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Basically all monetary theories claim that
They agree in general that the increases in the quantity of money lead to higher prices. But you may look specifically into the quantity theory of money (so-called the Chicago school of economics also known as monetarism) which uses the Irving Fischer Model. Apart from that, it directly follows from the concept of money, i.e. the input of excessive amount of money into the system will cause the prices to rebalance at a new, higher level. Competing theories (e.g. monetarism vs keynesianism) differ in how the new money propagates through the economy and in what degree it affects the economic activity and unemployment (see the so-called "Treasury view" to get an idea)
Thank you for your response. Some of the sources i already knew off, but i actually can't remember reading about the quantity theory of money (shame on me). So thanks for that one, and thanks for giving serious responses, i really feel like i am learning something from you. But do you think after a few discussions that you atleast understand me more in my view of fiat money as containing elements of speculation? Even if you don't agree it would be fun if i atleast made it possible for you to see my point of view. Do you think that the quantity theory of money can be used to practically predict changes in the currency market, or do you just see the theory as a general means of explaining what should move currencies? It largely depends on the specific currencies We all very well know how George Soros had shorted the British pound in the early 1990's and earned something like 1B dollars on the deal. So to say that currencies are not prone to speculation would be flat-out contradicting reality, obviously. And it is still more so in respect to weak currencies like the Russian ruble, for example, which can in fact be first heavily inflated ("bubbled") by foreign investors (like what seems to be happening to it right now) and then suddenly crashed (what is known as "carry-trade"). But ultimately, the final destiny of a currency is still determined by the financial policies of the government in respect to its currency (see Zimbabwe) Regarding practical importance of monetary theories, I don't really think that they have any such importance. As I said in my previous post, they all agree that more money means higher prices, and that's pretty much all you need to know about money at this level if you are looking for speculation and trading with currencies. You should be interested in other factors which determine the currency value (e.g. FED interest rates, reserve requirements, monetary aggregates and similar gory details). Monetary theories are for purely academic interest, not for application in trading. In other words, you could be a very successful currency trader and have never heard such names as Milton Friedman or Friedrich Hayek Yes well that was my orginial point. But i must have misinterperted your earlier post when you wrote "I think that no, the fiat money value doesn't come about via speculation. But I'm still curious how you can even imagine that."But as you mention, the famous George Soros did manipulate the exchange with speculation, having a practical effect on the value of the currency. Thus showing that fiat money's value is heavily influenced by speculation, i am confused to where you stand on the issue now? I see contradictions in your original posts with what you write now, so please clarify if there's something i missed. As you said earlier you had trouble even imagine how i could believe speculation being a factor, but now saying its obvious that it is? You also wrote " I suspect there cannot be bubbles of that kind with fiat currencies. The examples you give refer to severe currency devaluations. Obviously, the latter have nothing to do with speculative bubbles, though the end result is essentially the same (i.e. dramatic loss of value)"
Well first of all, as i said earlier this was a case of hyperinflation. Hyperinflation is very connected to bubbles witch would dissprove that statement(IMO). You also mentioned earlier that Germany's case with hyperinflation was caused by them devaluing the currency. The sources i can refer to all say that Germanys hyperinflation was caused by Germany printing absurd ammounts of paper money to pay of the debt they had after WW2. Thats not really a devaluing (devaluing refers to when the government delibratly changes the price of a currency) but rather a deappreciation in my book. You do mention the printing of money from Germany, but suggest that the money printing was a deliberate act from the government to devalue the mark. I dont't really agree with that. How would you then define a deapreaction in respect to a devaluation? In my opinion the Germany case was a deappreaction of the mark, the England case i mentioned earlier IMO is a devaluation of the pound. |
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Hello everyone. There is much discussion around the price of bitcoins. Some seem to believe it could fly to a million, while some believe its just a big speculation bubble ready to burst. My personal theory is that cryptocurrency is not the bubble, but rather the needle that will burst the fiat money bubble. Trough history we have always had an easy way to attribute value to things without it. Those who believe that fiat money is the only true way often attribute their opinion to the fact that fiat money is substainsable because of its centralized nature and its history of being used as a represantation of value. The fact that bitcoin was created in the aftermath of the 2008 financial crises clearly shows it's intent. I believe Satoshi saw how a centralized regulated market can't be substainable thanks to the egotistical and evil sides we humans all posses. Decentralized currencies will IMO be the future. I can't peg bitcoin to a certain price it will reach in the future as i usually don't speculate that way, but rather i just develop a bias on a subject and try to indentify the crowds bias as this is what acctualy IS the trend. The trend for decentralized currencies is bullish overall, with some currencies being more exciting then others. Invest in the cryptocurrency you believe in and do your homework, lets bring the fiat-money world down once and for all!!  