If someone says that "greater fool theory can apply to a lot of stuff, but NOT to < fill in name of asset class > " then that means that most probably that asset class already has reached that stage.  I still remember the talk about the "new economy" stuff back in the 90-ies and early 2000 when every suggestion that maybe the dot-com stuff was a big bubble was taken as coming from someone oldfashioned who couldn't come to grips with the fantastic new economic paradigm.  Same with the South Sea bubble centuries before.

I'm not saying that bitcoin is in a speculative bubble per se, but let us say that many things indicate that it could very well be, especially if most people demanding it, do so because they expect a strong rise in price and not because they want to use it.   That doesn't exclude, as I said before, that most of these people are visionaries, and that the true usage price of bitcoin will still be orders of magnitude higher than today, but there's not much that points in that direction right now (that's why they have to be visionaries, of course ).  It also doesn't mean that even if bitcoin is in a speculative bubble phase, that the bubble cannot still inflate a factor of 10 or 100 or so before it bursts.  So I'm not saying that bitcoin doesn't have the potential to still rise a lot (before stabilising, or before crashing).

But the way its demand seems to be organized, and the main reasons people seem to have behind its demand, are definitely indicating a great risk that "greater fool theory" is at work.



That doesn't matter.  The main motivation will be "it's going to rise" (whether that analysis is profound of superficial doesn't matter) --> greater fool theory.  If the main motivation is "I want to put this amount of value aside for later, and bitcoin is a great store of value to get out what I put in"  --> sustainable price.

It is essentially that simple.  You buy the stuff because you expect it to rise --> danger for greater fool theory if that is the main market drive  ;  you buy stuff because you want to store value in it ---> solid asset if that is the main market drive.

No more and no less ; independent of how much analysis goes into it.


Superficial analysis and making errors is not the same as "subjective value".  If I buy something because (erroneously) I *think* it will be worth 10 times more next week, then that doesn't mean that that asset is 10 times more to me, subjectively.  I'm just making a foolish mistake.  If I prefer an apple 10 times more than an orange, then that *is* subjective value.  It comes from my desires which are subjective.


Then you cannot use crypto either.  This is why "bitcoin for the poor" is a ridiculous concept.  In order to be able to have bitcoins, you already need to mine them, which is now a matter of rich business people in China for most part, or you have to buy them on exchanges, where you need already all the banking machinery at your disposal, plus more.  You need to have more banking and networking to be able to use bitcoin, than to use a credit card.  If you can't have a bank account and/or a credit card, you mostly can't have bitcoin either.  Yes, you could use localbitcoins with shady people trying to screw poor folks.  No, I think that a relatively poor person has easier access to some banking than to bitcoin.  Bitcoin is not going to revolutionize the economic relationships in poor countries before banking will.


And the fun thing is that crypto is even wilder and scammier as of today....  crypto is doing all the worst things of the financial world, much worse.
That's exactly what I'm complaining about: the bubbles, the speculation, the scamming in crypto is far worse than in the regular financial world.   That wouldn't be the case if it were mainly used as a currency, but it isn't.  It is blown up by whales, it is dumped, it is *essentially driven by hot air speculation* and almost not by the potential virtues you mention.  That's my bloody whole point !

Of course not.  The only thing that can reach "main consumer market" is a government-regulated, elite-scammed currency.  You already have that: fiat.  It is the only thing that can get "main consumer market" acceptance.  No crypto ever will, because a crypto is much more hassle, *especially* because it is not supposed to be centrally controlled.  Once you allow for central control, there's no need to go for crypto, and crypto has only disadvantages.  The only thing that works well centrally, is what we have now: fiat.  What makes crypto different from fiat is that it is not centrally controlled, and that is exactly what states don't like about it.

So, if you want to be law-abiding, stay away from crypto all together.   As will the main consumer market always do.  So "will not be accepted by the main consumer market" is valid for every non-centrally controlled crypto, whether anonymous or not.

The *only* thing crypto is useful for, is to do stuff governments don't like (to different degrees).  That will only become "main consumer market" if ever we get rid of government all together.

In as much as a crypto can be legalized, it loses its purpose (except as a betting token in the toolkit of professional financial gamblers).  Maybe one day governments will issue legal things that look from afar like crypto.  But it won't be crypto, because it won't be distributed and non-regulated.  It will just be another kind of fiat, with some technology taken from crypto.  That's the only thing that ever will go "main consumer market" as long as there are governments around.

Crypto is not meant to go "main consumer market" but to have a tool to have economic freedom without government, whether hidden, or whether because people got finally rid of it.  So the idea that crypto should comply to government demands to go mainstream is ridiculous.

You could just as well require terrorists to have a work permit for their actions.

