Speaking as someone who knows a lot about economics, I think PT Barnum put it best...[1]
Economics is very clear in predicting how this will end up. Bitcoins have no intrinsic value and therefore the long-term price will be precisely zero. Each generation has its tulips [2]; each generation claims that the persistence in tulip price means that there is permanent intrinsic value; each generation is disappointed [3].
The only thing interesting about bitcoins is that this provides an opportunity to watch a bubble: observe the justifications people make, observe how nay-sayers appear to be wrong, and watch the progression.
I don't think "intrinsic value" is a term in economics. It's a term in investing.
Economics is far from clear about predicting how Bitcoin will end up. The professional economics world has yet to seriously weigh in about Bitcoin. I just searched the top 10 journals on this list: http://faculty.maxwell.syr.edu/whorrace/journals.htm and none of them appear to have anything published about Bitcoin.
That said, Bitcoin does have "intrinsic value" as a payment processor. Think about PayPal. There's two kinds of value in PayPal. First, they have their deposits, which are denominated in various different currencies, and which are backed by various governments and insured. Then there are the people, the servers, the contracts, the buildings, all the other stuff that's necessary for those deposits to actually move around the globe. Ebay didn't buy PayPal's deposits, which aren't really PayPal's, they belong to their customers, eBay bought PayPal's assets.
Think of Bitcoin like that stuff... a distributed payment processing company. It just as reliable as PayPal, except no one can ever freeze your account, and you can only transfer Bitcoins. PayPal was worth $1.5 billion to eBay, so that's a reference for your "intrinsic valuation" that you're working on.
You might be thinking "well PayPal wouldn't be useful if it could only transfer Bitcoins and the value of Bitcoin is $0 so there's a chicken and egg problem!" Except I don't see a scenario where Bitcoin goes to $0. Let's imagine Bitcoin crashes all the way down to $0.01. Bitcoin is still useful if you're trying to get money to your grandma in Cuba, or to pay your Latvian web development contractor. Maybe it's extremely volatile, but that's OK because you otherwise have no way to get your money where it needs to go, and you're only going to keep it in Bitcoins for a few days. You buy some Bitcoins, send where they're going, and the other side cashes them out.
Now why is this relevant? Well, if during those 4 days, there was $1,000,000 worth of money that people were trying to send this way, then there need to be at least $1m worth of Bitcoins to "float" those transactions. Essentially those people all show up on Monday being like "we don't care how much it costs because we're selling them again in three days, we just need $1m worth of Bitcoins to send to our grandma/contractor/etc". Therefore the "value" of Bitcoin goes up to at least $0.05 ($1m/21m).
This is just one of Bitcoin's many "intrinsic" values. It is the "payment processor of last resort" for everyone who falls through the cracks of Western Union/Paypal/etc. This creates a floor below which Bitcoin is unlikely to fall.
You say you know "a lot about economics" and yet you don't know that currencies don't necessarily need to hold any intrinsic value. They are simply means of exchange. Paper money in the form of US Dollars has no intrinsic value (the value of the cotton paper... less than a cent per bill?). As long as people assign value to something and use it for exchange... it's a valid currency.
Will people all quit on Bitcoin some day and its value will fall to $0? Perhaps. But it won't be because it has no intrinsic value. It will be because they decided it's not a good currency.
Societies have used seashells and wampum in the past as currencies, which also have limited "intrinsic value". They're simply scarce resources that everyone agreed could be used for exchange - just like Bitcon.
They were initially valued as collectibles (just like gold) and then as a speculative investment. Now that a market exists and there is liquidity, they are valued for other reasons as well (payment system, black market transactions, hide wealth ... etc). Explain how we get to 0 from here since they will always have an underlying value as a collectible and speculative investment?
But ask people in Cyprus who have had their money confiscated by their bank if they think bitcoins would've been valuable to them, or people in China who've walked across the border with a thumbdrive of bitcoins/litecoins/??coins. Ask anyone who has made an overseas funds transfer if doing so was quicker and more painless than at bank. Volatility is offset by the overall price rise. Saying it has no intrinsic value is a moronic statement.
The main lesson to learn is in the altchains... otherwise it's just replacing one set of paper elites with a crypto elite. That's where the real awakening comes in, anyone can be an early adopter. Also, bitcoin is not a private blockchain, but even central banks could use cryptocoin implementations to move funds around internally. It's a piece of open-source software, that's a very important part of the equation of bitcoin's value: there can be pump and dumps at times, but overall it's severly missing the point to only see it as such.
add: now that I think about it, it'd be interesting for corporations to add the equivalent of an intranet of cryptocoins for budgeting and spending. There are tons of information systems potentials in bitcoin it blows my mind... even without some official government endorsement.. just in the software itself. Some intra/outer mini-exchange interfacing into some b2b portal to then access the public blockchains.
