[OT] Robert Schiller Thinks Bitcoin is a Bubble; Do You Agree?

"people wonder what their place is in this new world."

Those in computer science, machine learning, and AI will have nothing to worry about. The other 99% might have something to worry about.

Shiller always has an interesting take, and he usually gets things right.

From the article, Shiller on Trump: "It’s just amazing how he dominates and I think he has a genius at recognizing stories and listening to his audience and understanding what drives them."

It's totally amazing how Trump beat 17 GOP candidates and then beat Hillary. Still seams surreal.

Elon Musk seemed pretty angsty this weekend.

Yep, spelling error

My favorite economics joke:

A bunessman and an economist are walking down the sidewalk. The economist walks right past a 20 dollar bill. The business man says, "hey! Why didn't you pick that up?" And the economist says, "bc it was never there."

There's no unclaimed value in economics. All things are known and equal, so a psychological need, like he described, is a bubble, but that doesn't mean it doesn't have real value, or that it's going anywhere. I think he does make a good point, as far as the psychology he described. That need probably isn't going anywhere, but ppl might find a better way to fill it. Ugh, speculating :P

OTOH, I got dinged $25 on a $3000 outgoing wire transfer this morning and will probably get dinged $15 incoming. So at least $40 altogether. With some crypto-currencies I might be looking at < $0.10. Also it will take hours instead of minutes to arrive.

So bubble or not?

I'll hold to my claims that bitcoin will be severely tested or even "pop" when political risk enters the markets. Since there is no government backing, if the winds of politics shift to look for safe havens, people will go to the old standbys, which bitcoin is neither old or steady.

"You start talking about bitcoin and they’re excited! And I think, what’s so exciting? You have to think like humanities people. "

LOL!

So Revenge of the Liberal Artists if the bubble pops?

It's not the humanities people that "get excited." It's the Randoids who LDK at the thought of a digital gold standard.

BTY, good article.

I agree with his description of the limited value of both Bitcoin and other
Crypto-currencies, this direct quote from the article speaks volumes.

"It’s somewhat like crowdfunding. Say you’ve started a bar, and you want to fund it by issuing these tokens. A token is worth one beer, but your bar will only ever serve a set number of beers. If people think it will be a really hot bar, the value of the tokens trades for up to $100 or $200. People are raising hundreds of millions of dollars this way, with pretty thin business plans."

Ah, yes, that's the ICO phenomena that China outlawed this weekend. Caused a minor correction in BTC, and a bit more major in some of the Ethereum based currencies.

Interesting to hear everyone's opinions!

I'm not convinced by that article that Robert Shiller really understands Bitcoin. I think it is still very easy to hear about Bitcoin, maybe on the news or from a friend, and get the idea that it's just digital tokens... like points in an online video game. Unfortunately, I think the large majority of people who have heard of Bitcoin do not understand it at a fundamental level; they don't understand its significance. This is true for pretty much all people outside of the hard analytical sciences (comp sci, math, physics, engineering, etc). For example, in that article, I don't think the analogy of a hot-bar-giving-out-tokens-for-beer is an adequate analogy.

"Somehow bitcoin fits into that and it gives a sense of empowerment: I understand what’s happening! I can speculate and I can be rich from understanding this! That kind of is a solution to the fundamental angst."

• This is another example of how Bitcoin is not fully understood, even among those who have spent some time reading about it. This quote describes only one feature of Bitcoin and its application as a speculative asset. But if you spend enough time exploring this idea, eventually you might come across the ideas that people like Andreas Antonopoulos et al talk about--ideas like empowering NOT the western lower and middle class, but instead empowering the billions of people who are currently OUTSIDE the modern financial system. Andreas Antonopoulos seems to understand the significance of this technology better than most--better than even the guys like myself who actually understand the algorithm and why its important--as he has been working as an expert in the financial technology sector for many years, and ditched it when he learned about Bitcoin.

