under which circumstance would you conclude that you have been wrong?
I think I already answered that earlier today or yesterday...
Can you describe what would qualify as: a) a "success" of Bitcoin
I will be happy, and count it as a success, if bitcoin becomes a viable and attractive alternative to credit cards for legal international payments via internet. By "attractve" I mean one that many people will chose to use for its merits (convenience, price, safety, etc.), not for political motives or because they have invested in Bitcoins and want to encourage merchants.
Right now it is very far from that landmark, wouldn't you agree? Already I know that I will not be able to pay a hotel bill in China, for example.
b) Bitcoin being a good investment.
Buying a lottery ticket is always a bad investment, because one can compute the expected payoff, and it is negative.
If one buys a ticket and wins the jackpot,
still was a bad investment.
A good investment is one that, according to the best knowledge and judgement available at the time, gives a positive expectation of return. But there is no way to measure the probability of an event, either before or after the fact. Therefore, there is no way to determine empirically that something is a good investment before the fact, and no way to tell whether if it was a good investment after the fact.
Only in very few cases cases --- such as lotteries and other games --- there are proabilities that everyone would agree to, and therefore one can "prove" that something is a bad or good investment. Most of the time, probablities are subjective and personal, and so is the notion of "good investment" or "bad investment".
If someone invests in Bitcoin and gets filthy rich, good for him; but can you tell whether he was wise, or just lucky but stupid?
Last year the Brazilian oil company OGX filed for bankruptcy. Its stock price had multiplied by 10x in a couple of years (from 2 BRL to 24 BRL, if I recall correctly), which is fantastic in that market. Then it crashed in a few days, after it became known that its two deep-sea oil wells were nowhere as productive as it was hoped. Its shares are still traded today as a penny stock, 0,15 BRL in november, 0.30 BRL now.
OGX had several billion dollars of real money invested into it by many people. Were those people bad investors? I would not say so, they apparently did their homework and got positive expected value at the time.
Some of the original investors must have sold at the peak and made 1000% profit, some didn't and had 100% loss. Were the former better investors than the latter?
Or, to be more dramatic -- someone plays Russian Roulette ten times for a 10$ bet, and wins. Would you call that person a good investor?
(That reminds me of a great little movie called /Number 13/ -- not to be confused with /Number 23/. But I saw the French BW original, cannot vouch for the remake.)
Late reply, because, well, time zones. Not sure if we can pick up the discussion again.
My first question was, when would you consider Bitcoin a success. So "success" of btc would be, in your eyes, it being a useful (independent of political ambitions) Internet payment system. Fair enough.
It is, in my opinion, a bit silly to be *negative* about this aspect after a) btc only being around 5 years, and b) after a number of rather positive developments in the past 2 years.
To go into more detail: True, you cannot pay for your hotel room in China yet with Bitcoin, but that would have been a bit like asking Tim Berners-Lee, after he introduced you to HTTP, if you can already stream high-quality porn on it. He couldn't, so why not continue using VHS, you could have said. No improvement there.
I'm being a bit facetious here, but I'm sure you'll get my point: there is a time to declare an attempt dead (like, say, Sanger's Citizendium, which started with a great idea to improve on Wikipedia's sometimes anti-academic climate, but which is absolutely going *nowhere*, for years), and then there's *prematurely* declaring something dead. If you already want to declare our little experiment failed, 5 years after introduction, after reaching a market cap north of 10B USD, VC funding probably in the range of a few hundred million USD, and a so far small, but not completely uninteresting group of merchants accepting BTC, then I think that squarely falls under "prematurely declaring it dead".
In other words: being skeptic is recommended. And if the question is, "should you invest in it?", then there are good reasons *not* to invest... there's still a very real chance btc will be replaced by an alternative currency, or will only stay marginally useful. But that's the answer to the question "should I put my money into it, right now". Which is heavily dependent on your personal risk preferences. While the question that you seem to bring is subtly different: do we have evidence that Bitcoin is going nowhere/is most likely going to fail. And for that, I have yet to see any real evidence (neither the US nor the EU have taken a prohibitive stance towards it, not major flaw in the protocol has been revealed -- those would be "catastrophic" events, imo).
About your 2nd point, in response to my question, when Bitcoin would be a good investment, you answered that you cannot determine the probabilities of an event like how btc will develop, so any post hoc reasoning is moot, and then you go on to compare it to Russian roulette.
That is a straw man if I have ever seen one. According to that strict interpretation of probabilities and their application to real life events, *all* investments are equally good or bad, and there is no way to make an informed decision.
And just like that, our market driven economy just crumbled to dust. Hope you're happy now
Where I'm going with this is:
Cut out the investing rationale. Simply *assume* for a moment that (through intuition, or TA) an investor has a way to roughly predict the price function of USD/BTC. My question was: which USD/BTC price function would qualify as a good investment of that (perhaps hypothetically knowledgeable) investor.
Obviously, if price kept on falling now, never to reach 1000 USD again, everyone who invested in the last 3 months could conclude it was a bad investment. If however price recovers, and keeps on rising, there is really no meaningful way to declare it a "bad investment" until at some point it doesn't recover anymore.
That was my idea behind the second question: if there simply never is a point during our life time where btc price will fall so drastically that it never recovers, then it is plain bizarre to call it a "bad investment" in retrospect. The comparison to lotterey tickets or Russian roulette is not applicable, because in those cases the EV is known to be negative, while in all economic decisions, the probabilities are not known, and the risk one takes on in investing is directly related to the possible returns he expects to see.
So that *still* doesn't say you should invest in btc, but it is at odds with assumptions about economical behavior made in any other market to basically say that, no matter how btc price develops, it will never "have been a good investment, because it was impossible to know the chance of success ahead of time".
In even simpler terms: if, say, investing early on in Microsoft was a "good investment", then investing in Bitcoin (until now, unless we never recover from this correction) was a "good investment" as well. If, on the other hand, because of the inherent uncertainty re: outcomes investing in Bitcoin can never be a good investment, then investing in MSFT wasn't a good investment either. And in that case, all of stock trading essentially became meaningless.
Poll
