bitcoin - is there any real value here or is it a pure Ponzi scam?

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panchilly
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bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by panchilly » Fri Dec 01, 2017 6:47 pm

Is there any real value behind bitcoin other than the belief that someone in the future will pay more for a coin?

Will scalability challenges eventually reach a tipping point and trigger a doomsday scenario crash leaving bitcoin owners with nothing in the end?

Personally I am very surprised by all of this. I see no underlying value in Bitcoin. Honestly it reminds me very much of HYIP Ponzi scams. In fact HYIPs have gotten so popular that there are tons of other sites devoted to them including trackers, blogs, etc. People KNOWINGLY invest in these scams. See for example: https://bitcointalk.org/index.php?topic=520086.0

Is it the same HYIP losers who are the pioneering bitcoin investors?

EDIT: I am fully aware that Bitcoin isn't technically a Ponzi scam. By equating Bitcoin to a Ponzi, I am using the term informally to refer to to a huge speculative bubble with "greater fool" characteristics. HYIP, on the other hand, definitely is a Ponzi.
Last edited by panchilly on Fri Dec 01, 2017 7:42 pm, edited 2 times in total.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by brad.clarkston » Fri Dec 01, 2017 6:53 pm

Only if your a early miner. I sold my last coins when it hit $7k and haven't looked back due to buggy wallet code.

It's now a secondary marked for BitCoin's == people buying pre-mined coins just to sell high.
Maybe one of the new ones coming up but the days of just using your sub $300 graphic card to mine is just about over it's all turned into very specialized high end hardware.

Ragnoth
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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by Ragnoth » Fri Dec 01, 2017 7:17 pm

There is some hypothetical value, but not much.

The best argument is that it *could* become a convenient currency for exchange, although price is too erratic (and the transaction costs have come to high) for it to be used for that purpose.

You can image a scenario where people have no faith in their local currency (e.g., Zimbabuay or some other failed economy). Sometimes people in these situations will simply resort to trying to exchange dollars/euros instead, but an established cryptocurrency might be easier than messing around with trying to smuggle in and exchange dollars. A similar argument extends to black market transactions, where a semi-anonymous exchange of Bitcoin might be more convenient than a duffel bag full of cash. That's the only real value it has, than coupled with the belief that it's fundamentally worth something.

But as you allude to, just like any other currency it only works as long as people believe they can exchange it for goods and services. For the time being, there are enough people invested in mining bitcoins, stockpiling bitcoins, and (on rare occasion) exchanging in bitcoins for it to have some sense value. But aside from those networking effects, there isn't much that separates it from electronic Monopoly money, or any other cryptocurrency for that matter.

At some point the bottom will probably fall out (just like the bottom usually falls out of most currencies over the course of history), but no telling if that will happen in a month, a year, or several centuries from now.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by tludwig23 » Fri Dec 01, 2017 7:29 pm

It's not a Ponzi scheme.

A Ponzi scheme is a fraudulent investment. Bitcoin is not fraudulent. It is a risky investment, and may depend on the "great fool" theory of price increase, but it doesn't meet the definition of a Ponzi scheme.
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panchilly
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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by panchilly » Fri Dec 01, 2017 7:34 pm

tludwig23 wrote:
Fri Dec 01, 2017 7:29 pm
It's not a Ponzi scheme.

A Ponzi scheme is a fraudulent investment. Bitcoin is not fraudulent. It is a risky investment, and may depend on the "great fool" theory of price increase, but it doesn't meet the definition of a Ponzi scheme.
People often refer to "greater fool" silly investments or bubbles as Ponzi scams even though technically speaking they are not, as you have clearly described.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by technovelist » Fri Dec 01, 2017 7:37 pm

Each Bitcoin probably has a few dollars in value.

The rest (99.9%) is typical insanity in a bubble, although it isn't technically a Ponzi scheme as some others have pointed out.
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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by denovo » Fri Dec 01, 2017 7:39 pm

tludwig23 wrote:
Fri Dec 01, 2017 7:29 pm
It's not a Ponzi scheme.

A Ponzi scheme is a fraudulent investment. Bitcoin is not fraudulent. It is a risky investment, and may depend on the "great fool" theory of price increase, but it doesn't meet the definition of a Ponzi scheme.

+1

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by ulrichw » Fri Dec 01, 2017 8:26 pm

Ragnoth wrote:
Fri Dec 01, 2017 7:17 pm
[...] [L]ike any other currency it only works as long as people believe they can exchange it for goods and services. [...]
In my opinion this statement is too limited, and not where Bitcoin derives most of its value from today (unless your concept of "goods and services" extends to other currencies).