Please share your opinion on the subject, this is my first post and just wanted to share my thoughts, thank you =) LazyTurtle I dont agree with the statement that there is a fiat bubble and that bitcoin is the needle that will pop it. This will not be the case and bitcoin along with other cryptocurrency will not going to go against the fiat currency but rather they will complement with it. Bitcoin will complement fiat currency and will carry its value to the digital realms that fiat currency has never been before. How would you see this compilation? Would it be a coexistance between physical paper money and crypto currencies? Not really having anything to do with each other but can still live in peace with another perhaps? Or do you believe more in a sort of merge were they kind of become the same thing? If it is a sort of merge you believe in, would that not basically mean that fiat money becomes crypto currency, effectively dubbing crypto currencies as the true winner, so in a sense bursting the fiat money bubble? In that sense cryptos would be the needle that burst the bubble as fiat money as we now it would stopped being produced and the value of the paper would decrease. Perhaps calling it a bubble is a bit dramatic, but my definition of a bubble is short and sweet that something gets a value without a real correlated physical value ( speculation). Fiat money fits into this ( IMO), so does tulips, internet services etc... But please elaborate your view on how you think crypto and fiat will work together or against one another, really interesting! =) And sorry for spelling, just took a wake & bake, a bit fuzzy in the brain.... |
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In this discussion, many interlocutors have already given many proofs that previously in the past, money used by some countries has become worthless, because some different and better currency have taken its place.
In my opinion we will see exactly the same thing about fiat money now, i think that the cryptocurrencies will have a really big chance to replace such a strong fiats as USD or GBP, with support from a big part of society.
We already have seen incoming creation of ticincoin, which is going to be used in the specific region of Switzerland.
Hello! Learned a new word now, interlocutors haha had to google that one  Yes history truly shows that fiat money is unstable imo. We as a society always have had a hard time learning from our history. We do have a tendency to repeat the same stupid mistakes over and over again... Didn't now about ticincoin, gotta check that out! Perhaps a adoption between the current fiat money and the crypto money could be possible. Ticincoin seems to be somethings similiar, a "regional cryptocurrency" if im not mistaken? As i said in a earlier post, Bitdollars and Biteuros are perhaps in our future. Every country with their own local crypto currency, avaiable for exchange to other cryptocurrencies (like today's fiat money) but no bank or government controlling demand/supply etc.. Is this basically what ticincoin aims to be? Could you please give me some good links that gives info on ticincoin? Having trouble finding info on english just found some websites writen in swiss haha  |
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Right now it is (for the most part, at least)
Bitcoin and other cryptocurrencies fit well into the definition of a financial bubble. I could even claim that Bitcoin is a sort of tulipomania. Just like tulips, bitcoins are useful for some purpose, namely, for transferring value around the world while completely bypassing centralized (real controlled) entities like banks, but Bitcoin current price is by no means determined by this utility. Most of Bitcoin value today comes from sheer speculation. Whether Bitcoin bubble is going to pop eventually or its real use as a currency will finally match its use as a speculative vehicle is not clear as of yet
Good answer, always fun to hear others opinion. =) I agree with you, bitcoin does fit well in the definition of a bubble as it is completly speculative. But what about fiat money? We have seen again and again trough history how fiat money has just blew up in a bubble, happend with the german mark after world war 2 and then the zimbabwean dollar. Does this not show that fiat moneys value also comes trough speculation? the only diffrence being that it can much more easily be controlled, manipulated and abused to hurt individuals, while cryptocurrencies also are speculative in there value, it does have the security fiat-money does not against corruption and protecting the individual I think that no, the fiat money value doesn't come about via speculation But I'm still curious how you can even imagine that. It is more or less clear how people speculate with bitcoins (basically, "buy low, sell high"). It is possible as long as Bitcoin price is rising, i.e. new users constantly bringing their hard-earned dollars, euro, or whatever to the market and buy bitcoins in the hope of selling them at a higher price. I suspect there cannot be bubbles of that kind with fiat currencies. The examples you give refer to severe currency devaluations. Obviously, the latter have nothing to do with speculative bubbles, though the end result is essentially the same (i.e. dramatic loss of value) Well you are assuming two things here and i will try to give you my opinion. Let me try and explain why i can imagine fiat money being a speculative bubble, english is second language so give me a break on the spelling. =) Your first assumption that fiat money value is not a result of market speculation, could you elaborate what you believe are the true factors for a currencies value? You seem like you now your economics and i am always eager to hear everyone opinion Sorry, I didn't read the rest of your post And I hope that someone did that (instead of