.

3) Run the Jaxx app and set up a new wallet.

 

    IMPORTANT: Write down the 12 word backup phrase that you are given and save it somewhere secure.

 

4) Once you have your Bitcoin available in Coinbase send it to your Jaxx wallet.

  a) In Coinbase select "Send".

  b) Put in the amount to send (the max amount).

  c) In Jaxx copy the receive address.

  d) in Coinbase paste your jaxx receive address in the address to send to. And hit the send button.

  e) Wait until your Bitcoin shows up in Jaxx.  This could be as quick as 2 min or as long as an hour.  But will probably be within 10 min.

 

5) Now that you have Bitcoin in your private Jaxx wallet.  You can remove the Jaxx app from your phone.  Just uninstall the app completely. It is now gone and no one can get your Bitcoin by hacking into your phone.  The only way anyone could steal your Bitcoin from you now would be to somehow get a hold of your 12 word backup phrase which you wrote down when setting up Jaxx.

 

6) Now to restore your wallet you simply re-install Jaxx and instead of creating a new wallet select restore wallet the first time you run it.  It will ask you for your backup phrase. Type it in and your wallet containing your Bitcoins will be available for you to use.  You can do this to check the balance or to make a transaction. Then you can uninstall Jaxx again to have your wallet exist nowhere but on paper again.

 

rkbabang, are you just simplifying your explanation here about what is bitcoin and how its transactions work?

 

My understanding is that you never download a bitcoin. Bitcoins (more precisely, their values) are not stored on any specific device, but they "inhere" on transaction records on the blockchain network. By creating your own wallet and "sending bitcoins" to there, you are recording an additional transaction to your own address (this address is still part of the network). To make further transactions, you would need to know and use the private key that is generated by the wallet. And this private key is what gets stored in your wallet.

 

And to answer emily's question of why you cannot simply download "bitcoins" - Because it is simply not a download of an information artifact, but software like jaxx interacts with the blockchain to participate in the transaction recording (ledger) and manages the key generation / storage. You could write software yourself that does this, but obviously not straightforward like storing a file.

[rkbabang]

Is bitcoin a code made of numbers and letters that I can vuisially see or is a barcode image that you can scan with a scanner?

 

Both.  Your private key is made up of numbers and letters and your public address is also made up of different numbers and letters.  But they can both be made into a QR code which can be scanned by a smartphone camera.    Any string of numbers and letters can be made into a QR code, that includes website addresses, bitcoin addresses, or anything else.

 

 

After buying on coinbase, how do you transfer to Jaxx? Can it not be simply downloaded on a USB and saved on your hard drive? If so, would that be not most secure? Jaxx is a third party app and can be hacked.

 

After buying on Coinbase go to your account and select "send", you will fill out a form which needs the amount to send and the address to send to.  Fill in the amount to send, then go to jaxx and find your receive address, copy it, then paste it into the form on coinbase.  Then hit the send button.

It is pretty easy.  Jaxx is an application that runs on your computer or phone, but it doesn't send any info off of your device.  But yes if someone got control of your device they could steal your bitcoin from you.  This is the same if you kept your private key on your hard drive, if someone hacked your computer they could steal your bitcoin.  If you have a substantial amount and you are afraid of someone hacking your device you don't have to keep the Jaxx software on your device.  The best way to learn this I think is to actually do it.  My recommendation would be to take $100 to experiment with for educational purposes.

 

1) Set up a Coinbase account and buy $100 worth of Bitcoin.

2) Download the Jaxx app to your phone.

3) Run the Jaxx app and set up a new wallet.

 

    IMPORTANT: Write down the 12 word backup phrase that you are given and save it somewhere secure.

 

4) Once you have your Bitcoin available in Coinbase send it to your Jaxx wallet.

  a) In Coinbase select "Send".

  b) Put in the amount to send (the max amount).

  c) In Jaxx copy the receive address.

  d) in Coinbase paste your jaxx receive address in the address to send to. And hit the send button.

  e) Wait until your Bitcoin shows up in Jaxx.  This could be as quick as 2 min or as long as an hour.  But will probably be within 10 min.