Ha.  It is not because the market prices something at market value X, that you have to pay X for it.  You can just as well decide that the asset simply isn't worth X.  You have to have a specific motivation to want that asset.  Now, this is where financial assets distinguish from most other assets/commodities: they don't have (or shouldn't have) any subjective value beyond their estimated market value in the future.

I adhere to subjective value theory of course, which says that the value of something is not a property of a good or service, but a relationship between a subject and an object: something has value FOR someone.  This is why a fair deal is not an "equal exchange of value" but is actually a value creation: if I have an apple, and you have an orange, but I value an orange more than an apple, and you value an apple more than an orange, then, by exchanging an apple for an orange, we both win in value.  The *market value* is just a kind of average relative value estimation by a large group of actors, which make up the market.  If my personal value is higher than the market value, I buy ; if it is lower, I sell.

The point, however, is that that is not true for a *financial* asset.  A financial asset has no "subjective value".  A financial asset has only an "estimated future market value".  Well, there IS some subjective part to it, which is related to its fluidity.  But if for a moment, we assume the markets fluid, and start from the idea that any financial asset can, at any moment, be traded for another, then the *only* value a financial asset has, is the estimated future market value of it (including volatility, risk, ...).   There shouldn't be much "personal preferences" like with apples or oranges.  Some financial asset that I estimate at $1000 next week is perfectly equivalent to any other financial asset that I estimate at $1000.  Of course, my estimations are different from yours, and that makes that they look somewhat like they are subjective.  But if I somehow would *know* that the asset is $1000,- next week, then it is indistinguishable in value from any other asset for which I would know that they are also $1000,- next week.

Simply because the *only* thing that I can do with a financial asset, is to sell it to the market.  I cannot enjoy it, I cannot use it as a capital good, I cannot do anything with it, but sell it to the market.  So a financial asset doesn't have subjective value.  The subjective part of it only comes from my different expectation of its future market value from your expectation.  But there are no "personal preferences" involved: if it can be sold for $1000, then that's what it is worth.

So my *only* reason to get a financial asset is to think that I will get more out of it next week, next month, next year, than by obtaining another financial asset.

However, my decision to want to put value in a financial asset or not, on the other hand, IS totally subjective.  It depends on my personal desires to consume right away what I earn, or to store value for later.  In other words, the total DEMAND for financial assets is subjective.  But which asset to use to store that value, is not a matter of subjective preferences, but of estimated future market value of the assets between one has to chose.  What looks subjective, is our different ways to make those estimations.  But they are not "fundamentally subjective".  One will be more right than another one in his estimations.  This is different between "I being right in preferring an orange".   My preference for an orange over an apple is fundamentally subjective, and is not "right" or "erroneous".  However, my future estimate of market value of an asset is right or erroneous, as it will turn out.  That's what makes it non-subjective.

So, essentially, a financial asset doesn't have any "subjective" value at first approximation: it only has "estimated future market value".   The whole point now, is where this "future estimated market value" comes from.  If this future estimated market value has some fundamental basis (such as stock in a company that really will be a solid company, returning solid dividend for instance), then that's OK.  However, if the *main* future estimated market  value has is based upon a demand that finds its roots in an expectation of higher future market value, we are in "greater fool theory".

So it is *essential* to know what is the main reason of estimation of future market value of bitcoin, that motivates people to buy it at the current market price.  If that motivation is that people think that the future fundamental value will be the current or higher price, then bitcoin's market value is sustainable.  If that motivation is only that there will be even more demand for bitcoin because of an expectation of price rise, then we are in the school book example of greater fool theory.

So one shouldn't "care less of why people buy bitcoin".  It is essential.  The motivations to buy at current price are essential to determine whether most people (the market) estimates that bitcoin's fundamental value in the future will be higher or equal to current market price, or whether most people simply estimate that more people will do like they do: expect a higher market price in the future.

As said before, the fundamental value of a monetary asset (as a sub class of financial assets) is the market share it can capture for  "store of value" (without expectation of "more").  There is no other sustainable fundamental value for a monetary asset.  It is the only thing it can do: store value.  That storage of value induces, through Fisher's formula, a market cap for its tokens.

So the whole question is, whether most bitcoin demanders WANT bitcoin at current market price because they want to use it as a store of value, and/or because they think that the future fundamental value of bitcoin will be equal or larger than the current market price, or whether they simply think that more people will demand bitcoin because more people will expect it to rise.

One shouldn't "not care" about that.  It is, as I said, essential.

And as to what market share it will capture in the "store of value" pie, will depend entirely on the competitive edge this store of value brings over all other existing stores of value.  Now, the point is that as long as one is law-abiding and statist, there's not much of a store of value competitive edge that bitcoin can bring over many other competitors issued by banks.  It is only if one wants the states' nozy nose, and sticky fingers, to stay away from your financial stores, that bitcoin has a genuine proposition.  It is only if you want to use a currency in state-prohibited or limited trades, that it has a true value proposition.  Otherwise, use banks and VISA, it works better, I'd say.

