[OT] Just How Undervalued is Bitcoin?

Way beyond my pay grade.

To get a bit technical, I should say I see the value of the crypto currency market space going to at least $1 trillion dollars. I'm not sure where Bitcoin will be in it, however. It definitely has the name recognition advantage, and grand daddy status, but it is bumping into some scaling problems. These may be fixable with something called a Lightning network, but that is a complex piece of architecture and it remains to be seen if they can pull it off. But it doesn't really matter. If that fails coins which had scaleable designs to begin with are ready to quickly move in to fill the gap.

So if you prefer to answer with crypto space market cap, go ahead.

I'd be interested to know how you can value market cap without an underwriter?

Bitcoin will reach $1M per coin because the market says so, not because an underwriter thinks so

$1 million per coin would mean about $21 trillion market cap. Not completely impossible, but an ambitious target. Here's an article by BI comparing that to all the money in the world:

businessinsider.com

"All money" in the world (read the article if you want their definition) is listed as $84 trillion. So Bitcoin would have to capture 1/4 of that.

IMO, the fundamental value (as opposed to the market value at a specific point in time) of Bitcoin (or any crypto for that matter) is somehow dependent on the transaction volume of the network. One could imagine a function which returns the fundamental value of a cryptocurrency when given the, say, 30 day simple moving average of the daily transaction volume as input. When the input is 0 (i.e. literally nobody uses it) then the output is $0 per unit of cryptocurrency. When the input is on the order of the transaction volume handled by VISA, the output of this imaginary function is much larger than the current value of 1 BTC... perhaps the output would be $1,000,000, idk. I suppose one could fix the maximal extreme end of the function to the scenario in which all government currencies have gone out of use, and there is one universal cryptocurrency network that everybody uses. Then, the fundamental value of one unit would be the world's total assets divided by the number of units of the cryptocurrency... or something like that. I don't really know, I'm not an economist.

@crazyjoe So you believe that bitcoin is going to strengthen through pure capitalism, with no actual backer or market maker, then it will fluctuate wildly with such volatility that most will be scared off.

Well Dougster, and my figures are probably wrong since I just googled them, if there is $5b volume in BTC trades and a $53b securities market. If you scale the current exchange rate 10X you get $35,000 for a BTC. So I can see it. Not sure if that's your line of reasoning, I'm new at all of the finance and Econ stuff.

At lot of he volitility is is the exchange rate is due to all of the speculative trading and investing. So that's to be expected and as it turns out necessary. The publicity and network effects of bring the speculators on board is needed to help promote its acceptance.

Once more people are using BTC to actually buy stuff instead of just investing we will probably see more stability. But I doubt we'll see as much stability as we see with central planning, banking, and policies. But that's sort of the point and the true end game.

The true end game being a world with diminished need for central banks. Or at least the relationship will evolve.

^^^ Not in this lifetime freind as long as there are countries out there like the Chinese or the Russians you aren't getting rid of no central banks. Hate to tell you this but as bad as they are tha alternative is barter system and we go back to the 3rd or 4th centuries.

^^^ U da 'mane 25!! I laugh at all those who state the US dollar is a fiat currency. It's like yelling "fire" in a crowded theater except there's no consequences because nobody heads for the exits.

So much of the gold market is buried in Ft. Knox, so if all hell broke loose who's currency are you going to rely on, the rubble, the pound, the Euro, the dollar(US), the peso, the Franc? Lol!! The default will be precious commodities after currencies, then perishable and non-perishable goods. But essentially these (currencies and commodities) are backed by the US political presence, so someone that states the US dollar is a fiat currency is essentially ceying out bullshit because there's no consequences when nobody runs for the exits. If people actually do respond to the word "fire", they sure as hell ain't running to shore up cryptic currency. He'll trade will essentially stop if that happened, which is why tangibles will always be a safer haven than a currency, even a cryptic one. Never say the US dollar is fiat, unless you live outside of the US. Yes I wrote it, you're unpatriotic if you believe in a fiat currency.

How is the USD not a fiat currency? I don't think there is any controversy in saying that it is.

@25... the market speaks for itself

^^^Yes it does, and it very often speaks to us as well, how we choose to listen, is where the discussion begins.

Dougster, then every currency is fiat if you're stating the US dollar is.

AFAIK, there are no countries that back their currency with anything besides words. So, yes, all fiat.

Depends on what you mean by "is", ala Slick Willie style.