For those of you who read this and would like to see an example of an honest discussion about Bitcoin between a leader in the technology space and some politicians, I present the following video. It will take a bit of patience to watch (1 hour 52 minutes, so just a BIT of patience).

youtube.com

Btw, just remember: Ethereum is SkyNet.

When stuff like this happens, it makes Bitcoin sound kind of hokey: arstechnica.com

"The confusing result is that if you owned one bitcoin before the split you own two bitcoins now: one coin on the original Bitcoin network, and a second coin on the new Bitcoin Cash network. The two coins have the same cryptographic credentials, but they have very different values if you sell them for old-fashioned dollars. On Wednesday morning, one standard Bitcoin was worth about $2,700, while—on paper at least—a unit of Bitcoin Cash was worth around $600."

That kind of sounds like: "If we can sell the same bridge to speculators twice, we're going to go for it!"

I read an article the other day about an alternative currency in a country tied to ride sharing service credits which was bringing people into an on-line financial system who for some reason were excluded from traditional banks.

I see three long-term factors effecting Bitcoin's success:

How safe people feel using it to make illegal transactions on the dark web (there were recent stories about Adobe flash trackers unmasking users. Also, Silk Road was shut down a 3-4 years ago, and AlphaBay recently.

Whether speculation or demand drives coin prices so high that they're useless for typical transactions. The choice of spending $600 or $2700 in a transaction is kind of useless for many transactions.

The utility of Bitcoin vs. other stored value-based currencies. I read an article the other day about where in some Third World country, a ride sharing service started to allow users to transfer credits between one another, so people are using it like a debit card now, and you can use the credits to pay for pizza at local shops.

^^^And if you try to mine Bitcoin, there is nothing tangible that it can be tied to, and I have a hard time with it's non fungible aspect. It's basically an algorithm tied to a theory, but who knows, the world is changing quickly, maybe some one will explain it it in such a way that we'll all see the light.

ppwh: "Whether speculation or demand drives coin prices so high that they're useless for typical transactions. The choice of spending $600 or $2700 in a transaction is kind of useless for many transactions."

No worries, the Bitcoin developers were aware of the need for decimal places and provided 8 of them. So you can trade in as little as one "Satoshi" or one hundred millionth of a Bitcoin. If Bitcoin becomes a million dollar coin one day, then 8 decimal places may be too few, but more could be added with miner consensus or after another one of those coin splits you're talking about.

@25: What tangible thing is US fiat tied too? There used to be a gold standard but Nixon did away with that. At least Bitcoin is "provably" (assuming SHA-256 is secure) hard to create.

@Dougster give me something tangible, that I can touch, none of this is very convincing to me an old school buy and hold type.

I think the fact that they say that even people who are well-read on it can't come up with an understandable explanation is indicative of the problem. How is a currency system with the lowest denomination being $600 or $2700 bills and whose value fluctuates considerably based on Yahoo Finance stories ever going to work after the creators of the pyramid cash out?

@Dougster I get it, but the full faith and credit of the United States still carries water with me, and I still suspect most of our elected representatives although they do seem to be acting out at times, I have a hard time believing that they will default, if that ever happened, there would be a calamity, and the world as we know it will be forever changed.

Hate to break the bad news to you, but Bernanke already admitted that US fiat was just backed by numbers in a computers somewhere.

Dougster --> " got dinged $25 on a $3000 outgoing wire transfer this morning and will probably get dinged $15 incoming. So at least $40 altogether. With some crypto-currencies I might be looking at < $0.10."

^^^ Yes, this, 10X this. I feel like our existing electronic financial infrastructure exists to skim money out of me: percentages, fees. All way out of proportion to the value (to me) they bring to the table. Plus they take advantage of my (financial) ignorance. Though I'm correcting that.

I've said it before and I'll say it again. I like bitcoin because it's peer to peer and lacks all of the fees of the current system. Plus I can accept payments from individual who would rather avoid using the existing system yet can't use cash. I also avoid the exchanges for the same reason. I have yet to exchange actual USD for BTC or vice versa.