It is quite simple, but you refuse to see that simple point.
1) demand for an asset *because of expectation of price rise* is unsustainable in the long term.  It is the definition of "greater fool theory": you want to find someone who is going to pay more for the asset (to you) than you paid to acquire it.  EVIDENTLY that is going to stop one day.
2) demand for an asset for every other reason is potentially sustainable.  If it is a consumable commodity, it is for its consumption.  If it is production capital, it is for the value of the consumables that that production capital will help make.  And if it is a monetary asset, it is for the store of value function that it can provide.

Now, only "2" is the ultimate source of demand (and hence market value) of an asset.  So for a monetary asset, it is only in its quality as a store of value (short term, "currency" or long term "gold") that it can have a genuine, sustainable demand, and hence a "fundamental value".

Of course, "visionaries" can invest in an asset at lower market price than the future demand they expect in 2) would indicate.  That's true speculative investment, and the information these visionaries bring to the market is good.  The guy who recognizes the value of Steve Jobs garage store will be able to buy shares in it at a much lower market price, because he anticipates the big company Apple.  He makes a lot of profit by a speculative investment, and he's right.  That's not "greater fool", that's speculative investment.  The benefit he makes comes from the vision he had earlier than most market players.    He didn't buy an asset "just to find someone who will buy it at a larger price", he bought it because he knew before the others that the *fundamental value* (given by 2) would, one day, be much larger than the market price at which it was traded at that moment.

Suppose that Steve Jobs garage shop shares were traded at $2.- at a point, and that our visionary saw that one day, that company would be worth $1000,- a share.  Our visionary will buy stock at any price below $200.- (to still have a comfortable margin of a factor of 5).  That will make Steve's garage's stock rise far above its "current fundamental value", eventually a hundred-fold.  It is true that during that time, people are "sitting on a bubble", but they are not just "waiting for a greater fool", they are waiting for the company Apple to grow to their expectations.   When that will be the case, the fundamental value of the share will be $1000.- because of the accumulated capital and the dividends one can expect.

This is, what I would call, "sound speculation".  People expecting fundamentals to be much higher in the future than right now, and anticipating the price, buying lower right now, and hence boosting the price of the asset as compared to its current fundamentals.  But with the idea that one day, the price they have in mind WILL be fundamental.

However, if the only reason to buy an asset is to expect it to rise because more people will want it and expect it to rise, we are fully in "greater fool theory".  There is then no vision of fundamental value on the horizon.  There's just expectation for it to rise, and hope that more people will want it, because they also expect it to rise.  The last row will be disappointed, and get rid of it, and that's then the end of the inevitable bubble.

For a monetary asset, the funny thing is of course that the "company" and the "shares" are one and the same thing.  But we shouldn't make a mistake: the *fundamental* value of a currency comes from its usage as a store of value, a means of transporting value from one moment in time (and space) to another moment in time (and space).   This is the only source of value of a monetary asset, like the only source of value of Apple is the computers and software/services they sell in the end.

And for a monetary asset, the "usage value" derived from its use as a store of value is given by Fisher's formula, who tells us that the price of the monetary asset is given by how much value for how long is stored in it *as a store of value*.

We both agreed that that demand in bitcoin must be of the order of 5%, and so according to Fisher's formula, the current fundamental value of bitcoin would be $30,- (5% of its actual market price). 

So why are people paying $600,- for it ?

A) they are visionaries who expect bitcoin's usage to rise 20 times, like the visionary that saw Steve in his garage, and saw that one day, it would grow to a big company.  They all know that the true price of bitcoin is $600 or maybe even higher, and already want to store their value in it at that price.

B) they are only interested in selling it higher.

If it is true that bitcoin's usage will grow 20 fold or more (to buy stuff on the internet, to hold value for when one is an old person, for your children), then indeed, bitcoin's true fundamental value in the future will be higher than $600 and the people buying it now are like our Apple visionaries.

If the bitcoin community remains essentially consisting of people in class B, then we are fully in "greater fool theory".

And the way to distinguish both, is to answer honestly the following question: "would you still hold / demand coins when you would know that the current price level is "final" ?".  If the answer is yes, we are in "fundamental" mode, if the answer is "no" we are in greater fool theory mode.


You are explaining me how a market works. Thank you.  But that's not the point.  The fundamental point is this:
will most people demanding/holding bitcoin, still demand/hold when they know the ceiling is reached ?  If yes, the system is sustainable, if no, it will collapse like a bubble.


