"With trillions of dollars of cash sitting on the sidelines looking for return and trillions more being pumped into the market by governments around the world, nothing is too expensive. Instead, what’s more important is finding that which is unique. That of which we can print no more. That which is finite."
The trillions of dollars in QE are mostly hoarded in banks, not pumped into the markets. This is evident as M0 has increased greatly, while M1 hasn't. The purchases made in QE are mostly government bonds, the revenue of which is mostly spent on government salaries and entitlements. That's why there is very little general inflation, there aren't any big sums of new money flowing into consumer goods.
The trillions of private dollars chasing returns are still mostly risk-averse. It's not venture capital. It's not going to small business or home-owners. It may have gone into government bonds before, now it's going into the S&P. That's asset price inflation.
Buying commodities such as gold (or Bitcoin) as a hedge against inflation is irrational, when assets such as stocks are both inflating in terms of price and appreciating in terms of actual value, at the same time.
Of course, irrationality has never prevented prices to rise, but when your fundamentals are based mostly around "greater fool theory", you should perhaps reconsider your allocation.
"It’s only a matter of time until people figure out that bitcoin is the ultimate collectible."
I wouldn't deny that there's a certain sentimental value to owning one of "only" 21 million Bitcoins, but I wouldn't personally put it anywhere near five figures.
For comparison, like many others, I enjoyed playing the original Super Mario on the NES as a child. It came on a cartridge of which about 40 million units exist, with a current value of around $10.
You bring up a whole bunch of good points which I think people need to focus on your one line of greater fool theory. Theres such a huge misunderstanding of "value". Scarcity within itself does not create value. It's the mix of demand and scarcity that does, but to have demand there needs to be some inherent value in it along with timeliness.
One of the biggest fascinations I had in games was the EVE marketplace. If you dont know, EVE is a scifi mmo. The economy in the game is so legit, the devs have an econ PhD to analyze it and use it to help balance the game when new gear is in. Theres a good youtube video about this to help give a better explanation, but the jist of it, items in EVE are not permanent. Other mmos you can use whatever item indefinitely then sell it when you get something better. Dying and collecting your gear is trivial. Thus items have lower values, especially when better ones come in over time. In eve, when your ship goes boom, only 25%-50% or so of it survives... and whoever killed you nabbed it. This keeps the market value stable(ish). A bigger better gun or ship is no longer neccesarily better. The value, and I'm not talking about just price but the overall market demand, goes up for parts and ships that are niche and cost effective.
I'm on a phone and this is getting too long. Overall bitcoin is an investment vehicle based on privacy and scarcity. The first part no one can deny is rather brilliant and as far as I know has worked out as advertised (though let's not kid ourselves who 90% of that demographic is). The second part... I swear to everyone reading this, just get The Great Courses so you can listen to their Econ 101 class. Or just get it from the library or even get a random econ textbook. Read it. I bet you within 30 to 50 pages you'll fully grasp how childish bitcoin is. At that, everytime a major media news source has their econ expert talk, you'll realize they were all at the bottom of their classes.
Oh, somewhere in there I meant to say your comparison to Mario was bad because that game has inherent value, both nostalgia and still fun to play. You're comparing to something with no value other than giving utility companies more money due to the excess electricity generated to mine bitcoin. I still say Satoshi was just elec execs who drunkenly came up with this crypto scam: https://digiconomist.net/bitcoin-energy-consumption/
These are bad comparisons. Other collectibles are tangible; Bitcoin is invisible.
It will take effort to prove that you indeed do have one or more of the "finite" (21 million is a big finite when it comes to collectibles) bitcoins.
Collectors like to show off their collections. And since most people in the world, many techies included, cannot discern what is true from what is counterfeit when it comes to virtual items, there will be many times more fake bitcoin collections than real ones.
You're better off collecting words. Those are finite too, and some fall out of use or even exist only in some dead languages.