True fiat means arbitrary. The dollar floats, albeit way less numerically than the Yuan or cryptic currency. However there is more behind it than words when you have over 25% of the worlds GDP using it domestically, without regards to how its denominated against other currencies abroad when business gets done over seas.

It's benchmarked against commerce, so if it really was a true fiat, then commodities would be highly volatile from day to day, because you can really price the dollar to baskets of commodities; metals, lumber, livestock, and real estate. Since a house today may cost $250k, it still will be priced the same next week or in a few months with CPI in mind. It doesn't go from $250k to $350k and then back down to $150k within a year. I believe we are debating to what degree the term "fiat" means, or "is".

I don't think we are debating anything. Nobody denies that the USD is a fiat currency:

Fiat means basically by order of in the US our paper money is regulated by the Fed Reserve which acts as the central bank and is a quasi government agency, As far as I know all money used in the world today is Fiat Currency.

Granted it was a different time, but the U.S. was probably closer to pure capitalism in the 19th century. Didn't I read on TUSCL that the Great Depression was likely worsened and extended due to interference? Wasn't part of the causes for the 2007-2008 financial crisis, the worst since the Great Depression, caused over regulation in some areas and none in others?

Maybe true lessez-faire isn't possible since the world is more global, more trade, more state and military power, and less isolationist.

But does the Fed have too much power, unconstitutionally? Don't they fuck up as much as they get right? What's FAIR versus what's FREE? Does the current Fed+POTUS strike the right balance? Is central banking a capitalist or a communist concept? We got it from the King of England, no? Never said they can't have gold reserves. But the central manipulation?

/1. "Centralization of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly."

/2. "To coin Money, regulate the value thereof, and of foreign Coin, and fix the a Standard of Weights and Measures;"

Where does the Fed fall? Constitution or Manifesto?

Reference: archives.gov (Hamilton, Madison, Jefferson; 1787) marxists.org (Marx, Engels; 1848)

I don't know if you want to argue housing prices. Mine are still fucked up from the artificial value run up to the market readjustment following the meltdown.

The prices are close to real value today but still maybe 2X what they should be if the Fed was playing with interest rates. A $400,000 house bought on 3% down might only be half that if there wasn't so much credit manipulation.

A lot of a homes value today is its ZIP code plus the school district its in. Decouple the schooling with freedom and vouchers and the prices would be closer to real market clearing prices, with 20% down, and local bank holding the mortgage instead of these crazy mortgage investment instruments sold by too-big-to-fail national banks.

Most families buy these homes because they are trying to give give their children a good educational foundation for life while still living in a safe area. Hence the bidding wars, up or down. Education is sold as the investment for future opportunity.

So, we don't have currency backed by precious metal anymore. Most ( all ?) currency is now fiat currency, backed by a government promise. Even Venezuela.

So, what gives bitcoin its value ? Is the belief that bitcoin has value the only thing that gives it value ?

I really don't understand any of this. At first blush, I don't see why anyone would view crypto currency as an investment or even an asset if there is nothing behind it.

I totally deny the dollar is a fiat currency, because it isn't arbitrary. It's all tied to policy and government, both monetary and fiscally. Wait to see what tax cuts come along and what that does to inflation/values. If your a proponent of AI creating a basic income, that will devalue the currency more than anything, yet that isn't arbitrary by any means. Fiat?

Meat72, the US dollar is fiat currency. Please look up the definitions of the words "fiat" and "arbitrary." Please read about the difference between "commodity money" and "fiat money."

P.S. the US dollars are arbitrarily designed; the choice of which person's face appears on the front of the paper bills is completely arbitrary with regards to the decree that the paper bill is, by formal declaration (i.e. fiat), money.

P.P.S. gold was not arbitrarily used as commodity money for thousands of years. Rather, the unique physical and chemical properties of gold make it suitable for use as money.

Everyone using the term "fiat" for the US dollar is using the term very loosely. Let me be clear, Bitcoin is a fiat currency and the dollar is similar to a fiat currency. The dollar is representation currency, basically backed not only by government but baskets of commodities and of course goods and services.

You can debate all day long if the US dollar is fiat currency, because it is similar in nature. The Zimbabwe currency was a fiat currency a decade or so ago and hyperinflated because it didn't represent anything due to loss of political presence. That is what a true fiat currency looks like.

For those of you who want to dig into the weeds and know the details of "fiat", I can only recommend you to use the term correctly. Otherwise, framing the US dollar as fiat is total embellishment beyond proportions of sanity. It's not an attack of intelligence on anybody, other than using the term loosely for mere presence of fear. The term fiat to the US dollar is the same as the guys like Ron Paul and Porter Stansberry stating you should put all of your money into gold and precious metals. It goes too far !! That's all.