me) so your efforts haven't been spent in vain (though I may still read it later). Regarding this question, specifically, I already answered it before, and I think that the answer can be reduced to how value of a currency is determined as such. In fact, it is determined arbitrarily when the currency is first bootstrapped. To make it handy and usable, its basic units as well as the number of these units in total are chosen in such a way that the lowest possible denomination (say, halfpenny or cent) would be enough to buy an item which has the lowest possible value. A box of matches is often used as such an item. After bootstrapping the currency, the long term value of its unit (i.e. how much you can buy with, say, 1 dollar) basically depends on the relationship between total amount of that currency in circulation and the quantity of goods produced as well as the amount of services provided Well it's to bad you didn't read it you could have learned someting, it isnt that long  like Germany and Zimbawe never had a devaluation, but hyperinflation, kind of important fact you got wrong and you can always learn something! As I know it, currencies in these countries were deliberately devalued by excessive printing of money that led to hyperinflation. I'm not much interested in what happened in Zimbabwe (I mean specific details, but it looks like they had incompetent and corrupt government). Germany was obliged to pay out heavy reparations after it had lost in WWI, which it simply couldn't physically pay out (and which it didn't pay out in the end), so hyperinflation caused by massive devaluations of the German mark was an expected outcome. You may want to read The Economic Consequences of the Peace (1919) by John Keynes where Keynes predicts the economic chaos in Germany which was going to follow the Versailles peace treaty of 1919 Could you please give me your sources that show that goods and money circulation have been the deciding factor for currency value? Basically all monetary theories claim that They agree in general that the increases in the quantity of money lead to higher prices. But you may look specifically into the quantity theory of money (so-called the Chicago school of economics also known as monetarism) which uses the Irving Fischer Model. Apart from that, it directly follows from the concept of money, i.e. the input of excessive amount of money into the system will cause the prices to rebalance at a new, higher level. Competing theories (e.g. monetarism vs keynesianism) differ in how the new money propagates through the economy and in what degree it affects the economic activity and unemployment (see the so-called "Treasury view" to get an idea) Thank you for your response. Some of the sources i already knew off, but i actually can't remember reading about the quantity theory of money (shame on me). So thanks for that one, and thanks for giving serious responses, i really feel like i am learning something from you. But do you think after a few discussions that you atleast understand me more in my view of fiat money as containing elements of speculation? Even if you don't agree it would be fun if i atleast made it possible for you to see my point of view. Do you think that the quantity theory of money can be used to practically predict changes in the currency market, or do you just see the theory as a general means of explaining what should move currencies? |
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Hello everyone. There is much discussion around the price of bitcoins. Some seem to believe it could fly to a million, while some believe its just a big speculation bubble ready to burst. My personal theory is that cryptocurrency is not the bubble, but rather the needle that will burst the fiat money bubble. Trough history we have always had an easy way to attribute value to things without it. Those who believe that fiat money is the only true way often attribute their opinion to the fact that fiat money is substainsable because of its centralized nature and its history of being used as a represantation of value. The fact that bitcoin was created in the aftermath of the 2008 financial crises clearly shows it's intent. I believe Satoshi saw how a centralized regulated market can't be substainable thanks to the egotistical and evil sides we humans all posses. Decentralized currencies will IMO be the future. I can't peg bitcoin to a certain price it will reach in the future as i usually don't speculate that way, but rather i just develop a bias on a subject and try to indentify the crowds bias as this is what acctualy IS the trend. The trend for decentralized currencies is bullish overall, with some currencies being more exciting then others. Invest in the cryptocurrency you believe in and do your homework, lets bring the fiat-money world down once and for all!! Please share your opinion on the subject, this is my first post and just wanted to share my thoughts, thank you =) LazyTurtle No body know the future. But not so sure about bringing down over 2000 years old system. LOL. 2000 y/olds system vs 9 y/olds system  . Yes, the trend bullish for now, but in trading something fly too high will see below the bottom. Many theory prove this, Fibonacci, Ganns. Once this cryptocurrency reach it saturation stage, i can't image what will happen with all coins. Too expensive, in this realty world supply and demand most important thing for business. If no body can afford, then get ready to close your shop. I think cryptocurrency good for short term investment 1-3 years. Please do some research before making any decision to invest your money. Well 2000 years of existence yes, but fiat money certainly have had its crashes during this time, so to speak of this 2000 year old time as a stable period is wrong. I dont really have the time to go into details, but since the beginning fiat money have lost their value and failed again and again. Just because we continue to use a failing system it does not mean that it makes it a good system. - The denarius, the roman currency, one of the earliest fiat money ever in usage basically lost all value.
