help me understand crypto

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sengsational said:
It does share the attribute that early adopters are disproportionately rewarded.
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Would you call Apple, Amazon, Netflix and Tesla - pyramid schemes? I retired thanks to making an early bet on Apple. because I was disproportionately rewarded for believing in the company.
 
The comparison with stocks fails because companies flow cash.

The comparison with precious metals fails because you can't (easily) create new atomic elements.

You're buying an artificially scarce bit bucket with no intrinsic value.
 
twaddle said:
The comparison with stocks fails because companies flow cash.

The comparison with precious metals fails because you can't (easily) create new atomic elements.

You're buying an artificially scarce bit bucket with no intrinsic value.
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For every argument there's a counter argument (https://fee.org/articles/the-fallacy-of-intrinsic-value/). I think it's safe to assume that you do not believe BTC is worth touching with a ten feet pole while I am an enthusiast. It's totally ok. But just to clarify: I'm not betting my whole financial future on bitcoin. While I believe in it, I acknowledge that future is unpredictable and my investment my lose value. All I'm trying to say is that I like BTC's features and I think it's a great addition to my portfolio.
 
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Is there intrinsic value in bitcoins ability to transfer cross border securely?

Worth something I think
 
NFT's have that same "transportable" attribute, but with the added benefit that you get a pretty picture tied to the token.

I'm sitting this one out, but as a techie I think playing with the tech is cool. That's all the value I can extract.

Good lcuk to all those who hodl. :)
 
Wow, when I started this thread I did not expect to have so much discussion. Thanks to all who have shared their opinions and information.

I am halfway through my "The bitcoin standard" book and it has yet to talk about bitcoin. It has been a good discussion of the history of sound money and economic theory. I supposed setting the stage for the bitcoin discussion.

I have started to have a respect for BTC, but would like to mention a few points that either occured to me or I have come across.

I see a lot of Forbes articles every day about bitcoin. I am old enough to remember a similar flurry of articles about fiber optic network companies - and we know how that ended. My JDSU went from 7 to 125, but all I ended up saving was the shares I donated to my charitable giving trust.

A few years ago I asked the innocent question "what do you guys think about having gold in your asset allocation" on this forum and my posts were deleted and I got a talking to from the moderator. The fact that so many ER members are discussing BTC in this thread gives me the same willies as seeing all the Forbes articles.

I saw a video by a woman who was a former under-secretary of something but seems to have gotten on the bad side of the goverment types - Katherine something Fitz - she said that BTC is a pump and dump scheme, but you can make money trading it. She said that it was a dress rehersal for the government to make crypto money and the BTC crowd was building their own trap. She also said that if you were a billionare and had a huge amount of money to invest in gold and farmland, BTC was the perfect way to distract retail investors so you have no competition and 1% is not a lot to invest as a smoke screen.

At this point I am leaning towards thinking that having a small allocation to BTC makes sense, but I do wonder if all the you tube videos that are being pumped at me touting crypto are just designed to lure in the sheep for the fleecing.
 
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tenant13 said:
All I'm trying to say is that I like BTC's features and I think it's a great addition to my portfolio.
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If all you were trying to say is that you like it, you wouldn't get any disagreement from me. It's a free country. You can like anything you want. Making the claim that "its value (is) mathematically, rather than situationally assessed" is what I thought you were trying to say. Like pretty much anything, the value comes from the fact that people want it. If people in the future want something else more than bitcoin, then the fact that the algorithm limits mining to a fixed upper limit is meaningless. If nobody wants it, the price goes to zero. I'm not saying that will happen or is likely, I'm saying that there's no magic here that gets past people assessing it's value.
 
joesxm3 said:
Wow, when I started this thread I did not expect to have so much discussion. Thanks to all who have shared their opinions and information.

I am halfway through my "The bitcoin standard" book and it has yet to talk about bitcoin. It has been a good discussion of the history of sound money and economic theory. I supposed setting the stage for the bitcoin discussion.

I have started to have a respect for BTC, but would like to mention a few points that either occured to me or I have come across.

I see a lot of Forbes articles every day about bitcoin. I am old enough to remember a similar flurry of articles about fiber optic network companies - and we know how that ended. My JDSU went from 7 to 125, but all I ended up saving was the shares I donated to my charitable giving trust.

A few years ago I asked the innocent question "what do you guys think about having gold in your asset allocation" on this forum and my posts were deleted and I got a talking to from the moderator. The fact that so many ER members are discussing BTC in this thread gives me the same willies as seeing all the Forbes articles.

