Bitcoin, and other tulips


#846

Been mulling over this, but in the end don’t think its true.

Yes Gold has some level of speculating/investing but primarily the price is determined by classical economics.

A very rough example (economics 101)

There is total 20 Tonnes demand in the market for all gold, from jewellery to electronics.

However only 10 Tonnes can be mined p.a

The average cost of mining is $1000 per tonne

5 tonnes of demand will not buy over $1000 per tonne as they cannot make a profit on there jewellery at this price, this leaves 15 tonnes demand.

Of the remaining 15 tonnes demand the average selling price ends up at $1300 per tonne giving the miners $300 per tonne profit. In effect the first 9 tones are willing to pay more than $1300 and it is the marginal purchaser the tenth tonne willing to pay $1300 that sets the price.

This doesn’t happen with bitcoin. Yes there is miners, but there are no purchasers that can use bitcoin as an input for some other good to make their own profit, there is no jeweller or electronics. The purchaser of bitcoin is 100% speculators.


#847

You’re sort of right, except for the fact that about half the world’s demand for gold is for financial purposes only (and the other half is for consumption uses such as jewellery and technology). If the demand for financial purposes (primarily speculation) evaporated because people decided en masse it wasn’t a good store of value, then roughly half the demand would evaporate; the market would then be oversupplied by about half (assuming it’s currently in balance, which it roughly is), and the clearing price would theoretically move from where it is now all the way down to the cost of production for the 50th percentile of gold production (i.e. the most expensive 50% of current gold production would shut down, and the mine that currently produces at the 50th percentile in the cost curve would become the most expensive/marginal producer/price setter).

The above hypothetical ignores two realities which would unfold, both of which would place further downward pressure on the price:

  • If investment demand evaporated, then jewellery demand would likely fall significantly as well (as gold’s jewellery appeal at least partly stems from it traditionally being a store of financial value); and
  • A commodity’s production cost curve is not fixed - in times of distress/falling commodity prices, miners are quite adept at cutting costs and moving themselves down the curve (as has been demonstrated in the last 4-5 years across a range of commodities such as iron ore, coal, oil etc.).

#848

If one type of demand went, it’s oftenreplaced by another which had previously been priced out of the market.

Yes all commodities have booms and crashes but none have gone to zero or even close. There is nothing preventing bitcoin or any other crypto going to zero.

I know with very high certainty that gold won’t be $1 in 12 months time. Bitcoin could be.


#849

In fact $1 makes as much sense as $100,000


#850

Yes, gold won’t be $1 in 12 months’ time, but it is unlike many other commodities insofar as roughly half its demand is speculative/financial. In the unlikely scenario we all woke up tomorrow and decided it’s not a good store of value any longer, its price would evaporate - jewellery demand would also evaporate, and its alternate uses as an industrial metal are limited given its chemical properties.


#851

I just learnt that there is a small new ETF called BLOK (and BLCN too I think), representing a basket of listed companies with some link to block chain uses.

So a very diluted exposure…small daily movements that some people might find dull…but some links to investing in the technology’s potential.

I’m not interested personally, just thought I would mention it.


#852

Yes my Pinballs have been one of my best investments.


#853

It might be semantics , but i said they face the same issues, not that they are the same.

And yes the regular stock markets have rules and reulations and the potential for govt intervention, but thats like saying there are speeding rules and regations , so people dont speed.

Yes the atock markets have alot of , as someone else said , actual trinsic value or comodity behind it. Theres some that dont.

Whether its intergrateable or not , some alt xpins are trying to do that , have an actual business and use behind it. Again whether it works or npt who knows.

But the stock market has
Crashes
Bubbles
Despite all the rules and regs , have people breaking those rules and not really copping alot of punishment for it.
Wasnt it only one person was sent to jail for all the crap in the gfc ??
Good old bernie , if the sec had only checked that number to see he had 0 funds and running an a tual ponzi scheme.

And again if everyone at the same time took thwir money out od the sm or banks , then the system woukd break too.

So yes the systems are different , but imo they fave the same issues essentially, and can be bent and broken by dodgy people.


#854

The stock market is a big place with a lot of variable companies in it that do a lot of different things yes. Again comparing the whole market to crypto isn’t quite a fair variable.

Majority of people don’t speed. The fines are there as a disincentive. Same for drink driving. Do you ignore the rules and drive while over the limit? Flip side to your comment with no rules in place what’s keeping anyone in check?

Stock markets do have crashes and bubbles but again we are not comparing like with like. Think about the 2008 crash. How many companies actually went under? A lot were under severe stress and needed bailing out but how many actually collapsed? Even with the 2008 crash though the rules are now stronger than they were pre crash. Post HIH additional laws were introduced to ensure that doesn’t happen again.

Talking about withdrawing from banks maybe Greece is a good example of how governments can restrict cash to ensure the whole system doesn’t go down forever. Sure it was hard but with the restricitions in place it prevented the full collapse.

We do love to rubbish our banking system (and with good reason to) but our finance system is one of the best in the world and it’s only because of the rules they need to play within.


#855

If you want to make a comparision pick a company or two on the stock exchange and do a direct comparision to any crypto.


#856

If you want a long read (and there are many parts to it) the recent Parliament report on crypto is good.