Of course PoW is an inefficiency.  It is a necessary inefficiency, but one should only use so much as is really needed, namely to destroy seigniorage.  The market cap of bitcoin is actually something that is a nuisance: the lower it is, the better, until one reaches a point where it is too low to be used to buy stuff: you cannot buy a $20 000 car with a monetary asset that has only a market cap of say, $1000 000.  So it must be high enough.  But not too high.  The market cap is an inevitable problem that comes from Fisher's formula, but the lower it is, the better.
As PoW becomes more and more expensive as a function of the market cap (actually, as a function of the bloc reward that has to be destroyed in value), the lower it is, the more efficient bitcoin is and the less wasteful it is.


I think this is wrong.  That's not bitcoin's value, that's its technical way to achieve a system of transactable tokens without needing a gouvernment or other violence monopolist.


The ONLY paradigm shift that bitcoin could propose, is that one has a monetary asset without gouvernment interference, because it has no central point of failure (like banks) where the gouvernment can attack, and it is less material, so that one can hide it better from government than for instance gold, and take it abroad without it being confiscated when traveling.   So only as an anarchist money, it has any value.  For the rest, it is worse than what we already have.


If its main demand comes from people expecting its price to rise, and if that continues like this, then this is the schoolbook example of "greater fool theory".   Your argument that there will still be a lot of adoption only means that you expect the bubble to blow up much higher than today, but that is not an argument that it isn't a bubble.  This kind of argument is also typical for every bubble in history: the ceiling is still far away.  At a certain point, that is true of course, and at another point, it is not true any more.


To me, that's the only true value proposition bitcoin has.  Without that vision, it is just a financial gamblers' toy.  One more toy in their toolset, after futures, options, swaps, and other derivatives, now they have funny internet tokens too.  Another table in the big financial casino has opened, and the players are standing around it.

If it is not to get in the end, rid of gouvernment and law, I fail to see bitcoin's point, honestly.

I only partially agree with that way of thinking.  Altcoins are a good idea if it is to improve upon the technology.  Bitcoin being the first, it also has the least developed technology.   Because there's something to crypto that is different from all  other forms of technology: because the principal value proposition of a crypto is immutability, essentially the principles are "frozen in" at launch.  One can still tweak the tech a bit without breaking the immutability of principle, but that's about it.  A crypto cannot evolve fundamentally.  Bitcoin will remain with its limitations and shortcomings forever.  Most cryptos will.  There are cryptos like monero who have in their "immutability principles" also "regular hard forking", or who have evolved some kind of other state-like gouvernance like DASH, but I consider these cryptos more like interesting prototype development boards than actual immutable cryptos.  "evolving" cryptos are, I would say, by definition, not immutable - but as long as they stick to their basic principles, one could still accept that.  "voting coins" like ETH have essentially totally lost their immutability.

All this to say that, contrary to most technology, where the first mover also has most experience in evolving and improving, crypto is crippled that way.  So the way to invent new crypto tech is not to try to implement it on an existing system and fight the "immutability inertia" (which is on the other hand the essence of crypto), but to make a new coin.

So no, altcoins will not destroy crypto, on the contrary. It is the only way to go forward.  I see it actually as a continuous abandoning old crypto for newer ones.  That time scale can be long (exactly because it takes time to build up the monetary belief system and because of immutability), and old successful coins like bitcoin will probably take ages to die, but when they are REALLY technically totally and economically backwards and surpassed for tens of years, I cannot imagine, apart from a bunch of nostalgics, that people keep the old stuff running forever.  I see it rather that new generations of altcoins overtake old generations, if they really are much better technically and economically.

But new altcoins have to make technical/economical propositions that are really groundbreaking, and are not just tweaks of old stuff.

A monetary asset is by definition a "speculative" asset in that one speculates on "the other guy accepting it for value".  But there are two kinds of speculation: "same fool theory" (which is the basis of a monetary asset) and "greater fool theory" which is the basis of a speculative bubble.

In principle, a monetary asset gets its price from its usage, through Fisher's formula.  The more it is used as a store of value, the more "hold time times value storage" there is, and hence, the higher the market cap of the monetary asset.  As such, when a monetary asset has more adoption for its usage, its price will rise.

And of course, as with anything where the price will rise, there is (good) speculation in trying to foretell the future price of the asset, and hence buy it already right now.   This is then something that makes the price of the asset rise more quickly to its "final" value, but with the idea that that final value is sustained by its real usage demand (here, by Fisher's formula).  

The point however, is, that if the price rises speculatively to a certain height, the rise should be determined by a kind of analysis of its future fundamentals (here, genuine usage in "same fool theory"), and not so much by an analysis of its future *speculative* value, because then we are in a speculative bubble (where the price comes mainly from "greater fool theory").