 

5) Now that you have Bitcoin in your private Jaxx wallet.  You can remove the Jaxx app from your phone.  Just uninstall the app completely. It is now gone and no one can get your Bitcoin by hacking into your phone.  The only way anyone could steal your Bitcoin from you now would be to somehow get a hold of your 12 word backup phrase which you wrote down when setting up Jaxx.

 

6) Now to restore your wallet you simply re-install Jaxx and instead of creating a new wallet select restore wallet the first time you run it.  It will ask you for your backup phrase. Type it in and your wallet containing your Bitcoins will be available for you to use.  You can do this to check the balance or to make a transaction. Then you can uninstall Jaxx again to have your wallet exist nowhere but on paper again.

 

rkbabang, are you just simplifying your explanation here about what is bitcoin and how its transactions work?

 

My understanding is that you never download a bitcoin. Bitcoins (more precisely, their values) are not stored on any specific device, but they "inhere" on transaction records on the blockchain network. By creating your own wallet and "sending bitcoins" to there, you are recording an additional transaction to your own address (this address is still part of the network). To make further transactions, you would need to know and use the private key that is generated by the wallet. And this private key is what gets stored in your wallet.

 

And to answer emily's question of why you cannot simply download "bitcoins" - Because it is simply not a download of an information artifact, but software like jaxx interacts with the blockchain to participate in the transaction recording (ledger) and manages the key generation / storage. You could write software yourself that does this, but obviously not straightforward like storing a file.

 

Yes I was trying to simplify it.  More of a how to do it than a how it works explanation.  You are correct there is more to it.  Jaxx interacts with the block chain and doesn't really store anything.  It is even more complicated than that though, as Jaxx is an HD wallet which uses a hash of your 12 word backup phrase to generate a new private-key/public-address pair for every single transaction you make with it.  You can view all of your private key/public address pairs in the settings if you want to and use a block explorer to examine each one, but the software handles all of that under the hood for you.  When you restore it on a new Jaxx installation using your 12 word phrase it regenerates the hashes and searches the blockchain to re-compute your history and ballance.  The thing is that you don't have to understand how email works to send emails and you don't have to understand how bitcoin works to use bitcoin.  If you want a deep understanding of the underlying technology you could start with Satashi's white paper, there are also good books and articles which you could read, but if you just want to start using Bitcoin to get a feel for how it works there is no substitute for hands on experience.

 

[rkbabang]

rkbabang, thank you. Is it possible to download the code to a USB (or on computer) and back up on a local drive not connected to the internet? I assume that would be the safest like you would store gold. Is that possible to do? Hacking is the biggest danger as I read.

 

Yes you could use a computer that is never connected to the internet to create your wallet or install your wallet on a usb stick and only access it from non-connected computers.  Then send your coins from coinbase to the address generated by the offline computer.

 

You could also use a hardware wallet like Trezor this is pocket sized and not much bigger than a usb stick.  I've never used one, because I just prefer to keep paper wallets, but some people claim these are a highly secure way to hold your Bitcoins.  There is also the Ledger Nano S hardware wallet but those appear to be backordered until March.

 

 

[Cardboard]

The latest e-mails from Rkbabang should demonstrate clearly why this cannot replace gold. At least not for now.

 

The complexity, relying on third parties is way too high.

 

Moreover, I just entered this on my PC to see what this market is doing right now: https://www.coindesk.com/price/ and the screen is locked.

 

How could one of the largest exchanges be experiencing this on a regular basis and attract more users/demand and a sense of security?

 

Finally, when something goes up 20 times in any given year, it should give a pause to most rational players. That is at least what I would expect from participants on a website who know one thing or two about value investing.

 

This should also be especially true, when this new "hunt" for a supposedly store of value occurs during a raging bull market in paper assets.