The primary way that Bitcoin is priced today is through exchanges that provide a market to exchange Bitcoin with various "traditional" currencies.

What keeps its value high (or can cause it to rise) is the typical market pressure of more buyers than sellers.

Many people are simply holding on to their Bitcoin - this limits the supply, particularly when there are publicity spikes like we're currently going through. Even though there are new coins being mined, this influx of coins isn't enough to offset the current demand - net effect, the price rises.

The circular argument of value for Bitcoin is: Bitcoin has value as long as people are willing to pay money for Bitcoin. People are willing to pay money for Bitcoin because it has value.

This may not be an "intrinsic" value, but it is still a value that could persist. The cryptography behind Bitcoin is sound, and Bitcoin is quite transparent (every transaction ever performed is and will continue to be visible to everyone, forever). This makes it an interesting alternative for people who have a need to store value outside of traditional financial institutions.

Greed is another big driver of value right now - people are holding because they believe the value will keep rising. This reduces supply and keeps driving the price up.

Over time, we'll run out of greedy people willing to buy in. This will slow down the price increase. The question then is, will the other categories of Bitcoin users - people looking for a stable store of value, people using it as a means of exchange, people using it for trade (legal and not) - create enough demand to stabilize the price?

Who knows? I think there are good arguments both that Bitcoin's value will go to 0 and that Bitcoin's value will be orders of magnitude higher than today.

TL;DR: There is "real" value, but Bitcoin is more of gamble than an investment despite that.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by gips » Fri Dec 01, 2017 8:35 pm

- there is no real value and it's not a ponzi scam
- when it crashes, it will cause a large drop in the s&p 500
- I've speculated in bitcoin, have cashed out half my stake and if it goes to zero, my overall gamble will yield a 60% return.
- if you're going to trade in a bubble, you need an exit strategy.
- the underlying technology (blockchain) is disruptive and may transform many businesses

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by knightrider » Fri Dec 01, 2017 8:49 pm

This joke says it all:

"Value of time spent understanding bitcoins exceeds the value of bitcoins"

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by sailaway » Fri Dec 01, 2017 8:52 pm

It is a fiat currency without a Secret Service or military behind it.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by LadyGeek » Fri Dec 01, 2017 9:19 pm

This thread is now in the Investing - Theory, News & General forum (bitcoin).

The wiki has some background info: Bitcoin
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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by Marylander1 » Fri Dec 01, 2017 9:25 pm

I found this article in this weekend's Economist very helpful to understand the evidence that Bitcoin is a bubble:

The Economist | A lot of zeros http://www.economist.com/news/finance-a ... rsc=dg%7Ce

-Marylander1

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by JBTX » Fri Dec 01, 2017 10:01 pm

Best I can tell, the value, if any, is that it becomes a major alternative currency many years down the road. By design, the total bitcoin are supposed to cap at 21 million, and I think there are about 12 million out there now. Total world money is something like $25 trillion. Bit coin market value is about $300-$400 billion. If Bitcoin were used as 10% of money, as an example, then I would think in theory its market value would be $2.5 trillion.

If all 21million bitcoin were available, and bit coin was used for everything, I would think its value would be $25 trillion / $21 million = approx $1.2million per bitcoin.

$10,000 per bitcoin is just under 1% of 1.2 million, so that price would seem to imply that bitcoin will be used for approx 1.0% of transactions. If you are a believer in bitcoin, then there is still massive upside.

So the bet is supply will soon be fixed, and demand will exponentially increase, then the bitcoin value would increase.

As I said elsewhere, that seems like a lot of IFS. I don't buy it. But I guess that's the theory.
Last edited by JBTX on Fri Dec 01, 2017 10:14 pm, edited 1 time in total.

sjwoo
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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by sjwoo » Fri Dec 01, 2017 10:11 pm

gips wrote:
Fri Dec 01, 2017 8:35 pm
- when it crashes, it will cause a large drop in the s&p 500
I'm not sure I agree. So many people, in fact, I'd think the majority of investors, expect this currency to drop big time. If I were to hear tomorrow that bitcoin's are now worth $10, in just say, "Yup, we all knew where this was headed." I'd neither sell or buy any stocks from this bit of news.

The only way this would significantly hurt the market is if folks had sold their stocks and bought bitcoin, back and forth, back and forth...I just doubt it.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by technovelist » Fri Dec 01, 2017 10:13 pm

sjwoo wrote:
Fri Dec 01, 2017 10:11 pm
gips wrote:
Fri Dec 01, 2017 8:35 pm
- when it crashes, it will cause a large drop in the s&p 500
I'm not sure I agree. So many people, in fact, I'd think the majority of investors, expect this currency to drop big time. If I were to hear tomorrow that bitcoin's are now worth $10, in just say, "Yup, we all knew where this was headed." I'd neither sell or buy any stocks from this bit of news.

