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Author Topic: Why would Crypto be the future currencies if it's so volatile?  (Read 651 times)
beaupain
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August 07, 2017, 06:27:42 PM
 #1

Hi

Whilst I am a believer of the future of cryptocurrency, I do have a critical question which I believe will define its success or failure.

How can a currency be strong and reliable if it is super volatile versus EUR/USD/... ?  
Why would I ever pay goods in Bitcoin for instance, if I know that tomorrow the same product can twice as expensive (in USD when converted from Bitcoin)?  I believe this can only work if the full system is in Bitcoin (meaning you get your salary paid in Bitcoin, you pay your rent in Bitcoin and you spend Bitcoin for daily expenditures -> which is something I dont believe will ever happen)

Below an article of Howard Marks on cryptocurrency, with some total crap but also some valid questionmarks.

Cheers



Quote

Howard Marks on Digital Currencies


The discussion of innovative investments brings me to Bitcoin, Ether and other digital currencies.  I’d guess these things have arisen from the intersection of (a) doubts about financial security – including the value of national currencies – that grew out of the financial crisis and (b) the comfort felt by millennials regarding all things virtual.  But they’re not real.
 
Some businesses accept Bitcoin as payment.  Some buyers want to own Ether because it can be used to pay for computing power on the Ethereum network.  Some people are eager to speculate on digital currency for profit.  Others want to put a little money into these to-date-profitable phenomena rather than run the risk of missing out.  But they’re not real!
 
People tell me these currencies are solid, because (a) they’re secure against hacking and counterfeiting and (b) the software used to generate them strictly limits the amount that can be created.  But they’re not real!!!!!  Nobody has been able to make sense to me of these currencies.  Here are a few paragraphs on Ether from The New York Times of June 19:
 
The sudden rise of Ethereum highlights how volatile the bewildering world of virtual currency remains, where lines of code can be spun into billions of dollars in a matter of months. . . .
 
Ethereum was launched in the middle of 2015 by a 21-year-old college dropout, Vitalik Buterin . . .  Mr. Buterin was inspired by Bitcoin, and the software he built shares some of the same basic qualities.  Both are hosted and maintained by the computers of volunteers around the world, who are rewarded for their participation with new digital tokens that are released into the network every day.
 
Because the virtual currencies are tracked and maintained by a network of computers, no government or company is in charge.  The prices of both Bitcoin and Ether are established on private exchanges, where people can sell the tokens they own at the going market price. . . .
 
Many [new currency] applications being built on Ethereum are also raising money using the Ether currency, in what are known as initial coin offerings, a play on initial public offerings.
 
Start-ups that have followed this path have generally collected Ether from investors and exchanged them for units of their own specialized virtual currency, leaving the entrepreneurs with the Ether to convert into dollars and spend on operational expenses.
 
These coin offerings, which have proliferated in recent months, have created a surge of demand for the Ether currency.  Just last week, investors sent $150 million worth of Ether to a start-up, Bancor, that wants to make it easier to launch virtual currencies.
 
Bottom line: you can use the imaginary currency Ether to buy other new imaginary currencies, or to invest in new companies that will create other new currencies.  In “bubble.com,” I highlighted some illogical aspects of e-commerce by including some of my father’s old jokes regarding how to make money.  Here’s another that seems 100% appropriate for the digital currency movement:
 
Two guys meet in the street.  Joe tells Bob about the hamster he has for sale: pedigreed and highly intelligent.  Bob says he’d like to buy a hamster for his kid: “How much is it?”  Joe answers, “half a million,” and Bob tells him he’s crazy.
 
They meet again the next day.  “How’d you do with that hamster?”  Bob asks.  “Sold it,” says Joe.  “Did you get $500,000?” Bob asks.  “Sure,” says Joe.  “Cash?”  “No,” Joe answers, “I took two $250,000 canaries.”
 
One of my very favorite quotes concerning the market’s foibles, from John Kenneth Galbraith, says that in euphoric times, “past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.”
 
