Cryptocurrencies

[james22]

But it's also possible it just won't click for you.

 

It doesn't for everyone.

[73 Reds]

3 minutes ago, james22 said:

 

Probably the easiest: If you believe bitcoin is digital gold, divide gold's $18T market cap by 21M.

 

Otherwise, consider adoption curves.

 

 

But really, life changing wealth requires some effort. And the risk of wasted effort.

 

Read this thread and the MSTR one as well.

 

You'll see many of us were skeptics first.

 

(I first thought I'd piggy-back Blackrock believing they'd build a market as they did for ESG.)

 

 

Then look to Twitter/X. That's were the best discussion is now.

Since BTC can be "lost" how can we know for sure that the supply will always be limited?

[james22]

1 minute ago, 73 Reds said:

Since BTC can be "lost" how can we know for sure that the supply will always be limited?

 

Since BTC can be lost, supply can only always be ever more limited (<21M).

[TwoCitiesCapital]

15 minutes ago, 73 Reds said:

Curious that the opening paragraph in Peterson's "Metcalf's Law for Bitcoin" states that Bitcoin has no intrinsic value.  On the other thread proponents lambasted BTC skeptics for making the same suggestion.

 

I suppose that it depends on how one defines "intrinsic value". 

 

There is little value in BTC itself - the value is in the network (using Metcalf Law framework). 

 

I don't think this is irreconcilable with other theories/values nor is it much different than saying "gold has little intrinsic value - most of its market cap is monetary premium" 

 

I believe BTCs characteristics lend itself to obtaining a monetary premium - but that only occurs if the network grows through collective agreement. 

 

10 minutes ago, 73 Reds said:

Since BTC can be "lost" how can we know for sure that the supply will always be limited?

 

There are varying estimates of how much has been lost. As of right now, most estimates suggest 3-4 million to be irretrievably lost. 

 

If you want to be conservative, use the 21 million hard cap in your valuations. If you want to be more accurate, but have less margin of safety, use 17-18 million. 

Edited November 13 by TwoCitiesCapital

[james22]

 

[73 Reds]

6 minutes ago, TwoCitiesCapital said:

 

I suppose that it depends on how one defines "intrinsic value". 

 

There is little value in BTC itself - the value is in the network (using Metcalf Law framework). 

 

I don't think this is irreconcilable with other theories/values nor is it much different than saying "gold has little intrinsic value - most of its market cap is monetary premium" 

 

I believe BTCs characteristics lend itself to obtaining a monetary premium - but that only occurs if the network grows through collective agreement. 

 

 

There are varying estimates of how much has been lost. As of right now, most estimates suggest 3-4 million to be irretrievably lost. 

 

If you want to be conservative, use the 21 million hard cap in your valuations. If you want to be more accurate, but have less margin of safety, use 17-18 million. 

Re. Metcalf's Law I am left with some initial questions:

 

The article starts out by comparing  BTC to an Italian network of telephone tokens.  This seems much like today's forever stamps where people hoard them on the basis of anticipated price increases.  Yet the phone tokens and stamp prices rise gradually, in contrast to the price of BTC.  How can this be reconciled in terms of coming up with a fair price?

 

The article uses Facebook as a further analogy.  Facebook, as an entity clearly has value that can be measured in any number of traditional ways.  I can [almost] see where BTC as a network can also be valued based on the cumulative value to users of its convenience, etc... But what I can't decipher is how each wallet or coin can be valued, at least in a monetization sense, other than via bid/ask based on ???  Logically the value is not simply a proportional value of the network as a whole because the network is not a static, cost free endeavor.

 

The article asks (rhetorically) where value is created for traditional currencies.  What I think it neglects to acknowledge is that the US dollar is effectively a legal contract between the US government and the holder of the note for the nominal value of the currency.    

 

The article goes on to say that the model is based solely on supply and demand.  The author seems to take a leap of faith by stating "we expect deviations to occur but significant deviations should be subject to scrutiny". Why?  

 

The author does acknowledge that the price has been, and can be manipulated.  Doesn't this defeat one of the main purposes/advantages of BTC?

 

I'm sure when I re-read the article more questions will surface.  The article is fascinating and leaves me with more questions than before (that's a good thing!).  I intend to read the other authorities you and others have provided.  Thanks again.

  

[rkbabang]

Also 3 books I'd recommend highly.  