 

Cardboard

[rkbabang]

The latest e-mails from Rkbabang should demonstrate clearly why this cannot replace gold. At least not for now.

 

The complexity, relying on third parties is way too high.

 

Moreover, I just entered this on my PC to see what this market is doing right now: https://www.coindesk.com/price/ and the screen is locked.

 

How could one of the largest exchanges be experiencing this on a regular basis and attract more users/demand and a sense of security?

 

Finally, when something goes up 20 times in any given year, it should give a pause to most rational players. That is at least what I would expect from participants on a website who know one thing or two about value investing.

 

This should also be especially true, when this new "hunt" for a supposedly store of value occurs during a raging bull market in paper assets.

 

Cardboard

 

I don't know what is wrong with coindesk.com, I've never been to that website before, but it does appear broken.  There are a million other places you can get a quote though.  I usually use http://coincap.io/  If yahoo finance goes down and you can't get a stock quote from there, would you come to the conclusion that stocks are broken?

 

Also you misunderstand my posts there is no relying on third parties.  You can acquire Bitcoin outside of a company like Coinbase.  You could mine it yourself, you could go to an atm, you could find someone to sell you some, etc.  Just like gold, you can try prospecting yourself or you can find a private party to sell you some, or you can buy it from a dealer.  You can also purchase a gold ETF which is something you will one day be able to easily do with Bitcoin as well.  I've never physically owned gold as an investment, but I have in the past owned SGOL.

 

With Bitcoin you can absolutely do everything yourself.  You could write software to generate your own private keys and to interact with the blockchain or you could use opensource software that does this for you.  You can run this software on an air-gapped computer, generate your keys, and completely control your private keys without relying on any 3rd party.

 

EDIT: Also when it goes up 20X in a year it does give pause to rational players, but that also says nothing at all about what will happen long term with this.  It hit around $1100 in 2013 then went back down to around $100.  I am not saying similar crashes (or worse) will not happen along the way.

 

[Cardboard]

"I've never physically owned gold as an investment, but I have in the past owned SGOL."

 

Do yourself an immense favour: go buy right now an ounce of gold and bring it back home. Johnson Matthey is a highly reputable refiner and these are accepted/recognized anywhere.

 

This will cost you near nothing as these have very little commission to buy but, the process could show you what I mean.

 

Cardboard

[SnarkyPuppy]

The latest e-mails from Rkbabang should demonstrate clearly why this cannot replace gold. At least not for now.

 

The complexity, relying on third parties is way too high.

 

Moreover, I just entered this on my PC to see what this market is doing right now: https://www.coindesk.com/price/ and the screen is locked.

 

How could one of the largest exchanges be experiencing this on a regular basis and attract more users/demand and a sense of security?

 

Finally, when something goes up 20 times in any given year, it should give a pause to most rational players. That is at least what I would expect from participants on a website who know one thing or two about value investing.

 

This should also be especially true, when this new "hunt" for a supposedly store of value occurs during a raging bull market in paper assets.

 

Cardboard

 

We are valuing where things will be in 3 years from now.  Also, commitment and consistency bias is strong w this one.

 

As a value investor I've been taught to not react to price movements and evaluate underlying value.  Assuming something is overvalued simply because of price going up is no different than blaming others for buying things because prices have gone up. 

[SharperDingaan]

These things have a fine line between junkie and investor; and why, in part, we are no longer in them.

There is still a lot of money to be made, but we think that today it's largely a bet against the tide going out. Nothing wrong in that; we just prefer not to hold melting ice cubes.

 

SD

 

 

 

[rkbabang]

"I've never physically owned gold as an investment, but I have in the past owned SGOL."

 

Do yourself an immense favour: go buy right now an ounce of gold and bring it back home. Johnson Matthey is a highly reputable refiner and these are accepted/recognized anywhere.

 

This will cost you near nothing as these have very little commission to buy but, the process could show you what I mean.

 

Cardboard

 

I may just do that in the near future.  I suspect it will show me that Bitcoin is easier to acquire and store.  It couldn't hurt to own a small amount of gold though.

