Australian (ASX) Stock Market Forum

Bitcoin price discussion and analysis

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Value Collector said:
The ultimate value of a Zucchini is obviously derived from its ability to sustain human life by providing calories, vitamins and minerals, and from the enjoyment some people find in its taste, and it’s market price will be determined by supply and demand, and when that real value decays so will it’s market price, so it’s all linked to real world value.

The demand side of zucchini price is driven by its real world values that I mentioned, if it did t have those real world values I would be questioning why people are buying them hoping others would pay more too.

———

As for Nicola or any other stock, their value will ultimately be based on what products and services they produce and what profits they make.

In the mean time their stock price is based on hope that these products and services eventually materialise, if they don’t their stock price will eventually collapse.

But where does Bitcoin fit in?

we can’t eat it like a zucchini, if doesn’t represent ownership in a factory or factory idea such as Nicola, it’s not even a commodity like gold that has a real world use, and its not

My question remains, Where does Bitcoin derive its value?

I am not trolling here, this is a genuine question, I simply don’t understand it, if people had asked me 5 years ago my FMG stock was valuable, I could explain that in simple terms.

So far no matter where I look I can’t see anyone that can explain why Bitcoin has value.
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To be honest, the actual intrinsic value of bitcoin in something that I have also struggled with, but as I have analysed how Bitcoin may have value and then and then how other instruments may have value it is become a little bit more clearer for me.

There's are actually dozens of YouTube videos on this topic but I always come back to Raoul Pal.... I just like the way he likes things out.

 
wayneL said:
To be honest, the actual intrinsic value of bitcoin in something that I have also struggled with, but as I have analysed how Bitcoin may have value and then and then how other instruments may have value it is become a little bit more clearer for me.

There's are actually dozens of YouTube videos on this topic but I always come back to Raoul Pal.... I just like the way he likes things out.

Click to expand...


That guy is actually quite bearish on Bit coin if you listen to what he says around the 34min mark, saying its like Cisco during the internet bubble.

Another guy in the video compares it to My space, and says it could eventually be in the trash, which given its lack of real value I would have to agree is possibility.

It seems to me it's only real value it could ever have is if it became a real currency, but I can't see that happening, it is just far to volatile, I mean who would want to base a home loan in Bit coins, and find that that principle of their loan has grown due to bitcoin rising, or find that they can't afford the groceries because bitcoin is down 20% since payday, and now they can't afford the bill at the check out.

Currencies - have to be stable to be functional as currency, they can move slowly such as the reserve banks 2% inflation figure, but they can't fluctuate wildly as Bitcoin does.

Commodities - have to have a use outside of their use as a store of value, other wise they will fluctuate or disappear with fashion trends such as basketball cards or beanie babies with no real world value.

Equity- securities need to have some sort of real world value behind the or one day they will have their value disappear when people realise they are holding an empty sack.

-----------

In short I feel it could be fun to speculate on bitcoin, but I think its unwise to be thinking its eventual going to become what it's not and can't be.
 
Meanwhile, Pal describes himself currently as being "irresponsibly" long, Paul Tudor Jones has picked up some for his portfolio and several large companies such as stripe and PayPal have included in as part of their "cash” reserves.

For The longest time gold was described as a pet rock too, by none other than Warren buffett.

So, where to now?
 
Value Collector I have to disagree with your analysis somewhat. I think Bitcoin can (its not certain but there is a reasonable chance) eventually become a viable major currency. Why is that you may ask? Simply, because it removes the intermediary in the process (although some would argue the crypto exchanges effectively are the bitcoin intermediaries) and thus reduces frictional costs and counter-party risks. Currently if you want to send fiat currency overseas through either a bank wire transfer or western union you will pay hefty fees (or take a hit on the exchange rate). The reduction of counter-party risk can also be a huge benefit especially during a financial crises.

Sending Bitcoin can be done in a fraction of the time and for a fraction of the cost. Not to mention it has proven it has real world applications in sanctioned countries like Iran or Venezuela where access to the SWIFT system, etc is somewhat restricted.

As for the volatility of bitcoin it has gone down over time and will continue to decrease further in the future as it becomes more liquid and more mas adopted.

Once Bitcoin becomes a viable major currency the groundwork is then set for it to also become a true store of value because you then have a highly functional currency with limited supply (maximum 21 million). The value/ulitility that you are storing is its utility as a currency.
 
Value Hunter said:
Value Collector I have to disagree with your analysis somewhat. I think Bitcoin can (its not certain but there is a reasonable chance) eventually become a viable major currency. Why is that you may ask? Simply, because it removes the intermediary in the process (although some would argue the crypto exchanges effectively are the bitcoin intermediaries) and thus reduces frictional costs and counter-party risks. Currently if you want to send fiat currency overseas through either a bank wire transfer or western union you will pay hefty fees (or take a hit on the exchange rate). The reduction of counter-party risk can also be a huge benefit especially during a financial crises.