- When china first adopted paper money in the 11th century, where the chinese government emitted so large quanties the value just went away.
- France adopted paper money, locking them to coins at the time. They emitted to much paper money that was not backed up by coins, and so the money went useless. They acctually did this more then one time, the second time the paper money was called assignats. The end effect was the same, inflation to high rendering the fiat money useless as it has no true substansiable backup.
So if cryptocurrencies would take over and render fiat money value useless, it would certainly not be the first time fiat money loses its value, but perhaps the one with the biggest impact. Ill advise you to do some research on the 2000 years of "working fiat money". I dont really see time as a factor here to be honest. Who cares if one system is 2000 years old, and one is 9 years old? you want to use the one thats best for you not the age of it. I mean torture is 2000 years old, but lie-detectors are only a few years old, the world adapts and old systems disaappear. Its the nature of the world I think cryptocurrency is a really good long term investment, but time will tell. Thanks for your response m8. =) |
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No one can predict what exactly will happen in the future. In the event of a nuclear war, they can turn off electricity and the Internet, no currency will have value.
I wouldn't say no currency would have value in this situation, but at one point their will be something that rises above all the be worth something, the gold companies will say its gold, silver companies will say its silver, and so on and so forth. But yes, at some point all fiat-currencies are going to have to crash and we just have to wait for this to occur. I think that by the time this happens we're not going to even be able to use Bitcoin as we've entered a time where the internet and infrastructure has been destroyed (this is if fiat dies too) Good point. Such a situation would be extreme and call for extreme measures. Value probably in such a situation would return to the basics, food, shelter etc... Exciting to see tough witch currency will hold the most value the longest, IMO fiat money is pretty weak in that regard if you compare to other resources that currently hold value the same way fiat does. |
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Right now it is (for the most part, at least)
Bitcoin and other cryptocurrencies fit well into the definition of a financial bubble. I could even claim that Bitcoin is a sort of tulipomania. Just like tulips, bitcoins are useful for some purpose, namely, for transferring value around the world while completely bypassing centralized (real controlled) entities like banks, but Bitcoin current price is by no means determined by this utility. Most of Bitcoin value today comes from sheer speculation. Whether Bitcoin bubble is going to pop eventually or its real use as a currency will finally match its use as a speculative vehicle is not clear as of yet
Good answer, always fun to hear others opinion. =) I agree with you, bitcoin does fit well in the definition of a bubble as it is completly speculative. But what about fiat money? We have seen again and again trough history how fiat money has just blew up in a bubble, happend with the german mark after world war 2 and then the zimbabwean dollar. Does this not show that fiat moneys value also comes trough speculation? the only diffrence being that it can much more easily be controlled, manipulated and abused to hurt individuals, while cryptocurrencies also are speculative in there value, it does have the security fiat-money does not against corruption and protecting the individual I think that no, the fiat money value doesn't come about via speculation But I'm still curious how you can even imagine that. It is more or less clear how people speculate with bitcoins (basically, "buy low, sell high"). It is possible as long as Bitcoin price is rising, i.e. new users constantly bringing their hard-earned dollars, euro, or whatever to the market and buy bitcoins in the hope of selling them at a higher price. I suspect there cannot be bubbles of that kind with fiat currencies. The examples you give refer to severe currency devaluations. Obviously, the latter have nothing to do with speculative bubbles, though the end result is essentially the same (i.e. dramatic loss of value) Well you are assuming two things here and i will try to give you my opinion. Let me try and explain why i can imagine fiat money being a speculative bubble, english is second language so give me a break on the spelling. =) Your first assumption that fiat money value is not a result of market speculation, could you elaborate what you believe are the true factors for a currencies value? You seem like you now your economics and i am always eager to hear everyone opinion Sorry, I didn't read the rest of your post And I hope that someone did that (instead of me) so your efforts haven't been spent in vain (though I may still read it later). Regarding this question, specifically, I already answered it before, and I think that the answer can be reduced to how value of a currency is determined as such. In fact, it is determined arbitrarily when the currency is first bootstrapped. To make it handy and usable, its basic units as well as the number of these units in total are chosen in such a way that the lowest possible denomination (say, halfpenny or cent) would be enough to buy