You see, if I buy stock of a small company, called Apple, and I believe in these guys, then at the moment I buy stock, I'm willing to offer much more than the actual "fundamentals" of the small company, because I believe that *their fundamentals* will be much, much larger in the future, and hence, I'm willing to buy at higher prices than a normal fundamentals analysis would allow for.  If several "visionaries" like me do the same, then at a certain point, Apple shares will soar, and one might think that it is a speculative bubble, but it isn't: it is a belief in future value.  If the price falls, that's just an occasion to buy more Apple stock.

But if my "speculation target" is, say, 15 years, I'm counting on the fact that 15 years later, Apple will REALLY deliver value at the price I estimated.  If not, I was wrong, and I bought stock of a company that didn't behave as I expected.  So I'm willing to buy Apple stock at prices that are much higher than "current value analysis" would suggest, because I believe in real, fundamental value 15 years later.  I'm not really counting on finding a "greater fool" 15 years later ; I'm thinking that I'm just seeing things earlier, and make a profit from that early vision.

If Apple doesn't deliver 15 years later, I've lost a lot of money, and I've pumped up the price of the Apple shares by mistake.  If Apple does deliver, I will have no problems selling my shares at the "normal fundamentals market price" at that moment, and cash in on my vision.

With bitcoin, if I'm willing to offer $600 for a coin, and assuming that only 5% is "real usage" by now, I'm already taking a bet that bitcoin's real currency usage will increase 20-fold in the next 15 years, say.  $600 is already a very speculative price of a serious value increase over the actual "fundamentals" value of bitcoin right now.

If I really believe that bitcoin will be used 20 times more than right now, I will break even in 15 years.  If it will be used 40 times more, I will double my money in 15 years because then its fundamental price will be even higher: $1200.

I see bitcoin as the Apple share of a company whose share, with fundamental analysis, should be $30, and actually costs $600, because people are speculating on a 20-fold increase of its usage.

If you are hoping for $6000,-, then you are imagining a 200-fold increase of its usage as a currency as compared to today.  Maybe.

However, if you hope for $6000, because people that bought at $60, got $600 out of it, then you are in a speculative bubble thinking, and I think most bitcoin investors are thinking that way.  I wonder how many of them are convinced of a 200 fold increase in actual bitcoin usage, like early believers in Apple hoped for a 200 fold increase of Apple's fundamentals value increase.

However, the funny thing is that with bitcoin, there's no difference between "the shares" and "the company", and higher shares make for higher company costs (mining).


No, I'm not.  If you would have read some of my contributions, you'd see that I have a very, very low opinion of ETH.  I also think that PoS is an error.  It seems to me that it is sufficient to say something negative about bitcoin's market situation, and this triggers emotional reactions.


No, volatility is a pain for a monetary asset's usage.  It induces exchange risk, which brings in costs to cover them.  This reply indicates that you're not in the bitcoin usage paradigm, but in the speculative ripping-one-another-off paradigm.

Nobody wants a piece of bread to be $1 one day, $3 the other, and $0.5 next week.  Volatility is terrible for a currency.


Here we are again: greater fools.


Replace "bitcoin" by "Euro" or "dollar" and you see the problem.  "cashing out of a currency" sounds strange, no ?


Sure, bitcoin has become what it is now.  The initial reason for it to be a freedom currency seems, however, quite remote now, and it has become a financial gamblers' item.  I fail to see what it brings in that case.  Just another financial toy.  Not something that will bring freedom to people.


Again, my analysis is simply "what it ought to be" if it were to be a freedom tool, which was the reason for its invention, and what could have made it special in the history of humankind.  Maybe the lesson is simply that it is quite naive to think that inventing a tool that could be used to free people, will not be abused by TPTB and the greedy crowd to turn it into something that kills its original proposition, and maybe this is, in the end, the very reason why TPTB are what they are.

In other words, what was the original value of bitcoin was that it was potentially a fundamental element in the regaining of freedom of people from what has been taken from them for millenia: economic freedom, which needs a free currency.  My "ought to be" is simply the path that it would have taken if it was still on that track.  It clearly isn't any more (or, as I said above, it actually never was, for more fundamental reasons of people being such that they always corrupt their chances for freedom, to exchange it for a quick profit).



I have no idea.  It could go up (for sure it will go up temporarily in "bigger fool theory") ; however, if no genuine adoption takes place (I mean: use as a currency), then for sure it has to come down in the end ; maybe we are already near the top.  If current usage remains, it should in principle drop to something like $30.  If usage increases 10-fold, it will be $300.
If usage increases a thousand-fold, it will be $30 000.

However, the blocks are full already.  So my idea is that bitcoin might very well be hitting its ceiling (not its speculative price, but its real potential for usage).  Or it might indeed, one day, become used a lot.  I have absolutely no idea.