Maybe I’m just a dinosaur, too technologically backward to appreciate the greatness of digital currency.  But it is my firm view that the ability of these things to gain acceptance is just one more proof of the prevalence today of financial naiveté, willing risk-taking and wishful thinking.
 
In my view, digital currencies are nothing but an unfounded fad (or perhaps even a pyramid scheme), based on a willingness to ascribe value to something that has little or none beyond what people will pay for it.  But this isn’t the first time.  The same description can be applied to the Tulip mania that peaked in 1637, the South Sea Bubble (1720) and the Internet Bubble (1999-2000).  
 
Serious investing consists of buying things because the price is attractive relative to intrinsic value.  Speculation, on the other hand, occurs when people buy something without any consideration of its underlying value or the appropriateness of its price, solely because they think others will pay more for it in the future.  
 
It isn’t unreasonable for someone to use Bitcoin to pay for something – or for a seller to accept Bitcoin in payment – based on an agreement between the parties: barter takes place all the time.  But does that make it “currency”?
 
The price of Bitcoin has more than doubled since the start of the year.  Can something that does that seriously be considered a “medium of exchange” or “store of value,” rather than the subject of a speculative mania?  Maybe not, but Bitcoin looks staid in comparison to Ether, which has appreciated 4,500% so far this year.  The outstanding Ether is now worth 82% as much as all the Bitcoin in the world, up from 5% at the beginning of the year.  
 
The New York Times notes that together, the outstanding Bitcoin and Ether are worth more than Paypal and almost as much as Goldman Sachs.  Would you rather own all of the two digital currencies or one of those companies?  In other words, are these currencies’ values real?  They’re likely to keep working as long as optimism is present, but their performance in bad times is far from dependable.  What will happen to Bitcoin’s price and liquidity in a crisis if people decide they’d rather hold dollars (or gold)
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August 07, 2017, 06:31:57 PM
 #2

It's the future of currencies thanks to the unique features/properties it has such as trustlessness and decentralization.
Right now Bitcoin is highly volatile but the more people use it, the less volatile it becomes. It has already come to a point where value raises more steadily compared to the past, but it's not always the case.

   
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August 07, 2017, 07:07:54 PM
 #3

I think a cryptocurrency can be a future currency. But this happen when there is no fluctuation in value. In future when almost all of the people use Bitcoin for whatever they sell or buy, the supply and demand will be in balance and the value will be fixed.

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August 07, 2017, 09:14:21 PM
 #4

what does that mean by future currencies ?
every country have their own currencies,and that 'future currencies' what does that mean ?
don't tell me cryptocurrency will replace an actual currency aka FIAT ?
that will not happen,both of them need to coexist.

Bitcoin created as a payment point and how much is it based on FIAT.
if there's no fiat how can we estimate the value of each coin ?
and also,Bitcoin can easily monopolize by certain people for now, so more likely it will never replace FIAT.

I don't believe an article or what talking about it,because that all are an opinion.
so more likely it will happen or it will not.

Also your statement 'Super volatile' it's already describe it.
how can?

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August 07, 2017, 09:27:45 PM
 #5

At the momtny market cap of all cryptos is really small and in the nearest future we wont see any changes in economics.
Still FIAT would be much more stronger and cryptos wouldnt replace it for sure.

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August 08, 2017, 01:00:25 AM
 #6

You know what, I pose the same question. How will cryptocurrencies stand any chance when their prices are so volatile. I saw this post yesterday and I was continually thinking about it. Why would Satoshi make a currency that has no chance of being accepted but the general public because of its volatility? Suddenly, it came to my mind that Bitcoin is a deflationary currency. The Bitcoin halving continually decreases the supply of coins that are circulating. When demand increases or stays the same, the price of Bitcoin would continually go up; slowly but surely.