Sending Bitcoin can be done in a fraction of the time and for a fraction of the cost. Not to mention it has proven it has real world applications in sanctioned countries like Iran or Venezuela where access to the SWIFT system, etc is somewhat restricted.

As for the volatility of bitcoin it has gone down over time and will continue to decrease further in the future as it becomes more liquid and more mas adopted.

Once Bitcoin becomes a viable major currency the groundwork is then set for it to also become a true store of value because you then have a highly functional currency with limited supply (maximum 21 million). The value/ulitility that you are storing is its utility as a currency.
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Would you take out a home loan for $x amount of Bitcoin?

Would you sign an employment contract and promise to pay staff $x amount of bit coin per week for the next 2 years?

I can’t see it ever being stable enough for that, even gold isn’t stable enough for that.
 
Bitcoin is a store of value and I believe that's why it will continue to climb, I just dont believe bitcoin has the anonymity, ease of use and/or technology to become an everyday currency, which when you say 'viable major currency" is what you are alluding to. Its just not going to happen as there are other Cryptos that are far better suited to be used as every day currency that are easier to use, faster, better technology. I think a stable coin pegged to the USD or similar will become the "viable major currency".

You need to see bitcoin as being the gold storage of crypto currency already, saying for it to become a value of storage it must first become a viable major currency is again incorrect, there are many instances in the past (like gold) where the value will start to exceed the use for everyday currency and people would rather hold and store then use. Bitcoin is already there, being pushed on by a market that most people dont understand and cant get into that is manipulated constantly.

I would go as far to say that the number of bitcoin transactions will not increase massively but probably slow - in Q4 2017 bitcoin had approx 320k transactions, hit a top of 380k in Q1 2019, and Q3 2020 hit 350k so while the price is up the transactions are not. Why? Because people are buying and holding, nobody will be wanting to spend bitcoin on everyday things if they think it could possible double, triple or whatever in the next few years - it just doesnt make sense to me.

Ever heard the story of the first pizza that was bought with 10,000 bitcoin? yup... thats why bitcoin will never become a transactional everyday crypto, people will trade it to make money or hold it to make money they will not use it to buy things.

Well thats what I think anyway.
 
matty77 said:
Bitcoin is a store of value and I believe that's why it will continue to climb
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But my question is, where is this “Value” derived?

what is stopping Bitcoin going to zero?

I mean humans have used all sorts of things as stores of value, even sea shells, glass beads, etc.

but unless something has a real world value in use, there is nothing stopping it going to zero, because there is no mechanism that kicks in to support the price once fashions change.
 
I agree with VC to a point.

Its used a bit for certain transactions and shifting money around. Can't see it really moving mainstream. But given it isn't a centrally controlled currency, it will be valued to some degree by the fanatics.

I suppose the moment tech catches up to crack the security measures it then becomes worthless.
 
moXJO said:
. Can't see it really moving mainstream. But given it isn't a centrally controlled currency, it will be valued to some degree by the fanatics.
.
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To me that means it will forever be volatile and never be a usable currency, which means it's more of a commodity and its a commodity with no underlying intrinsic value that can support price and prevent it becoming obsolete.

------
I am not saying you guys can't trade it for profit in the short term, I am just trying to understand whether it holds any longterm value or use beyond this trading activity, or will it eventually become defunct like sea shells, glass beads, carved sticks and the countless other commodity type financial assets humans have experimented with over the years.
 
I go along with @matty77 comments above, more of a store of value than a currency with widespread use for exactly the reasons stated.

But I also agree with him about there being other solutions adopted for that purpose. I'm by no means an expert, a complete novice in fact, but I am seeing a lot of efforts and development in the so-called DEFI space, Etherium (as opposed to Ether) etc.

As a point of interest I do have one client that pays me in BTC and two who pay me in gold via Goldpass. and I was reading somewhere where some Canadian Windsor calories are allowing people to pay their rates in cryptocurrency.

The key here as I've stated before is uptake and uptake is increasing.
 
Value Collector said:
But my question is, where is this “Value” derived?

what is stopping Bitcoin going to zero?

I mean humans have used all sorts of things as stores of value, even sea shells, glass beads, etc.

but unless something has a real world value in use, there is nothing stopping it going to zero, because there is no mechanism that kicks in to support the price once fashions change.
Click to expand...