The only way this would significantly hurt the market is if folks had sold their stocks and bought bitcoin, back and forth, back and forth...I just doubt it.
I don't see how it would affect the stock market particularly either.
In theory, theory and practice are identical. In practice, they often differ.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by birdog » Fri Dec 01, 2017 10:16 pm

It is not currently a practical currency. Transaction costs are too high and it’s way, way too volatile. No one is really using it as a currency currently. I heard someone today say to think of it as digital gold.
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JBTX
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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by JBTX » Fri Dec 01, 2017 10:19 pm

sjwoo wrote:
Fri Dec 01, 2017 10:11 pm
gips wrote:
Fri Dec 01, 2017 8:35 pm
- when it crashes, it will cause a large drop in the s&p 500
I'm not sure I agree. So many people, in fact, I'd think the majority of investors, expect this currency to drop big time. If I were to hear tomorrow that bitcoin's are now worth $10, in just say, "Yup, we all knew where this was headed." I'd neither sell or buy any stocks from this bit of news.

The only way this would significantly hurt the market is if folks had sold their stocks and bought bitcoin, back and forth, back and forth...I just doubt it.
Total bitcoin market value is something like $400 billion. The net wealth impact of that going immediately away is relatively modest, compared to the total us stock market at $25 trillion. A crash in bitcoin would destroy the same amount of wealth as about a 1.5% drop in the US stock market, if my numbers are correct.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by bob60014 » Fri Dec 01, 2017 10:24 pm

My main worry is that is that, other than cash, this is the "currency" of choice for those involved in illicit activities.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by gips » Fri Dec 01, 2017 10:37 pm

technovelist wrote:
Fri Dec 01, 2017 10:13 pm
sjwoo wrote:
Fri Dec 01, 2017 10:11 pm
gips wrote:
Fri Dec 01, 2017 8:35 pm
- when it crashes, it will cause a large drop in the s&p 500
I'm not sure I agree. So many people, in fact, I'd think the majority of investors, expect this currency to drop big time. If I were to hear tomorrow that bitcoin's are now worth $10, in just say, "Yup, we all knew where this was headed." I'd neither sell or buy any stocks from this bit of news.

The only way this would significantly hurt the market is if folks had sold their stocks and bought bitcoin, back and forth, back and forth...I just doubt it.
I don't see how it would affect the stock market particularly either.
the tulip bubble was followed by a depression, the .com bust was followed by a recession as was the bursting of the subprime bubble. why will this be different?

sjwoo
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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by sjwoo » Fri Dec 01, 2017 10:45 pm

gips wrote:
Fri Dec 01, 2017 10:37 pm
technovelist wrote:
Fri Dec 01, 2017 10:13 pm
sjwoo wrote:
Fri Dec 01, 2017 10:11 pm
gips wrote:
Fri Dec 01, 2017 8:35 pm
- when it crashes, it will cause a large drop in the s&p 500
I'm not sure I agree. So many people, in fact, I'd think the majority of investors, expect this currency to drop big time. If I were to hear tomorrow that bitcoin's are now worth $10, in just say, "Yup, we all knew where this was headed." I'd neither sell or buy any stocks from this bit of news.

The only way this would significantly hurt the market is if folks had sold their stocks and bought bitcoin, back and forth, back and forth...I just doubt it.
I don't see how it would affect the stock market particularly either.
the tulip bubble was followed by a depression, the .com bust was followed by a recession as was the bursting of the subprime bubble. why will this be different?
I think it depends on the penetration of the shared fiction of value. I sadly did think that with the internet "this time it's different" back in 2000. Normal valuations don't matter, I proclaimed, and so did many, many others. I don't feel the same mania here, not in the slightest. But maybe that's because I already went through two huge bubbles in the last twenty years...the wound is still very fresh. Perhaps with millennials, this is not the case.

Good thing millennial aren't running the show, right?

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by zaboomafoozarg » Fri Dec 01, 2017 11:02 pm

gips wrote:
Fri Dec 01, 2017 10:37 pm
technovelist wrote:
Fri Dec 01, 2017 10:13 pm
I don't see how it would affect the stock market particularly either.
the tulip bubble was followed by a depression, the .com bust was followed by a recession as was the bursting of the subprime bubble. why will this be different?
Depends on how much money has been invested/speculated into BTC if/when it crashes.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by 552BB » Fri Dec 01, 2017 11:05 pm

Good evening BH,

My .02 cents.



