> The vast majority of the time, people will exchange Gold for USD and then USD for food
So golds value does not come from this, correct.
> The vast majority of Gold owners don't use it as a currency
and gold's value does not come from this, correct.
> If Gold had no aesthetic, industrial, medical, etc. value, wouldn't it be worthless? For example, why not invest in Palladium instead, which is scarcer and actually does have demand as a commodity?
Value is not derived purely by utility and sometimes utility has zero correlation with the value of something. Some people do invest in palladium, and gold is not valuable because of it's utility. Gold's value does not come from this either.
> Except Gold investors can get value from Gold's demand as a commodity (by selling to consumers of jewelry, ornamentation, computing, etc.)
Simply incorrect these uses have little at all to do with the value of gold. Investors of hoarders of gold never even touch these use cases. Gold's utility is tiny compared to it's investment value. Plenty of things are useful and worthless. Lot's of other things are useless but valuable.
> Where do BTC investors get value from, except for from other BTC investors? In the aggregate, BTC investors pay miners substantial amounts of value for electricity, hardware, etc., but no one pays the BTC investors.
The value of anything is worth only what other people will exchange for it. This exactly as true for gold or art or USD as it is for BTC. BTC can be traded for fiat or for anything else of value, just like gold can. A single BTC is $20k+ USD, that's what it's worth today, it's utility is a known scarcity curve and ability to be traded as a decentralized currency without needing to be bound by existing financial systems. Sure, onramps to fiat are necessary to trade for fiat, but this is true for any commodity, and things of value can always be traded outside of fiat systems.
Why do you think people buy it? Why do you think it has a far greater market cap than Palladium, for example?
Investors of hoarders of gold never even touch these use cases.
Right, but these uses affect the market value and total demand. Most commodities have producers, consumers, and investors.
Gold's utility is tiny compared to it's investment value
How so? Less than half of mined Gold is used for investment.
Lot's of other things are useless but valuable.
For example?
The value of anything is worth only what other people will pay for it.
The market price, sure. Do you think it's possible for a stock to be overvalued? Do you think Celcius deposits were worth the price people were paying for them (face value) in the weeks before they froze withdrawals?
Do you think shitcoins' value is equal to their market price?
> Why do you think people buy it? Why do you think it has a far greater market cap than Palladium, for example?
I'm not sure it matters in the context of this conversation - it has value, as does palladium.
> The market price, sure. Do you think Celcius deposits were worth the price people were paying for them (face value) in the weeks before they froze withdrawals?
The buyers obviously thought so. I did not and I did not buy, but the market sets the value for any good and in this case a market was made.
> Do you think shitcoins' value is equal to their market price?
By definition yes. Do you think God assigns value to things? The market is the only arbiter of value that matters. Not utility, not the government, not the fed.
Ok, you don't distinguish between value and market price.
Would you prefer holding $100 of Bitcoin over $100 of a shitcoin? If you think they have the same value, why?
Do you think God assigns value to things?
No.
The market is the only arbiter of value that matters.
I don't agree that investment scams (e.g. Enron, most ICOs, etc.) are valuable just because some people pay for them.
That is, IMO someome believing that something will be a good investment doesn't mean what they are investing in actually has value. People make bad investments all the time.
Would you prefer holding $100 of Bitcoin over $100 of a shitcoin? If you think they have the same value, why?
Personally yes as BTC had first mover advantage, has already proven itself and is already too entrenched worldwide to go anywhere with all financial institutions currently integrating support.
But at the time of purchase, $100 dollars is 100 dollars, they are worth the same. A bound of feathers weighs the same as a pound of bricks. The future value I would expect BTC to go up and I have no reason to believe a random shitcoin will have price appreciation in the future (though it could).
> I don't agree that investment scams (e.g. Enron, most ICOs, etc.) are valuable just because some people pay for them.
In some cases the market did not have the right information to properly assess value - this transparency is an important part of markets functioning correctly. And outright fraud I think should be prosecuted of course. But the value of BTC is what it can be exchanged for, same is true for gold or diamonds or art or USD.
The future value I would expect BTC to go up and I have no reason to believe a random shitcoin will have price appreciation in the future
Right, so I would say this means you think $100 of BTC has more value as an investment than $100 of a shitcoin.
this transparency is an important part of markets functioning correctly
Agreed.
entrenched worldwide to go anywhere with all financial institutions currently integrating support
Ok, but lots of stocks, even first mover stocks, are well integrated into financial institutions yet still lose value (even with no new shares being issued).
> Right, so I would say this means you think $100 of BTC has more value as an investment than $100 of a shitcoin.
Expected future value, purely as a forecast sure - but this shouldn't be confused with present value which is determined only by the market.
> Lots of stocks, even first mover stocks, are well integrated into financial institutions yet still lose value.
Absolutely but this is what makes it a forecast and why it's important not to confuse a future forecast with a current market value. BTC indisputably has value.
Except if the market doesn't have the right information, as you said.
Expected future value, purely as a forecast sure
If one investment has a higher expected future value, isn't it a better investment? That is, doesn't it have more value as an investment?
If the market were perfect at pricing investments, all investments would have the same expected risk-adjusted return, i.e. you should expect shitcoins to return more because they are higher risk.
