One question about collectible value of the casascius coins
How much of a price premium people pay for a 1, 10, ... physical bitcoins versus the BTCUSD rate?
TL;DR:I theorize the existence of any collectible market relies on premiums being attached to the commodity upon which they are based. In this case, casascius coins premiums will be measured in terms of BTC, not USD.
I've resisted thinking of it in terms of a premium that in any way ties to USD. Doing that would make these coins an anti-investment - given an upward price of the commodity upon which the coins are based, one would always have more worth by investing in the raw form of Bitcoins than in investing in the coins.
A simple example, presuming a meteoric rise in BTC price from $10 to $1000. Two investors each put $1000 into Bitcoin, one buying casascius coins, the other buying electronically-stored Bitcoins.
Joe buys 100 Bitcoins at $10 apiece. For simplicity, say Bitcoin spot is at $5, and $5 was a premium for the coin.
Jane uses the same $1000, but buys 200 Bitcoins and puts them in a market.
Bitcoin goes from spot of $5 to spot of $1000.
Joe has 100 Bitcoins with a spot value of $100,000. Plus a premium of
Jane has 200 Bitcoins with a spot value of $200,000.
So the question remains - what is the premium? Possibilities:
A) A fixed USD premium. Joe paid a $5 premium when he bought them, that same premium remains.
B) A fixed BTC premium. Joe paid a 1.0 BTC premium when he bought them, that same premium remains.
Looking at each scenario:
A)
Joe's adds $5 for each of his 100 BTC, taking his $100,000 in spot up to a net value of $100,500.
Jane adds $0 for each of her 200 BTC, taking her $200,000 in spot up to a net value of $200,000.
B)
Joe's adds $1000 for each of his 100 BTC, taking his $100,000 in spot up to a net value of $200,000.
Jane adds $0 for each of her 200 BTC, taking her $200,000 in spot up to a net value of $200,000.
In short, A) is not how a collectible market behaves. If it were, it would not be a collectible market - it would be an anti-collectible market. You only make gains if the underlying commodity
decreases in value. Compare 100-year trends of gold spot vs. rare gold coins, or diamonds carat value vs. rarer quality/size specimens.
With the simple example, in B) we see Joe and Jane coming out exactly equal.
Whether in the long run Joe's value comes out ahead of or behind Jane has to do with any change in BTC premiums in the secondary market.
Whether those premiums are higher or lower than the original premiums that Mike offers will be purely driven by whether future investors perceive a greater value.
I strongly suspect Mike is keenly aware of this. In the same line of thinking, if he were to lower the premiums on his offerings, this would create a disincentive to buy today - and an incentive to buy later. That doesn't foster growth in a collectible market - it motivates everyone to dump their coins.
There's a whole 'nother layer that looks at whether BTC premiums scale additively or multiplicatively. And some details around how as prices rise, older coins price themselves out of the general collectible market, enter a dead zone, then will re-emerge in the elite collectible market, with a different investor base representing the buyers. But they're just that - theories. Ultimately, it will be the behavior of us, the buyers and sellers of these coins, that define the market, and its behavior.
I cringe when I see people that are sitting on gold mines - early, high-end collectible coins - dumping them for fear that model A) represents the future, and they're better off converting to plain BTC before they lose out. This question that S3052 asked - it gets visited in nearly every coin transaction I conduct. I'm hoping to get these concepts out there, so that current holders won't release their coins to new holders, based purely on fear and a lack of information/collectible market behavior.
If this seems off-topic for this thread, I apologize. It has long struck me as the largest piece of misunderstood data standing in the way of the collectible bitcoin market absolutely taking off. If this does seem on-topic, I'd highly value the thoughts of others, especially Mike.