Bitcoin is a sham.

Think of it this way. What is any currency used for, whether it be dollars, pesos, etc.

Its used to purchase; goods, services, entertainment, all kinds of things.



What is bitcoin used for currently?

That is right, NOT for purchasing. It is used for one reason and one reason only, for the hope that some other sucker will buy it off of you for a higher price.

You will not find a single person that owns bitcoin so that he use it as a currency; you know, just in case his dollars are not accepted!!!



Thats my opinion.



:sharebeer

talltodd
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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by talltodd » Fri Dec 01, 2017 11:16 pm

Bitcoin is backed by the use value of the distributed ledger in the underlying technology of the Blockchain.

Tamalak
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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by Tamalak » Fri Dec 01, 2017 11:18 pm

Bitcoin is a currency. It's not a good investment in terms of average expected future returns (which is zero for any currency). But it's not a scam, either.

I would buy bitcoin if I wanted to use it as a currency is meant to be used.. to buy stuff.
Last edited by Tamalak on Fri Dec 01, 2017 11:24 pm, edited 1 time in total.

WanderingDoc
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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by WanderingDoc » Fri Dec 01, 2017 11:21 pm

panchilly wrote:
Fri Dec 01, 2017 6:47 pm
Is there any real value behind bitcoin other than the belief that someone in the future will pay more for a coin?

Will scalability challenges eventually reach a tipping point and trigger a doomsday scenario crash leaving bitcoin owners with nothing in the end?

Personally I am very surprised by all of this. I see no underlying value in Bitcoin. Honestly it reminds me very much of HYIP Ponzi scams. In fact HYIPs have gotten so popular that there are tons of other sites devoted to them including trackers, blogs, etc. People KNOWINGLY invest in these scams. See for example: https://bitcointalk.org/index.php?topic=520086.0

Is it the same HYIP losers who are the pioneering bitcoin investors?

EDIT: I am fully aware that Bitcoin isn't technically a Ponzi scam. By equating Bitcoin to a Ponzi, I am using the term informally to refer to to a huge speculative bubble with "greater fool" characteristics. HYIP, on the other hand, definitely is a Ponzi.
I haven't read the replies.

If we are just talking pure math, you'd be mad to not put 1% of your investible assets in Bitcoin. If there was a 95% chance of Bitcoin going to zero, and a 5% chance 1 Bitcoin goes to $500K, you'd be a food indeed.
One day it suddenly dawned on me that I had won the real estate lottery. | I'm not looking to get rich quickly. I'm not looking to get rich slowly. I'm looking to get rich for sure.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by Tamalak » Fri Dec 01, 2017 11:26 pm

WanderingDoc wrote:
Fri Dec 01, 2017 11:21 pm
panchilly wrote:
Fri Dec 01, 2017 6:47 pm
Is there any real value behind bitcoin other than the belief that someone in the future will pay more for a coin?

Will scalability challenges eventually reach a tipping point and trigger a doomsday scenario crash leaving bitcoin owners with nothing in the end?

Personally I am very surprised by all of this. I see no underlying value in Bitcoin. Honestly it reminds me very much of HYIP Ponzi scams. In fact HYIPs have gotten so popular that there are tons of other sites devoted to them including trackers, blogs, etc. People KNOWINGLY invest in these scams. See for example: https://bitcointalk.org/index.php?topic=520086.0

Is it the same HYIP losers who are the pioneering bitcoin investors?

EDIT: I am fully aware that Bitcoin isn't technically a Ponzi scam. By equating Bitcoin to a Ponzi, I am using the term informally to refer to to a huge speculative bubble with "greater fool" characteristics. HYIP, on the other hand, definitely is a Ponzi.
I haven't read the replies.

If we are just talking pure math, you'd be mad to not put 1% of your investible assets in Bitcoin. If there was a 95% chance of Bitcoin going to zero, and a 5% chance 1 Bitcoin goes to $500K, you'd be a food indeed.
Is there some reason you can assert the market is not pricing bitcoin correctly? If the average expected return is what you say, the current market valuation is way low.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by alwayshedge » Fri Dec 01, 2017 11:27 pm

I bought a 3 bitcoins around $1600. I recently sold $4800 worth of bitcoin around $10,000 and now will let the profit do all the work. I don't really care if it goes to zero or not. It's more for my fun money. It's fun to watch the price go up and down..but who knows..maybe it will get to 1MM eventually.

sfnerd
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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by sfnerd » Fri Dec 01, 2017 11:45 pm

sjwoo wrote:
Fri Dec 01, 2017 10:45 pm
gips wrote:
Fri Dec 01, 2017 10:37 pm
technovelist wrote:
Fri Dec 01, 2017 10:13 pm
sjwoo wrote:
Fri Dec 01, 2017 10:11 pm
gips wrote:
Fri Dec 01, 2017 8:35 pm
- when it crashes, it will cause a large drop in the s&p 500
I'm not sure I agree. So many people, in fact, I'd think the majority of investors, expect this currency to drop big time. If I were to hear tomorrow that bitcoin's are now worth $10, in just say, "Yup, we all knew where this was headed." I'd neither sell or buy any stocks from this bit of news.