1)  "The Bitcoin Standard: The Decentralized Alternative to Central Banking", by Saifedean Ammous

2)  "Broken Money: Why Our Financial System is Failing Us and How We Can Make it Better" by Lyn Alden
3) "Softwar: A Novel Theory on Power Projection and the National Strategic Significance of Bitcoin" by Jason Lowery

 

The first 2 are similar, but make different arguments and go over the history slightly differently.  I found I derived a lot value from reading both of them.  But certainly read at least one of them.  Softwar is a little far out there and I'm still not sold on it and not completely sure what to think of it, but he goes over non-monetary uses for the Bitcoin blockchain claiming the cryptocurrency/hard asset way is just one way of looking at it and not even the most important way.  He says Bitcoin is better referred to as Bitpower and gives a Second Amendment argument for the right of Americans to own, or should I say keep and bear, bitcoin.  I found it interesting that money isn't the only application for the hardest asset and the most secure network ever conceived by humanity.  Bitcoin, its blockchain, and its network aren't just money or just an asset or just a way of waging war, it is something completely new and different. A completely new technology that is in a category of its own. 

 

[Paarslaars]

46 minutes ago, james22 said:

(I first thought I'd piggy-back Blackrock believing they'd build a market as they did for ESG.)

 

Same here, I was a skeptic on BTC until I heard Blackrock was pushing it. Made me take a small position and do some DD based on recommendations here. Now it's 50% of my portfolio (largely due to gains but ok :)).

[TwoCitiesCapital]

9 minutes ago, 73 Reds said:

The article starts out by comparing  BTC to an Italian network of telephone tokens.  This seems much like today's forever stamps where people hoard them on the basis of anticipated price increases.  Yet the phone tokens and stamp prices rise gradually, in contrast to the price of BTC.  How can this be reconciled in terms of coming up with a fair price?

 

Bitcoin is the representation of the network and required to interact with it. Figure out the value of the network - that's your market cap. 

 

Bitcoin is just an arbitrary division of that network into 21 million parts similar to how the # of shares outstanding for a corporation is largely arbitrary and what matters is not the share price of each share but the value as a whole. 

 

9 minutes ago, 73 Reds said:

 

The article uses Facebook as a further analogy.  Facebook, as an entity clearly has value that can be measured in any number of traditional ways.  I can [almost] see where BTC as a network can also be valued based on the cumulative value to users of its convenience, etc... But what I can't decipher is how each wallet or coin can be valued, at least in a monetization sense, other than via bid/ask based on ???  Logically the value is not simply a proportional value of the network as a whole because the network is not a static, cost free endeavor.

 

Value of the network divided by coins outstanding. 

 

9 minutes ago, 73 Reds said:

 

The article asks (rhetorically) where value is created for traditional currencies.  What I think it neglects to acknowledge is that the US dollar is effectively a legal contract between the US government and the holder of the note for the nominal value of the currency.    

 

An agreement that the US government regularly defaults on by actively diminishing the value of the currency that is their liability. 

 

How much is a contract worth if one side is constantly breaching the terms of it? 

 

9 minutes ago, 73 Reds said:

 

The article goes on to say that the model is based solely on supply and demand.  The author seems to take a leap of faith by stating "we expect deviations to occur but significant deviations should be subject to scrutiny". Why?  

 

Don't all assets have deviations from "fair value"? Or at the very least different estimates among participants of what "fair value" is? I'm not entirely sure I'm understanding what is questionable here? 

 

9 minutes ago, 73 Reds said:

 

The author does acknowledge that the price has been, and can be manipulated.  Doesn't this defeat one of the main purposes/advantages of BTC?

 

He acknowledges it was manipulated in its infancy back in 2011 -2013. And that's not universally agreed upon. 

 

But yes - any micro cap stock can be manipulated. BTC was no different in its infancy. Limited liquidity. Limited regulatory over sight. Limited market participants. That's not the case today. 

 

9 minutes ago, 73 Reds said:

 

I'm sure when I re-read the article more questions will surface.  The article is fascinating and leaves me with more questions than before (that's a good thing!).  I intend to read the other authorities you and others have provided.  Thanks again.

  

+1

Edited November 13 by TwoCitiesCapital

[jfan]

26 minutes ago, 73 Reds said:

Since BTC can be "lost" how can we know for sure that the supply will always be limited?

The supply is built into the codebase. To make a change requires the a majority of the nodes to agree to the change. During the blocksize wars, the miners wanted the network to change to increase transactional throughput and misjudged the degree of voting power they had. They assumed that having all the hashing power gave them more influence. However, the node operators and open-source programmers were able to mount a response rejecting their hard fork proposal. 