 

[JimBowerman]

 

Finally, when something goes up 20 times in any given year, it should give a pause to most rational players. That is at least what I would expect from participants on a website who know one thing or two about value investing.

 

 

My problem with this is that "something going up 20x" doesn't account for fundamentals.  Many value investors simply say its overvalued because of recent price action.  Aren't we supposed to largely ignore past price movements in value investing and instead focus on fundamentals (% of gold market cap, % of world money supply, etc)?

 

I think what is really happening here is that crypto in general eliminates the IPO phase of investments.  In its first 9 years as a company, Google went from $0 to $100B+, but people were less likely to call it a bubble because most of the price rise (in % terms ) was pre-IPO.  The IPO market cap was around $20B, but if you chart gains in the pre IPO price of google shares they'd look almost exactly like crypto prices.  Its largely optics imo.

 

Not saying crypto is a great investment or that it can't fall severly from here, but I don't see a lot of fundamental analysis from value investors going on in regards to crypto (both on the bullish and bearish side).

[SnarkyPuppy]

 

Finally, when something goes up 20 times in any given year, it should give a pause to most rational players. That is at least what I would expect from participants on a website who know one thing or two about value investing.

 

 

My problem with this is that "something going up 20x" doesn't account for fundamentals.  Many value investors simply say its overvalued because of recent price action.  Aren't we supposed to largely ignore past price movements in value investing and instead focus on fundamentals (% of gold market cap, % of world money supply, etc)?

 

I think what is really happening here is that crypto in general eliminates the IPO phase of investments.  In its first 9 years as a company, Google went from $0 to $100B+, but people were less likely to call it a bubble because most of the price rise (in % terms ) was pre-IPO.  The IPO market cap was around $20B, but if you chart gains in the pre IPO price of google shares they'd look almost exactly like crypto prices.  Its largely optics imo.

 

Not saying crypto is a great investment or that it can't fall severly from here, but I don't see a lot of fundamental analysis from value investors going on in regards to crypto (both on the bullish and bearish side).

 

+1

[Cardboard]

"My problem with this is that "something going up 20x" doesn't account for fundamentals.  Many value investors simply say its overvalued because of recent price action.  Aren't we supposed to largely ignore past price movements in value investing and instead focus on fundamentals (% of gold market cap, % of world money supply, etc)?

 

I think what is really happening here is that crypto in general eliminates the IPO phase of investments.  In its first 9 years as a company, Google went from $0 to $100B+, but people were less likely to call it a bubble because most of the price rise (in % terms ) was pre-IPO.  The IPO market cap was around $20B, but if you chart gains in the pre IPO price of google shares they'd look almost exactly like crypto prices.  Its largely optics imo.

 

Not saying crypto is a great investment or that it can't fall severly from here, but I don't see a lot of fundamental analysis from value investors going on in regards to crypto (both on the bullish and bearish side)."

 

A value investor will accept that something goes up 20 times in one year if there was large undervaluation and/or something fundamental that has changed to justify this 20 times. However, I will submit that in my 20+ years of investing that this is very rare occurence and much more likely to happen to obscure, small market cap securities vs billion $ assets.

 

So you should ask yourself, what has changed to cryptos in the span of 12 months to justify such move?

 

Moreover, the main thesis that I have heard on this board is that Bitcoin should be valued at $7 trillion mostly because gold has such valuation. Is this fundamental analysis?

 

Cardboard

[clutch]

The latest e-mails from Rkbabang should demonstrate clearly why this cannot replace gold. At least not for now.

 

The complexity, relying on third parties is way too high.

 

Are you just talking about the complexity and reliance that occur during transactions?

 

Either way, think of all the processes required in mining, processing, selling, regulating, trading, and storing gold (in a relatively safe environment). Think of all the complexities and third parties involved in those processes.