The only way this would significantly hurt the market is if folks had sold their stocks and bought bitcoin, back and forth, back and forth...I just doubt it.
I don't see how it would affect the stock market particularly either.
the tulip bubble was followed by a depression, the .com bust was followed by a recession as was the bursting of the subprime bubble. why will this be different?
I think it depends on the penetration of the shared fiction of value. I sadly did think that with the internet "this time it's different" back in 2000. Normal valuations don't matter, I proclaimed, and so did many, many others. I don't feel the same mania here, not in the slightest. But maybe that's because I already went through two huge bubbles in the last twenty years...the wound is still very fresh. Perhaps with millennials, this is not the case.

Good thing millennial aren't running the show, right?
What I worry about is bitcoin-related companies entering the S&P, or S&P companies investing in bitcoin. If bitcoin is seen as legitimate and financial institutions are involved, then we'll be exposed when the bubble pops. This is something I'm watching, and if I see serious companies holding or profiting from bitcoin I'll probably start hoarding some cash. Luckily we're a way away from that.

There is not much utility behind bitcoin. It is an awful mode of payment. It is inherently insecure (if I can hack your wallet and take your bitcoin, there is no third party or government that will roll back the transaction). It is deflationary and limited by design. There is no yield, and it adapts slower to change than other forms of digital or crypto currency.

Blockchain is interesting, but the idea of a cryptographic distributed ledger is not new. I remember talking about this idea in the 90s in cryptograpgy class at university. This is not as revolutionary as the internet, and people saying this are crazy. In the first few years after being accessible, the internet had transformed human life fundamentally. Blockchain will not do this.

There is a lot of mania around bitcoin right now, and a lot of "pump and dump" going on. Be aware and watch for systemic risks.

ccieemeritus
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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by ccieemeritus » Sat Dec 02, 2017 12:21 am

Definition of Ponzi from dictionary.com:
a swindle in which a quick return, made up of money from new investors, on an initial investment lures the victim into much bigger risks.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by technovelist » Sat Dec 02, 2017 12:38 am

gips wrote:
Fri Dec 01, 2017 10:37 pm
technovelist wrote:
Fri Dec 01, 2017 10:13 pm
sjwoo wrote:
Fri Dec 01, 2017 10:11 pm
gips wrote:
Fri Dec 01, 2017 8:35 pm
- when it crashes, it will cause a large drop in the s&p 500
I'm not sure I agree. So many people, in fact, I'd think the majority of investors, expect this currency to drop big time. If I were to hear tomorrow that bitcoin's are now worth $10, in just say, "Yup, we all knew where this was headed." I'd neither sell or buy any stocks from this bit of news.

The only way this would significantly hurt the market is if folks had sold their stocks and bought bitcoin, back and forth, back and forth...I just doubt it.
I don't see how it would affect the stock market particularly either.
the tulip bubble was followed by a depression, the .com bust was followed by a recession as was the bursting of the subprime bubble. why will this be different?
Because the amount of speculation on Bitcoin is tiny compared to the overall markets, unlike those previous bubbles. Also, I doubt that 1/10th of 1% of the population is involved in Bitcoin in any way that could possibly affect them seriously, again unlike the previous bubbles.

I think the bursting of the Bitcoin bubble will have an effect similar to that of the bursting of the Beanie Baby bubble.
In theory, theory and practice are identical. In practice, they often differ.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by Regressor » Sat Dec 02, 2017 1:05 am

JBTX wrote:
Fri Dec 01, 2017 10:01 pm
If all 21million bitcoin were available, and bit coin was used for everything, I would think its value would be $25 trillion / $21 million = approx $1.2million per bitcoin.
If all the money available is $25 trillion, and we mine additional $25 trillion worth of bitcoins which don't contribute any goods or services to society, doesn't that imply that the value of all the goods and services would suddenly be worth $50 trillion dollars, i.e. it would cause 100% inflation? Or the value of dollar would have to go to zero, i.e. Bitcoin would be used instead of dollar.. Both options seem pretty impossible.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by technovelist » Sat Dec 02, 2017 1:09 am