This statement could not be further from the truth. It's far easier and more reliable to prove that you own an authentic Bitcoin than it is to prove that you own an authentic painting.
In fact, Bitcoin is the most auditable asset in the history of mankind. The audit process can be done in a decentralized way and carries 0 risk and unlike the auditing processes of other valuable assets, it can be carried out quickly, cheaply and at any scale.
All other auditing processes rely on trusting a third party, not Bitcoin. It's the perfect asset.
Sooner or later, the reserve banks of the world are going to be forced onto cryptocurrencies. Bitcoin is better than gold in terms of supply inelasticity and auditability; these are the two most important features from a reserve asset. Bitcoin is also gaining ground in terms of universal recognition which is the third most important feature.
"21 million is a big finite when it comes to collectibles"
It's worse than that. You can divide BTC into a lot of tiny pieces. So there are lot more than 21 million pieces. Most collectibles are valuble as the whole thing, not little pieces sliced off of them.
It's actually much harder to prove that your conventional collection is worth what you think. Sure it might be a pretty collection but maybe only for the collector himself. With bitcoin it might be easier to lie but it is also easier to verify the lie.
Bitcoin collectors are definitely showing off their "collections" to their family and friends. Verification is even better than any collectible, just show them a screen of your coinbase account.
> It will take effort to prove that you indeed do have one or more of the "finite" (21 million is a big finite when it comes to collectibles) bitcoins.
Is it really? Here's how you can verify wallet ownership in about 10 minutes:
- The one who like you to verify the ownership generates a signature file from whatever they want
- Ask the owner of the wallet to add the hash of that file to OP_RETURN in a transaction from their wallet
- Wait for the transaction to be validated (longest step)
- The one who wants to verify the ownership can now compare the latest transaction from the wallet to the hash of their signature file
Same process applies for proving ownership of bank accounts, although if done in the weekend/evening, verifying the bank account will take longer time and you need to have a receiving bank account to read the signature hash, otherwise the process is mostly identical.
The rest of your comment is based on that you can't prove you own any bitcoins, hence worthless as you can prove you own bitcoins, it's trivial really. A quick search before thinking out loud would have shown you the answer.
I disagree that Bitcoin is a collector's item. Bitcoin is a network composed of many different kinds of software systems, the Bitcoin cryptocurrency represents the core unit of account of this network; the value of Bitcoin is thus derived from the demand generated by its network. Through the economic value that they provide, software systems which integrate with Bitcoin (either as a payment system or store of value) generate a constant stream of automated demand for BTC.
Bitcoin therefore acts like a share of the economic value provided by its network. Not so different from fiat currencies such as Dollars and Euros but its value is more tightly integrated with its network since software systems have a stronger technical lock-in factor (whereas fiat relies more on legal and psychological factors for lock-in).
How good an investment are these collectibles though? You always hear of the price going up, yet few hard-nosed hedge funds would follow a collectible investment strategy.
I've read that as the number of people interested in a given kind of collectible shrinks, the market gets increasingly illiquid, but the nominal values don't change much - people don't want to sell at a loss, so when the value is much lower than the last posted trade, trades just don't happen.
Like every market it relies on three large groups existing. One large holding the asset with no intent to sell over the next “horizon” whatever that’s defined at. One group holding the asset and needing to sell it soon. And finally one group holding USD (or your local context equivalent) looking to buy into the asset. The winners and losers as far as appreciation of the asset (I made money holding it!) or depreciation of the asset (I recovered 70% of my value) are determined by how large each of those groups is.
The stock market has been great because the population has been booming. The holders looking to sell have no trouble finding buyers looking to buy so they lock in their appreciation. The real estate holders in Detroit and now maybe SV (recent buyers) didn’t do great because demand for their asset cratered.
It’s anyone’s guess what will happen to Bitcoin. Will it go mainstream causing the buyer class to massively outstrip the seller class and lock in huge gains for the current holders (to the moon!) or will it become as illegal as heroin in the major markets causing all legit holders to exit and the price to tumble to next to nothing?