To quote treasury.gov (2011), \quote Legal Tender Status ... Federal Reserve notes are not redeemable in gold, silver or any other commodity, and receive no backing by anything This has been the case since 1933. The notes have no value for themselves, but for what they will buy. In another sense, because they are legal tender, Federal Reserve notes are "backed" by all the goods and services in the economy.

\end quote

The notes have no value for themselves. The notes have no value for themselves. The notes have no value for themselves. The notes have no value for themselves. The notes have no value for themselves. The notes have no value for themselves. The notes have no value for themselves. The notes have no value for themselves. The notes have no value for themselves. The notes have no value for themselves. The notes have no value for themselves. The notes have no value for themselves. The notes have no value for themselves. The notes have no value for themselves. The notes have no value for themselves.

Is Dr. Phil a doctor?

Is Donal Trump a republican?

Both terms "doctor" and "Republican" are overstated. I think my points about the US dollar being labeled a fiat currency are pretty good.

@Meat Fiat simply means by order of. The question is who's word is good, that is what gives money its value. Our money is backed by the full faith and credit of the United States of America, my initial question was who backs Bitcoin and how do I know I can trust that backer (underwriter, Central Bank, market maker, Etc.)

@FTS I meant to respond to your statement as well the US Treasury prints money that is backed by the full faith and credit of The United States of America and can be used to purchase any goods and service that are produced legally within that economy.

Any time I've used Bitcoin, the two parties (me and some guy, we checked the exchanges) figured a ROUGH value of 1 BTC we could agree on (in USD), then did the exchange. Idea was the person ending up with BTC had to have reasonable faith that he could change them (soon) either for USD at an exchange, or by repeating the barter process we just did.

Without exchange that exchange BTC for USD, I bet we'd be back to the days of Laszlo bartering 10,000 BTC for 2 large pizzas again.

I was talking with the Older Indian gentleman who runs the convenience store near me a few years back. He had no problem accepting BItcoin using the same process: he wouldn't run it through his PoS just yet, but we could run it through our phones or computers, barter out a rough BTC value between like two of us -- for this pile of groceries will you take 0.0045 BTC? OK, deal -- , then do the exchange. Wait the few minutes for it to clear, then we'd be good.

Some places officially or unofficially take PayPal and many take Apple Pay (really NFC like MC PayPass). Though those are all USD. But many are more open to alternative methods of payment these days.

Rather than full faith and credit of the United States of America, we just use off he cuff rough values, ime, with Bitcoin. Substitute Pokemon cards for Bitcoin, and it's mostly the same.

Twentyfive, my wife jokes that if someone were to steal or rob my Bitcoin, she thinks I wouldn't be able to talk to robbery Dept at the police station I'd be directed to the detective in-charge of the-theft-of-Pokemon-cards Dept. Lol!

Remember Mt.Gox? The defect Bitcoin online exchange formerly in Japan? I think all of the securities traders for Bitcoin back in the day felt Mt.Gox invoked images of Fort Knox, so they trusted it. But really MTGOX initially stood for MAGIC THE GATHERING ONLINE eXCHANGE, as in magic cards, like Pokemon cards. Hence my wife's joke.

@Dominic if the bitcoin is legal to own in the UUA then the PD have an obligation to investigate and attempt to recover your property but were bitcoin to collapse who is going to make you whole, IMHO no one.

Correct, I think we'd be screwed. That's why I tend to get rid of mine (historically) pretty fast. I always felt $200USD for 1BTC was a fair price. I can't explain the current value.

@twentyfive, that's reassuring to read that the PD would help be out in a situation of Bitcoin theft or robbery.

^^^^So far neither has anyone else until there is an understandable explanation of the value of Bitcoin I'll be a watcher of that market, but not a participant.

reddit.com

Tulips ?

@FTS I read that whole thing and all I take from it is that the Bitcoin Proponents think it's a money tree and bears more fruit as it ages, sorry but if anything that raises my scam-o-meter to unprecedented levels.

Bitcoin has value because there is an unmet market need for a decentralize wallet, irreversible, unfreezable, payment mechanism. The merchant banks who handle MC, Visa, AmEx, Diners Club, etc. wouldn't accomodate the demands, so the market built one itself. It just so happens to have modest transaction fees, too. All things equal, I'd rather have one with USD on top of blockchain but until that is possible .. BTC will do.