I saw a video by a woman who was a former under-secretary of something but seems to have gotten on the bad side of the goverment types - Katherine something Fitz - she said that BTC is a pump and dump scheme, but you can make money trading it. She said that it was a dress rehersal for the government to make crypto money and the BTC crowd was building their own trap. She also said that if you were a billionare and had a huge amount of money to invest in gold and farmland, BTC was the perfect way to distract retail investors so you have no competition and 1% is not a lot to invest as a smoke screen.

At this point I am leaning towards thinking that having a small allocation to BTC makes sense, but I do wonder if all the you tube videos that are being pumped at me touting crypto are just designed to lure in the sheep for the fleecing.
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You likely mean Catherine Austin Fitts although given the nature of the comments it could have been Katherine Fitz :LOL:

Ms Fitts has a lot of interesting things to say about a lot of subjects (most recently about microprocessors injected into us via covid vaccines) and I find her most entertaining. There's always a grain of truth in pretty much everything we read so I would never scoff at anyone's point of view. I would just keep in mind that every new technology - especially the kind that has a chance of disrupting a lot - is quite often met with strong reactions. It's easy to be smart from the hindsight as this classic anti-internet essay illustrates but it's just as easy to hedge your bets. The choice is yours.
 
sengsational said:
If all you were trying to say is that you like it, you wouldn't get any disagreement from me. It's a free country. You can like anything you want. Making the claim that "its value (is) mathematically, rather than situationally assessed" is what I thought you were trying to say. Like pretty much anything, the value comes from the fact that people want it. If people in the future want something else more than bitcoin, then the fact that the algorithm limits mining to a fixed upper limit is meaningless. If nobody wants it, the price goes to zero. I'm not saying that will happen or is likely, I'm saying that there's no magic here that gets past people assessing it's value.
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We both agree on where value comes from. Perhaps I didn't express my point of view precisely but the example of gold purity meant to illustrate that. While it's not generally disputed how to measure it in carats, there might be situations when that is not possible and as a result the value of a gold object is being disputed. That will never be the case with BTC. It's just math and market.
 
Bitcoin is an elaborate math scheme that has conned people into thinking it has real value.
 
jim584672 said:
Bitcoin is an elaborate math scheme that has conned people into thinking it has real value.
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Quite frankly I have no idea about the worth of BTC but it’s easily decipherable and there are WAY too many smart people buying it for it to be a con. Bubble or whatever maybe? But definitely not a con.
 
Dismissive one-liners are not all that helpful. I'll just say that if people value it, it has "real value". It used to be that shells had value and were used for exchange (as in "a mere bag of shells"). It used to be salt at one point (that's where the term salary comes from - you got paid for your time with salt). These were quite "stupid" things, but had a somewhat controlled supply, so became useful, had value and were used to transact for goods and services. That's not to say bitcoin won't collapse. Shells collapsed, as did salt. I'm no historian, but it seems when a more useful tool appears, older tools disappear. Government issued coins were useful because there was a body that standardized bits of metal, thus increasing trust. Bitcoin has proven useful and will probably stick around as long as nothing better comes along. But when something better does appear, bitcoin will be gone. I have no idea when.
 
sengsational said:
Dismissive one-liners are not all that helpful. I'll just say that if people value it, it has "real value". It used to be that shells had value and were used for exchange (as in "a mere bag of shells"). It used to be salt at one point (that's where the term salary comes from - you got paid for your time with salt). These were quite "stupid" things, but had a somewhat controlled supply, so became useful, had value and were used to transact for goods and services. That's not to say bitcoin won't collapse. Shells collapsed, as did salt. I'm no historian, but it seems when a more useful tool appears, older tools disappear. Government issued coins were useful because there was a body that standardized bits of metal, thus increasing trust. Bitcoin has proven useful and will probably stick around as long as nothing better comes along. But when something better does appear, bitcoin will be gone. I have no idea when.
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I generally agree with all that except with the "bitcoin will be gone" when something better comes along statement. It's possible but I personally see it as coexisting with and being adopted by the financial industry and used for building new instruments on top of the bitcoin protocol. We can already trade BTC futures and take fiat loans against BTC collaterals, there are networks built on top of the existing blockchains that enable the proverbial coffee purchasing transactions. Gold never really went away - we just don't use it the same way we used to.
 
I finally managed to read through the first 75% of the book "The Bitcoin Standard" and got to the part where it talks about Bitcoin.