Are you saying this because you've heard all the arguments for Bitcoin's value and think they're bunk or are you saying this because you're unaware of them?
Once all the "free" bitcoins have been mined, the intrinsic value of bitcoin will be the computing power the network is willing to expend in exchange for that coin as a fee.
Quite apart from using it as a store of value, and international payments processing engine, this could in fact be valuable in and of itself for purposes such as document signing and verification, a kind of peer-to-peer twitter[0], and (I guess here Bitcoin bulls speculate) other hitherto unknown uses. The intrinsic value of a bitcoin is therefore proportional to the value of the blockchain itself.
[0] Actually, why _don't_ we have a twitter clone based on the blockchain? Doesn't seem to me that it would be too hard to implement. Of course, messages will take 10 minutes on average to send, be immutable and permanent, and throughput would be limited, but at the very least it would have a novelty factor.
I think you have a point here. Money is a medium of exchange (check) and a store of value (?). Fiat currencies are backed by the country of origin. Monetary policy for each respective currency is managed by their Reserve Bank. Who or what backs the full faith and credit of the Bitcoin? Which individual or governing body sets the supply of Bitcoins?
Just because the long-term price will reach zero doesn't mean you can't profit in the short-term. Defining "long-term" and "short-term" more precisely is key to finding profit though.
Incidentally, Coinbase's graph has an almost misleadingly modest aspect ratio. If you want to compare their growth to other growth graphs you've seen, compress it by at least half horizontally.
pg, if a reasonably intelligent person asked you to describe bitcoin, how would you do it? -if you'd humor me
I ask, because IMO much of the debate about bitcoin consists of people conflating and abusing definitions and talking past each other. As you are obviously interested in it, I wonder what you see, and perhaps what interests you most about it.
Note the title is a bit misleading. They say 650,000 users but the next sentence they state
> "we crossed more than 650,000 consumer Bitcoin wallets"
I'm not familiar with their service but I have 20 or so wallets that I've accumulated over the past 20 months, so I'm guessing its entirely possible for a single user to have multiple wallets, infact its so common that I'd label it the norm.
I wonder what percentage of their users, and wallets hold any bitcoins?
You have 20 Coinbase wallets? Unlike regular bitcoin wallets, there's no reason to have more than one Coinbase wallet. A Coinbase wallet can have an unlimited number of Bitcoin addresses and it is generally tied to a real name with a bank account and/or credit card for purchasing and selling bitcoins.
You probably mean you have 1 wallet, containing 20 Bitcoin addresses.
Not sure why Coinbase uses the terminology "consumer Bitcoin wallet", but it is pretty clear they mean "user accounts", where each account is associated to 1 wallet, each containing possibly multiple addresses.
From what I can tell as a Coinbase user, for someone to have multiple wallets they would need to have multiple user accounts. Ie: each user account has 1 wallet.
Kudos for a stunningly misleading graph. The manipulation of numbers is impressive.
Whats wrong with it? Bitcoin to USD has dropped by 50% in the last few days. By taking a "monthly average" and graphing that they've been able to hide this discrepancy.
However there is no legitimate reason to graph the "monthly average" instead of just the price. It's a line graph so it can deal with a range of numbers quite well. In fact the graph has a total of 6 data points for the BTC to USD line, the whiff of BS is strong on this one.
Could someone visit coinbase's career page and confirm that the Apply buttons are not working. https://coinbase.com/careers
Coinbase has one of the more interesting legal positions I have come across in a long time (registration/licensing/compliance work) and I know I will be kicking myself a year from now if I did not make every effort.
So the piece about more women was a little bit weird. It appears that as the broader market (made up of ~50% women) begins to use your product, you experience your demographic skew towards the broader markets' average demographic. Breathtaking.
I think they are trying to illustrate a move towards more mass-market appeal and reach. Depending on which data source you look at, females account for anywhere from 70 to 90+% of consumer purchase decisions in the US. If Coinbase wants to move from being the cryptocurrency enthusiast and tech speculator's toy to actually seeing significant product/service spend in Bitcoins with merchants, increasing their female userbase could definitely help.
No money is actually in the coinbase account. It only stores Bitcoin. If you sell bitcoin, the USD balance will immediate be ACH'ed directly to the bank info you have set up.[1] Otherwise, I guess you won't be able to use the sell feature(?). BTC-e.com is different; you can sell all your coins and have a USD balance[2].