[SnarkyPuppy]

"My problem with this is that "something going up 20x" doesn't account for fundamentals.  Many value investors simply say its overvalued because of recent price action.  Aren't we supposed to largely ignore past price movements in value investing and instead focus on fundamentals (% of gold market cap, % of world money supply, etc)?

 

I think what is really happening here is that crypto in general eliminates the IPO phase of investments.  In its first 9 years as a company, Google went from $0 to $100B+, but people were less likely to call it a bubble because most of the price rise (in % terms ) was pre-IPO.  The IPO market cap was around $20B, but if you chart gains in the pre IPO price of google shares they'd look almost exactly like crypto prices.  Its largely optics imo.

 

Not saying crypto is a great investment or that it can't fall severly from here, but I don't see a lot of fundamental analysis from value investors going on in regards to crypto (both on the bullish and bearish side)."

 

A value investor will accept that something goes up 20 times in one year if there was large undervaluation and/or something fundamental that has changed to justify this 20 times. However, I will submit that in my 20+ years of investing that this is very rare occurence and much more likely to happen to obscure, small market cap securities vs billion $ assets.

 

So you should ask yourself, what has changed to cryptos in the span of 12 months to justify such move?

 

Moreover, the main thesis that I have heard on this board is that Bitcoin should be valued at $7 trillion mostly because gold has such valuation. Is this fundamental analysis?

 

Cardboard

 

Does fundamental analysis have to be complicated to be fundamental? 

 

Gold is used as a scarce flight-to-safety store-of-value which is naturally anti-central bank (i.e. government) and a hedge against the current financial system.  It is a demonstrable fact that such an asset is valued at $7trillion. 

 

Bitcoin seeks to fill the same role.  Compared to gold, Bitcoin is easier to move globally, cheaper, faster, scarcer, easier and more secure to store, and MOST importantly:  has trustless immutability.    (Note:  some of these are not currently the case but probablisticaly will be the case in 3-5 years - such as ease of use, storage, and cost;  many are mistaking the current difficulty with the future ease;  a possible relevant comparison is sending emails in 1987 versus sending emails in 2017). 

 

If the assumption proves to be true/accepted that bitcoin performs the function of gold in a more efficient and trustless manner (this is clearly debatable), then its entirely within the realm of possibility that it reaches the valuation of gold. 

 

I will say - this is ABSOLUTELY NOT fundamental value investing with a margin of safety.  This is clearcut speculation - maybe others disagree with this but this absolutely can go to $0 and "probably" (probabilistically >50%) go to $0.  The variant perception is that bitcoin has significant value based on its trustless immutability - and the value proposition is that similar assets are valued at ~23x.  You are risking $1 to make $23. 

 

Determine the odds and place your bets.

[JimBowerman]

 

So you should ask yourself, what has changed to cryptos in the span of 12 months to justify such move?

 

 

Cardboard

 

Couldn't the same question be asked of bezos when he invested in google in 1998 at 6 cents a share?  What changed at google form 1998 to 2000 or 2005 for that matter?  Sure they changed/added things (gmail etc) but in general the basic structure of google was kinda there in 1998 (superior search engine, which is naturally winner take all and then selling ad revenue based on that).  You just had to be an accredited investor and believe in their roadmap.  Same thing with amazon...roadmap was laid out in 1997.  angel investors, if they believed bezos, coulda seen the roadmap even earlier.  Then it was a matter of: 1) will the internet take off and 2) will amazon be a leader in that space.  Thats still kinda the same basic thesis all these years later.  The details have evolved but its still basically that.

 

I think with crypto you kinda have a similar thing: 1) will cryptos in general ever be big? 2) if so, which one is likely to be the leader.