This means that Bitcoin price would not drop if enough people, the world population, used it. The price would either increase or sustain, never drop. I know that a price hype is also classified as volatility, but a price increase is always good. Smiley

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August 08, 2017, 08:58:22 AM
 #7

Crypto currencies ,especially bitcoin would be the future because they are free from inflation.Whenever there is a demand for currency,the corresponding government starts printing more paper currrencies and issues them for circulation which creates inflation in the currency.It starts losing its value.More over,if any government suddenly says that high value notes are banned just as indian government did in demonitization,people holding such currencies suffer.But since bitcoin is decentralized,no one could devalue it and so it becomes a secured currency.

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August 08, 2017, 09:31:51 AM
 #8

Imagine this scenario.

One day you buy a rock that is worth $12.

In 6 years, your rock is worth $3,400.

Its fair to say the value of your rock is subject to a extremely high degree of volatility(price shift).

People forget volatility can be a good thing or a bad thing(its not always negative).

It only describes a relative degree to which something is shifting on a percentage basis. It doesn't say whether value is increasing or decreasing.  Smiley

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August 08, 2017, 10:29:19 AM
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It only describes a relative degree to which something is shifting on a percentage basis. It doesn't say whether value is increasing or decreasing.  Smiley
Bitcoin's price both increases and decreases depending on the time, and to the individual it depends when they bought it. 

If the volatility was steadily going up, no one would ever spend it at all and it would be just about the worst currency ever.

The gold price was once stable, because a government would agree to exchange gold for a fixed amount of fiat money.  Thus inflation happened as governments accumulated more gold.

Now, the gold price is not stable because its price is mostly based on speculation and not real-world use.

A similar thing applies to Bitcoin.  The problem is that Bitcoin users love to rebel against governments, but to make BTC a steady means of payment, it would need to already have taken over pretty much all payments in the world.

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August 08, 2017, 10:59:00 AM
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All crypto currencies have a completely different philosophy and structure than Fiat money. Yes, this leads to the fact that the price of bitcoin fluctuates constantly, but it only gives additional opportunities for earnings.

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August 08, 2017, 11:43:07 AM
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Between now and future where this dream will come true if at all, there is a process and in that process, a lot of anomaly would have been addressed and part of that would include the issue of volatility and for those assuming that bitcoin will be adopted without addressing the issue of volatility are just jokers because it will not happen especially for merchants. Also, between now and that future it is expected that the population that would be involved in bitcoin would have been large enough to establish stability in which people coming in at that time would do little or no impact to price.
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August 16, 2017, 08:38:39 AM
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Because it’s an absolutely new approach to finances. The reason of its volatility is the young age of a currency. And there are still few places where you can buy something with crypto. So people keep their coins, or maybe trade them. But when they want to buy something in a store they are more likely to sell some of cryptos and buy goods with fiat. As soon as our world will be more adapted to cryptocurrency, it will be less volatile for sure.
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August 31, 2017, 12:20:47 PM
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Hi

Whilst I am a believer of the future of cryptocurrency, I do have a critical question which I believe will define its success or failure.

How can a currency be strong and reliable if it is super volatile versus EUR/USD/... ?  
Why would I ever pay goods in Bitcoin for instance, if I know that tomorrow the same product can twice as expensive (in USD when converted from Bitcoin)?  I believe this can only work if the full system is in Bitcoin (meaning you get your salary paid in Bitcoin, you pay your rent in Bitcoin and you spend Bitcoin for daily expenditures -> which is something I dont believe will ever happen)

Below an article of Howard Marks on cryptocurrency, with some total crap but also some valid questionmarks.

Cheers



Quote

Howard Marks on Digital Currencies


The discussion of innovative investments brings me to Bitcoin, Ether and other digital currencies.  I’d guess these things have arisen from the intersection of (a) doubts about financial security – including the value of national currencies – that grew out of the financial crisis and (b) the comfort felt by millennials regarding all things virtual.  But they’re not real.
 
