2 economists just eviscerated bitcoin, saying it should be trading at $20

[Lowryy]

Why did this make the news?

There are economists who predict 1,000,000usd per coin.
There are economists who predict 0 usd per coin.

Who cares? I assume no one makes their decisions based on what two economists say.....or three economists.

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[LeGaulois]

Most economists don't have a deep knowledge about bitcoin, they speculate only using the "traditional methods", analytics, stats.... And most just repeat what they got in their daily news.
They don't consider the bitcoin's evolution, before, now, later. If you think about all the predictions we see, maybe 75% are wrong. Nostradamus would do a better job.
As for the $20 number it doesn't make sense to me, as i said a lot of things aren't considered.

Buy high sell low, if you listen to them, you can become homeless

Lesson 1:: Advice from an "experienced" economist

[Murloc]

Is it time to realize that bitcoin's high price principally came from speculative sources and not real world utilization?

If an asset is growing so fast like Bitcoin did then it is 100% clear that the nature of this growth if truly speculative. But if the guy is just trying to remove all current "speculative" transactions and claimint that it is a "real price" then he is just retarded, sorry. There is nothing bad in healthy speculationm and they will always exist. On the other hand even if you remove all speculative transactions BTC will become more suitable for buying stuff and fees will decrease. This "economist" is trying to get a full picture just by changing 1 detail.

[hisslyness]

It is currently costing approx. $2400-$3000 to generate 1BTC.

Do you really think any miners will sell their coin for $20 each?

Also, there are 16,841,875BTC. Let's just say there are "1million active accounts".

that is 16.841875BTC per account or $336.83... Pay 1 week rent and you have 0BTC left!

[fabiorem]

Nobody trusts and listen to economists here.

Economists are like tamed dogs, whereas we hodlers are the wolves. We dont speak the same language.

[bbc.reporter]

What about gold minus speculation? That's probably around $20-$50 of actual usage too.

There can be two types: one type is "same fool".  You know perfectly well that the asset is worthless in itself, but you firmly believe that others believe, and will continue to believe, in the SAME value (more or less) than you are going to spend it on.  Gold is of this type.  Famous old paintings are of this type.   It is a "store of value".  This is a belief that can last for a very, very long time.

The other type is "greater fool".  A pyramid game. You know that the asset is worthless, but you expect to be amongst the early birds in a mode phenomenon, where you'll find a greater fool to sell your asset for MUCH MORE than you paid for it.  In order to stimulate this even more, there needs to be a megalomaniac story that it is ACTUALLY a very useful asset of some future important capital with strong fundamentals, but that only visionaries can see it.  Say, the "monetary system of the future".  This kind of stuff always ends in a bang.

Now, go and think: most people buying bitcoin, do they do this because there are obvious fundamentals (which are not a megalomaniac story that won't work if you think about it 5 minutes) ; do you think that most people do it to put their savings safe, without an expectation of a lot of return, just a safety against loss ; or do you think that most people bought it to sell it to much higher bidders ?  What is YOUR motivation ?

Well, then you know in what category we're playing...

I reckon you are making up the term same fool, I had to do a google search but I found nothing about it hehehe.

In any case, I disagree with your assessment of gold as compared to bitcoin. Look at this chart, https://www.bullionvault.com/gold-price-chart.do then zoom it out to 20 years. It also shows that there are also greater fools in the gold market but with lower volatility.

That is because gold's lower volatility is caused by higher volume and higher liquidity. Gold's daily volume is an estimated  $125.3 billion per day. It is clear that if bitcoin reaches that level of liquidity, its volatility would also go down, for reasons you already know.

[stompix]

It is currently costing approx. $2400-$3000 to generate 1BTC.
Do you really think any miners will sell their coin for $20 each?

There is no fixed cost for generating a coin.
If the price will drop below 1000$ people will just start turning off their miners, difficulty will go down, and the ones that still have dirty cheap power will be the only ones mining.

Look what happened with oil. It's quite the same from a miner's perspective.

