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Author Topic: Why bit coin is different from every previous speculative bubble asset  (Read 971 times)
vanchau
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November 28, 2013, 07:50:34 AM
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The arguments against bitcoin are primarily centered around it being "just another" speculative bubble asset.  Because it is not based in any "real value", it is simply worth what people will pay for it (this is the actually how fiat currencies are also, but not important to this discussion). Therefore, as soon as people decide its not valuable, it's value will crash. 
This happened with tulips, beanie babies, internet stocks, etc.  This is a true statement, if the masses suddenly decide bitcoin is worthless, it will be, just like all the speculative assets before it.

However, bit coins are unique in that they are both a speculative investment and a useful financial tool.   Every other speculative bubble centered around things that were purely just speculative.  With beanie baby or tulips,  people were simply trying to buy something that they could sell to another fool later all (see Greater Fool Theory).  There was no usefulness for that asset other than hoping you could buy it and sell it someone else.  As soon as panic set in and people stopped buying beanie babies or tulips, you were literally left holding a pretty worthless asset.

Bitcoins are quite useful in that you can actually buy things with them.  More and more shops/retailers/organizations are accepting bit coin as a form of payment.  Shopify just made it easy for their 75,000+ online merchants to accept bit coin.  Everything from air travel to universities can be now be bought with bitcoins and the list is growing.  In some countries, credits cards are not used so online payments are hard.  Bitcoin could solve that problem since it doesn't require traditional banking to be established.  In many ways, bit coin is to money what mobile did to telephony i.e.: where some countries skipped the land line phone system and went straight to mobile, countries will skip traditional banking and go straight to bit coin.

In China, there are very few people accepting bit coin as payment, but it is still very useful for them because it is used as a way to move money out of the country.  Again, bit coins are a great way to transfer value it is being used to bypass a country's capital controls.  There's never been a way to safely and quickly transfer large sums of money to whomever you want.

Going back to why a speculative bubble bursts, it bursts because people suddenly decide there is no value in that asset.  If you're holding a bunch of tulips or beanie babies and that happens, you have no recourse.  With bit coin, since it is quite valuable regardless of its current value, it will always be viewed as valuable.  yes there may be some volatility in its price but the usefulness of bit coin is not a fad, it is real.  Since it is useful it is therefore valuable and will not experience the "bubble burst" that so many people think will happen.

Now if there was some bug in the code or some hacker was able to destroy the integrity of bit coin, then this could destroy bit coin, until a better/safer version was implemented.  There is always that kind of chance, albeit small. 

Anyway my $0.02 or .00002 btc
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wobber
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November 28, 2013, 07:52:18 AM
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Yet another noob that knows all but spells "bit coin"

If you hate me, you can spam me here: 19wdQNKjnATkgXvpzmSrkSYhJtuJWb8mKs
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November 28, 2013, 07:54:02 AM
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Until speculation and utility come into some state of equilibrium, they will be working against each other. And yes, it is an asset bubble. The only use 99% of the people have for BTC at the moment is "hold" to be rich.
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November 28, 2013, 08:17:02 AM
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Yet another noob that knows all but spells "bit coin"

Auto correct and didn't feel like fixing it.   Thanks for adding valuable info the discussion.
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