Urbandreamer wrote:Bitcoin isn't a company! People who quote Mr Gates or Mr Buffet often fail to understand that they are usually talking about wanting to invest in productive assets. Some argue that it should be viewed as a commodity. Something like gold.
Those people are wrong. If you invest in a commodity, you know that you can exchange your contract for the physical commodity, which has either industrial or commercial use. I would accept that owning a crypto asset is like owning a future of a commodity, but one that cannot be fulfilled in the lifetime of the holder or indeed any future holders. In other words, it's a contract with no underlying asset. I value that at zero, so any value that it is being traded at, to me, is representative of a bubble.
The properties that I see of value in Bitcoin are.
1) Inflation. NO, not what you think. There are many uses of the word. In this case I'm talking about an increase in the supply or "Monetary Inflation".
The argument I see is that Bitcoin is strictly limited in the number of coins that can ever be mined, but there is nothing stopping someone from cloning the whole network and releasing a new coin (say, Citcoin) and then arguing that each of their coins should be worth the exact same as Bitcoin because they would have the exact same utility. As such, the idea that it is a scarce asset just doesn't seem like it is actually the case.
2) Decentralization. This makes the system very robust.
But the existing system is already robust, and processes transactions at a fraction of the cost because the existing systems don't require a huge number of repetitions of the exact same transactions, nor is there any need to artificially ramp up the difficulty of processing such transactions.
3) Trustless. Even gold has trust issues. That's the purpose of the hallmark or the face on a coin. That's the mark of who claims it's honest.
I guess if you think there are genuine trust issues with something like gold, then you might have greater issues than an inability to trust the financial system. I don't think gold is a particularly good investment for most people, but I'm well aware that if you buy gold from a reputable source, you can trust that you have, say, 99.99% pure gold.
Ps, re-greater fool theory. The assumption must be that the alternative has merits.
You say that, but then you look at GBP, i.e. cash, which isn't an investment, it's a method of turning work into assets or means of living. The point of greater fool theory is to identify how the profits for an investment should materialise. If, in the long term, the investment carries out some form of activity which takes some form of intellectual property and turns it into profit, then the majority of returns in the very long run come from the underlying economic activity. On the other hand, if the return is only expected to come from someone eventually paying more for the exact same asset as you are spending money on now, then you are relying on them being more of a fool than you, and the corollary to that is that the person you are buying the same asset from now must have bought it at some point in the past hoping that they would be able to sell it to someone more foolish than them, etc. Eventually the whole system comes to rely on constantly selling assets on to greater and greater fools, i.e. to people who were not smart enough to buy the exact same asset as you are currently trading at a lower price than you originally bought at.
This has nothing whatsoever to do with GBP. I get my wages paid into my bank account in GBP, and I pay my taxes and bills and buy my groceries with GBP. Its sole function is to allow me to do those things, so what it does in terms of inflation in the long run is fairly irrelevant except when it comes to negotiating my salary.
Be honest, how many of you are trying to avoid the implications of that by buying company shares. I know that I am.
That's exactly what I do, but I buy shares in companies that are either doing something already (e.g. the renewable energy companies that I own) or are looking to turn technology patents into large-scale applications. In both cases, there's a very significant economic activity that I become part-owner of and am entitled to profits therefrom.