Here's Why Bubbles and Busts Will Continue On the Way to Higher Prices

[Trader Steve]

Mass adoption is not needed for bitcoin. It is a commodity that has unique features and benefits and these features and benefits (see link below) are valued by a certain group of people. Most of the people who will value it do not even know it exists yet. If there were never any more usability improvements to the current client, bitcoin would still increase in value over time.

Not everyone needs to understand it or how to use it.

A prime example is gold and silver. Most people don't know or understand them. Most people don't own them. Most people don't know where to buy them or sell them. Yet precious metals still have value because those who understand economics see that they serve a purpose.

Bitcoin is the same way, and in many respects, much better than precious metals.

Right now we are in the discovery and speculation phase. Most buyers don't understand bitcoin's true value and purpose - they are merely playing a speculation game and piling in. When challenges arise these same people pile out.

We will see many of these speculation bubbles and crashes along the way to higher prices. Bitcoin has too many features and benefits that cannot be ignored nor denied.

Bitcoin: A New Commodity Created To Serve Market Demand
http://tinyurl.com/3ctt5v8

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[Shinobi]

I come here to watch the cognitive dissonance and zeolatry. Thanks for both!

[Mike Moceri]

I think the simpler solution to the apparent disconnect between the regression theorem and cryptocurrencies is that cryptocurrencies break the regression theorem. I like Mises and all, but really? People are trying to apply the economics of the 1940s to the monetary system of today...

[Trader Steve]

I come here to watch the cognitive dissonance and zeolatry. Thanks for both!

Call it what you like but you cannot deny economic law.

[kiba]

I think the simpler solution to the apparent disconnect between the regression theorem and cryptocurrencies is that cryptocurrencies break the regression theorem. I like Mises and all, but really? People are trying to apply the economics of the 1940s to the monetary system of today...

The regression theorem is account of how money arise from a barter economy. The theorem is irrelevant to bitcoin.

[markm]

I think the simpler solution to the apparent disconnect between the regression theorem and cryptocurrencies is that cryptocurrencies break the regression theorem. I like Mises and all, but really? People are trying to apply the economics of the 1940s to the monetary system of today...

The regression theorem is account of how money arise from a barter economy. The theorem is irrelevant to bitcoin.

That sounds wrong, but maybe I do not understand the theorem, so lets review what I thought it was.

My understanding is that according to the theorem money arises when something useful (such as data aka information) turns out to be so useful that lots of people not only agree that it is useful but also start to use it as an intermediary in trade.

So, like, maybe once upon a time someone figured writing was so useful that instead of trading a loaf of bread for a shoelace they traded a loaf of bread either for a note saying "pay the bearer on demand one loaf of bread" or a note saying "pay the bearer on demand one shoelace".

Pretty soon more and more people were trading items for information in various variations of such techniques.

Along came computers, a new medium to write on with new writing tools, so people started trading goods for entries in databases.

And so on.

Did I get it wrong?

-MarkM-

[kjj]

I think the simpler solution to the apparent disconnect between the regression theorem and cryptocurrencies is that cryptocurrencies break the regression theorem. I like Mises and all, but really? People are trying to apply the economics of the 1940s to the monetary system of today...

The regression theorem is account of how money arise from a barter economy. The theorem is irrelevant to bitcoin.

That sounds wrong, but maybe I do not understand the theorem, so lets review what I thought it was.

My understanding is that according to the theorem money arises when something useful (such as data aka information) turns out to be so useful that lots of people not only agree that it is useful but also start to use it as an intermediary in trade.

So, like, maybe once upon a time someone figured writing was so useful that instead of trading a loaf of bread for a shoelace they traded a loaf of bread either for a note saying "pay the bearer on demand one loaf of bread" or a note saying "pay the bearer on demand one shoelace".

Pretty soon more and more people were trading items for information in various variations of such techniques.

Along came computers, a new medium to write on with new writing tools, so people started trading goods for entries in databases.

And so on.

Did I get it wrong?

-MarkM-

Horribly wrong, I'm afraid.  You are confusing the concept of money with the concept of tokens.

In your example, the notes aren't valuable except as they embody promises that they can be redeemed for stuff, that is, they are tokens.

Money (in this context) is something (either actually present or in token form) that is widely accepted in trade.  Doesn't matter much what the thing is, or why it is widely accepted, just so long as it is.

Kiba is right that regression isn't important here.  I would go another step and say that regression wasn't ever important anywhere.  Money was in wide use all around the world for thousands of years before anyone thought they needed to invent a story to retroactively rationalize how it happened.

For bitcoin to be successful, it just needs to be better than the alternatives for at least one use, and I'm sure each of us can think of several things that bitcoin does better than any existing financial system.