an item which has the lowest possible value. A box of matches is often used as such an item. After bootstrapping the currency, the long term value of its unit (i.e. how much you can buy with, say, 1 dollar) basically depends on the relationship between total amount of that currency in circulation and the quantity of goods produced as well as the amount of services provided Well it's to bad you didn't read it you could have learned someting, it isnt that long like Germany and Zimbawe never had a devaluation, but hyperinflation, kind of important fact you got wrong and you can always learn something! Could you please give me your sources that show that goods and money circulation have been the deciding factor for currency value? I have to say that i am almost daily discussing currency moves with banks and hedge funds, and i have never acctually talked to someone that believes these factors truly determine currency value in the practical world, perhaps it works in theory but i am speaking of what ACCTUALLY happends with the value, not what should happend. I have tough read quite a few that prove them wrong, i would recommend Engels research work, ill return with the exact papers and provide you my sources that i base my opinion on, mostly swedish unfortuntly but for now i'll just show the english one's.. If currency value truly is free of speculative impact, this correlation you describe should be relatively easy to prove with a econometric model as goods, services and money supply are pretty easily followed (GDP etc). If this were the case, predicting the forex market would be quite easy. I am always open to learning and can easily accept when i am wrong, but i need more proof then you just saying it like a fact and not a opinion as i have read very much on the disappoving of currency value being solely effected by goods, services and money supply. I also recommend you read what i wrote earlier, no point discussing if you wont even read the discussion, and please dont forget to supply your sources, thanks m8! =)
My sources i recommend you check out. I have more i just plucked the most recent ones i read that speak against your theory of money supply, goods and services.Jean-Philippe Cayen, Donald Coletti, René Lalonde, Philipp Maier What Drives Exchange Rates? New Evidence from a Panel of U.S. Dollar Bilateral Exchange Rates, June 9, 2009 Jeannine Bailliu,Michael R. King What Drives Movements in Exchange Rates?, 2005 David Hauner, Jaewoo Lee, and Hajime Takizawa, IMF Working Paper: In Which Exchange Rate Models Do Forecasters Trust?, 2011 Neroli Austin and Geordie Reid, RBNZ: NZSIM, A model of the New Zealand economyfor forecasting and policy analysis, 2017 |
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No one can predict what exactly will happen in the future. In the event of a nuclear war, they can turn off electricity and the Internet, no currency will have value.
That is so true, and thats why i own a safe at home stocked with gold, silver and canned food haha! Diversify, never believe in just one thing as nobody can ever now Just don't let anyone know. Study shows that most preppers wouldn't survive with all their stacked food and gadgets because in case of a collapse scenario they'd quickly get raided and robbed, maybe also killed in the process. Bitcoin can be called a bubble, because its price will depend on acceptance. It's now worth more than it should be because people believe in it, but it all could change within weeks. If you look globally, then any currency can be called a bubble. People just decided that these pieces of paper have value. And everyone agrees with this. This of course is meaningless when there is a war This is exactly my point so i completly agree.=) Fiat money doesnt have a tangible value and a twisted supply/demand process. Cryptocurrencies might not have a tangible value, but atleast the supply/demand process is more stable as the supply is pre-set. This ofcourse has it's own challenges, but still is better then governments being able to offer neverending supply at will. |
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That is a really interesting point of view I think, I have never thought about this that way, that actually bitcoin and other cryptocurrencies may become that "needle" that will pop-up the "fiat bubble".
It would mean that bitcoin will be used in the future as a main payment method, and also as a main currency. It may also happen to some altcoin, there is also a possibility in which the most known and trusted cryptocurrency will be some particular alt ( let's say, not yet designed ) that will cover behind some really powerful technology.
But I wouldn't even expect that to happen in 20 years, that is just too short period of time to see fiat money dissapearing, in favour of cryptocurrencies.
Glad you found it interesting =) Yea the time until this would happend really is impossible to predict, but fiat wont exactly disappear any time soon. Perhaps we will see both fiat and crypto go hand in hand in the future, neither popping the other but working in symbios. Or perhaps the fiat will merge with the crypto. Perhaps the future will give us BitDollars, BitEuros and BitSeks... The possibilities really are endless, thats why its one of the most fascinating topics to discuss in my opinion:) |
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No one can predict what exactly will happen in the future. In the event of a nuclear war, they can turn off electricity and the Internet, no currency will have value.