 

Seriously now.   The point is that a crypto currency that is global, on the internet, has of course nothing to do with the Netherlands, their history, or their former famous fiat money.   For all it matters, it could have been invented by a Chinese living in Brazil, and mainly gambled on by Singaporean business people.   A Russian guy could invent SwissFrancCoin if he wanted to.  That doesn't give to his crypto any of the properties that the Swiss Franc has.

The premine is only part of the story. The trusted setup is another part.  And finally, the optional anonymity is a total failure of the concept of fungible and anonymous transactions: those few anonymous transactions will stand out loud and clear on the chain ; easily blocked.  Also, although ZKP has the *potential* of having a much larger anonymity set (than for instance monero), if only a few users use it for real, it has actually a much smaller anonymity set.  It is not much better than mixers like with DASH in that case.

Finally, much of the crypto it entirely new.  It should stand the test of time to see whether there are no big holes in it.

That said, a zcash-like clone without post-premine, which can solve the issue of the trusted setup (I have some ideas) and which makes the anonymity compulsory, would be very valuable.

And I wish all the best to zcash itself, which will bring the anonymity/fungibility discussion in the focus, and which will test the crypto. 

My point is only that I'm all for that 5% current utility, and I'm saying that the 95% of speculative bubble is only harming that 5% of real value, maybe to the point of rendering it totally dead.

Because that 95% of speculation is making the costs of the system 20 times higher (difficulty adapts to price, and hence the wasting of mining resources) than necessary to sustain its 5% of utility ; it makes the volatility much higher than would be if only sustained by demand for the 5% of utility (one would think that the demand for actual usage is more stable than the speculation demand and offer), and given the higher volumes, it attracts institutional players, lawmakers and regulators much more than necessary.  All this goes against the competitive advantage that the real usage of bitcoin could potentially bring, if it were essentially limited to its 5% of real usage.
With a market cap 20 times smaller, mining PoW 20 times less, and bitcoin essentially sustained by real usage, fees would be smaller, blocks wouldn't be full (yet), gamblers like the Winkelvoss boys wouldn't be around, and regulators wouldn't mix in, banks wouldn't be interested and volatility wouldn't be that high.  Adoption would be genuine adoption, and the whole ecosystem would be sustainable, which is not the case if 95% of its price and market is made up of "greater fool theory".

That said, it may very well be that bitcoin will have an evolving ecosystem, with constant price, and more and more genuine adoption, and less and less speculation, so that, say, the current price of $600 is sustained for years (say, 15 years), with less and less speculation, and more and more genuine usage.  That is not excluded.  That would be good.  It would have been still better, though, if instead of having gone directly to $600, it would have slowly risen, following genuine adoption, and only have reached $600 15 years from now, when those $600 represent more than 90% of genuine usage (so an 18 fold increase of current adoption for real usage).

That's true, but the "ease of use" that is part of the crypto currency itself is different from the tools that can be used/forged to use that crypto currency.   There is something like "ease of use" in things like "times to confirm transactions".  That's fundamentally related to the crypto currency itself.  You cannot have, for instance, 6 block confirmations in 30 seconds with bitcoin, because that's part of the crypto currency's immutable definition.

However, the software that uses the crypto currency system (wallets, GUI, ...) is independent of the crypto currency itself.  It is part of the *application* of a crypto currency.  I consider a crypto currency something like, say, the internet protocol.  The internet protocol doesn't have any "user interface".  You can build things on top of that, but that is not the thing itself.

Whether you access the block chain through a web site, a GUI or a CLI has nothing to do with the block chain itself, which rules are the crypto currency.

I think that the world's GDP is of the order of $ 100 trillion or so.   We have 20 million bitcoin at 100 million satoshi each, which brings us to 2000 trillion satoshi.    So if bitcoin were to handle the full world's GDP,  a satoshi would be of the order of 5 cents.

Now, having bank transfer costs of 5 cents when you want to transfer 5 cents wouldn't sound like ridiculous, wouldn't it ?

The discretisation of bitcoin units (in Satoshi) is not what is going to limit bitcoin's adoption.   The block chain and block size is, long before this becomes an issue.

Yes.  It is too obviously an association that doesn't exist.  It is one of the basic methods in publicity: false associations.  The tobacco industry was famous for it: associating "social success" with smoking.  But almost all publicity does it. 