Regressor wrote:
Sat Dec 02, 2017 1:05 am
JBTX wrote:
Fri Dec 01, 2017 10:01 pm
If all 21million bitcoin were available, and bit coin was used for everything, I would think its value would be $25 trillion / $21 million = approx $1.2million per bitcoin.
If all the money available is $25 trillion, and we mine additional $25 trillion worth of bitcoins which don't contribute any goods or services to society, doesn't that imply that the value of all the goods and services would suddenly be worth $50 trillion dollars, i.e. it would cause 100% inflation? Or the value of dollar would have to go to zero, i.e. Bitcoin would be used instead of dollar.. Both options seem pretty impossible.
I assume the idea is that you would have to convert Bitcoin to dollars to spend it, in which case it wouldn't raise prices because it wouldn't actually serve as money.

But I agree that it doesn't sound likely that the total value of Bitcoin could equal that of the dollar.
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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by quantAndHold » Sat Dec 02, 2017 2:47 am

Charles Ponzi wishes he came up with bitcoin.

Not a Ponzi scheme, because a Ponzi scheme implies that someone is running the whole thing. Bitcoin is a currency-like thing currently in the middle of a speculative bubble. There is probably some intrinsic value there as a medium of exchange, but much less than it is going for now. I just don’t know how much less, and I don’t know how much higher it’s going to go before it takes a dive. So I stay away.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by quaternion » Sat Dec 02, 2017 6:10 am

Bitcoin appears to have some value as a de-centralized transaction processing network if (1) your local currency has severe problems (a la Venezuela, Zimbabwe, etc.) or (2) you want to avoid the scrutiny of authorities who monitor traditional financial transactions.

The problem with bitcoin is that transactions, by design, require significant computational work (i.e., electricity) to process. Last I read, the bitcoin network uses about the same amount of power as the entire nation of Ireland! Traditional, centralized transaction processing systems are vastly more energy efficient. For example, the Visa network probably needs a few modest-sized data centers and handles vastly higher volume than the bitcoin network.

IMHO, while perhaps not worthless, the inherent value of bitcoin is questionable.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by goalie » Sat Dec 02, 2017 6:15 am

I was told many years ago, "If you can't explain an investment to a 5 year old, in under 5 minutes, head for the hills." I understand that people are making a lot of money with Bitcoin, but I'm staying away.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by JBTX » Sat Dec 02, 2017 9:12 am

technovelist wrote:
Sat Dec 02, 2017 1:09 am
Regressor wrote:
Sat Dec 02, 2017 1:05 am
JBTX wrote:
Fri Dec 01, 2017 10:01 pm
If all 21million bitcoin were available, and bit coin was used for everything, I would think its value would be $25 trillion / $21 million = approx $1.2million per bitcoin.
If all the money available is $25 trillion, and we mine additional $25 trillion worth of bitcoins which don't contribute any goods or services to society, doesn't that imply that the value of all the goods and services would suddenly be worth $50 trillion dollars, i.e. it would cause 100% inflation? Or the value of dollar would have to go to zero, i.e. Bitcoin would be used instead of dollar.. Both options seem pretty impossible.
I assume the idea is that you would have to convert Bitcoin to dollars to spend it, in which case it wouldn't raise prices because it wouldn't actually serve as money.

But I agree that it doesn't sound likely that the total value of Bitcoin could equal that of the dollar.
This. Kinda. I’m saying one day everybody in the world had to swap all their currency to bitcoin by worldwide decree. I’m just engaging in a wildly hypothetical exercise as to how bitcoins value could increase. If the supply of bitcoin is capped and that holds, and demand for use of bitcoin as a currency substantially increases, it could theoretically go higher. However there are many practical reasons as of right now why bitcoin is limited as a day to day currency and I have no idea if it expands or fizzles a slow death. Also I don’t understand it well enough to know exactly how the cap/max of bitcoin is enforced.

From a macroeconomic perspective to have a currency with a fixed supply and a rapidly increasing value leads to deflation and economic depressions. This was somewhat of an issue when currency was fully backed by gold.