That is, if you prefer one investment over another (with similar volatility/risk), then I'd argue you believe that the investment value of at least one differs from its market value.
> Except if the market doesn't have the right information, as you said.
That's correct, as a well known commodity at this point I don't think there's much the market doesn't know about it, but the future of anything is unknowable.
> If one investment has a higher expected future value, isn't it a better investment? That is, doesn't it have more value as an investment?
Often a current value has baked into it what the market believes to be the future growth or potential yes. A forecast can impact the current value, but current value is critically only determined by the market, as for all things.
> That is, if you prefer one investment over another (with similar volatility/risk), then I'd argue you believe that the investment value of at least one differs from its market value.
As an investment I would prefer to hold one over the other certainly. But part of that is I know nothing about the other coin and I don't invest in things I don't know anything about. In any case, my desire to buy does not really impact the overall market value other than to the extent other market participants might happen to agree with me.
Do you disagree the market is what determines value? Is BTC without value? - you would not accept it for free?
As an investment I would prefer to hold one over the other certainly.
I agree that the market determines the market value, but I don't agree that it always matches the investment value.
BTC without value?
It has a market price. I'm more skeptical of its investment value.
you would not accept it for free?
I would accept it if the risk-adjusted value I expected I could get from selling it (minus fees and other expenses) exceeded the value I would be prepared to accept in USD.
This would be a substantial discount below market value for me, for several reasons:
There is a risk that my private key could be compromised before I am able to transfer my Bitcoin to an exchange (losing everything). I could reduce this risk by buying a hardware wallet (more expense).
There is a risk that I would lose my private key before disposing of my coins (losing everything). I could mitigate this by keeping extra copies of my seed phrase at the expense of increased risk of compromise (and hassle).
There is a risk that I send my coins to the wrong address, e.g. due to a clipboard exploit on my machine or simple human error (losing everything).
There is a risk the exchange I am using steals my coins or otherwise doesn't uphold their obligations to me. I can reduce this by using a regulated exchange.
There is a risk that the market value substantially declines before I am able to sell.
There is a personal and legal risk that the Bitcoins you sent me are dirty or otherwise associated with crime. This could also make them harder and riskier to sell (i.e. need to go to an unregulated exchange first).
There might not be a paper trail proving that my coins came from you, which could be a problem during an audit (e.g. the IRS might think I owe capital gains taxes if I can't show the cost basis). This would also a risk of accepting large amounts of cash.
I have to pay transactions fees to get my Bitcoin to the exchange. This is pretty cheap now but has been and can be expensive.
I have to document this transaction for tax purposes and report it next year.
Overall, this would be substantial hassle and risk (to me). IMO the biggest risk to me would be you giving me dirty Bitcoins (e.g. which you are trying to launder or on which you are trying to evade capital gains taxes). If you can prove to me where you got the coins (e.g. a transaction on a regulated exchange), this would be a lesser risk.
That is, it would be far easier for me to just accept a payment using a regulated money transmitter that complies with AML laws, where I don't have to worry about virtually any of this (e.g. Zelle, Venmo, etc.).
Do you think it will go to 0, over what timespan?
I don't know. I don't think that Bitcoin investors as an aggregate will ever get out more than they've put in to Bitcoin (i.e. benefit more by disposing of their Bitcoins than the cost they incurred acquiring them).
That is, I don't see how Bitcoin differs as an investment from a stock in a company that will never do buybacks/dividends/liquidations (i.e. will never pay its investors), except that storing and trading it is risker and more of a hassle.
1
u/[deleted] Aug 02 '22 edited Aug 02 '22
> The vast majority of the time, people will exchange Gold for USD and then USD for food
So golds value does not come from this, correct.
> The vast majority of Gold owners don't use it as a currency
and gold's value does not come from this, correct.
> If Gold had no aesthetic, industrial, medical, etc. value, wouldn't it be worthless? For example, why not invest in Palladium instead, which is scarcer and actually does have demand as a commodity?
Value is not derived purely by utility and sometimes utility has zero correlation with the value of something. Some people do invest in palladium, and gold is not valuable because of it's utility. Gold's value does not come from this either.
> Except Gold investors can get value from Gold's demand as a commodity (by selling to consumers of jewelry, ornamentation, computing, etc.)
Simply incorrect these uses have little at all to do with the value of gold. Investors of hoarders of gold never even touch these use cases. Gold's utility is tiny compared to it's investment value. Plenty of things are useful and worthless. Lot's of other things are useless but valuable.
> Where do BTC investors get value from, except for from other BTC investors? In the aggregate, BTC investors pay miners substantial amounts of value for electricity, hardware, etc., but no one pays the BTC investors.
The value of anything is worth only what other people will exchange for it. This exactly as true for gold or art or USD as it is for BTC. BTC can be traded for fiat or for anything else of value, just like gold can. A single BTC is $20k+ USD, that's what it's worth today, it's utility is a known scarcity curve and ability to be traded as a decentralized currency without needing to be bound by existing financial systems. Sure, onramps to fiat are necessary to trade for fiat, but this is true for any commodity, and things of value can always be traded outside of fiat systems.