That is so true, and thats why i own a safe at home stocked with gold, silver and canned food haha! Diversify, never believe in just one thing as nobody can ever now Just don't let anyone know. Study shows that most preppers wouldn't survive with all their stacked food and gadgets because in case of a collapse scenario they'd quickly get raided and robbed, maybe also killed in the process. Bitcoin can be called a bubble, because its price will depend on acceptance. It's now worth more than it should be because people believe in it, but it all could change within weeks. Yea thats true, gotta keep it to myself.=) I wouldnt call myself a prepper i actually try to have a positive outlook on the world but it just feels best having some food and such for emergencies, but theres food for like a month so not super serious about that, haha! Yes cryptocurrency value at the moment really is speculative. What is your opinion on fiat money? Do you believe it could exist in a bubble, or do you believe it can only be the victim of over speculation, and not a "true bubble"? I find discussing the diffrences between fiat and crypto really exciting and love to hear everybodys opinion. |
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However, gold's price for example is also not currently defined by anything - it's just based on its use as an asset. I could give someone a gold ingot in exchange for a resource, but it would be expensive to take it from one place to another, and the same applies to Bitcoin. Gold's intrinsic value is also actually lower than its price, but that's because it is something that people would reasonably put money into to protect themselves from the risk of fiat currency. This is what means that neither Bitcoin nor gold are in a bubble I don't quite see your point You say that gold price is not defined by anything, but then is there anything which price is defined by something else? And with what the price of the latter is defined then? If we follow this logic, we should necessarily conclude that there cannot be bubbles at all. But in this case the whole notion becomes meaningless. If we, nevertheless, proceed from the fact that bubbles do really happen (since otherwise this notion wouldn't come about), we should define or find out a criterion which would allow us to tell between bubbles and non-bubbles I personally set the criterion for a bubble to assets who have a value without a tangible usage. For exemple, if you reset the whole world and put one man in a forest, he probaly wont start to seek out fiat money, but more probaly he would search for food, shelter etc... Things that come in scarcity can be victims of over speculation, but not truly be bubbles IMO. As the nature of scarciscity attributes true value to assets as they one day will be used up. Fiat money doesnt really have that scarcity, or that tangible need, it truly just is a speculative value for paper that can be exchanged for goods. IMO hyperinflation bascially is a fiat money bubble popping! Gold have some diffrences and similarties with fiat money. It is a asset that dont really do anything but sit there and look pretty and get a attributed value (like fiat money). Sure it can be used for electronics but other more easily obtained minerals exist for those usages. I would say price is defined by supply and demand, witch comes from scarcity. Without scarcity we have a neverending supply (more or less) as we do with fiat money. Gold is scarce and therefore i would rather own that then paper money, but i would rather own a farm then gold haha =) |
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I think Bitcoin and fiat can exist together very well, there isn't necessity to kill fiat to rise Bitcoin. It's not good to have only one main currency on the world, that can feed evil forces which can control the currency, and this way, they will control the world. When we have many currencies being used by different people it's harder to be controlled by others.
Decentralization can lead us to centralization anyway... The most powerful man in the world is the one who conquered the centralization by the decentralized way.