Only one thing is certain, in this time of uncertainty, you will certainly have no trouble finding lots of people willing to tell you which one it’s going to be with absolute certainty in their conviction.
Unless a collectible also provides some emotional or intrinsic (such as gold, which is used in manufacturing) value to the holder, it is essentially a vehicle in a ponzi scheme.
Once the market of interested collectors dries up, the value vanishes. So to play the collectible game on true value-less items, one must time the entrance and the exit to take advantage of other players.
It works out because there are always going to be new dollars entering the system but very little bitcoin. In that regard it is like digital gold. It's about network effects and convenience. You can use any element as a store of value but storing say oxygen will require huge tanks to store very little money. Gold is small and easy to handle.
Finite in the context of collectibles thus far tends to mean "a small few". Even if it means "quite a few", it's still an absurd stretch to say that 21 million is the kind of finite that makes for a collectible.
Maybe you are right, but I'm afraid we won't live the day when Bitcoin gets 0 mining reward. Long term we're all dead (I can always hope for the opposite though :) )
Bitcoin isn't a collectible, because Bitcoin isn't unique or rare, it's infinitely divisible, and highly liquid. However, like a mint-condition beanie-baby, the value of Bitcoin is highly debatable. While most people would agree there is some non-zero value of having a distributed and decentralized currency, without a historical basis for valuation, justifying the price is difficult. It's better to think about crypto as an independent asset class with its own dynamics that are probably correlated to the balance of power between private and public interests. Ask yourself: in the long run, and globally, does the value of decentralized currency system increase or decrease relative to our current inflation-based monetary system?
I don't really agree with the main idea of the article.
Based on what I've seen lately, Bitcoin seems to be perceived as a sort of exotic asset that is however becoming more palatable to 'serious' institutional investors. If things continue down this road, my feeling is that Bitcoin and perhaps a few other crypto currencies will end up with some sort of gold-like role in the investment landscape.
Note however that I'm referring to bullion, not rare coins that are collected for their own sake and that can fetch prices that far exceed those of their gold content.
But is this rare item something people are interested in “collecting”? From my understanding, if there are future collectibles popular to the level of Beanie Babies or Funko Pops, money will go there instead, where the asset is more interesting than just a number. Seems something like Flow [0] assets fit the specific concept of “collectibles” more than BTC.
For analogy, I’d be curious how the vintage currency collectible market compares with that of other collectibles.
What this article doesn't mention is all the failed attempts at creating collectible value, leading to a survivorship bias that implies rare+finite=value. Something being rare doesn't imply value, it's the combination of being rare and desired that makes a collectible worth anything. Although, I'm not even sure it should be considered a collectible, as the desire to own bitcoin is one that diminishes the less it's worth.
With collectors items, I wonder how much of the value is driven by people being nostalgic about their childhood?
For example, is stamp collecting still as big as ever, or is it going away because of email?
When I was younger people had started collecting phone cards (which were used in my country to make phone calls from phone cells). Since phone cells and phone cards don't really exist anymore, do new collectors even enter the market?
It's not money because the few people who bought things with it always regretted it. People prefer to hoard it which is generally something that is not done with money.
As long as there's a black market for drugs, there will be one for bitcoin and other crypto. People may be buying "jets, cars, watches, etc" and maybe even use it just to hoard, but that's not what is really driving bitcoin's value.
I too predicted [1] that in the future Bitcoin will be comparable to works of arts, not to digital gold, as hoarders like to think. A collectible is even better comparison. But I disagree with the price prediction. People are already buying it because they expect the price will raise. This is a bubble. It's not what happens with collectibles or arts.
Collectibles can very much generate price bubbles. Some of them are quite slow to inflate/deflate, and thus not very exciting/newsworthy, but even those are bubbles.