It’s pretty balanced as well with cryptos (like ripple) and existing payment systems (like paypal) along with ASIC, APRA the ACCC all having their say and quoted along the report and considerations with the current Corporations Act and any legal ramifications.

https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Digital_currency/Report/

Chapters 3 and 5 are also handy if you wish to learn more about the pros and minuses.


#857

it depends on your pov though. if you say crypto is just make believe on the net, what is half of the stock market then ? isn’t there a futures markets, where essentially people are putting bets on bitcoin reaching lows of 7 ish grand per coin, by jan 26 ?

It’s not the sole and only way to invest no doubt, but that area is just like crypto is it not ? betting on nothing there.

and that’s very naive about the gfc and lack of companies going under. Like i said to date i’m pretty sure only 1 person is serving jail time for anything from that, so that’s like saying no body did anything wrong, cos only one person went to jail.

alot of banks and companies were bailed out cos the USA system is so corrupt and interchanging, considering how many big banking people are in the government churning system, they did it for personal gain more than anything.
lets not forget how many trillions and trillions of dollars is the USA alone in debt ? when exactly are they going to be paying that back ?

greece is an example sure, how will it go if every country however goes, yeah nah you can’t withdraw all your money, to it’s citizens ?

I’m not saying the regular stock market and banking system is 100% like cryptos.
I’m saying they are just as open to exploitation and destruction, and we’ve seen it time and time again throughout history.
Australian banking may have tighter ropes, but in the grand scale of it all, it’s like saying we are the best sporting nation, cos we are no.1 in afl.


#858

I’ve never said cryptos are nothing. You’re the one who keeps this comparison going.

With the futures market could be seen as ‘insurance’. For x amount i’ll take your shares if they reach x, if they don’t reach x you’ll give me y. It’s not nothing. Think of it like car insurance. If you don’t crash your car you still need to pay the premium.

It’s not the only way it’s used but there are legitimate reasons for it as well. Same with currency or commodities. A business may prefer to pay a premium to ensure the currency they are trading is always x. You pay a premium for the privledge.

Let’s compare your scenario above too. If the USA goes under as you suggest, no one in the world is going to have money to invest in anything. Where do you think cryptos will be? Probably most likely in the same position as the rest of the world. If the world crashes and the world wants cash how do you get cash from your coin? Vice versa if cryptos crash it won’t affect the market at all (according to the linked report above).

There is more than one person in jail. That’s a common myth. Investigations continue today.

https://www.ft.com/content/de173cc6-7c79-11e7-ab01-a13271d1ee9c

You’re right though. More should’ve been jailed and hopefully the authorities will get to them all.


#859

The “but the stock market is risky too” comparison is waaaaaaaaaaay off.

Of course there is risk in other investments, hence the risk = return concept thats literally the first thing anyone learns in finance and investing.

But theres a risk in walking down Footscray late at night alone and there is risk in taking a road trip in Syria. Both have risk, but its not really comparable in any meaningful way.

Sufficiently diversified portfolios have been proven over 100 years of data to provide around a 10% return p.a. You might lose on one stock, you might have a bad year but over the long run your going to come out way ahead. If cryptos have returned 1000% in the past year where do you think the risk is at? Are you ok if the price goes down by as much this year?

Im probably too negative in this thread. For all those that have just invested loose change, all power to you and if you’ve made enough for a car or holiday(or more if your really lucky) fantastic! But others that are investing in cyrptos instead of the share market, because why not, its all the same. Gulp!


#860

Risk is one side of the story. Trust is the other.

We don’t ‘trust’ our banks to do the right thing (they keep harping on doing good with our money and all that but know it’s profit profit profit) but all of us put our money with them ‘trusting’ when the time comes we can withdraw it with no issues.

To be fair too, crypto has been good that it has forced the banks to introduce real time transfers (coming 2018?) and invest into things like that. Competition is good.


#861

Anyone looking at more ETH or holding out for a further drop?


#862

Holding out for a little bit longer , maybe a day or 2.


#863

**[quote=“Preliminary_Point2, post:859, topic:850, full:true”]
The “but the stock market is risky too” comparison is waaaaaaaaaaay off.

Of course there is risk in other investments, hence the risk = return concept thats literally the first thing anyone learns in finance and investing.

But theres a risk in walking down Footscray late at night alone and there is risk in taking a road trip in Syria. Both have risk, but its not really comparable in any meaningful way.

Sufficiently diversified portfolios have been proven over 100 years of data to provide around a 10% return p.a. You might lose on one stock, you might have a bad year but over the long run your going to come out way ahead. If cryptos have returned 1000% in the past year where do you think the risk is at? Are you ok if the price goes down by as much this year?

Im probably too negative in this thread. For all those that have just invested loose change, all power to you and if you’ve made enough for a car or holiday(or more if your really lucky) fantastic! But others that are investing in cyrptos instead of the share market, because why not, its all the same. Gulp!
[/quote]

Nah you and soulnet are just giving a different side and viewpoint.

I sonr mind the median view on it , just donr lime thw overtly over the top crap that people off of this site carry on with.


#864

What?


#865

Chubby fingers plus on the phone … not a good combo haha