OT: Ray, how's your Bitcoin investment going?

[MattTuck]

Maybe.

One could also say it shows how much demand there is for non government controlled money. Or for cheaper ways to transfer money.

Cash is still the largest currency used in criminal activities. Every time I leave cash on the table at a restaurant, I don't hear the people around me whispering that I am some sort of criminal.

[notsew]

Whatever its potential use, its clearly in the midst of a insane bubble. Even its biggest boosters couldn't possibly believe these levels are sustainable? Right?

[moose8]

I’ve got to say the two times people brought up financial advice threads that I’ve remembered- the Facebook IPO and bitcoin - both times you could have made a ton of money if you went with the optimists.

[54ny77]

With Facebook there's liquidity.

Where do you go to cash out of your bitcoin and take the proceeds in your fiat currency of choice?

The winds of regulatory crackdown are starting to blow on the "legitimate" fintech sector. It's only a matter of time before it hits stuff like bitcoin or other blockchain "currency."

It's a huge destabilizing force. That's bad for the business of gov't.

Originally Posted by moose8

I’ve got to say the two times people brought up financial advice threads that I’ve remembered- the Facebook IPO and bitcoin - both times you could have made a ton of money if you went with the optimists.

[andeww]

Very interesting to go back and read the comments from the past. 5 years ago people were kicking themselves for not buying, again 2 years ago, now today. When will the fear of missing out end?

[54ny77]

so true!

i wonder if that handlebar tape guy, the one who always bitched and moaned about "frn's" (yet ironically was more willing to accept them as payment for his products....) dropped accepting those awful "frn's" and now only accepts bitcoin.

let's assume a vendor is accepting bitcoin as currency. do they continually adjust product pricing relative to bitcoin value increase?

that would be insane process to manage. imagine intra-day price volatility on a gallon of milk at the local supermarket.

Originally Posted by andeww

Very interesting to go back and read the comments from the past. 5 years ago people were kicking themselves for not buying, again 2 years ago, now today. When will the fear of missing out end?

[toosahn]

Originally Posted by 54ny77

With Facebook there's liquidity.

Where do you go to cash out of your bitcoin and take the proceeds in your fiat currency of choice?

Gemini, Coinbase, Kraken, Bitcoin ATMs

[thegunner]

coinbase fees are hella high man, makes it less viable now also the transactions are super slow.

that said, if i sell something and someone wants to pay me in btc...

[toosahn]

Originally Posted by thegunner

coinbase fees are hella high man, makes it less viable now also the transactions are super slow.

that said, if i sell something and someone wants to pay me in btc...

Gemini then

[MattTuck]

Originally Posted by notsew

Whatever its potential use, its clearly in the midst of a insane bubble. Even its biggest boosters couldn't possibly believe these levels are sustainable? Right?

I'm not an insane booster, and I could believe that a single bitcoin is worth well in excess of $1 million. It really isn't hard to arrive at that price.

Look at other scarce things (let's just say real estate). Do I believe that there are atleast 16 million pieces of property in the world that are worth $1 million? I do. That would be something like 0.22% of the world population owning an expensive house. It doesn't seem unreasonable. Factor in the fact that many wealthy people own multiple homes in multiple countries, I could probably make an argument that there are more.

As a store of wealth bitcoin has some advantages and disadvantages over real estate. Namely, you can't live in your bitcoin. But, in a matter of minutes, you could move your bitcoin around the world, or convert it to a local currency. Not easy to do with a house.

Now, I am not saying that $1 million+ is the most likely value for bitcoin. I'm just saying I could believe a world where a single bitcoin is worth that much.

16 million of something is really not that much when spread over the globe. FedEx (since we're in shopping season) has about 268 million shares outstanding, with a value of 218 per share. If you made fedex have only 16million shares, each would be worth $3655.

Just food for thought.

I'm not sure what the appropriate price for a bitcoin is, maybe we are in a bubble. But 10 years from now, I would not be surprised if bitcoin were $1 million +. Also would not be surprised if it were $0.

[Tony T]

Originally Posted by Tony T

(10-12-2017) $5,100

Originally Posted by cat6

(Today) $10k

I shoulda bought @ $5,100

[notsew]

Originally Posted by MattTuck

I'm not an insane booster, and I could believe that a single bitcoin is worth well in excess of $1 million. It really isn't hard to arrive at that price.

Look at other scarce things (let's just say real estate). Do I believe that there are atleast 16 million pieces of property in the world that are worth $1 million? I do. That would be something like 0.22% of the world population owning an expensive house. It doesn't seem unreasonable. Factor in the fact that many wealthy people own multiple homes in multiple countries, I could probably make an argument that there are more.

As a store of wealth bitcoin has some advantages and disadvantages over real estate. Namely, you can't live in your bitcoin. But, in a matter of minutes, you could move your bitcoin around the world, or convert it to a local currency. Not easy to do with a house.

Now, I am not saying that $1 million+ is the most likely value for bitcoin. I'm just saying I could believe a world where a single bitcoin is worth that much.

16 million of something is really not that much when spread over the globe. FedEx (since we're in shopping season) has about 268 million shares outstanding, with a value of 218 per share. If you made fedex have only 16million shares, each would be worth $3655.