 

The nature of a lot of investing is naturally going to be that price rises PROCEED actual product developments.  No way you could justify amazon's stock price in 2000 based on what it had implemented at the time.  But investors are able to look forward and time has shown that even those who top ticked amazon in the 2000 bubble had the big picture right (ie internet has turned into a big thing, and amazon has retained leadership)

 

investors all learn about new tech etc gradually.  I think what youre seeing is more that most investors are finally learning about crypto and taking it seriously instead of blowing it off (which is what most did when they first heard about it in the 2013 bubble).  In the real world ideas need to sit with investors for a while.  IMO thats the reason for the recent price rise, because your right, the nothing has changed significantly in crypt in the last 12 months...or at least nothing that wasn't fairly predictable back in 2015.  That said, the main ideas were there back in 2010, but i wouldnt' expect an instant price rise to a 1T market cap back in 2010 because ideas take time to percolate thorugh society. As they do i'd expect price rises like we saw in the last 12 months even without fundamental changes to the product.

[rkbabang]

"My problem with this is that "something going up 20x" doesn't account for fundamentals.  Many value investors simply say its overvalued because of recent price action.  Aren't we supposed to largely ignore past price movements in value investing and instead focus on fundamentals (% of gold market cap, % of world money supply, etc)?

 

I think what is really happening here is that crypto in general eliminates the IPO phase of investments.  In its first 9 years as a company, Google went from $0 to $100B+, but people were less likely to call it a bubble because most of the price rise (in % terms ) was pre-IPO.  The IPO market cap was around $20B, but if you chart gains in the pre IPO price of google shares they'd look almost exactly like crypto prices.  Its largely optics imo.

 

Not saying crypto is a great investment or that it can't fall severly from here, but I don't see a lot of fundamental analysis from value investors going on in regards to crypto (both on the bullish and bearish side)."

 

A value investor will accept that something goes up 20 times in one year if there was large undervaluation and/or something fundamental that has changed to justify this 20 times. However, I will submit that in my 20+ years of investing that this is very rare occurence and much more likely to happen to obscure, small market cap securities vs billion $ assets.

 

So you should ask yourself, what has changed to cryptos in the span of 12 months to justify such move?

 

Moreover, the main thesis that I have heard on this board is that Bitcoin should be valued at $7 trillion mostly because gold has such valuation. Is this fundamental analysis?

 

Cardboard

 

How do you value gold?  Should it be valued at $7T right now or is it over or under valued? 

 

I've read many times that Bitcoin is too volatile to be a good store of value. While that is true currently, the volatility will need to be less than it is, even gold isn't completely stable.  Gold went from $35/oz in 1970 to $850/oz in 1980.  It fell to as low as $250 in 1999 and was trading over $1000 in 2008.

 

Just in my lifetime gold has ranged from $38 to $1800.  That is a 47X difference on a store of value that has been in common use for thousands of years (you aren't going to get more stable than that).  And it wasn't a smooth increase from $38 to $1800, but up and down massively.

 

 

I don't know how to exactly value Bitcoin, but there are some things I'm sure of.

 

It will be used as a store of value that will be more commonly utilized than gold. Therefor it will be valued at some portion of what gold is valued at today.  It won't be 100%, people will still hold gold and there will still be a market for it.  So will Bitcoin be valued at half of what gold is today?  85%?  Maybe I'm wrong and it will only be 25%.  I don't know.  But at 25%-85% of $7T the market cap will be in the trillions eventually.  I don't know how long this will take (5-15 years maybe), but I am counting on being approximately correct rather than precisely wrong.

 

[Liberty]

Gold went from $35/oz in 1970 to $850/oz in 1980.  It fell to as low as $250 in 1999 and was trading over $1000 in 2008.

 

Just in my lifetime gold has ranged from $38 to $1800.  That is a 47X difference on a store of value that has been in common use for thousands of years (you aren't going to get more stable than that).  And it wasn't a smooth increase from $38 to $1800, but up and down massively.

 

The value of the US dollar also changed during that period.

 

Pretty big difference between changing that much over 40-50 year and that much in a year.

[rkbabang]

Gold went from $35/oz in 1970 to $850/oz in 1980.  It fell to as low as $250 in 1999 and was trading over $1000 in 2008.