You can create a Coinbase account without banking info. But after you've created it, I'm not sure what good it would be to you. I guess you could just use it to manage your bitcoins and have one place to check. But the real service coinbase provides is transforming BTC to USD and vice-versa. If you're not going to enter your banking info to use that feature, you might as well generate a pub/priv key at bitaddress.org and just make sure you don't lose the private key.
i too signed up in coinbase end of november ,carried away by the hype( before the crash that is)! but thankfully didnt buy any BTC. there may be others like me.
[+] [-] cjensen|12 years ago|reply
Economics is very clear in predicting how this will end up. Bitcoins have no intrinsic value and therefore the long-term price will be precisely zero. Each generation has its tulips [2]; each generation claims that the persistence in tulip price means that there is permanent intrinsic value; each generation is disappointed [3].
The only thing interesting about bitcoins is that this provides an opportunity to watch a bubble: observe the justifications people make, observe how nay-sayers appear to be wrong, and watch the progression.
[1] http://en.wikipedia.org/wiki/There%27s_a_sucker_born_every_m...
[2] http://en.wikipedia.org/wiki/Tulip_mania
[3] http://en.wikipedia.org/wiki/Extraordinary_Popular_Delusions...
[+] [-] erikpukinskis|12 years ago|reply
Economics is far from clear about predicting how Bitcoin will end up. The professional economics world has yet to seriously weigh in about Bitcoin. I just searched the top 10 journals on this list: http://faculty.maxwell.syr.edu/whorrace/journals.htm and none of them appear to have anything published about Bitcoin.
That said, Bitcoin does have "intrinsic value" as a payment processor. Think about PayPal. There's two kinds of value in PayPal. First, they have their deposits, which are denominated in various different currencies, and which are backed by various governments and insured. Then there are the people, the servers, the contracts, the buildings, all the other stuff that's necessary for those deposits to actually move around the globe. Ebay didn't buy PayPal's deposits, which aren't really PayPal's, they belong to their customers, eBay bought PayPal's assets.
Think of Bitcoin like that stuff... a distributed payment processing company. It just as reliable as PayPal, except no one can ever freeze your account, and you can only transfer Bitcoins. PayPal was worth $1.5 billion to eBay, so that's a reference for your "intrinsic valuation" that you're working on.
You might be thinking "well PayPal wouldn't be useful if it could only transfer Bitcoins and the value of Bitcoin is $0 so there's a chicken and egg problem!" Except I don't see a scenario where Bitcoin goes to $0. Let's imagine Bitcoin crashes all the way down to $0.01. Bitcoin is still useful if you're trying to get money to your grandma in Cuba, or to pay your Latvian web development contractor. Maybe it's extremely volatile, but that's OK because you otherwise have no way to get your money where it needs to go, and you're only going to keep it in Bitcoins for a few days. You buy some Bitcoins, send where they're going, and the other side cashes them out.
Now why is this relevant? Well, if during those 4 days, there was $1,000,000 worth of money that people were trying to send this way, then there need to be at least $1m worth of Bitcoins to "float" those transactions. Essentially those people all show up on Monday being like "we don't care how much it costs because we're selling them again in three days, we just need $1m worth of Bitcoins to send to our grandma/contractor/etc". Therefore the "value" of Bitcoin goes up to at least $0.05 ($1m/21m).
This is just one of Bitcoin's many "intrinsic" values. It is the "payment processor of last resort" for everyone who falls through the cracks of Western Union/Paypal/etc. This creates a floor below which Bitcoin is unlikely to fall.
[+] [-] WoodenChair|12 years ago|reply
Will people all quit on Bitcoin some day and its value will fall to $0? Perhaps. But it won't be because it has no intrinsic value. It will be because they decided it's not a good currency.
Societies have used seashells and wampum in the past as currencies, which also have limited "intrinsic value". They're simply scarce resources that everyone agreed could be used for exchange - just like Bitcon.
[+] [-] d23|12 years ago|reply
Neither does gold, paper money, or diamonds. And yet they've remained valuable for a long time. What gives?
[+] [-] richcollins|12 years ago|reply
[+] [-] adrianwaj|12 years ago|reply
But ask people in Cyprus who have had their money confiscated by their bank if they think bitcoins would've been valuable to them, or people in China who've walked across the border with a thumbdrive of bitcoins/litecoins/??coins. Ask anyone who has made an overseas funds transfer if doing so was quicker and more painless than at bank. Volatility is offset by the overall price rise. Saying it has no intrinsic value is a moronic statement.