Also, there are 16,841,875BTC. Let's just say there are "1million active accounts".
that is 16.841875BTC per account or $336.83... Pay 1 week rent and you have 0BTC left!

Yeah, and years ago you've had 10k BTC, you were hungry, pizza, and puff....0 BTC.
Your arguments are "One is worth now 10k how can it be worth 10?"

Well, it can happen, there is the possibility, and not the cost of mining or the price of rent will stop it but exactly what those two "economist" completely missed. The real usage and the trust users have in BTC

[bitcoinisbest]

It is currently costing approx. $2400-$3000 to generate 1BTC.

Do you really think any miners will sell their coin for $20 each?

Also, there are 16,841,875BTC. Let's just say there are "1million active accounts".

that is 16.841875BTC per account or $336.83... Pay 1 week rent and you have 0BTC left!

Saying is easy than done. Just imagine do you think that bitcoin provides the endless opportunities to the people with its benefit and such benefit in the world will be available at 20$? In that case the homes, mansions, travelling etc all should be in 2 figure as well in the whole world which is not the case. So do not think much about statement and to those people the btc will give them the answer when the price will start rising again.

[hisslyness]

It is currently costing approx. $2400-$3000 to generate 1BTC.
Do you really think any miners will sell their coin for $20 each?

There is no fixed cost for generating a coin.
If the price will drop below 1000$ people will just start turning off their miners, difficulty will go down, and the ones that still have dirty cheap power will be the only ones mining.

Look what happened with oil. It's quite the same from a miner's perspective.

Also, there are 16,841,875BTC. Let's just say there are "1million active accounts".
that is 16.841875BTC per account or $336.83... Pay 1 week rent and you have 0BTC left!

Yeah, and years ago you've had 10k BTC, you were hungry, pizza, and puff....0 BTC.
Your arguments are "One is worth now 10k how can it be worth 10?"

Well, it can happen, there is the possibility, and not the cost of mining or the price of rent will stop it but exactly what those two "economist" completely missed. The real usage and the trust users have in BTC

100% agree there is no fixed cost for generating a coin.

However there is a cost, a variable cost, at the time of production. Someone has to pay for all that electricity. The depreciation of hardware etc etc..

Hence, It is currently costing approx. $2400-$3000 to generate 1BTC.

During 2013-2014 the difficulty just keep rising, people were not turning off their mining equipment, but rather adding to the network. We went from 23TH to 290,000TH (290PH).

Also, I was merely giving an example of what would happen if 1BTC was worth $20.00 at this current time. It just wouldn't function as a payment method, due to the limiting supply.

[cellard]

Bitcoin is death threads coming up, good sign.

Indeed. Anyone remembers the PhD economist Nobel Prize super expert calling an under $10 bitcoin back in 2013?



He failed so much that he became a meme, now know as "professor bitcorn."

This is what happens when you call bottoms, you can be wrong and then miss having a position for the next bull run. If the bottom was $7500, the people expecting way cheaper prices will be left out for the next bull run which could peak anywhere from $50k to $100k as people realize that the bottom was a long time ago and they FOMO back in. This is how bitcoin grows, I've been seeing it since day 1.

[Carlsen]

No miner wold give away his coins for 20$.
I think they would rather let it stay in a wallet for all eternity. The investments that are necessary to create a bitcoin these day are so high, it does not make a difference to give it away for free or sell it for 20 dollars.
In both cases they would go bankrupt in days. And without miners, we have no new blocks, and without new blocks.. well, you know the game...

[ChiBitCTy]

Many of the worlds smartest humans have touted Bitcoin and vice versa.  However more often than not the pundits are always missing key factors.  First off BTC is the newest hedge asset.  Volatile hedge, but what financial anything isn't in it's infancy?

Two important reads my buddy wrote that I will share that everyone and anyone can read and make sense of yet very informing and written extremely well.  