 

Just in my lifetime gold has ranged from $38 to $1800.  That is a 47X difference on a store of value that has been in common use for thousands of years (you aren't going to get more stable than that).  And it wasn't a smooth increase from $38 to $1800, but up and down massively.

 

The value of the US dollar also changed during that period.

 

Pretty big difference between changing that much over 40-50 year and that much in a year.

 

No disputing that.  I'm just saying nothing is completely stable and bitcoin is so new and so few people use it (and even fewer understand it) that I wouldn't be surprised if we have a few more up or down 30X years coming.  On the bear side: there is a lot of Bitcoin in a small number of hands, when those whales start selling things are going to get bumpy and panic will ensue. And on the bullish side: With so few people currently invested and it being so hard for people to invest in (see my above posts that you mentioned), I don't think we've even even come close to seeing how insane Bitcoin mania can get.  Bitcoin will be as easy to use as normal banking is now and every joe sixpack will be buying, so the real mania is still to come (Bitcoin with a $30T market cap maybe).  But 20 years from now all that will have shaken out and it will be close to as stable as gold has been (up or down 3-5X in a decade).

 

[clutch]

I think there is one limitation of cryptocurrecies that strikes at the core of its value proposition. The primary strength is its decentralization and its independence from any state or organization. However, it requires a global computer network, i.e., the Internet, for it to work. The problem is that the infrastructure that provides the Internet is centralized and owned by states / corporations. So the bedrock on which the blockchain network lives on is not decentralized and independent.

 

Also, if you are cut off from the network, you cannot participate in this. Just think of the citizens of North Korea - they cannot participate in any Bitcoin transactions because they cannot even access the public Internet.

 

What happens if a totalitarian state abolishes the infrastructure for the Internet because they see cryptocurrencies as their biggest threat? Maybe not even a single state, but the world as a whole decides for whatever reason that the Internet needs to be abolished? Or another world-war destroys all the digital infrastructures? I guess such conditions are so dire that considerations of the value of cryptocurrencies are moot... But don't these things supposed to be a store of value because these events could occur?

 

That is also one positive for gold. Even if we go back to fighting with rocks and sticks, gold could still have value.

 

[rkbabang]

I think there is one limitation of cryptocurrecies that strikes at the core of its value proposition. The primary strength is its decentralization and its independence from any state or organization. However, it requires a global computer network, i.e., the Internet, for it to work. The problem is that the infrastructure that provides the Internet is centralized and owned by states / corporations. So the bedrock on which the blockchain network lives on is not decentralized and independent.

 

Also, if you are cut off from the network, you cannot participate in this. Just think of the citizens of North Korea - they cannot participate in any Bitcoin transactions because they cannot even access the public Internet.

 

What happens if a totalitarian state abolishes the infrastructure for the Internet because they see cryptocurrencies as their biggest threat? Maybe not even a single state, but the world as a whole decides for whatever reason that the Internet needs to be abolished? Or another world-war destroys all the digital infrastructures? I guess such conditions are so dire that considerations of the value of cryptocurrencies are moot... But don't these things supposed to be a store of value because these events could occur?

 

That is also one positive for gold. Even if we go back to fighting with rocks and sticks, gold could still have value.

 

 

Yes gold isn't going anywhere, but if the US government gets tyrannical to the point where it shuts down the internet I suspect I'll have larger problems than my Bitcoin holdings.

 

[Cardboard]

"Yes gold isn't going anywhere, but if the US government gets tyrannical to the point where it shuts down the internet I suspect I'll have larger problems than my Bitcoin holdings."

 

This gets to my point: there is no hunt right now for a store of value.

 

The hunt right now is related to greed, the fear to miss out on something or after almost 8 years into a major bull market.

 

Imagine this whole conversation in 2008-2009 during the major downturn. Even then the supposedly great store of value or gold was down quite a bit. Everything was thrown away. Raising cash was all that mattered.

 

I am not saying that Rkbabang is not onto something and that crypto is worthless. However, I am quite skeptical about the store of value argument especially after the kind of frenzy that we have seen.

 

Cardboard