Gold was a collectors item also, and that was the fuel behind it being a currency for a thousand years.
Here is where switching from silver to meaningless metal in Roman currency was one of the big reasons for Rome's collapse. A currency backed up by something with "money printing disabled" is key to a currency not turning devalued over time.
It produces "facts" that everyone agrees on (entries on the blockchain). Facts that everyone agrees on are somewhat rare, and this provides value as these facts can be used to prove things.
Whether the value this provides justifies the current price of bitcoin is an open question (I doubt it) but anyone relying on the blockchain for keeping a record has an interest in ensuring the value of bitcoin is not zero
“enables the worst of the worst people in the world.”
Exactly.
“A financial instrument that brings out the worst in people—greed—won't change the world for the better.” —I wish I never bought bitcoin; https://www.quitfacebook.org/file/greed.html.
TL;DR; by doing a little bit of work, you can transfer a cucumber from your possession to your friend's. Same for Bitcoin. Therefore, Bitcoin is a cucumber.
[+] [-] incrudible|5 years ago|reply
The trillions of dollars in QE are mostly hoarded in banks, not pumped into the markets. This is evident as M0 has increased greatly, while M1 hasn't. The purchases made in QE are mostly government bonds, the revenue of which is mostly spent on government salaries and entitlements. That's why there is very little general inflation, there aren't any big sums of new money flowing into consumer goods.
The trillions of private dollars chasing returns are still mostly risk-averse. It's not venture capital. It's not going to small business or home-owners. It may have gone into government bonds before, now it's going into the S&P. That's asset price inflation.
Buying commodities such as gold (or Bitcoin) as a hedge against inflation is irrational, when assets such as stocks are both inflating in terms of price and appreciating in terms of actual value, at the same time.
Of course, irrationality has never prevented prices to rise, but when your fundamentals are based mostly around "greater fool theory", you should perhaps reconsider your allocation.
"It’s only a matter of time until people figure out that bitcoin is the ultimate collectible."
I wouldn't deny that there's a certain sentimental value to owning one of "only" 21 million Bitcoins, but I wouldn't personally put it anywhere near five figures.
For comparison, like many others, I enjoyed playing the original Super Mario on the NES as a child. It came on a cartridge of which about 40 million units exist, with a current value of around $10.
[+] [-] NoOneNew|5 years ago|reply
One of the biggest fascinations I had in games was the EVE marketplace. If you dont know, EVE is a scifi mmo. The economy in the game is so legit, the devs have an econ PhD to analyze it and use it to help balance the game when new gear is in. Theres a good youtube video about this to help give a better explanation, but the jist of it, items in EVE are not permanent. Other mmos you can use whatever item indefinitely then sell it when you get something better. Dying and collecting your gear is trivial. Thus items have lower values, especially when better ones come in over time. In eve, when your ship goes boom, only 25%-50% or so of it survives... and whoever killed you nabbed it. This keeps the market value stable(ish). A bigger better gun or ship is no longer neccesarily better. The value, and I'm not talking about just price but the overall market demand, goes up for parts and ships that are niche and cost effective.
I'm on a phone and this is getting too long. Overall bitcoin is an investment vehicle based on privacy and scarcity. The first part no one can deny is rather brilliant and as far as I know has worked out as advertised (though let's not kid ourselves who 90% of that demographic is). The second part... I swear to everyone reading this, just get The Great Courses so you can listen to their Econ 101 class. Or just get it from the library or even get a random econ textbook. Read it. I bet you within 30 to 50 pages you'll fully grasp how childish bitcoin is. At that, everytime a major media news source has their econ expert talk, you'll realize they were all at the bottom of their classes.