 

As with any voting system, it does require the node operators to be educated well enough to reject such changes. That said, most people (including myself) are not technical, so to some degree we rely on the open source ecosystem to keep the network true to its roots. 

 

This is a risk. But as the system grows, it will be harder and harder to achieve any consensus, and hence most proposals will be in deadlock, and the existing codebase will not change.

[73 Reds]

11 minutes ago, Paarslaars said:

 

Same here, I was a skeptic on BTC until I heard Blackrock was pushing it. Made me take a small position and do some DD based on recommendations here. Now it's 50% of my portfolio (largely due to gains but ok :)).

Not here questioning your winnings!  But Wall Street and the financial industry has never shied away from promoting anything that will put money in their pockets.

[73 Reds]

16 minutes ago, rkbabang said:

Also 3 books I'd recommend highly.  

1)  "The Bitcoin Standard: The Decentralized Alternative to Central Banking", by Saifedean Ammous

2)  "Broken Money: Why Our Financial System is Failing Us and How We Can Make it Better" by Lyn Alden
3) "Softwar: A Novel Theory on Power Projection and the National Strategic Significance of Bitcoin" by Jason Lowery

 

The first 2 are similar, but make different arguments and go over the history slightly differently.  I found I derived a lot value from reading both of them.  But certainly read at least one of them.  Softwar is a little far out there and I'm still not sold on it and not completely sure what to think of it, but he goes over non-monetary uses for the Bitcoin blockchain claiming the cryptocurrency/hard asset way is just one way of looking at it and not even the most important way.  He says Bitcoin is better referred to as Bitpower and gives a Second Amendment argument for the right of Americans to own, or should I say keep and bear, bitcoin.  I found it interesting that money isn't the only application for the hardest asset and the most secure network ever conceived by humanity.  Bitcoin, its blockchain, and its network aren't just money or just an asset or just a way of waging war, it is something completely new and different. A completely new technology that is in a category of its own. 

 

TY @rkbabang

[73 Reds]

18 minutes ago, TwoCitiesCapital said:

 

Bitcoin is the representation of the network and required to interact with it. Figure out the value of the network - that's your market cap. 

 

Bitcoin is just an arbitrary division of that network into 21 million parts similar to how the # of shares outstanding for a corporation is largely arbitrary and what matters is not the share price of each share but the value as a whole. 

 

 

Value of the network divided by coins outstanding. 

 

 

An agreement that the US government regularly defaults on by actively diminishing the value of the currency that is their liability. 

 

How much is a contract worth if one side is constantly breaching the terms of it? 

 

 

Don't all assets have deviations from "fair value"? Or at the very least different estimates among participants of what "fair value" is? I'm not entirely sure I'm understanding what is questionable here? 

 

 

He acknowledges it was manipulated in its infancy back in 2011 -2013. And that's not universally agreed upon. 

 

But yes - any micro cap stock can be manipulated. BTC was no different in its infancy. Limited liquidity. Limited regulatory over sight. Limited market participants. That's not the case today. 

 

+1

Figuring out the value of the whole network, leaving subjectivity aside is indeed the tough part.  The problem (for me at least) is subjectivity has generally been effective.

[rkbabang]

3 minutes ago, 73 Reds said:

Figuring out the value of the whole network, leaving subjectivity aside is indeed the tough part.  The problem (for me at least) is subjectivity has generally been effective.

 

 

Valuing it is extremely difficult.  It's like someone telling you in 2004 that you could invest privately in Facebook and it might have 3 billion active users someday and make a lot of money from monetizing its users.  1) Would you even believe that?  2) How could you value it?  How could you know exactly what a user would be worth to FB in 20 years?   But you would know that the company would likely be worth a lot if that were to happen.

 

[james22]

55 minutes ago, 73 Reds said:

Figuring out the value of the whole network, leaving subjectivity aside is indeed the tough part.  The problem (for me at least) is subjectivity has generally been effective.

 

All you need is a little information advantage.

 

And that's easy with bitcoin. 

 

Because so many are absolutely convinced the value of the whole network is zero.

[Luke]

 

Pump it.

 

[Luke]

3 minutes ago, james22 said:

All you need is a little information advantage.

 

And that's easy with bitcoin. 

 

Because so many are absolutely convinced the value of the whole network is zero.

All you need is a bunch of irrational buyers who throw their hard-earned cash against this without knowing the outcome or being able to predict it to a certain degree.