BTC as a payment system ..the day is near again with the Lightning Network-  https://medium.com/@melik_87377/lightning-network-enables-unicast-transactions-in-bitcoin-lightning-is-bitcoins-tcp-ip-stack-8ec1d42c14f5



Let's not forget many of us here live in 1st world countries and very lucky because of it.  World Bank Group’s Douglas Pearce says he’s most intrigued by the number 2 billion. That staggering sum represents the "unbanked”; people without access to transaction accounts. That lack of access is especially a problem for the poor, for women, and for people in rural areas.  Bitcoin to many of these people and many more to come..is their bank!

[Zicadis]

Bitcoin is not something you learn in school and I don’t believe these economists are predicting such low prices for bitcoin all in the name of causing panic and AFAIK bitcoin will never be worth anywhere near the $20 margin.

[ChiBitCTy]

Bitcoin is not something you learn in school and I don’t believe these economists are predicting such low prices for bitcoin all in the name of causing panic and AFAIK bitcoin will never be worth anywhere near the $20 margin.

The fact that Bitcoin got it's foot in the wall-street door with futures bodes extremely well for it's future.  No pun.  Economists should be running countries ..not reality TV stars.  I love economist, freakonomics may be the best book I've ever read.  But they are NOT financial analysts.  Many simply don't know how financial products work like say an advisor/CFA/CFP etc would.  Speaking of advisors, I've seen the likes of Buffett speaking poorly of BTC.  Dude is likely the best investor we've seen..but that only means so much.  He knows everything there is about traditional products but I HIGHLY doubt he even has the time to study Bitcoin well enough.  He's old school.  An advisor myself, I can't count how many old traditionalists (and great advisors often) will simply balk at new products without even giving it the time of day or even when they're game changing products (see Equity Linked Notes).  It's just how it is.  Let's not forget the baby boomers whom still think Marijuana is a drug equal to LSD and Alcohol are often the biggest pundits.  They resist change no matter how much sense it makes.

My point-don't read too much in to that.  Also, a lot of people like to say things for press or ulterior motives (Jamie Dimon).  To be fair Jamie made a walk of shame for the ages backing up on his highly pointed and emotional hate for BTC (even as he continues to see millions fly out of his bank every day to purchase crytpo).

Live in the past die in the past. Let's not forget people once thought it crazy gold money was turned in for "worthless pieces of paper". 

[dinofelis]

I reckon you are making up the term same fool, I had to do a google search but I found nothing about it hehehe.

I'm defining it.  I have the right to define a notion in an argument, right ?  The notion of same fool is like the notion of greater fool, except that the coefficient of foolishness in same-fool systems has an expectation value of near 1, while the expectation value of the coefficient of foolishness is a large number in greater-fool systems.  (and I suppose that you won't be able to find "coefficient of foolishness" either).

The point is that you can have a finite set of fools, and they can maintain indefinitely a system of same-fool belief ; however a finite set of fools can never sustain a greater-fool system: they run out of greater fools at a given moment.

Here, the definition of coefficient of foolishness A in such kind of games is the following:

 "an entity is willing to buy the asset at price X, on the condition of expecting to find buyers at A.X."

I have the right to define notions.  I thought it was obvious, and it didn't need explanation.

If we have a finite set of entities, the above game can be played only successfully for a long time if the expectation value of A over that set is near 1.  That's what I call a "same fool" system.  For instance, I know that a $100 bill is intrinsically worth nothing.  I can at best light my stove with it, physically, I cannot eat it, it is not beautiful.  So this quite useless piece of paper isn't worth anything intrinsically.   Wanting to work a few hours to obtain such a piece of paper is foolishness.  Except that I'm willing to do so, because I believe that I will find another fool, accepting it against similar value.  And the very next day, that fool (who also accepted a piece of paper he can do nothing with) will find a third fool that ALSO is EQUALLY foolish.  And in the end, that third fool will propose that bill to me for a few hours of work, and lo and behold, I am again as foolish as he is to accept to do work for a silly piece of paper. That game can  continue indefinitely, because each time each of us is satisfied in our expectations.