Oh, somewhere in there I meant to say your comparison to Mario was bad because that game has inherent value, both nostalgia and still fun to play. You're comparing to something with no value other than giving utility companies more money due to the excess electricity generated to mine bitcoin. I still say Satoshi was just elec execs who drunkenly came up with this crypto scam: https://digiconomist.net/bitcoin-energy-consumption/
[+] [-] blunte|5 years ago|reply
It will take effort to prove that you indeed do have one or more of the "finite" (21 million is a big finite when it comes to collectibles) bitcoins.
Collectors like to show off their collections. And since most people in the world, many techies included, cannot discern what is true from what is counterfeit when it comes to virtual items, there will be many times more fake bitcoin collections than real ones.
You're better off collecting words. Those are finite too, and some fall out of use or even exist only in some dead languages.
[+] [-] cryptica|5 years ago|reply
This statement could not be further from the truth. It's far easier and more reliable to prove that you own an authentic Bitcoin than it is to prove that you own an authentic painting.
In fact, Bitcoin is the most auditable asset in the history of mankind. The audit process can be done in a decentralized way and carries 0 risk and unlike the auditing processes of other valuable assets, it can be carried out quickly, cheaply and at any scale.
All other auditing processes rely on trusting a third party, not Bitcoin. It's the perfect asset.
Sooner or later, the reserve banks of the world are going to be forced onto cryptocurrencies. Bitcoin is better than gold in terms of supply inelasticity and auditability; these are the two most important features from a reserve asset. Bitcoin is also gaining ground in terms of universal recognition which is the third most important feature.
[+] [-] geomark|5 years ago|reply
It's worse than that. You can divide BTC into a lot of tiny pieces. So there are lot more than 21 million pieces. Most collectibles are valuble as the whole thing, not little pieces sliced off of them.
[+] [-] imtringued|5 years ago|reply
[+] [-] Rallerbabs|5 years ago|reply
[+] [-] JoshTko|5 years ago|reply
[+] [-] capableweb|5 years ago|reply
Is it really? Here's how you can verify wallet ownership in about 10 minutes:
- The one who like you to verify the ownership generates a signature file from whatever they want
- Ask the owner of the wallet to add the hash of that file to OP_RETURN in a transaction from their wallet
- Wait for the transaction to be validated (longest step)
- The one who wants to verify the ownership can now compare the latest transaction from the wallet to the hash of their signature file
Same process applies for proving ownership of bank accounts, although if done in the weekend/evening, verifying the bank account will take longer time and you need to have a receiving bank account to read the signature hash, otherwise the process is mostly identical.
The rest of your comment is based on that you can't prove you own any bitcoins, hence worthless as you can prove you own bitcoins, it's trivial really. A quick search before thinking out loud would have shown you the answer.
[+] [-] cryptica|5 years ago|reply
Bitcoin therefore acts like a share of the economic value provided by its network. Not so different from fiat currencies such as Dollars and Euros but its value is more tightly integrated with its network since software systems have a stronger technical lock-in factor (whereas fiat relies more on legal and psychological factors for lock-in).
[+] [-] lmm|5 years ago|reply
I've read that as the number of people interested in a given kind of collectible shrinks, the market gets increasingly illiquid, but the nominal values don't change much - people don't want to sell at a loss, so when the value is much lower than the last posted trade, trades just don't happen.
[+] [-] purple-again|5 years ago|reply
The stock market has been great because the population has been booming. The holders looking to sell have no trouble finding buyers looking to buy so they lock in their appreciation. The real estate holders in Detroit and now maybe SV (recent buyers) didn’t do great because demand for their asset cratered.
It’s anyone’s guess what will happen to Bitcoin. Will it go mainstream causing the buyer class to massively outstrip the seller class and lock in huge gains for the current holders (to the moon!) or will it become as illegal as heroin in the major markets causing all legit holders to exit and the price to tumble to next to nothing?
Only one thing is certain, in this time of uncertainty, you will certainly have no trouble finding lots of people willing to tell you which one it’s going to be with absolute certainty in their conviction.