I think you make a really good point here, and i totally agree. A coexistence is always best, it kinda refers back to the whole "diversify to minimize risk". The more diffrent factors, the less the impact if one goes corrupt. =) |
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Right now it is (for the most part, at least)
Bitcoin and other cryptocurrencies fit well into the definition of a financial bubble. I could even claim that Bitcoin is a sort of tulipomania. Just like tulips, bitcoins are useful for some purpose, namely, for transferring value around the world while completely bypassing centralized (real controlled) entities like banks, but Bitcoin current price is by no means determined by this utility. Most of Bitcoin value today comes from sheer speculation. Whether Bitcoin bubble is going to pop eventually or its real use as a currency will finally match its use as a speculative vehicle is not clear as of yet
Good answer, always fun to hear others opinion. =) I agree with you, bitcoin does fit well in the definition of a bubble as it is completly speculative. But what about fiat money? We have seen again and again trough history how fiat money has just blew up in a bubble, happend with the german mark after world war 2 and then the zimbabwean dollar. Does this not show that fiat moneys value also comes trough speculation? the only diffrence being that it can much more easily be controlled, manipulated and abused to hurt individuals, while cryptocurrencies also are speculative in there value, it does have the security fiat-money does not against corruption and protecting the individual I think that no, the fiat money value doesn't come about via speculation But I'm still curious how you can even imagine that. It is more or less clear how people speculate with bitcoins (basically, "buy low, sell high"). It is possible as long as Bitcoin price is rising, i.e. new users constantly bringing their hard-earned dollars, euro, or whatever to the market and buy bitcoins in the hope of selling them at a higher price. I suspect there cannot be bubbles of that kind with fiat currencies. The examples you give refer to severe currency devaluations. Obviously, the latter have nothing to do with speculative bubbles, though the end result is essentially the same (i.e. dramatic loss of value) Well you are assuming two things here and i will try to give you my opinion. Let me try and explain why i can imagine fiat money being a speculative bubble, english is second language so give me a break on the spelling. =) Your first assumption that fiat money value is not a result of market speculation, could you elaborate what you believe are the true factors for a currencies value? You seem like you now your economics and i am always eager to hear everyone opinion. My assumption here is that fiat-money with floating exchanges truly get their value determined from speculation. I aslo believe fixed exchanges have a element of speculation in them, as the government has to speculate to set a fixed value. This can be seen in the case with England 1967 when Harold Wilson devalued the pound. England basically speculated then that the devaluation was needed to stimulate the economy, but no substainsable evidence is to be found to show that the devaluation improved the growth. Acctually it was quite slow in the UK after the devaluation, witch was the opposite to what England was trying to do, thus we can see that even governments speculate the value when they set it, and can never truly know what effect it will have. I recently read a report from Riksbanken (the central bank of sweden) in witch the report explored what truly drives the value of floating exchanges. They tried to explain the value as an effect of growth using diffrent stats (gdp,cpi etc...) but in all cases the random walk model prevailed (the market moves randomly). They also explored the inflation theory, that inflation is what determines the value, but this also was hard to prove to be totaly excluded from speculation as inflation is a pretty abstract value. Sure CPI and diffrent stats can give us a general feeling of the inflation, but this still is speculative (IMO). The report did not ofcourse try every possibility that could effect a currencies value, so ofcourse there could be unexplored topics that could explain what drives the price, but their conclusion was that when a currency get a floating exchange, big actors and small actors will speculate on the price. The price moves by liqidity in the market, witch comes from actors speculating in what they believe the currency is worth relative to another. There is no physical relation that a healthy country automaticaly should have a currency that is worth more then a country that is unhealthy witch often is the standard explanation of why a country has a stronger currency. This according to basic economics should be determined by demand and supply, and when you have a centralized force governing the supply of money (by being able to print it), we as smaller actors really have to speculate as we can never know when our government might drastically increase supply (as Germany did) and dilute the value to the point that we are standing there with paper money that does not hold any real physical value then the one we attribute to it. The german case was not a case of devaluation. Devaluation is when a country change their fixed exchange rate to another value then the current (like england 1967). What Germany exeperienced is called hyperinflation, witch basically is when money supply increases extremly with no growth in the country to sustain or explain it. This IMO shows speculative elements in the fiat money value. As i said earlier, we constantly speculate on currencies value because we do not truly now what factors drive the exchange, and we can never know if the supply drastically increases, witch would render the money useless as it has no true physical use other then the value we give it.
Your second assumption is that the speculation in crypto currencies more or less only comes from buy low, sell high mentality while fiat money does not. I dont really agree with that that is the only driving factor, but i understand your point. I think that you basically mean that fiat-currencies have something substanaible that aids traders to make speculative descisions on the value, while crypto currencies dont really have that and people are just buying and selling coins randomly because they think it will be worth more or less tomorow on the chart. I personally know alot of people (including myself) who basically just keeps buying bitcoins at what ever price because we believe in the idea the our government cant control a economy fairly and intelligently, and see bitcoin as a hedge against the government. I started buying bitcoins in 2012 and i am just holding and holding and holding witch is quite common in the bitcoin community IMO (might be wrong here). The daytrading speculative elements of buying low and selling high is extremly clear in stocks, currencies and commodities. Some of the biggest actors (hedge fund, banks) speculating in currencies use algo trading. A preprogrammed robot making descisions of a value according to mathematical points of interest, that IMO is extremly speculative and really has no ground to what the real value should be (this exists very much in currency hedge funds, atleast the once i have visited). I assume you mention the "buy low, sell high" mentality because you believe it exists in crypto currencies but not fiat money, is just wanted to explain why i think this might be so. I could only find the report from Riksbanken in Swedish, but i will try to find a translated version so i can share it with you if it would be of interest, quite exciting research report =) LazyTurtle |
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No one can predict what exactly will happen in the future. In the event of a nuclear war, they can turn off electricity and the Internet, no currency will have value.