I see that the increase in the "monetary supply" of bitcoin was quite high until only a few years ago. By that I mean that the amount of new bitcoin being mined was increasing at a percentage rate higher than the M2 and much more than the amount of gold being mined.

It seems that this rate is dropping and in a few years the rate of increase will be less than the rate of gold supply increase. I guess that may have something to do with the store of value story gaining traction.

Another thing I read that I had not realized is that in order to move your BTC to a wallet via an on-chain transaction, you have to pay a miner fee. It seems that the miner fee is totally driven by supply and demand and there is a limit of something like 350,000 transactions per day.

The book said that as the value of BTC increases, the amount of the fee will also increase. The number of desired transactions will also drive up the fee.

The book also seemed to think that as the value of BTC grows, it would become useful for settling huge transactions (billions of dollars) and that banks and other organizations would take over the handling of smaller transactions by issuing their own currency backed by their BTC.

So that brings me to a few worries:

Apparently you specify the amount of fee you will pay when you initiate a transaction and if you are too low, your transaction might never be entered into the block chain. This would seem to mean that you would be sending your BTC into the void?

I also wonder, if the value of BTC gets too large and the major institutions are competing from the transactions, might the small BTC holder be starved out of the transaction bidding market and not be able to move his BTC out of his wallet?

I can see the advantage of controlling your own BTC in a wallet, but what if the fees get too high to make it cost effective to move your BTC except in very large amounts? Maybe that would force us into some sort of custodian arrangement.

I see that Fidelity has filed for some sort of BTC custodian service. I don't know if they have it approved yet. From what I read it might be limited to accredited investors and would have a minimum $100,000 deposit requirement.

Having no real world experience in the transaction fee, I don't know what they are now or how fast they might be increasing. It would seem that they must be going up with the current frenzy of BTC activiy.

Any info or thoughts on this stuff?

Thanks.
 
captain3d said:
Current gas/transaction fee seems to be around $21. https://ycharts.com/indicators/bitcoin_average_transaction_fee
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That's interesting.... I just tried to set up BTC withdrawal from my Coinbase account to an outside address and the quoted fee was: 0.00003259 BTC which at current prices is about $1.80 - regardless of the amount being transferred. I believe that fees depend on the desired speed of the transfer. From my experience: if I didn't care how long I was willing to wait, it was cheap, otherwise the cost would raise. Essentially those transfers are not prioritized and can take a day or 3 to be confirmed. Not that different from bank transfers.
 
Here’s the Coinbase fee schedule for crypto transactions https://help.coinbase.com/en/coinbase/trading-and-funding/pricing-and-fees/fees

Coinbase charges a spread of about one-half of one percent (0.50%) for cryptocurrency purchases and cryptocurrency sales. However, the actual spread may be higher or lower due to market fluctuations in the price of cryptocurrency on Coinbase Pro between the time we quote a price and the time when the order executes.
./.
We also charge a Coinbase Fee (in addition to the spread), which is the greater of (a) a flat fee or (b) a variable percentage fee determined by region, product feature, and payment type
./.
For example, if you are in the United States and wish to purchase $100 of bitcoin and pay with a US bank account or your USD Wallet, the flat fee would be calculated as $2.99. As noted below in the variable fee section, the variable percentage fee would be 1.49% of the total transaction, or $1.49. Since the flat fee is greater than 1.49% of the total transaction, your fee would be $2.99. If you wanted to purchase bitcoin with a debit card, we would charge a fee of 3.99% since the variable percentage fee is higher than the flat fee.
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Reminds me of brokerage charges from the 70’s and 80’s.
 
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bmcgonig said:
Quite frankly I have no idea about the worth of BTC but it’s easily decipherable and there are WAY too many smart people buying it for it to be a con. Bubble or whatever maybe? But definitely not a con.
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Really? It's definitely not a con because there are way too many smart people buying it? That's your basis for judgement? I can show you a lot of smart people who were conned by Bernie Madoff. I can likewise also show you many smart people who say that bitcoin is a con. How about Warren Buffett and Charlie Munger for starters? How about Bill Gates? They're kind of smart.

My personal belief - bitcoin, along with all the cryptos, and now NFTs have taken off because there is too much real money floating around, markets are at all-time highs, and interest rates are at all-time lows.

Cryptos will very likely be part of our future monetary systems - government and central bank controlled cryptos. I'm quite confident that bitcoin will not be any significant part of that future, certainly not for the use case of day to day monetary transactions. And so the question fundamentally becomes "What is it good for"? and "Why bitcoin"?
 
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