My point was rather, that if in social interactions, there is a suspicion of monetary interest, then the social value of it falls to zero.  If I write posts on a forum to discuss, and to a certain extend, to "give some social weight" to my ideas, then if people would somehow know that I do this for the financial gain it brings me, it would ruin the social value of my contributions.  Confusing social success with "getting money for it" is in my opinion a fundamental mistake.  If people write articles because they want to get paid for it by their readers, then these articles lose their social value ; that is, the writer is then seen as a professional, producing articles to win money, and not because he has something to say.  People will write articles that are studied to please and attract donations, clicks, whatever it is that generates revenue, and not to give out a social posture.    Writing for money already exists: it is called journalism.  The writings by journalists are business ; they are not "social interaction".  From the moment they do it for money, they can't do it "for social interaction".  In the same way a call girl has sex for money, and has nothing to do with amorous feelings.

But that is exactly because the Gulden had such strong resonance, while, say, the French frank, or the Spanish peseta had much, much less emotional significance.

BTW, there ARE no "country coins".  There are crypto coins which have the NAME of countries of fiat denominations.  But that doesn't mean they have anything to do with that currency or with that country.  That's the whole point !  This is nothing but a kind of scam to attach the name of a country or a (former) fiat denomination to a crypto.  Gulden has just as much to do with the Netherlands or with their former fiat, as Jupitercoin has to do with the planet Jupiter.


As I said, I didn't look into the technicalities of the Gulden.  The "name scam" was to me enough to put me off.  If it has technical merit, then that merit should stand on its own, and any name would do.  The name is too much of a false association trick.  If it is technically sound, then it is a pity to have done this naming scam.

I think that is a fundamental misconception.  It is the error steem and the likes are making.  Social networks are NOT about making money (for the users).  They are about ego-boasting, about having social success, about everything which is the social nature of a human being.  The very concept that it becomes a merchandise kills it.   Even though you can do so, the idea of BUYING friends on facebook is considered ridiculous.  You are not scoring socially if people know that the 7000 friends you have, were bought. 

Wanting to turn social networks into monetary considerations, is like wanting to turn girlfriends into hookers.

This is exactly what the business of facebook is about: being MONETARILY free.  By giving you "for free" (as in free beer, not as in freedom) means of social interaction, where you are in for the social interaction and competition, one can make money of you with all the information you provide and the ads you look at.   But by definition, you cannot monetize that information and that looking at ads, because if you do, you spoil the social side of it.

If you write stuff on facebook, you are supposed to do so because of your social interaction desires.  If people would even suspect you to do so for money, it would lose all of its social empowerment.  So you simply CANNOT monetize this (at least, openly).

No, what would kill facebook would be a peer-to-peer social network with the same free access (as in free beer) and on top of that, your freedom.  But that won't happen, because all formerly motivated people to write free software are now in the business of writing crypto currencies to get rich quickly...

In other words: trying to do something steem-like to "overtake facebook" is not only going to fail, it is going to make facebook stronger, and it is sucking away the efforts that could have gone in putting up a free peer-to-peer alternative.

But that is exactly what I wanted to say: it is a name-trick.  The crypto currency "gulden" has NOTHING to do with the Dutch Gulden, apart from that name.  If you would have called it "crypto789" then it wouldn't exist.  It exists because of the name, and that's essentially it.  That was my point.

It is exactly because of the strong rooting of the Gulden in Dutch history that it plays on the sensible nostalgic strings of many a Dutchman (and woman) with this name, and that if it were called crypto789, it would not even exist.  The crypto Gulden has simply nothing to do with the historical Dutch Gulden.

In the same way I could make a coin which is called DeutchMarkcoin or something, or I could call it Luthercoin or Calvincoin or whatever, to play on an emotional string.  It wouldn't even have to have a block chain, just IOU tokens on an exchange.

A crypto currency is a set of rules and a history, that is supposed to be immutable (or only muted for a priori agreed-upon kinds of changes).  It is an abstract concept that is put to work by node software and by a network protocol.   The quality of a crypto currency resides in its principles and in the way a relatively large set of people adheres to it (also called "the community").  And that's it.

A crypto currency has nothing to do with web sites, graphical user interfaces, and "bad" things some people might do with it.

Nobody in his right mind would judge the strength of, say, the Euro or the dollar or the Yen or whatever currency on the basis of the wallets in which you put them, on the user friendliness of ATM that distribute it, or whether someone had badly locked its safe and got some of them stolen.  You don't think that the german Mark was a strong currency because people locked it well up in their safes, and had nice wallets in which they carried it around, while the Zimbabwean dollar was a very weak currency because it got regularly stolen from the cardboard boxes in which people held them, right ?

In the same way, whether crypto gets stolen from web sites like exchanges and web wallets, or whether people have their wallet keys stolen or not, has simply nothing to do with the crypto currency at hand.

Maybe.  I would think that the *usage* of bitcoin, and the *usage* of monero are not a factor of 1000 apart, especially after some dark market adoption.  That is not because I think that monero is used so much, but rather because I think because bitcoin is used so little.  But you are probably right that $1 was an optimistic view, and it would rather be less than that.