That is so true, and thats why i own a safe at home stocked with gold, silver and canned food haha! Diversify, never believe in just one thing as nobody can ever now |
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I started in the currency trade after i got my bachelors degree in economics, after that i studied econometrics trying to find mathematical similarities between GDP, inflation and so on...
I just wanted to share my story quick. Today i manage about 750 000 dollars as a personal fund, witch i grew from 250 dollars during 5 years in the forex market.
What i have learned during this time is that the emotional stability is really what will make you a winner. Almost every strategy out there will work to make consistent profits, but only if you as a trader is consistent.
I advise you to really work on your mind, start doing some mediation and find your inner zen and calm.
And never be to dependent upon others advice, make your own opinion and stick to it. I dont know how many times i have been called crazy by friends because they wont agree, but then the same choices they smashed me for made me large ammounts of money.
Dont be a part of the general trading crowd, but rather watch them and their insanity unfold in the market. Be the stable pillar in the chaos and weed out the noise.
Pretty abstract advice, but do try to take it to heart. This really are the idelogies that have given me my financial freedom.
LazyTurtle <3
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My personal theory is that cryptocurrency is not the bubble, but rather the needle that will burst the fiat money bubble. Trough history we have always had an easy way to attribute value to things without it. Those who believe that fiat money is the only true way often attribute their opinion to the fact that fiat money is substainsable because of its centralized nature and its history of being used as a represantation of value
Right now it is (for the most part, at least) Bitcoin and other cryptocurrencies fit well into the definition of a financial bubble. I could even claim that Bitcoin is a sort of tulipomania. Just like tulips, bitcoins are useful for some purpose, namely, for transferring value around the world while completely bypassing centralized (real controlled) entities like banks, but Bitcoin current price is by no means determined by this utility. Most of Bitcoin value today comes from sheer speculation. Whether Bitcoin bubble is going to pop eventually or its real use as a currency will finally match its use as a speculative vehicle is not clear as of yet Good answer, always fun to hear others opinion. =) I agree with you, bitcoin does fit well in the definition of a bubble as it is completly speculative. But what about fiat money? We have seen again and again trough history how fiat money has just blew up in a bubble, happend with the german mark after world war 2 and then the zimbabwean dollar. Does this not show that fiat moneys value also comes trough speculation? the only diffrence being that it can much more easily be controlled, manipulated and abused to hurt individuals, while cryptocurrencies also are speculative in there value, it does have the security fiat-money does not against corruption and protecting the individual. Perhaps you could call fiat and crypto money for bubbles, with the crypto having one extra layer of soap as it is decentralized. You did change my opinion a bit tough, i do agree with you that cryptocurrency is in a bubble, as you said the definition fits perfetcly, so thanks for contributting to my wisdom , i did write a bit blatantly that cryptos arent bubbles but that was a misrepresantion of my opinion haha, thanks:) I believe the speculation that money needs a centralized controlling force IS part of the bubble and that is what is ready to burst, as peoples confidence in government is steadily declining(i believe). |
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Hello everyone. There is much discussion around the price of bitcoins. Some seem to believe it could fly to a million, while some believe its just a big speculation bubble ready to burst. My personal theory is that cryptocurrency is not the bubble, but rather the needle that will burst the fiat money bubble. Trough history we have always had an easy way to attribute value to things without it. Those who believe that fiat money is the only true way often attribute their opinion to the fact that fiat money is substainsable because of its centralized nature and its history of being used as a represantation of value. The fact that bitcoin was created in the aftermath of the 2008 financial crises clearly shows it's intent. I believe Satoshi saw how a centralized regulated market can't be substainable thanks to the egotistical and evil sides we humans all posses. Decentralized currencies will IMO be the future. I can't peg bitcoin to a certain price it will reach in the future as i usually don't speculate that way, but rather i just develop a bias on a subject and try to indentify the crowds bias as this is what acctualy IS the trend. The trend for decentralized currencies is bullish overall, with some currencies being more exciting then others. Invest in the cryptocurrency you believe in and do your homework, lets bring the fiat-money world down once and for all!! Please share your opinion on the subject, this is my first post and just wanted to share my thoughts, thank you =) LazyTurtle
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