Some businesses accept Bitcoin as payment.  Some buyers want to own Ether because it can be used to pay for computing power on the Ethereum network.  Some people are eager to speculate on digital currency for profit.  Others want to put a little money into these to-date-profitable phenomena rather than run the risk of missing out.  But they’re not real!
 
People tell me these currencies are solid, because (a) they’re secure against hacking and counterfeiting and (b) the software used to generate them strictly limits the amount that can be created.  But they’re not real!!!!!  Nobody has been able to make sense to me of these currencies.  Here are a few paragraphs on Ether from The New York Times of June 19:
 
The sudden rise of Ethereum highlights how volatile the bewildering world of virtual currency remains, where lines of code can be spun into billions of dollars in a matter of months. . . .
 
Ethereum was launched in the middle of 2015 by a 21-year-old college dropout, Vitalik Buterin . . .  Mr. Buterin was inspired by Bitcoin, and the software he built shares some of the same basic qualities.  Both are hosted and maintained by the computers of volunteers around the world, who are rewarded for their participation with new digital tokens that are released into the network every day.
 
Because the virtual currencies are tracked and maintained by a network of computers, no government or company is in charge.  The prices of both Bitcoin and Ether are established on private exchanges, where people can sell the tokens they own at the going market price. . . .
 
Many [new currency] applications being built on Ethereum are also raising money using the Ether currency, in what are known as initial coin offerings, a play on initial public offerings.
 
Start-ups that have followed this path have generally collected Ether from investors and exchanged them for units of their own specialized virtual currency, leaving the entrepreneurs with the Ether to convert into dollars and spend on operational expenses.
 
These coin offerings, which have proliferated in recent months, have created a surge of demand for the Ether currency.  Just last week, investors sent $150 million worth of Ether to a start-up, Bancor, that wants to make it easier to launch virtual currencies.
 
Bottom line: you can use the imaginary currency Ether to buy other new imaginary currencies, or to invest in new companies that will create other new currencies.  In “bubble.com,” I highlighted some illogical aspects of e-commerce by including some of my father’s old jokes regarding how to make money.  Here’s another that seems 100% appropriate for the digital currency movement:
 
Two guys meet in the street.  Joe tells Bob about the hamster he has for sale: pedigreed and highly intelligent.  Bob says he’d like to buy a hamster for his kid: “How much is it?”  Joe answers, “half a million,” and Bob tells him he’s crazy.
 
They meet again the next day.  “How’d you do with that hamster?”  Bob asks.  “Sold it,” says Joe.  “Did you get $500,000?” Bob asks.  “Sure,” says Joe.  “Cash?”  “No,” Joe answers, “I took two $250,000 canaries.”
 
One of my very favorite quotes concerning the market’s foibles, from John Kenneth Galbraith, says that in euphoric times, “past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.”
 
Maybe I’m just a dinosaur, too technologically backward to appreciate the greatness of digital currency.  But it is my firm view that the ability of these things to gain acceptance is just one more proof of the prevalence today of financial naiveté, willing risk-taking and wishful thinking.
 
In my view, digital currencies are nothing but an unfounded fad (or perhaps even a pyramid scheme), based on a willingness to ascribe value to something that has little or none beyond what people will pay for it.  But this isn’t the first time.  The same description can be applied to the Tulip mania that peaked in 1637, the South Sea Bubble (1720) and the Internet Bubble (1999-2000).  
 
Serious investing consists of buying things because the price is attractive relative to intrinsic value.  Speculation, on the other hand, occurs when people buy something without any consideration of its underlying value or the appropriateness of its price, solely because they think others will pay more for it in the future.  
 
It isn’t unreasonable for someone to use Bitcoin to pay for something – or for a seller to accept Bitcoin in payment – based on an agreement between the parties: barter takes place all the time.  But does that make it “currency”?
 