You can kind of work out an actual real world value of BTC and that is the cost to mine one bitcoin, that could be considered the actual real world value right now. This would be between 12,000 to 18,000 USD per coin depending on how you are mining it, electricity charges etc. This is just one of the things people may use to put a so called value on bitcoin. Obviously this value will increase as bitcoins become harder to mine.

What is stopping bitcoin going to zero? nothing.
What is stopping gold going to zero? nothing.

Just because it can go to zero doesn't mean it will, or that its worthless.

The biggest risk to bitcoin that I see is, Government intervention and censorship/banning (although this may also push prices up)

Another risk is quantum computing and being able to derive private keys - but this may only affect around 25% of bitcoin, and I would imagine if this becomes a real risk people will be able to move bitcoin out of p2k wallets anyway, so again its a risk but you can mitigate it. Obviously as technology advances things change though.

Bitcoin is open to a fair bit of market manipulation at the moment, you can see that in 2017 when prices went through the roof but I think over time as the markets matures the prices will stabilize, (Crypto is still an early new market!) possible positives for Bitcoin could be the destabilization of the USD going forward as China continues to push its own agenda and people look to move money where they have total control, and quick control as well.

I dont think Bitcoin will be the end game for Crypto, but I think it will be around for the next 10-15 years, and will probably be a good investment to those that are happy to take a risk. / Not financial advice DYOR
 
matty77 said:
You can kind of work out an actual real world value of BTC and that is the cost to mine one bitcoin, that could be considered the actual real world value right now. This would be between 12,000 to 18,000 USD per coin depending on how you are mining it, electricity charges etc. This is just one of the things people may use to put a so called value on bitcoin. Obviously this value will increase as bitcoins become harder to mine.

What is stopping bitcoin going to zero? nothing.
What is stopping gold going to zero? nothing.

Just because it can go to zero doesn't mean it will, or that its worthless.

The biggest risk to bitcoin that I see is, Government intervention and censorship/banning (although this may also push prices up)

Another risk is quantum computing and being able to derive private keys - but this may only affect around 25% of bitcoin, and I would imagine if this becomes a real risk people will be able to move bitcoin out of p2k wallets anyway, so again its a risk but you can mitigate it. Obviously as technology advances things change though.

Bitcoin is open to a fair bit of market manipulation at the moment, you can see that in 2017 when prices went through the roof but I think over time as the markets matures the prices will stabilize, (Crypto is still an early new market!) possible positives for Bitcoin could be the destabilization of the USD going forward as China continues to push its own agenda and people look to move money where they have total control, and quick control as well.

I dont think Bitcoin will be the end game for Crypto, but I think it will be around for the next 10-15 years, and will probably be a good investment to those that are happy to take a risk. / Not financial advice DYOR
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value and cost are very different things, the cost of mining Bitcoin won’t provide any support to its market priceif the market simply loses interest in Bitcoin, and decided to begin trading something else.

Gold wouldn’t go to zero because it has real world applications, as a minimum of would maintain at least the value of copper, because it is more conductive than copper, so at a certain price point makers of cable would switch to using gold if the gold price dropped below copper, and there are many other mechanisms that would kick in before it even reached copper price.

bit coin however isn’t real, it has no other use beyond its ability to act as a financial trading thing, there is nothing to support its price if traders lose interest in it and move on.
 
It all comes down to confidence in its value and base interest I suppose. When investors don't have confidence prices drop. Everything also has an expiration when the tech catches up. Gold and off world mining would probably smash the price eventually. Long way before the tech catches up.

Coins, cars, art, stamps, collectables all go through fazes. Antiques use to be a thing but I'm sure they got smashed. So can be generational as well as base interest.

There are those that are pushing it in the tech community so that's an upside to it.

Similar to regular central bank really. That plastic $100 note is only worth something while the base is invested. Confidence gets shaken and it gets revalued.
 
moXJO said:
Similar to regular central bank really. That plastic $100 note is only worth something while the base is invested. Confidence gets shaken and it gets revalued.
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See, but that plastic $100 note has use as an actual currency, it is specifically managed not to be volatile, it is managed in a way that it will lose about 2% of its value a year, but that gives it enough stability to be useful as a currency.

people feel confident enough in that $100 notes stability to sign long term leases, loans, employment contracts etc etc based on it, no one is going to sign a long term lease in a fixed amount of Bitcoin, it could bankrupt either side of the transaction depending on which way it swings

————
but yes currencies can go to zero, and most lose value steadily, but they are useful for trading goods and services, how ever as I said Bit coin doesn’t have that functionality.

people that say unmanaged “currencies” are better than managed ones need their head read.

I wouldn’t suggest “Storing Value” in currency for long, excess cash should be invested into real assets that hold their value and produce income.
 

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