I think there is a theoretical value to bitcoin but it is wildly speculative.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by stickman731 » Sat Dec 02, 2017 9:25 am

Recently watched a documentary on Netflix - Banking on Bitcoin and it got me even more confused. I understand the blockchain but where is the underlying value outside of the speculator pool. Since I still do not completely understand it, I will not risk my monies.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by technovelist » Sat Dec 02, 2017 9:26 am

stickman731 wrote:
Sat Dec 02, 2017 9:25 am
Recently watched a documentary on Netflix - Banking on Bitcoin and it got me even more confused. I understand the blockchain but where is the underlying value outside of the speculator pool. Since I still do not completely understand it, I will not risk my monies.
There is no significant underlying value. It's a fad.
In theory, theory and practice are identical. In practice, they often differ.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by ensign_lee » Sat Dec 02, 2017 10:02 am

It's a not a ponzi. A ponzi would be a scheme where you keep putting in dollars and some central person keeps skimming off of the top, promising returns.

Bitcoin is A) not centralized and B) is not sitting here promising returns. It's just sitting there, happening to appreciate in value because current demand outpaces supply.

Whether or not there is value there really depends on whether you think there is value in a currency that is non-inflationary and that is easy to send around the world.

21 million (the total capped supply of bitcoin) sounds like a large number, until you consider that there are 7 billion people in the world. My quick back of the envelope math whenever anyone asks what a bitcoin should be worth is thus:

7 billion people. Let's say 5% of the world wants bitcoin as either a transactional currency or a store of value, so that's 350M. And of that 5%, let's say on average, they want $1000 worth. That would imply a valuation of $16,666 (7B*.05*1000/21M), which we're not even at. And that's assuming that only 5% of the world ever wants to be involved with bitcoin.

Will it ever get to that hypothetical situation I described above? I don't know, we'll see. But that's the bet I've made by being in bitcoin. Adoption is rapidly increasing. The CME and NASDAQ are now getting involved, and it seems as though larger institutional investors are getting their feet wet.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by lostdog » Sat Dec 02, 2017 10:09 am

So let's say you have a gain of 10 million in bitcoins. You decide to sell all of it. When you sell it will there be an ACH transfer to your checking or savings? Is it that simple?
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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by sperry8 » Sat Dec 02, 2017 10:11 am

It seems quite weird to me that it can hold and increase its value. Here you have something created out of thin air that is going straight up and that anyone and everyone can buy into and become rich. Now some may argue Bitcoin is limited... but cryptos are not. There are over 1,000 of them. People just creating "money" out of thin air and everyone who buys, likely even a monkey, is getting rich. Ether is up more than Bitcoin for example. If this is true and actually continues then I see global hyperinflation. Because suddenly there will be millions of more millionaires all chasing a limited supply of goods and services. Prices will rise, fast. Because all these new millionaires won their money as opposed to earning it - and will spend it fast (read up on lotto winners for an example). Anyway - back to my original point - it just makes no sense that anyone can create a crypto currency and ICO it and then anyone who buys sees insane returns. It never ends if true... and I just don't see how it can be. And again, if it is - hyperinflation is on the way.
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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by sjwoo » Sat Dec 02, 2017 10:18 am

sfnerd wrote:
Fri Dec 01, 2017 11:45 pm
There is a lot of mania around bitcoin right now, and a lot of "pump and dump" going on. Be aware and watch for systemic risks.
After reading this continuing thread, I now think you may have a point with this idea of contagion. On another thread about seeing market crashes ahead, lots of folks here said they knew the housing bubble in 2007 but very few expected it could trigger such a widespread panic. Granted, housing is a much, much bigger part of the economic pie than bitcoin, but if institutional investors get involved significantly, this could theoretically get to be more than a blip.

I still think this thing doesn't have legs, but it bears watching.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by sjwoo » Sat Dec 02, 2017 10:27 am

sperry8 wrote:
Sat Dec 02, 2017 10:11 am
Here you have something created out of thin air that is going straight up and that anyone and everyone can buy into and become rich.
This literally sounds like etoys.com, CMGI, Rambus, etc. Some innate value, sure, but nowhere near the valuations they achieved.

If bitcoin is going up, it's simply because demand is outstripping supply. Somebody is putting real money, actual dollars, temporarily for spectacular gains, hoping they can get out before the house of cards fall. I suppose there are a few who are willing to buy and hold, who believe the value will go even higher.

All I can say is that there are lots of people with iron stomachs in this world!

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by book lover » Sat Dec 02, 2017 10:30 am

If it is being used on the dark web as a medium of purchase, it is not something that I would be interested in being involved with when it comes to investing: the Vanguard 500 Index suits me just fine.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by Marylander1 » Sat Dec 02, 2017 10:31 am

sperry8 wrote:
Sat Dec 02, 2017 10:11 am
Because suddenly there will be millions of more millionaires all chasing a limited supply of goods and services.
Hyperinflation would impact only Bitcoin, not more stable currencies. As long as the newly created value remains in Bitcoin, that additional "wealth" can appear stable. But whenever any store of value is sold to convert to dollars or other currency, that slightly depresses its exchange rate. If there's a Bitcoin bubble, it's only a matter of time until a critical mass of its holdings are sold, pushing the value down enough for others to notice. That triggers more sales, driving down the value further, eventually causing panic. Such a feedback loop is how bubbles crash.