So, when MC starts Zitcoin and Amex starts Quitcoin, what happens to the value of Bitcoin currency ?

Interesting times! Let the market decide!

@mark94, I do t have confidence the incumbents are willing to meet the market demands. Or that the US Executive branch will let them.

^don't have confidence

@Mark94, nothing happens.

Okay, I have to correct myself. Nobody questions that USD is a fiat currency *** except for Meat.

Is Bitcoin a fiat currency? I would say it is, because, at the end of the day, there is nothing backing it other than a good reputation and growing acceptance and guaranteed production schedule.

Why does the USD have value even though it is Fiat? Good track record, strong economy backing it, and competent stewards like the Fed, and US government. (Or should I say relative to other countries, at least? :-) )

Why does Bitcoin have value? Good track record, growing economy backing it, competent stewards. But, mostly, I think because, assuming SHA-256 is secure, it has a guaranteed production rate which nobody can do anything to fuck with.

Dominic77: "Let the market decide!"

I'm with you and crazyjoe on this one. Market seems to be speaking pretty loudly and clearly on this one.

For me cryptocurrency is a one way street right now. I put in my original investment (x). Things went well so I tripled up to 3x put in. Now with gains I'm at about 7x. I did take out a bit of money 0.2x to convert back to USD but only reluctant and as part of crypto currency related venture.

Oddly enough, a big enemy of Bitcoin right now is the fact that it appreciates so fast, that people are reluctant to spend it. See Gresham's law.

Who's buying the dip?

Same question. If it turns south, is there anything that would stop a panic. Market maker supporting it ? Assets backing it up ? Could it drop just as fast as it climbed ?

A market maker isn't going to stop anything that wants to go down from going down. They are just their to profit off the spread: not speculate.

I would say all the buyers who missed the initial run ups eager to get in on a decent price would be the support. Russia, China and other countries also certainly have an interest in seeing a competitor to the USD.

I didn't change any position this week. Haven't for a little while now. I like my current allocations. I was never into any ICO stuff to begin with.

I'm buying plumbing supplies, with all the shit breaking around here, TX, and the southeast.

Bitcoin has dropped about 20% since Sept 7, a week ago. How is everyone thinking now ?

Just bought some more.

The fiat currency thing still has me chuckling. Everybody knows that part of the dollar is pegged to intellectual property rights along with all other things commerce both domestically And globally? Commodities(natural resources), entertainment(think Disney), policy, etc., etc., etc......and constitution.

Bitcoin is pegged only to intellectual property rights, and it is not very well diversified in that right. It's sole bet is anti-government. Think about that for longer than 1 second, maybe even two seconds so you can let that sink in. For your sake, I hope I'm wrong.

Intelligent people are there own worst enemy. They push the envelope in non-rational behaviors. They anchor to an idea, which is a bias much like confirmation bias. When presented with new ideas, or even old ideas, they ignore it and rationalize things the way an intelligent person wants to see it to be.

Thomas Jefferson, Ben Franklin, and even Albert Einstein were smart enough to understand their limitations. An individual is only as smart as him/herself. To diversify amongst others is much wiser. Therefore you will likely never beat out over your lifetime and indexing or buy and hold the market approach. Bitcoin is such a small part of the market, you're buying a lot of hope at this point. My opinion of course...

Meat72: "Bitcoin is pegged only to intellectual property rights"

Say what? It's all open source. People copy from each quite freely. I don't think even the major protocols (e.g. the ZeroKnowledge ones) are close. It won't matter anyway, b/c people who just use the patented idea since who are you going to sue? The blockchain? How you going to force it to pay.

So I got carried away with stating "only to intellectual property rights". It is admittedly a new concept to me; who knows who else.

Huge comeback in the last 2 trading days, where the drop can almost be eliminated after Dimon's blitz against cryptos!

Oh, baby! They China is only responsible for 15% of crypto trading. Their crackdown should just hasten the development of decentralized exchanges like BitSquare.

Lastest rumor tonight:

The Chinese are getting wise and the PBOC is recommending they launch in their own national crypto-currency asap to try and dampen the rise of Bitcoin.

I don't think a Chinese crypto currency (Yuan backed) would cut it, however, because China just has too much debt (if you thought the US was bad!) and due to the inflation rate. They've had trouble selling bonds before.

Only a Fed crypto currency, or, much weaker choice, Euro crypto currency would cut it, IMO. I don't think the US is an any danger of moving quickly with that clown Donald Trump running the circus, so I guess that would leave it all up to Europe.