The price of Bitcoin has more than doubled since the start of the year.  Can something that does that seriously be considered a “medium of exchange” or “store of value,” rather than the subject of a speculative mania?  Maybe not, but Bitcoin looks staid in comparison to Ether, which has appreciated 4,500% so far this year.  The outstanding Ether is now worth 82% as much as all the Bitcoin in the world, up from 5% at the beginning of the year.  
 
The New York Times notes that together, the outstanding Bitcoin and Ether are worth more than Paypal and almost as much as Goldman Sachs.  Would you rather own all of the two digital currencies or one of those companies?  In other words, are these currencies’ values real?  They’re likely to keep working as long as optimism is present, but their performance in bad times is far from dependable.  What will happen to Bitcoin’s price and liquidity in a crisis if people decide they’d rather hold dollars (or gold)
They would be currencies of the future because people won’t bother about the volatility very soon, since many people would be involved in it the only thing that would happen is that the price would keep rising cos of demand and supply


 
 
 
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September 01, 2017, 09:50:44 AM
 #14

Hi

Whilst I am a believer of the future of cryptocurrency, I do have a critical question which I believe will define its success or failure.

How can a currency be strong and reliable if it is super volatile versus EUR/USD/... ?  
Why would I ever pay goods in Bitcoin for instance, if I know that tomorrow the same product can twice as expensive (in USD when converted from Bitcoin)?  I believe this can only work if the full system is in Bitcoin (meaning you get your salary paid in Bitcoin, you pay your rent in Bitcoin and you spend Bitcoin for daily expenditures -> which is something I dont believe will ever happen)

Below an article of Howard Marks on cryptocurrency, with some total crap but also some valid questionmarks.

Cheers



Quote

Howard Marks on Digital Currencies


The discussion of innovative investments brings me to Bitcoin, Ether and other digital currencies.  I’d guess these things have arisen from the intersection of (a) doubts about financial security – including the value of national currencies – that grew out of the financial crisis and (b) the comfort felt by millennials regarding all things virtual.  But they’re not real.
 
Some businesses accept Bitcoin as payment.  Some buyers want to own Ether because it can be used to pay for computing power on the Ethereum network.  Some people are eager to speculate on digital currency for profit.  Others want to put a little money into these to-date-profitable phenomena rather than run the risk of missing out.  But they’re not real!
 
People tell me these currencies are solid, because (a) they’re secure against hacking and counterfeiting and (b) the software used to generate them strictly limits the amount that can be created.  But they’re not real!!!!!  Nobody has been able to make sense to me of these currencies.  Here are a few paragraphs on Ether from The New York Times of June 19:
 
The sudden rise of Ethereum highlights how volatile the bewildering world of virtual currency remains, where lines of code can be spun into billions of dollars in a matter of months. . . .
 
Ethereum was launched in the middle of 2015 by a 21-year-old college dropout, Vitalik Buterin . . .  Mr. Buterin was inspired by Bitcoin, and the software he built shares some of the same basic qualities.  Both are hosted and maintained by the computers of volunteers around the world, who are rewarded for their participation with new digital tokens that are released into the network every day.
 
Because the virtual currencies are tracked and maintained by a network of computers, no government or company is in charge.  The prices of both Bitcoin and Ether are established on private exchanges, where people can sell the tokens they own at the going market price. . . .
 
Many [new currency] applications being built on Ethereum are also raising money using the Ether currency, in what are known as initial coin offerings, a play on initial public offerings.
 
Start-ups that have followed this path have generally collected Ether from investors and exchanged them for units of their own specialized virtual currency, leaving the entrepreneurs with the Ether to convert into dollars and spend on operational expenses.
 
These coin offerings, which have proliferated in recent months, have created a surge of demand for the Ether currency.  Just last week, investors sent $150 million worth of Ether to a start-up, Bancor, that wants to make it easier to launch virtual currencies.
 