@ppwh and people who are well read on quantum mechanics can't come up with an understandable explanation to people without mathematical backgrounds. Does that mean it's not valid?

Just curious: if the fluctuations that @ppwh was talking about subside and bitcoin becomes a stable currency what happens to Fed-level monetary policy? Are we all not fucked if we fall into a recession?

Actually Feynman took it a step further and said "nobody" understands quantum mechanics intuitively. But valid it remains.

I think that "If you're explaining, your losing" applies here.

It's hard to see a compelling reason to put money into a system that has the feel of an 8th grade science project where they say "no worries, we'll just change the rules to make it work really good!!! we are the elite bitcoin miners guild and if we want to extend the decimal place, you're all good!! We even practiced in Second Reality!!!"

Quantum Mechanics can still work even if the ignorant masses don't understand it and wouldn't put money into it based on their current level of understanding.

@Random funny, you should mention that. I was talking just that point with a colleague at dinner last week. One property I like about Fiat is that it can be printed if we fall into a recession. I think the Fed proved themselves to be competent managers.

In the case of Bitcoin, it's inherently deflationary so would exacerbate any recession. There are some coins which are inflationary, but it is not in vogue in crypto-currency circles. I fail to understand why, or why the idea is so repulsive when I mention it.

twentyfive --> "give me something tangible, that I can touch, none of this is very convincing to me an old school buy and hold type."

It's all relative. Isn't this why NFL and MLB players get taken for a ride on many of their investments? They can't sit through an investment or financial seminar or mentoring. Index funds to them is something they can't hold. But restaurants, night clubs, and car dealerships? That's something tangible, to them. They can drive to it; see it; show it to people. And once the athlete gets there, he can tell them, that's where all my money went! How or why, I have no idea. But he sure sounded convincing and he knows my cousin!

This was all sarcasm. Still I don't understand what you guys don't understand about bitcoin.

Second Life, rather. I remember all the talk about how you were supposed to be able to buy prime virtual real estate and then be able to bank when the lower levels of the pyramid came on board. Not sure how that worked out compared to Amway, though.

@ppwh Well I gave you my wire transfer example. Maybe you like giving more money to the banks though, and waiting hours instead of minutes for wire transfers. Me, I prefer lower fees and faster transfers. shrug

Oh, yes, and not being able to do wire transfers on weekends or bank holidays is great, isn't it? Blockchain, by contrast, never sleeps. :-)

@ppwh I think that "If you're explaining, your losing" applies here.

I don't know, man. Hard for me to look at the graph of BTC/USD and see that it is losing.

I have made one wire transfer in the past three years. I am willing to take the $45 hit compared to losing everything I put in when everyone walks away after a couple of years because it's not cool anymore.

ppwh --> "It's hard to see a compelling reason to put money into a system that has the feel of an 8th grade science project "

I'm not sure blockchain seems like an eighth grade science project. It's a little more thought out than that. Maybe I see where some guys are coming from.

From my POV, full faith of the U.S. government doesn't mean much when any time I try to build up assets in USD some unplanned medical bill comes along (twice) and wipes me out. If I'd had them in BTC, I might still have them.

So from my POV, I'll take a chance with this because I've been fucked (over) with what we have. TYVM! ;)

@ppwh I don't see what the big deal is that miner's can change the coin. People would still have to accept the changes, or it would become a worthless fork.

US paper money has changed over time as well. Addition of colors just recently. Other countries have stopped making lower denomination coins (e.g. pennies b/c copper is getting expensive). So, yeah, all money gets tweaked over time. Or has significant changes like the gold standard gets dropped.

@Dominic77, I completely agree with your point about USD.

On the other hand, money deposited in a bank is protected by the FDIC.

