nsacpi
Expects Yuge Games
From the linked page above:
Every asset price has both fundamental and bubble components. In most cases, the bubble component of an assets price is zero and the asset price is driven by its fundamental value. For bitcoin, one can argue that the fundamental component is zero and that the price of bitcoin is entirely driven by behavioral frenzy. Bitcoin has no fundamental value and, really, no intrinsic value.
I don't think this is quite right. Bitcoin has a fundamental source of value. It is used for transactions that some people would like shielded from authorities. For whatever reason. Some of it is criminal activity. Some of it because people have an ideological opposition to government intrusion and regulation. I suspect its value will rise and fall with the number of people who want to use it for these and other reasons. Of course, it could be overtaken by another cryptocurrency. If something else caught on then its value could crash pretty quickly. And there are a LARGE number of bitcoin holders who have bought it for speculative purposes. So there IS likely to be a bubble element to its value in addition to a fundamental element. It is just like real estate in that regard. Some people buy a house or apartment to live in. But there are also flippers looking to make a quick buck. It is a question of proportion. My impression is that there are lots of flippers in the bitcoin market, which is why it's price is so volatile. Given the ease with which new cryptocurrencies can be created bitcoin's fundamental value is likely to be a very small fraction of its current price.
Every asset price has both fundamental and bubble components. In most cases, the bubble component of an assets price is zero and the asset price is driven by its fundamental value. For bitcoin, one can argue that the fundamental component is zero and that the price of bitcoin is entirely driven by behavioral frenzy. Bitcoin has no fundamental value and, really, no intrinsic value.
I don't think this is quite right. Bitcoin has a fundamental source of value. It is used for transactions that some people would like shielded from authorities. For whatever reason. Some of it is criminal activity. Some of it because people have an ideological opposition to government intrusion and regulation. I suspect its value will rise and fall with the number of people who want to use it for these and other reasons. Of course, it could be overtaken by another cryptocurrency. If something else caught on then its value could crash pretty quickly. And there are a LARGE number of bitcoin holders who have bought it for speculative purposes. So there IS likely to be a bubble element to its value in addition to a fundamental element. It is just like real estate in that regard. Some people buy a house or apartment to live in. But there are also flippers looking to make a quick buck. It is a question of proportion. My impression is that there are lots of flippers in the bitcoin market, which is why it's price is so volatile. Given the ease with which new cryptocurrencies can be created bitcoin's fundamental value is likely to be a very small fraction of its current price.
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