Bottom line: you can use the imaginary currency Ether to buy other new imaginary currencies, or to invest in new companies that will create other new currencies.  In “bubble.com,” I highlighted some illogical aspects of e-commerce by including some of my father’s old jokes regarding how to make money.  Here’s another that seems 100% appropriate for the digital currency movement:
 
Two guys meet in the street.  Joe tells Bob about the hamster he has for sale: pedigreed and highly intelligent.  Bob says he’d like to buy a hamster for his kid: “How much is it?”  Joe answers, “half a million,” and Bob tells him he’s crazy.
 
They meet again the next day.  “How’d you do with that hamster?”  Bob asks.  “Sold it,” says Joe.  “Did you get $500,000?” Bob asks.  “Sure,” says Joe.  “Cash?”  “No,” Joe answers, “I took two $250,000 canaries.”
 
One of my very favorite quotes concerning the market’s foibles, from John Kenneth Galbraith, says that in euphoric times, “past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.”
 
Maybe I’m just a dinosaur, too technologically backward to appreciate the greatness of digital currency.  But it is my firm view that the ability of these things to gain acceptance is just one more proof of the prevalence today of financial naiveté, willing risk-taking and wishful thinking.
 
In my view, digital currencies are nothing but an unfounded fad (or perhaps even a pyramid scheme), based on a willingness to ascribe value to something that has little or none beyond what people will pay for it.  But this isn’t the first time.  The same description can be applied to the Tulip mania that peaked in 1637, the South Sea Bubble (1720) and the Internet Bubble (1999-2000).  
 
Serious investing consists of buying things because the price is attractive relative to intrinsic value.  Speculation, on the other hand, occurs when people buy something without any consideration of its underlying value or the appropriateness of its price, solely because they think others will pay more for it in the future.  
 
It isn’t unreasonable for someone to use Bitcoin to pay for something – or for a seller to accept Bitcoin in payment – based on an agreement between the parties: barter takes place all the time.  But does that make it “currency”?
 
The price of Bitcoin has more than doubled since the start of the year.  Can something that does that seriously be considered a “medium of exchange” or “store of value,” rather than the subject of a speculative mania?  Maybe not, but Bitcoin looks staid in comparison to Ether, which has appreciated 4,500% so far this year.  The outstanding Ether is now worth 82% as much as all the Bitcoin in the world, up from 5% at the beginning of the year.  
 
The New York Times notes that together, the outstanding Bitcoin and Ether are worth more than Paypal and almost as much as Goldman Sachs.  Would you rather own all of the two digital currencies or one of those companies?  In other words, are these currencies’ values real?  They’re likely to keep working as long as optimism is present, but their performance in bad times is far from dependable.  What will happen to Bitcoin’s price and liquidity in a crisis if people decide they’d rather hold dollars (or gold)
They would be currencies of the future because people won’t bother about the volatility very soon, since many people would be involved in it the only thing that would happen is that the price would keep rising cos of demand and supply
I will agree to what you think. Volatility hardly matters if Bitcoin is giving its investors what they demand of. And Bitcoin is fulfilling their demands in an excellent manner making a lot of investors Billionaire. Otherwise you are right bitcoin will be the currency of the future and people are invest their money very easy.

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September 02, 2017, 08:54:11 AM
 #15

Hi

Whilst I am a believer of the future of cryptocurrency, I do have a critical question which I believe will define its success or failure.

How can a currency be strong and reliable if it is super volatile versus EUR/USD/... ?  
Why would I ever pay goods in Bitcoin for instance, if I know that tomorrow the same product can twice as expensive (in USD when converted from Bitcoin)?  I believe this can only work if the full system is in Bitcoin (meaning you get your salary paid in Bitcoin, you pay your rent in Bitcoin and you spend Bitcoin for daily expenditures -> which is something I dont believe will ever happen)

Below an article of Howard Marks on cryptocurrency, with some total crap but also some valid questionmarks.