Bubbles can create many paper millionaires, but when they try to cash it in, only those at the front of the line succeed.

-Marylander1

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by sperry8 » Sat Dec 02, 2017 10:37 am

Marylander1 wrote:
Sat Dec 02, 2017 10:31 am
sperry8 wrote:
Sat Dec 02, 2017 10:11 am
Because suddenly there will be millions of more millionaires all chasing a limited supply of goods and services.
Hyperinflation would impact only Bitcoin, not more stable currencies. As long as the newly created value remains in Bitcoin, that additional "wealth" can appear stable. But whenever any store of value is sold to convert to dollars or other currency, that slightly depresses the Bitcoin exchange rate. If there's a Bitcoin bubble, it's only a matter of time until a critical mass of its holdings are sold, pushing the value down enough for others to notice. That triggers more sales, driving down the value further, eventually causing panic. Such a feedback loop is how bubbles crash.

Bubbles can create many paper millionaires, but when they try to cash it in, only those at the front of the line succeed.

-Marylander1
Understood. But in a scenario where Bitcoin becomes worth $5mm+ and people convert their Bitcoins at $1mm or $2mm into currency you can have a lot of people who are now millionaires who weren't before. Even today people are "cashing out" and although this depresses the price somewhat, due to demand and limited # of Bitcoins the price still goes up (although not as much as if people never sold). Now someone in the US who has a new million to play with won't create as much hyperinflation. But Bitcoin is traded globally. Zimbabwaens will now be millionaires too. There will simply be a lot of currency now and people willing to spend it.
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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by Alexa9 » Sat Dec 02, 2017 10:37 am

I view Bitcoin as a penny stock or a lottery ticket in terms of the odds of it succeeding and the potential rewards, but I could be wrong.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by bridge » Sat Dec 02, 2017 10:39 am

lostdog wrote:
Sat Dec 02, 2017 10:09 am
So let's say you have a gain of 10 million in bitcoins. You decide to sell all of it. When you sell it will there be an ACH transfer to your checking or savings? Is it that simple?
No. Depends who you sell it to and the terms of payment you agree with the buyer.

Bitcoin is typically traded on an exchange platform, which would pay out to your bank account if you choose to withdraw your USD balance.

You can also find a private buyer and negotiate terms with them.

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Re: bitcoin - is there any real value here or is it a pure Ponzi scam?

Post by technovelist » Sat Dec 02, 2017 10:45 am

sperry8 wrote:
Sat Dec 02, 2017 10:37 am
Marylander1 wrote:
Sat Dec 02, 2017 10:31 am
sperry8 wrote:
Sat Dec 02, 2017 10:11 am
Because suddenly there will be millions of more millionaires all chasing a limited supply of goods and services.
Hyperinflation would impact only Bitcoin, not more stable currencies. As long as the newly created value remains in Bitcoin, that additional "wealth" can appear stable. But whenever any store of value is sold to convert to dollars or other currency, that slightly depresses the Bitcoin exchange rate. If there's a Bitcoin bubble, it's only a matter of time until a critical mass of its holdings are sold, pushing the value down enough for others to notice. That triggers more sales, driving down the value further, eventually causing panic. Such a feedback loop is how bubbles crash.

Bubbles can create many paper millionaires, but when they try to cash it in, only those at the front of the line succeed.

-Marylander1
Understood. But in a scenario where Bitcoin becomes worth $5mm+ and people convert their Bitcoins at $1mm or $2mm into currency you can have a lot of people who are now millionaires who weren't before. Even today people are "cashing out" and although this depresses the price somewhat, due to demand and limited # of Bitcoins the price still goes up (although not as much as if people never sold). Now someone in the US who has a new million to play with won't create as much hyperinflation. But Bitcoin is traded globally. Zimbabwaens will now be millionaires too. There will simply be a lot of currency now and people willing to spend it.
As long as people effectively have to sell their Bitcoin for dollars, there cannot be hyperinflation in dollars because there are no new dollars in circulation; each sale of a Bitcoin for dollars is also a purchase of a Bitcoin for dollars, so the net effect on overall prices in dollars is zero.

Now if Bitcoin were widely accepted for purchases of goods, then those goods could go up quite a bit in dollars because the Bitcoin millionaires could outbid people using dollars.
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