By the way, discussing this sort of stuff is really hard.  When we say money, we are usually referring to a token (cash in the wallet) or a token for that token (checking account, etc), or something even further removed (ATM card/check/savings account).  For extra fun, as we peel away the stack of tortoises, we find out that the bottom token (cash) isn't a token for anything.  It is just a token. 

[markm]

But obviously tokens, even if not "for" anything, are useful. So useful that they are more widely traded in more volume than anything else unless you count other somewhat borderline-conceptual things such as "molecules" or "atoms" in which case possibly more atoms or molecules are traded than are tokens...

-MarkM- (I dunno though, a LOT of tokens are traded, and atom and molecule are each a token "for" whole families of "things" each...)

[kjj]

But obviously tokens, even if not "for" anything, are useful. So useful that they are more widely traded in more volume than anything else unless you count other somewhat borderline-conceptual things such as "molecules" or "atoms" in which case possibly more atoms or molecules are traded than are tokens...

-MarkM- (I dunno though, a LOT of tokens are traded, and atom and molecule are each a token "for" whole families of "things" each...)

Yup, exactly.  USD are the best, most useful empty promises on the planet.  And they've been empty for nearly 100, 80, or 40 years now (depending on your point of view), and the world hasn't come to an end.

I've had the "money is nothing" chat with many people, and I always know when they "get" it because there is always a look of absolute horror on their faces at that instant.  And always there is a call a few days later, or a few weeks, when they work through all of the repercussions and come to the conclusion that you can't possibly run a global economy on empty promises.  Except that we clearly are doing exactly that, and it works.  More or less.

That is why bitcoin has such a low barrier for success.  Value is meaningless, the key is utility.

[bitrebel]

I agree with the OP 100% but I will never state it publicly, because I want bitcoins value to drop so I can buy a mass shitload of 'em on the cheap!

(Reverse Psy Op to acquire mass bitcoin upon flash devaluation)

[hugolp]

Yup, exactly.  USD are the best, most useful empty promises on the planet.  And they've been empty for nearly 100, 80, or 40 years now (depending on your point of view), and the world hasn't come to an end.

I've had the "money is nothing" chat with many people, and I always know when they "get" it because there is always a look of absolute horror on their faces at that instant.  And always there is a call a few days later, or a few weeks, when they work through all of the repercussions and come to the conclusion that you can't possibly run a global economy on empty promises.  Except that we clearly are doing exactly that, and it works.  More or less.

That is why bitcoin has such a low barrier for success.  Value is meaningless, the key is utility.

But you are forgetting two things:

1. Bitcoin and USD are opposites. The USD is a fiat currency while Bitcoin is a voluntary currency.
2. You are misrepresenting the position of the people criticizing fiat currencies. There has not been a paper fiat currency that has lasted more than a 100 years in history. And paper fiat currency is a very old concept, it has been tried for centuries. That means something.

And we can see the effects of the monetary policy all around us. Bubbles everywhere, big disparities in wealth, destruction of the middle class, etc... The fiat monetary system is hurting us. But that does not mean that you change to a paper fiat currency and the next morning the whole economy collapses. Nobody is saying that. The market is resilient and can keep going even when abused. The system could have another ride and last 20 or 30 years more, who knows, but its quite clear that its getting to the end. Its more and more unstable as time goes by.

[bitrebel]

Bubbles and bursts will only occur due to influence by Obama and Soros, indirectly, of course.

[kjj]

But you are forgetting two things:

1. Bitcoin and USD are opposites. The USD is a fiat currency while Bitcoin is a voluntary currency.
2. You are misrepresenting the position of the people criticizing fiat currencies. There has not been a paper fiat currency that has lasted more than a 100 years in history. And paper fiat currency is a very old concept, it has been tried for centuries. That means something.

1.  I'm well aware of the difference.

2.  No, I haven't misrepresented anything of the sort, mostly because I haven't said anything about people criticizing anything.  I'm also well aware of the history of paper money.

Generally speaking, people that know enough about our monetary system to criticize it don't need me to explain basic concepts like what "backs" the dollar.

[bitrebel]

The $ (Dollar) is the biggest PONZI scheme in history.
The reason so many people believe in it, is because so many people are paid off and make a living dependent on it and the fraud perpetuated by it's existence.

With the advent of the internet and mini-movies like Zeitgeist and the Money Masters etc, etc, the previous "minority" of awakened people are slowly becoming the "majority" of awakened people. This will lead to, and is leading to, a gradual abandonment of the dollar in favor of more "stable" currencies like BITCOIN. Although bitcoin may currently be slightly unstable, in the long run, it will appear more stable than the dollar as safeguards for bitcoin are put into place and the dollar slowly weakens through hyperinflation.