Cheers



Quote

Howard Marks on Digital Currencies


The discussion of innovative investments brings me to Bitcoin, Ether and other digital currencies.  I’d guess these things have arisen from the intersection of (a) doubts about financial security – including the value of national currencies – that grew out of the financial crisis and (b) the comfort felt by millennials regarding all things virtual.  But they’re not real.
 
Some businesses accept Bitcoin as payment.  Some buyers want to own Ether because it can be used to pay for computing power on the Ethereum network.  Some people are eager to speculate on digital currency for profit.  Others want to put a little money into these to-date-profitable phenomena rather than run the risk of missing out.  But they’re not real!
 
People tell me these currencies are solid, because (a) they’re secure against hacking and counterfeiting and (b) the software used to generate them strictly limits the amount that can be created.  But they’re not real!!!!!  Nobody has been able to make sense to me of these currencies.  Here are a few paragraphs on Ether from The New York Times of June 19:
 
The sudden rise of Ethereum highlights how volatile the bewildering world of virtual currency remains, where lines of code can be spun into billions of dollars in a matter of months. . . .
 
Ethereum was launched in the middle of 2015 by a 21-year-old college dropout, Vitalik Buterin . . .  Mr. Buterin was inspired by Bitcoin, and the software he built shares some of the same basic qualities.  Both are hosted and maintained by the computers of volunteers around the world, who are rewarded for their participation with new digital tokens that are released into the network every day.
 
Because the virtual currencies are tracked and maintained by a network of computers, no government or company is in charge.  The prices of both Bitcoin and Ether are established on private exchanges, where people can sell the tokens they own at the going market price. . . .
 
Many [new currency] applications being built on Ethereum are also raising money using the Ether currency, in what are known as initial coin offerings, a play on initial public offerings.
 
Start-ups that have followed this path have generally collected Ether from investors and exchanged them for units of their own specialized virtual currency, leaving the entrepreneurs with the Ether to convert into dollars and spend on operational expenses.
 
These coin offerings, which have proliferated in recent months, have created a surge of demand for the Ether currency.  Just last week, investors sent $150 million worth of Ether to a start-up, Bancor, that wants to make it easier to launch virtual currencies.
 
Bottom line: you can use the imaginary currency Ether to buy other new imaginary currencies, or to invest in new companies that will create other new currencies.  In “bubble.com,” I highlighted some illogical aspects of e-commerce by including some of my father’s old jokes regarding how to make money.  Here’s another that seems 100% appropriate for the digital currency movement:
 
Two guys meet in the street.  Joe tells Bob about the hamster he has for sale: pedigreed and highly intelligent.  Bob says he’d like to buy a hamster for his kid: “How much is it?”  Joe answers, “half a million,” and Bob tells him he’s crazy.
 
They meet again the next day.  “How’d you do with that hamster?”  Bob asks.  “Sold it,” says Joe.  “Did you get $500,000?” Bob asks.  “Sure,” says Joe.  “Cash?”  “No,” Joe answers, “I took two $250,000 canaries.”
 
One of my very favorite quotes concerning the market’s foibles, from John Kenneth Galbraith, says that in euphoric times, “past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.”
 
Maybe I’m just a dinosaur, too technologically backward to appreciate the greatness of digital currency.  But it is my firm view that the ability of these things to gain acceptance is just one more proof of the prevalence today of financial naiveté, willing risk-taking and wishful thinking.
 
In my view, digital currencies are nothing but an unfounded fad (or perhaps even a pyramid scheme), based on a willingness to ascribe value to something that has little or none beyond what people will pay for it.  But this isn’t the first time.  The same description can be applied to the Tulip mania that peaked in 1637, the South Sea Bubble (1720) and the Internet Bubble (1999-2000).  
 
Serious investing consists of buying things because the price is attractive relative to intrinsic value.  Speculation, on the other hand, occurs when people buy something without any consideration of its underlying value or the appropriateness of its price, solely because they think others will pay more for it in the future.  
 