However, if there's an asset X within a finite set of people, of which the people only want to acquire it for price X, if on average, they expect to sell it for 100 X to another player (bitcoin and co must be of that kind), then you end up ALWAYS having a large portion of the players totally frustrated in their expectations.

In as much an asset can continue to go around with people expecting more or less the SAME value when they sell it, than when they buy it, an asset cannot continue to go around with people expecting more or less a much higher value when they sell it, than when they buy it.  This always ends up frustrating a large majority of the players, unless the set of players is infinite.

You can classify speculative assets (that is, assets which are intrinsically worthless, such as a piece of paper that is a $100 dollar bill) in two sets: the set of assets where most of its users are in the "same fool" game ; and the set of assets where most of its users are in the "greater fool" game.  Crypto users are in the last kind.

By far most crypto buyers are ONLY buying crypto, because they want to sell their crypto for MUCH more than they acquired it. There is only a very, very small fraction of crypto buyers that are NOT buying crypto with the idea of selling it higher.  So the average A in this game is much higher than 1.  I don't know how much it is, but ask yourself: if someone buys bitcoin at $10 000, do you really think that his motivation is to sell that coin at about $10 000, 5 years from now and that was the real motivation ?

[hisslyness]

I reckon you are making up the term same fool, I had to do a google search but I found nothing about it hehehe.

I'm defining it.  I have the right to define a notion in an argument, right ?  The notion of same fool is like the notion of greater fool, except that the coefficient of foolishness in same-fool systems has an expectation value of near 1, while the expectation value of the coefficient of foolishness is a large number in greater-fool systems.  (and I suppose that you won't be able to find "coefficient of foolishness" either).

The point is that you can have a finite set of fools, and they can maintain indefinitely a system of same-fool belief ; however a finite set of fools can never sustain a greater-fool system: they run out of greater fools at a given moment.

Here, the definition of coefficient of foolishness A in such kind of games is the following:

 "an entity is willing to buy the asset at price X, on the condition of expecting to find buyers at A.X."

I have the right to define notions.  I thought it was obvious, and it didn't need explanation.

If we have a finite set of entities, the above game can be played only successfully for a long time if the expectation value of A over that set is near 1.  That's what I call a "same fool" system.  For instance, I know that a $100 bill is intrinsically worth nothing.  I can at best light my stove with it, physically, I cannot eat it, it is not beautiful.  So this quite useless piece of paper isn't worth anything intrinsically.   Wanting to work a few hours to obtain such a piece of paper is foolishness.  Except that I'm willing to do so, because I believe that I will find another fool, accepting it against similar value.  And the very next day, that fool (who also accepted a piece of paper he can do nothing with) will find a third fool that ALSO is EQUALLY foolish.  And in the end, that third fool will propose that bill to me for a few hours of work, and lo and behold, I am again as foolish as he is to accept to do work for a silly piece of paper. That game can  continue indefinitely, because each time each of us is satisfied in our expectations.

However, if there's an asset X within a finite set of people, of which the people only want to acquire it for price X, if on average, they expect to sell it for 100 X to another player (bitcoin and co must be of that kind), then you end up ALWAYS having a large portion of the players totally frustrated in their expectations.

In as much an asset can continue to go around with people expecting more or less the SAME value when they sell it, than when they buy it, an asset cannot continue to go around with people expecting more or less a much higher value when they sell it, than when they buy it.  This always ends up frustrating a large majority of the players, unless the set of players is infinite.

You can classify speculative assets (that is, assets which are intrinsically worthless, such as a piece of paper that is a $100 dollar bill) in two sets: the set of assets where most of its users are in the "same fool" game ; and the set of assets where most of its users are in the "greater fool" game.  Crypto users are in the last kind.

By far most crypto buyers are ONLY buying crypto, because they want to sell their crypto for MUCH more than they acquired it. There is only a very, very small fraction of crypto buyers that are NOT buying crypto with the idea of selling it higher.  So the average A in this game is much higher than 1.  I don't know how much it is, but ask yourself: if someone buys bitcoin at $10 000, do you really think that his motivation is to sell that coin at about $10 000, 5 years from now and that was the real motivation ?