Absolutely not.  Of course there is some speculation on gold, and there is speculation on the stock market.  But *the bulk of the asset price* of these things is NOT normally due to speculation.   Most people buying gold don't do it because they think that there will be a *serious increase in the adoption of gold*.  Most people buying gold do it for a long-term store of value.  They don't expect to get out MUCH MORE than they put in.  Their *main motive* is not to have a, say, 20-fold increase of the market value of gold in 10 years.  They essentially want to keep their market value (and combat, for instance, fiat inflation and bank costs, hide from state interference, be able to give it to their children without being stolen by the state over it....).  Nobody is buying gold now at about $40 000 per kg (say, the price of a rather good car for a kg of gold) to be able to buy 20 good cars in 20 years with that gold.  People would like to be able to buy a good car with the gold they buy now, 20 years from now. 
The stock market stock price is essentially the diminished future cash flow of dividend.  People buy stock with the idea that their investment in *production capital* will induce *value production* and *economic growth* and take the reward for that.  They are not "hoping for a bigger fool".   The day that they buy stock at the correct market price, they will get their return in dividend as the market estimated.

Of course there is speculation but the demand for speculation is not such, that it makes the asset in question have a much higher market price than its "fundamental" price.  In fact, each time that that happens, one talks about a speculative bubble, and the market always ends up correcting for it.


If that is really true, then this thing will come down one day, because it is a speculative bubble.
Again, there's nothing wrong with speculation (it fluidifies the market) as long as speculation is not the main drive for the price.   When speculation determines the price (when speculation in expectation of a higher price determines the price) the speculative bubble is inevitable.  From black tulips to dot-com.

For sure now most of crypto is bubble-sustained (what I call "greater fool theory").  But that doesn't mean that it will soon come crashing down.  There are 3 possible scenarios:

1) the bubble-sustained price will slowly be replaced by "true usage".   In that case, the speculators of today are in fact visionaries, who were earlier than others in seeing the true fundamental value of crypto.  Adoption is then true adoption for usage, and the profile of the average crypto user changes from "gambler" to "user".  That is, the demand for crypto will be less and less "to invest", and "to make profit", but more and more "to use it for real as money".  Unfortunately, that is not the current tendency.

2) the bubble-sustained price will rise, and rise and rise, as long as there are more and more greater fools (also called "adoption", but speculative adoption).  There will be a "last generation of greater fools" which will be the largest population interested in crypto for "profit" and which will be tremendously disappointed, because of course no more rise.  The result of this can be twofold:

2a) when it starts to become clear that there's no more rise in the future, the thing will come crashing down, like a genuine speculative bubble.  Bong.

2b) the "belief" in the system will have such long time constant, that the realisation of "damn, no more rise" will be spread over a very long period.  We will then see a very long, slow erosion of the price, until USAGE demand will be in agreement with the price, which will be a very large factor lower.

There can be a combination of 2b) and 1).  It may be that during the erosion of the speculative hope for higher prices, usage starts to increase, and the demand for usage starts to replace the disappointment of the last row of "investors".

I have no idea how high that the current bubble can still inflate.  Maybe there are still factors of 10 to be taken before one hits the ceiling.  But one thing is clear to me: the current price is MAINLY driven by the "hope for rise" and NOT by "usage", and that is something that mathematically comes to an end one day or another.  Tomorrow or 20 years from now, I don't know. The only question is HOW it will come to an end: crashing down ; slow, long erosion ; or slow replacement with genuine usage.

The question to answer honestly is this one: "suppose that most bitcoin holders today would KNOW that bitcoin will remain at $600 for the next 20 years, with modest ups and downs, would their demand and their holdings of bitcoin be the same on average as today ?"

If the answer to the question is "yes", then the current price is solid.  If the answer is "no" (which I think it is), then we are in the scenario I just described.

Bitcoin is the same.  Remember $1000 end of 2013 ?  That was not "bitcoin usage".  The XMR $13 was not "monero usage".  If you were buying monero to "profit from the rise" then you were essentially gambling, like all those people, which were in the end responsible for its rise.   

Probably the true usage value of bitcoin is something like $10, and the true usage value of monero is maybe $1.  All the rest is gambling.  The $590 remaining $ of bitcoin, and the $10 (or now $6) remaining $ of monero, and essentially most of crypto's market cap, is people buying to bet on a rise, not to use it. 

When monero rose from $2 to $4 or so, I thought that was usage for a part.  When it rose to $10, that would have meant that if it was usage, it would been the money of a yearly multi-billion dollar market in a few weeks time.  That's not possible.

But bitcoin is not supporting a trillion-dollar market as its money either.  So most of this is just gambling.  The usage part of it is tiny.