[+] [-] blunte|5 years ago|reply
Once the market of interested collectors dries up, the value vanishes. So to play the collectible game on true value-less items, one must time the entrance and the exit to take advantage of other players.
[+] [-] imtringued|5 years ago|reply
[+] [-] tromp|5 years ago|reply
Finite-ness is over-rated [1], and for Proof-of-Work cryptocurrencies, harmful to long-term stability [2].
[1] https://john-tromp.medium.com/a-case-for-using-soft-total-su...
[2] https://www.cs.princeton.edu/~arvindn/publications/mining_CC...
[+] [-] blunte|5 years ago|reply
[+] [-] xiphias2|5 years ago|reply
[+] [-] unknown|5 years ago|reply
[deleted]
[+] [-] xikrib|5 years ago|reply
[+] [-] leto_ii|5 years ago|reply
Based on what I've seen lately, Bitcoin seems to be perceived as a sort of exotic asset that is however becoming more palatable to 'serious' institutional investors. If things continue down this road, my feeling is that Bitcoin and perhaps a few other crypto currencies will end up with some sort of gold-like role in the investment landscape.
Note however that I'm referring to bullion, not rare coins that are collected for their own sake and that can fetch prices that far exceed those of their gold content.
[+] [-] brianjunyinchan|5 years ago|reply
For analogy, I’d be curious how the vintage currency collectible market compares with that of other collectibles.
[0] https://www.onflow.org/
[+] [-] unknown|5 years ago|reply
[deleted]
[+] [-] swalls|5 years ago|reply
[+] [-] scotty79|5 years ago|reply
Desire to own any collectible thing decreases with the value of given collectible. At least in most collectors.
[+] [-] ketamine__|5 years ago|reply
[+] [-] collectorsitem|5 years ago|reply
For example, is stamp collecting still as big as ever, or is it going away because of email?
When I was younger people had started collecting phone cards (which were used in my country to make phone calls from phone cells). Since phone cells and phone cards don't really exist anymore, do new collectors even enter the market?
[+] [-] atemerev|5 years ago|reply
Bitcoin is money.
[+] [-] imtringued|5 years ago|reply
[+] [-] unknown|5 years ago|reply
[deleted]
[+] [-] ulisesrmzroche|5 years ago|reply
[+] [-] justafriend|5 years ago|reply
[+] [-] dandanua|5 years ago|reply
[1] https://dandanua.github.io/posts/why-i-wouldnt-recommend-usi...
[+] [-] lmm|5 years ago|reply
It's absolutely what happens with collectibles and arts.
[+] [-] blunte|5 years ago|reply
https://en.wikipedia.org/wiki/Beanie_Babies
[+] [-] _0ffh|5 years ago|reply
[+] [-] HashThis|5 years ago|reply
Here is where switching from silver to meaningless metal in Roman currency was one of the big reasons for Rome's collapse. A currency backed up by something with "money printing disabled" is key to a currency not turning devalued over time.
http://i1.wp.com/money.visualcapitalist.com/wp-content/uploa...
[+] [-] sub7|5 years ago|reply
Bitcoin is pure mania, it's completely worthless and enables the worst of the worst people in the world.
[+] [-] Lewton|5 years ago|reply
Bitcoin does produce something.
It produces "facts" that everyone agrees on (entries on the blockchain). Facts that everyone agrees on are somewhat rare, and this provides value as these facts can be used to prove things.
Whether the value this provides justifies the current price of bitcoin is an open question (I doubt it) but anyone relying on the blockchain for keeping a record has an interest in ensuring the value of bitcoin is not zero
[+] [-] Priem19|5 years ago|reply
Exactly.
“A financial instrument that brings out the worst in people—greed—won't change the world for the better.” —I wish I never bought bitcoin; https://www.quitfacebook.org/file/greed.html.
[+] [-] lostmsu|5 years ago|reply
[+] [-] trident1000|5 years ago|reply
[deleted]