The main lesson to learn is in the altchains... otherwise it's just replacing one set of paper elites with a crypto elite. That's where the real awakening comes in, anyone can be an early adopter. Also, bitcoin is not a private blockchain, but even central banks could use cryptocoin implementations to move funds around internally. It's a piece of open-source software, that's a very important part of the equation of bitcoin's value: there can be pump and dumps at times, but overall it's severly missing the point to only see it as such.
add: now that I think about it, it'd be interesting for corporations to add the equivalent of an intranet of cryptocoins for budgeting and spending. There are tons of information systems potentials in bitcoin it blows my mind... even without some official government endorsement.. just in the software itself. Some intra/outer mini-exchange interfacing into some b2b portal to then access the public blockchains.
[+] [-] KaoruAoiShiho|12 years ago|reply
[+] [-] nvader|12 years ago|reply
Quite apart from using it as a store of value, and international payments processing engine, this could in fact be valuable in and of itself for purposes such as document signing and verification, a kind of peer-to-peer twitter[0], and (I guess here Bitcoin bulls speculate) other hitherto unknown uses. The intrinsic value of a bitcoin is therefore proportional to the value of the blockchain itself.
[0] Actually, why _don't_ we have a twitter clone based on the blockchain? Doesn't seem to me that it would be too hard to implement. Of course, messages will take 10 minutes on average to send, be immutable and permanent, and throughput would be limited, but at the very least it would have a novelty factor.
[+] [-] kaa2102|12 years ago|reply
[+] [-] driverdan|12 years ago|reply
[+] [-] kgo|12 years ago|reply
[+] [-] pg|12 years ago|reply
[+] [-] markkat|12 years ago|reply
I ask, because IMO much of the debate about bitcoin consists of people conflating and abusing definitions and talking past each other. As you are obviously interested in it, I wonder what you see, and perhaps what interests you most about it.
[+] [-] unknown|12 years ago|reply
[deleted]
[+] [-] richardlblair|12 years ago|reply
https://news.ycombinator.com/item?id=6929705
[+] [-] Ensorceled|12 years ago|reply
[+] [-] blhack|12 years ago|reply
[+] [-] chollida1|12 years ago|reply
> "we crossed more than 650,000 consumer Bitcoin wallets"
I'm not familiar with their service but I have 20 or so wallets that I've accumulated over the past 20 months, so I'm guessing its entirely possible for a single user to have multiple wallets, infact its so common that I'd label it the norm.
I wonder what percentage of their users, and wallets hold any bitcoins?
[+] [-] modeless|12 years ago|reply
[+] [-] mrb|12 years ago|reply
Not sure why Coinbase uses the terminology "consumer Bitcoin wallet", but it is pretty clear they mean "user accounts", where each account is associated to 1 wallet, each containing possibly multiple addresses.
[+] [-] sprice|12 years ago|reply
[+] [-] reillyse|12 years ago|reply
Whats wrong with it? Bitcoin to USD has dropped by 50% in the last few days. By taking a "monthly average" and graphing that they've been able to hide this discrepancy.
However there is no legitimate reason to graph the "monthly average" instead of just the price. It's a line graph so it can deal with a range of numbers quite well. In fact the graph has a total of 6 data points for the BTC to USD line, the whiff of BS is strong on this one.
[+] [-] will_brown|12 years ago|reply
Coinbase has one of the more interesting legal positions I have come across in a long time (registration/licensing/compliance work) and I know I will be kicking myself a year from now if I did not make every effort.
[+] [-] superprime|12 years ago|reply
[+] [-] slg|12 years ago|reply
[+] [-] samolang|12 years ago|reply
[+] [-] znowi|12 years ago|reply
[+] [-] TheBiv|12 years ago|reply
[+] [-] jeremyrwelch|12 years ago|reply
[+] [-] minimax|12 years ago|reply
[+] [-] smtddr|12 years ago|reply
You can create a Coinbase account without banking info. But after you've created it, I'm not sure what good it would be to you. I guess you could just use it to manage your bitcoins and have one place to check. But the real service coinbase provides is transforming BTC to USD and vice-versa. If you're not going to enter your banking info to use that feature, you might as well generate a pub/priv key at bitaddress.org and just make sure you don't lose the private key.
1. http://i.imgur.com/LMowl3F.png
2. http://i.imgur.com/3K1JPgR.png
[+] [-] ziyan|12 years ago|reply
[+] [-] konaseer|12 years ago|reply