And 5 years from now will you be doing the same amount of work for that $100.00 (piece of paper you can do nothing with) ?

You can not compare your example above, to someone buying BTC and wanting to sell it higher in 5 years time.

In fact, I would expect to be able to pay someone less BTC to mow my lawns in five years from now.

[Wilhelm]

Is it time to realize that bitcoin's high price principally came from speculative sources and not real world utilization? I know I will get a lot of negative replies by saying it, but a simple look at the market shows that it is true. With the speculatory mania gone, what does the bitcoin market really have?



Richard Jackman, an economist at the London School of Economics, and Savvas Savouri, an economist at Toscafund Asset Management, however, estimate the coin is still trading far higher than it should.

That number, according to Jackman and Savouri, is a mere $20. Here's their logic:

The supply of bitcoin increases only slowly towards its famous fixed limit and is now around 15m. The use of bitcoin as a means of payment is currently around $100m per month, or $1,200m a year. Were bitcoin just like ordinary money each bitcoin would be used around four times a year in making transactions. So we have 60m bitcoin payments supporting $1,200m worth of bitcoin transactions, which requires that each bitcoin is worth $20.

There's always a "but" with such analysis. And the "but" in this case is that bitcoin could be worth its current value, but it would have to see a 1000-fold increase in its use as a form of payment.

Read the full article http://www.businessinsider.com/2-economists-just-eviscerated-bitcoin-saying-it-should-be-trading-at-20-2018-2

What a load of crap ....

OK so a store of value is based on transactions ?!?!?!?
Following that logic I can say that a Picasso painting isn't worth anything because no paintings are being sold 

Maybe I'm not an "economist" but a store of value should be based on work. But since money is printed at will those "economists" probably forgot the basic principals.
If you can create a bitcoin for $20 I'm buying your product

[shield132]

Do really anyone believes what these economists announce or say? 20$ - price of bitcoin? Lol, people they just lie you, their aim is this.
Just imagine if bitcoin is 20$, how will miners profit? No way, so this will destroy bitcoin. Also if we forget miners and this fact of destroy, one very reach man can easily buy all bitcoin.
It's a shame to say something very shit for money, especially when you are famous.

[arnbrd]

They are a bit out of the era I think, because according to their logic, obscure fiat currencies from countries with high population should have a big value, since there are many exchanges... Also how could fiat money devaluation work with such an idea ? They are stupid from A to Z, like most of the time with specialists...

[tee-rex]

Is it time to realize that bitcoin's high price principally came from speculative sources and not real world utilization? I know I will get a lot of negative replies by saying it, but a simple look at the market shows that it is true. With the speculatory mania gone, what does the bitcoin market really have?

Richard Jackman, an economist at the London School of Economics, and Savvas Savouri, an economist at Toscafund Asset Management, however, estimate the coin is still trading far higher than it should.

That number, according to Jackman and Savouri, is a mere $20. Here's their logic:

The supply of bitcoin increases only slowly towards its famous fixed limit and is now around 15m. The use of bitcoin as a means of payment is currently around $100m per month, or $1,200m a year. Were bitcoin just like ordinary money each bitcoin would be used around four times a year in making transactions. So we have 60m bitcoin payments supporting $1,200m worth of bitcoin transactions, which requires that each bitcoin is worth $20.

There's always a "but" with such analysis. And the "but" in this case is that bitcoin could be worth its current value, but it would have to see a 1000-fold increase in its use as a form of payment.

There is nothing new in this. The speculative nature of Bitcoin has been known for ages. Anyway, speculation is also an important part of it whether someone likes it or not. And as the "but" part suggests, if we remove speculation, Bitcoin's use as a form of payment could actually expand. Speculations add dramatically to volatility, but volatility is the major roadblock to wider Bitcoin adoption as a means of payment.