Just food for thought.

I'm not sure what the appropriate price for a bitcoin is, maybe we are in a bubble. But 10 years from now, I would not be surprised if bitcoin were $1 million +. Also would not be surprised if it were $0.

I see the logic, and I don't disagree necessarily, but my skeptical side says that this valuation is illogical, which makes me worry. Those other examples have value beyond being a place to hide/store cash and speculation (although certainly with real estate, that's a significant driver). My computer scientist friend tells me that the underlying problem with Bitcoin's long-term potential is the difficulty with transactions. It simply takes too long. There may be a cryptocurrancy that becomes a standard, but he thinks its unlikely to be bitcoin. If everyone paid with bitcoin at the grocery store you'd be in line for half an hour. If it has barriers to its transaction value then its just a place to park money. The only advantage it has over gold is portability and manufactured scarcity. There's 50 other cryptocurrancies with the same advantage. Bitcoin was just the first one to the table.

That said, what I don't know is a lot, and despite the madness of it, I'm considering sinking a little bit of money into it (or a competitor) just as a lottery ticket (as I should have done when I first considered it years ago!).

[MattTuck]

Originally Posted by notsew

I see the logic, and I don't disagree necessarily, but my skeptical side says that this valuation is illogical, which makes me worry. Those other examples have value beyond being a place to hide/store cash and speculation (although certainly with real estate, that's a significant driver). My computer scientist friend tells me that the underlying problem with Bitcoin's long-term potential is the difficulty with transactions. It simply takes too long. There may be a cryptocurrancy that becomes a standard, but he thinks its unlikely to be bitcoin. If everyone paid with bitcoin at the grocery store you'd be in line for half an hour. If it has barriers to its transaction value then its just a place to park money. The only advantage it has over gold is portability and manufactured scarcity. There's 50 other cryptocurrancies with the same advantage. Bitcoin was just the first one to the table.

That said, what I don't know is a lot, and despite the madness of it, I'm considering sinking a little bit of money into it (or a competitor) just as a lottery ticket (as I should have done when I first considered it years ago!).

If you have questions about transaction times or transaction costs, I found this article helpful.

https://blog.gridplus.io/money-vs-cr...1-33c09dfea671

[IMG]https://cdn-images-1.medium.com/max/1600/0*pOxA-cwUQZjEMU4X.[/IMG]

Some of the perception about slow transactions comes from the fact that we are actually fairly insulated from the real costs and delays of our transactions.

Yes, whip out your credit card and the transaction seems like it is very fast. But behind the scenes, there is actually some delay in recording it, and processing it. Similar with writing a check. Same with transaction fees. As a consumer, we buy something for 100 and we're done with it. But the merchant only gets $97.50 after fees.

Scaling bitcoin is definitely a challenge. I'm not sure it will ever become something that you transact with on a daily basis. I'm not sure that we need a record of every small transaction in the world kept in cryptographically secure ledger. On the other hand, if it can be used to transfer larger sums of money (say a weekly paycheck) there could be value to people who do not have bank accounts, or people who need to send money to family overseas that currently pay high rates.

Again, this is just food for thought. Clearly, a lot of people are getting into it now for speculative reasons... trying to get rich quickly. Perhaps the price is justified, perhaps not. But, I wouldn't dismiss it at this point just based on price. There is some real technical innovation here. We don't really know if that innovation will pan out or if it will collapse under its own weight.

Also, Aswath Domadaran had a blogpost a few weeks ago talking about bitcoin, and made a compelling argument that it cannot be valued. It can be priced. Much like a currency or a collectible, there is no cashflow associated with owning the asset like there is with a stock or bond. As such, he argues there is no way to calculate an intrinsic value for bitcoin in the way you can with a stock.

[Louis]

Originally Posted by MattTuck

Also, Aswath Domadaran had a blogpost a few weeks ago talking about bitcoin, and made a compelling argument that it cannot be valued. It can be priced. Much like a currency or a collectible, there is no cashflow associated with owning the asset like there is with a stock or bond. As such, he argues there is no way to calculate an intrinsic value for bitcoin in the way you can with a stock.

It's been a quite a while since I was in b-school, but I'm pretty sure that there are quite a few companies that are actively traded that don't show positive cash flow and haven't for a while. I suppose for both those companies and Bitcoin it's all a matter of future expectations.

[MattTuck]

Originally Posted by Louis

It's been a quite a while since I was in b-school, but I'm pretty sure that there are quite a few companies that are actively traded that don't show positive cash flow and haven't for a while. I suppose for both those companies and Bitcoin it's all a matter of future expectations.

With a stock, the value is still determined by expectations about future cashflows (and other stuff, but this is a simplification). Even if a company has never made money, or isn't making money now, the market can still have expectations about real positive cashflows that will occur in the future.

The general idea of investing is to calculate a firm's value, and then compare that value to the current price of the stock. If the value is higher than the current price, buy the stock and wait for the market to accurately price the stock to reflect your opinion. Sell stock when the price exceeds your calculation of value.

As one might argue, owning a bitcoin doesn't entitle you to any stream of cash flows. So it cannot be valued like a stream of cashflows.

Here is the link to Damodoran's video.
https://www.youtube.com/watch?v=8iNeXCAM_Ik