It sounds like it is just too damned bad when stuff like Flexcoin being hacked and closing happens:

theguardian.com

And that wasn't the last time:

businessinsider.com

@Dominic77 There are tangible benefits to owning a part of a corporation there is certainty that I can understand, buying an automobile, still as a depreciating asset is still an asset made from steel, rubber and glass, owning a business like a restaurant if managed properly will increase your own personal wealth by providing a stream of income,lots of folks are financially illiterate, and make poor choices with their money, look at strippers some of them make thousands of dollars in a week and still can't pay their bills in a timely manner, I am not saying that bitcoin is bad, or good, I reserve judgement for now, just haven't had anyone explain it to my satisfaction.
@Dougster I saw what Bernanke said a long time ago, but I understand his logic, still there is back-up for the logic that the U.S. dollar is the strongest real currency that has ever existed apart from trading in precious bullion (not actually a currency, even though gold and silver can be minted as a coin) which would be very unwieldy and prices fluctuate from day to day, yes I know the dollar fluctuates as well, but generally when I go to buy a loaf of bread or a car I'll know the cost, and it won't vary like a commodity.

@Dominic: I found the notion of decentralized crypto-currencies exchanges very interesting. Especially if the participants are joining through hidden darknet services.

@ppwh, 8th grade science project? How about you explain how Bitcoin works and we'll all see if you're smarter than an 8th grader.

PS "Oh, no worries, your US dollars are simply no longer backed by physical gold, they're just pieces of paper now. You're all good!!!"

"Oh, we inflated the real estate market and caused a GLOBAL FINANCIAL CRISIS?! No worries, we got this, we'll just print trillions of dollars. They're just numbers in a computer anyway... okay, how many zeros in a trillion?..."

Sounds like a 5th grade science project to me.

@25: Another thing I talked with my colleague about at dinner last week. As the crypto-currency market grows in size the cost of hedging will go down.

Right now, though, I think if you are able to withstand the fluctuations you would be a fool not to accept bitcoin, since it's price is pretty clearly in an uptrend. Apparently many of the companies accept it have no intention of converting it back to fiat or spending it. Just gonna #HODL it themselves.

But you are right, fluctuations, is a valid short term objection to accepting Bitcoin for some. People, absolutely, are working on solutions, however.

@ppwh, 8th grade science project? How about you explain how Bitcoin works and we'll all see if you're smarter than an 8th grader

I'm on the outside looking in, not an insider.

When I hear stuff like the currency being forked, and splitting into Bitcoin cash vs. Bitcoin, it sounds like a bunch of 8th graders who decided to make up the rules as they go along after they got bored of Dungeons and Dragons.

At the end of the day, Bitcoin depends on people paying for it in some other currency (I don't think my landlord is ever going to accept it for rent) Their willingness to do that is going to depend on the kinds of things that I'm bringing up. I don't really care about Bitcoin one way or the other. As someone who would only want to use it as a currency, It seems like pointless risk.

Like I said, if one of the branches of my bank gets robbed they don't close down and tell me that all my money is gone. What benefit does Bitcoin offer if I'm not speculating or making illegal transactions on the dark web?

futuretrackstar -->"Oh, we inflated the real estate market and caused a GLOBAL FINANCIAL CRISIS?! "

Yes, this is how I know lots of people are either shielded from these problems or have different problems than rest of us. Lots of working folks are still underwater from the last housing bubble. Though I knew it was a bubble going into it, but I bought away because it what I was supposed to do and many advised me to do it.

Plus the risks that the FDIC ensures against are the least of my concerns and the least of my risks day-to-day where I might lose my assets. Are you guys only worried about doomsday scenarios and not day to day risks?

Maybe I need to learn how trusts and estates work?

Or maybe we're just like two ships passing in the night?

Dougster --> "Apparently many of the companies accept [BTC] have no intention of converting [BTC] back to fiat or spending it. Just gonna #HODL it themselves."

^^^ Yes! this is the way to approach it, IMO.

To me it's like speaking or writing in a foreign language. There the goal is to learn to THINK in the language, not necessarily translate it back and forth between English, or whatever your native language is.

