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Author Topic: AAPL vs. Bitcoin - what are the differences?  (Read 412 times)
cost9170
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November 28, 2013, 04:33:55 AM
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Disclaimer: Im not necessarily a skeptic of bitcoin going past $1000-$2000 and staying there but I do want honest opinions here.

1. If you look at a chart of AAPL over the last 5 years you'll see it went from about 100 to a high of 700 - so 700% increase.

2. Over this period, AAPL revenue grew about 4-fold, from $40 billion to $170 billion. AAPL is one of the success stories of our time

3. How does AAPL differ from bitcoin here? (Its an honest question, and no vague comments please)

----------------

So now we look at bitcoin, which many people say could go to $100,000+

1. Obviously bitcoin doesn't have "revenue" and so it's hard to compare. But what we can do is look at its market capitalization which I read is around $6 billion in terms of value out there.

2. So for bitcoin to really grow like people say, people who think they'll become millionaires off bitcoin buying now, its cap must grow to $600 billion

- What could cause bitcoin to have such a high capitalization?
- How likely do you think it is that this capitalization is reached?
- What time frame would you give it?
- How is bitcoin massively different from the true success stories of companies like AAPL? Why is there an expectation that it should grow 100 fold or something like that?


-------------

So my opinion:

I think, like most people do who have bought into it with some thought given beforehand (rather than a pure gamble but rather speculation) that bitcoin is like a long call option. There's a solid chance of bitcoin failing and literally dropping down below $100 or worse. However, there's a smaller possibility, say around 30%, that bitcoin really takes off. For this to happen it would have to have:

- commerical use beyond the black market on a MASSIVE scale
- Governments that won't interfere too much with it
- The attention of people, much like how paypal slowly became a necessity for ebay for example

Right now the price move is mostly just speculators I believe (including myself). So the momentum could certainly carry it higher, say to $2k or $3k, especially now that news outlets are reporting on it. However I am skeptical when people act like bitcoin is a 50%+ probability play that it really takes off and shows the consistent triple digit returns people expect.



What are your thoughts?

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cost9170
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November 28, 2013, 04:48:14 AM
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I also thought this was a very good article on the subject, particularly about the part as to why it might ultimately fail (like beanie babies) but speculation could still drive it up substantially:

http://finance.yahoo.com/blogs/daily-ticker/bitcoin-heading-toward-high-could-1-million-175818638.html
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November 28, 2013, 04:56:24 AM
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The two have absolutely nothing in common. One is a company that produces things, and the other is an open source payment system.

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November 28, 2013, 05:01:50 AM
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This is what I'm talking about. A one-line answer. How about if you can school the comparison so much, you write a paragraph or 2 doing so?

While I own bitcoin, it sounds like you're going in blind. A sheep that follows the herd but that just might be making the right decision regardless.
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November 28, 2013, 05:48:26 AM
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1. If you look at a chart of AAPL over the last 5 years you'll see it went from about 100 to a high of 700 - so 700% increase.

2. Over this period, AAPL revenue grew about 4-fold, from $40 billion to $170 billion. AAPL is one of the success stories of our time

3. How does AAPL differ from bitcoin here? (Its an honest question, and no vague comments please)

----------------

So now we look at bitcoin, which many people say could go to $100,000+

1. Obviously bitcoin doesn't have "revenue" and so it's hard to compare. But what we can do is look at its market capitalization which I read is around $6 billion in terms of value out there.

2. So for bitcoin to really grow like people say, people who think they'll become millionaires off bitcoin buying now, its cap must grow to $600 billion

- What could cause bitcoin to have such a high capitalization?
- How likely do you think it is that this capitalization is reached?
- What time frame would you give it?
- How is bitcoin massively different from the true success stories of companies like AAPL? Why is there an expectation that it should grow 100 fold or something like that?



1. If you look at AAPL from 2003 it went from about 8 bucks to $700+.  I will let you do the math.

2. Why are you selecting that time frame, and not going from either AAPL inception or at least the lows in '03? AAPL was around a long while before it stumbled into iMoney (no disrespect it was a good company under Jobs for sure, but timing was everything too)

3. AAPL is a company and bitcoin is essentially a currency. People seem to differentiate it as a "digital currency" which is redundant. I see maybe 1% of my money in cash form, ever. All the rest is digital. I think about 98% of all USD is digital currency via debit/credit. You are not expecting a profit on revenues, you are expecting demand for the currency to increase as supply decreases. As global central banks hyperinflate their currencies by creating infinitely more of it in both cash and digital form, the relationship of equilibrium between BTC and USD or CYN etc forces relative values upwards for BTC which is (allegedly) not going to expand infinitely.