It isn’t unreasonable for someone to use Bitcoin to pay for something – or for a seller to accept Bitcoin in payment – based on an agreement between the parties: barter takes place all the time.  But does that make it “currency”?
 
The price of Bitcoin has more than doubled since the start of the year.  Can something that does that seriously be considered a “medium of exchange” or “store of value,” rather than the subject of a speculative mania?  Maybe not, but Bitcoin looks staid in comparison to Ether, which has appreciated 4,500% so far this year.  The outstanding Ether is now worth 82% as much as all the Bitcoin in the world, up from 5% at the beginning of the year.  
 
The New York Times notes that together, the outstanding Bitcoin and Ether are worth more than Paypal and almost as much as Goldman Sachs.  Would you rather own all of the two digital currencies or one of those companies?  In other words, are these currencies’ values real?  They’re likely to keep working as long as optimism is present, but their performance in bad times is far from dependable.  What will happen to Bitcoin’s price and liquidity in a crisis if people decide they’d rather hold dollars (or gold)
The volatility of the market is one of the reasons why bitcoin is being regarded to as the future of currencies because its going to put lots of cash into the pockets of those who stood by the currency throughout the good and bad days

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September 02, 2017, 11:28:31 AM
 #16

Crypto currency will soon be a means of earning in the future, and ordinary currencies will remain for settlement. I do not believe that instability will be more important than conventional currencies.

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September 02, 2017, 11:56:24 AM
 #17

I think that it is so valatile because it's market cap is till not as high as it used to be. One day it will spread far enough and the rates would be mutch more stable. Yes, it will take some years but i belive that one day it will be more stable Smiley

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September 02, 2017, 01:05:05 PM
 #18

Volatility is terrible right now, and there's no way that bitcoin would act as sound money compared to what fiat currently does. Aside from that, tx fees are crazy and ridiculuos; sending money to someone would require you to spend at least a dollar before someone receives it within the next 10 minutes. Albeit the original proposal of Satoshi, bitcoin isn't ready yet to live up with that.

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September 02, 2017, 02:05:37 PM
 #19

Just think of a crypto that is not volatile like fiat? a stable currency not increasing and decreasing its value is the same as less volatile crypto. If it is stable it will not go high price like the bitcoins right now. Volatility is a big part of bitcoins price and if we less it it might be not have a good future because the investors and the users will lose their interest.



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September 02, 2017, 02:22:43 PM
 #20

Hi

Whilst I am a believer of the future of cryptocurrency, I do have a critical question which I believe will define its success or failure.

How can a currency be strong and reliable if it is super volatile versus EUR/USD/... ?  
Why would I ever pay goods in Bitcoin for instance, if I know that tomorrow the same product can twice as expensive (in USD when converted from Bitcoin)?  I believe this can only work if the full system is in Bitcoin (meaning you get your salary paid in Bitcoin, you pay your rent in Bitcoin and you spend Bitcoin for daily expenditures -> which is something I dont believe will ever happen)

Below an article of Howard Marks on cryptocurrency, with some total crap but also some valid questionmarks.

Cheers



Quote

Howard Marks on Digital Currencies


 
The New York Times notes that together, the outstanding Bitcoin and Ether are worth more than Paypal and almost as much as Goldman Sachs.  Would you rather own all of the two digital currencies or one of those companies?  In other words, are these currencies’ values real?  They’re likely to keep working as long as optimism is present, but their performance in bad times is far from dependable.  What will happen to Bitcoin’s price and liquidity in a crisis if people decide they’d rather hold dollars (or gold)

It feels like what he's trying to say is that Bitcoin will be a shitcoin in the future because people will hold dollar. Were all in a great lines of questions here but I think they are just afraid that the dollars that they love will lost its value. We have the underhand on this one because it would be a crisis when the government and banks refuse to hug this technology. The technology is not perfect but it has potential that far syurpasses your dollar and I think instead of closing your eyes on what can blockchain technology can offer just watch how cryptocurrencies take over this era.


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