@ppwh There are non-dark web merchants who accept Bitcoin. Overstock for instance. Uber accepts a competitor: Litecoin. I already mention lower wire fees. Lower banking fees in general. Apparently of no interest to you, but I and others care.

And, even right now, there are jobs where you can get paid in crypto-currencies (and, no not just "dark web assassin"). The money was basically "printed" and nobody ever paid for it with fiat. It's getting more self-sustain as time goes on, but, no, Rome was not built in a day.

@ppwh does bring up a valid point though that there needs to be better security mechanism and education regarding crypto-currencies. Another big problem is the lack of a cancellation window if you send to the wrong party, for instance. All these things are being worked on (Lightning network for instances).

The fact that it is not perfect yet, is not a valid argument that it is all intrinsically worthless. Many of these problems have solutions, and people who provide those solutions are going to be making the big bucks.

To answer the original question, my feeling is that there is a bubble and that within 3-6 months, there will be significant value loss.

The reasons are:

1. Falling consumer confidence in the dark web after Hansa and AlphaBay were taken down: theguardian.com

2. "Bitcoin Foundation boss urges cautious investment" "The head of the Bitcoin Foundation, Llew Claasen, has urged people to invest "no more than they can afford" in the crypto-currency."

bbc.com

That all sounds a lot like the "irrational exhuberance" phrase that was being tossed around by Greenspan leading up to the dot com bubble burst. Together with the Schiller article, this kind of buzz will likely put a damper on speculation.

1. With Overstock.com being the main legit outlet accepting it, there is little reason for anyone other than speculators and Hansa / AlphaBay customers to have bitcoin, so widespread adoption seems pretty far off - especially with the stigma of being associated with illegal transactions.

2. A single employee's computer being hacked or getting a virus resulting in the loss of all the Bitcoins in an exchange doesn't instill consumer confidence. I haven't heard of anything like this happening in a non-Bitcoin context. If it's that easy for a single employee's computer to do this, there is essentially no barrier to an inside job stealing all the bitcoin at an exchange.

The only time I have heard of anything like this at a bank was when John McCain and friends were doing the Lincoln Savings and Loan thing in the 1980s.

Add Microsoft to the list of non-darknet companies now accepting payment with Bitcoin:

reddit.com

My own feeling is that Bitcoin is not a bubble. In fact, I have a hard time seeing how the market cap of the crypto-currency space does not go to at least $1 trillion dollars. If Bitcoin holds it's relative share of market cap that will put it's value around $35,000.

@ppwh >"I'm on the outside looking in, not an insider."

• Translation: "I'm a pussy who makes excuses."

• Translation: "I'm a pussy who makes excuses."

Translation: I don't have any beef with the underlying technology. Rather, pointing out risks involving how the real world does / would interact with the currency.

I have learned a few things from the discussion, like being able to have decimal places and current scalability limits for transactions. With the decimal places, Bitcoin sounds better than I thought.

With the miners being able to set monetary policy, though, that again kind of sounds like you're having an 8th grader who installed the mining software at his school's computer lab making these decisions.

In other words, don't ask fucking questions if you don't want to hear honest answers.

"With the miners being able to set monetary policy,"

Isn't this a very serious problem affecting the widespread adoption of any crypto-currency? The Euro was a failure. For example, how can the ECB set monetary policy for Germany and Greece at the same time -- both of which have very different needs?

Didn't read all the posts, but do these crypto-currencies encourage money laundering? Is there any way to subdue all the wild price swings?

@Random that is what I referred to on the other thread I don't see bitcoin becoming a major factor unless the pick up an underwriter.

^^ sorry didn't see your post @25.

This is all new to me and just trying to use common sense. Governments around the world will have to step in if money laundering is a big problem or if it prevents individual countries from setting their own monetary policy.

Here is the correct answer: no, Bitcoin is not a bubble; Bitcoin does not have an appearance similar to these: google.com