----------

1. "Market capitalization" is the wrong term, that is the perceived value of a company based on its share price. That would be like calling M1 the market capitalization of the US. More prefer notional value of USD $6 billion, if you say so (I haven't checked lately). You aren't buying the company when you buy a stock, you are buying a proxy on the company's performance. For a less opaque example, Facebook (FB) is valued near $50 billion market cap. Their 2013 earnings estimate is around $500 million. Ignoring anticipated growth it would take a hundred years to recoup your share price on earnings alone. You are buying anticipated growth in earnings, a future desire for others to acquire a limited supply of shares at a higher price. In this way, especially in the world of quantitative easing, shares can be viewed as a kind of currency. FB and AAPL can and will issue more shares when they wish, will BTC? I have no idea. They claim they will only issue a fixed amount, but I am completely ignorant as to how set in stone that is or is not, and see that as an undefined risk.

2. Yes, notional value of all BTC at $600 billion would approximate the rise of AAPL stock from '03 to the highs.

- What could cause bitcoin to have such a high capitalization?

Devaluation of the USD as QE printing of trillions and trillions of new dollars eventually flows from the banks into the real economy. This is almost inevitable.

- How likely do you think it is that this capitalization is reached?

Assuming big assumptions of a fixed supply, a genuinely secure medium, and lack of legal constraints (outlawed), I think it is entirely possible...

- What time frame would you give it?

Less than 5 years. Or never.

- How is bitcoin massively different from the true success stories of companies like AAPL? Why is there an expectation that it should grow 100 fold or something like that?

At inception they were worth 0 or close to it. Now they are $1,000 and people are clamoring to get in. How much of the dollar-yuan-euro-yen invested public has thus far found their way into bitcoins? 1%? I would bet fewer given the intricacies and geekdom nature of it. But say 2%. It took 2% of the population making a small investment in BTC to increase the value from 0 to $1,000. The rate of increase is clearly nonlinear, thus a 1% or .1% increase in demand is adding X to the price over Y time, parabolically.

There will (allegedly) be 21 million BTC total at culmination. Counter with central banks, USD increase of 2.5 trillion newly created in the last 4 years. $USD2 trillion new yen with $USD3 trillion more at least on the way. This creates both an impetus for a fixed currency (demand) and creates a relative value increase in total BTC vs total any other outstanding currency. 

odolvlobo
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November 28, 2013, 05:49:23 AM
 #6

Alright. I'll give your questions a thoughtful answer.

1. If you look at a chart of AAPL over the last 5 years you'll see it went from about 100 to a high of 700 - so 700% increase.
2. Over this period, AAPL revenue grew about 4-fold, from $40 billion to $170 billion. AAPL is one of the success stories of our time
3. How does AAPL differ from bitcoin here? (Its an honest question, and no vague comments please)
----------------
- What could cause bitcoin to have such a high capitalization?
- How likely do you think it is that this capitalization is reached?
- What time frame would you give it?
- How is bitcoin massively different from the true success stories of companies like AAPL? Why is there an expectation that it should grow 100 fold or something like that?

Bitcoin and AAPL differ in too many ways to list, but I want to note that the market cap of Apple is not comparable to the market cap of Bitcoin. A more reasonable comparison would be between bitcoin and gold or bitcoin and land. All three have a limited supply and some utility.

Bitcoin has a high capitalization because its utility is expected to be extremely high (and also because there is some bubble mentality building). I doubt it will reach $100,000 anytime soon, but I also doubted that it would reach $1000 this year.

Ugh, again with the AAPL comparison. Anyway, Bitcoin is not yet a success story. Its story has barely begun. It is important to understand that the exchange rate does not measure success. Success is measured by transaction fees. The transaction fee is what measures the value of a bitcoin transaction. People are willing to pay more for other transaction methods because Bitcoin isn't really all that useful yet. That is why the transaction fee is so low compared to other transaction methods.

So my opinion:
...

Buying bitcoins is like investing in a small startup. It might have great potential, but it could also be a flop. There are so many paths that Bitcoin could take, and there are many ways it could succeed and many ways it could fail. I don't think there is a way to make a prediction about its future with any kind of confidence. At this point, no amount of analysis will be able to tell you any more than Bitcoin could be worth zero, or it could be worth a lot, or perhaps something in between.

I think the greatest threat to Bitcoin is the mania around the exchange rate and all the greed that brings out in people. People lose sight of the fact that Bitcoin is a payment system (with its own currency). Without the payment system, bitcoins have zero utility and thus zero value. I think that Bitcoin would be better off it bitcoins were still worth less than $1.

I have taken a close look at the core technology and the concept, and see genius and revolution. I have no idea where it will go, but I know that something interesting will be the result.

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cost9170
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November 28, 2013, 05:58:14 AM
 #7

Thanks guys for the detailed responses, thats what I was looking for. I'll get back to you both soon
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