[Luke]

This reminds me of peak GME 2021 btw! And yes, there were many who made a lot of cash. The ones who lost it weren't that loud

[Milu]

To echo some of the comments from above, I was also a massive bitcoin skeptic. It was only after I read the 'Bitcoin Standard' book in 2020 that it finally 'clicked' for me and I took a small position. That small position has grown into a decent sized position.

 

For any of the skeptics I would say to read that book with an open mind and by the end you will either 'get it' and perhaps decide to hold a small amount in your portfolio, or decide it's not for you which is a perfectly valid decision too. I think the fact that I was a small bit of a gold bug before realising the value of bitcoin that made the transition easier for me. I don't see Bitcoin or Gold as investments really, more suitable for maintaining purchasing power. Although I expect bitcoin to do a lot better than just maintain purchasing power due to the fixed supply and ever increasing demand from global institutions/investors. Eventually this will find an equilibrium but that could be years off.

[Longnose]

I was a totally against it. 

 

Then decided to not just follow the hater crowd but buy a little and play with the technology for myself just so i could more confidently say yea this is useless and a scam. 

 

Tasted the koolaid and said this is pretty awesome. 

 

Outside of my retirement accounts also largely because of growth its now 30% of my portfolio. 

 

Other chains while very cool do not hold the same value as BTC to me. BTC is the only truly decentralized coin/token.

[rkbabang]

15 minutes ago, Milu said:

Eventually this will find an equilibrium but that could be years off.

 

I expect it will be decades off, not just years.   If I had to guess 30-60 years.  You are not going to replace the measure of value in society over night.  We are so early that we are still at the stage where people are measuring the value of BTC in their local currencies rather than the other way around.  When people start saying that the USD is worth X sats and the CAD is worth Y sats and the Pound is worth Z sats, you will know that we are over the hump.  It will be a roller-coaster ride in the interim, but the general direction over any long window of time (say any 4 year window) will be up.  Which is exactly what has happened so far.   I say 4 years, because the halving cycle gives it this built in 4 year cycle where the inflows from newly mined coins gets cut in half.

 

Edited November 13 by rkbabang

[TwoCitiesCapital]

16 minutes ago, Luke said:

This reminds me of peak GME 2021 btw! And yes, there were many who made a lot of cash. The ones who lost it weren't that loud

 

It reminds me of BTC in 2013, 2017, and 2021. 

[Milu]

Just now, rkbabang said:

 

I expect it will be decades off, not just years.   If I had to guess 30-60 years.  You are not going to replace the measure of value in society over night.  We are so early that we are still at the stage where people are measuring the value of BTC in their local currencies rather than the other way around.  It will be a roller-coaster ride in the interim, but the general direction over any long window of time (say any 4 year window) will be up.  Which is exactly what has happened so far.   I say 4 years, because the halving cycle gives it this built in 4 year cycle where the inflows from newly mined coins gets cut in half.

 

Yes, you are more likely right, I probably hedged my estimate a little bit to not put off the skeptics too much. I'm trying not to give them too much ammo to jump on even though I mostly agree with your viewpoint 

 

Any of these prediction about it becoming a global reserve currency, or having a part in everyone's portfolio are almost too grand of a pronouncement, so I tend to just stick with the Digital Gold comparison for now as it's the easiest one to 'get' for the people who are curious.

[rkbabang]

4 minutes ago, TwoCitiesCapital said:

 

It reminds me of BTC in 2013, 2017, and 2021. 

 

Yes, if anything this cycle seems a little more bullish.  We had it re-touch its all time high before the halving earlier in the year.  And it is seems to be rallying a little early right now.

[TwoCitiesCapital]

On 8/14/2024 at 5:24 PM, TwoCitiesCapital said:

Nah - I'm still accumulating. 

 

Bitcoin often takes a breather during miner capitulation post halving. Not to mention the supply event of the German government selling offset much of the prior ETF accumulation in terms of taking BTC supply off market. 

 

Just gotta be patient. Slow accumulation via the ETFs, corporate balance sheets, governments, and retail will eventually eat up the supply which was just halved. Just requires a little patience.

 

I don't mind waiting longer, but I think 100k by December may be in the cards regardless of the election outcome. 

 

We may not be quite at 100k yet, but its damn close enough to take the victory lap with 7 weeks left in the year. To be clear, this prediction was made when BTC was @ 61k. 

 

It wasn't an guarantee, but was very probable given the valuation of the network, where the price was trading relative to network value at that time, and how BTC has behaved post supply halving in the past cycles. This is the informational edge @james22 is referring to - it's still easy.

Edited November 13 by TwoCitiesCapital