Crypto explanation to sceptic people
Hi,
I've been discussing with some friends lately about cryptocurrencies. FYI, I'm a hodler and so far was able to make quite a nice profit. My friend, who is very sceptic about the crypto market, sent me today an article that was published in a European newspaper. For those not willing to read the entire article below, the key points are: * crypto does not meet the minimum requirements to be used as a currency: crypto does not have an intrinsic value (e.g. not linked to gold) and crypto has no credible central instance that is willing to accept it as a payment vehicle * no central entity can take measures to keep it stable * there's an infinite amount of equilibrium prices * there is a lot of value in the blockchain technology, however it's a free technology => who would pay for something that is free * there will be crypto currencies in the future, but entirely due to a central instance issuing them
Note: this does not represent my view or opinion at all, but I found it sometimes difficult to disprove or counter some of the arguments the author is making. Therefor I though it was nice to collect feedback from the 1000s of Redditors on this subreddit. What do you think about the article.
The full article (translated by Google Translate)
Soap bubble for sale. Bitcoin price to match
A colleague who recently stayed in Greece had a conversation with a local taxi driver. The driver advised him to invest in "those bit coins" because that is guaranteed profitable. In 2009, the virtual currency that you can trade online is less than one euro. Meanwhile, the price has risen to more than 2,600 euros. Count your profit. In this paper, the cryptomunt also became increasingly popular with us as a savings or investment instrument, and the question is whether there is another chance for interested buyers to pick up (DS 24 June). Anyone who loves it may be worn, but it is absurd to consider bitcoins as an investment or savings product. Based on basic valuation principles, the intrinsic value and realistic price of an investment is equal to all (discounted) future profits that will generate the underlying asset. For a share, this is, for example, the profit benefits of the company, for a real estate investment, this is the rental income after cost. Those who pay less for an investment than the final profit benefits are doing a good job. Whoever pays more breaks his pants. The problem is that bitcoins can not generate future profits. The blockchain technology that is the basis of bitcoins is undoubtedly revolutionary. She offers numerous opportunities that can change the worldview, such as contracts closing and registering online without the help of a notary or legislator. But this technology is essentially a computer code that you can find on the Internet for free or create it yourself if you want to use them. Why would anyone ever pay a fortune for something that is available free of charge? In the meanwhile, for example, more than 700 alternate crypto points are circulating. The intrinsic value of a bitcoin that you hold in a digital portfolio is therefore nil. It is absurd to consider bitcoins as an investment or savings product Some argue that the bitcoin's value is derived from the fact that it will eventually replace the euro as a means of exchange and unit of account for economic transactions. Digital money is efficient and cost-effective because we do not need classic coins and banknotes and banks become superfluous to perform the transactions. In that case, everyone has to purchase bitcoins. However, the bitcoin does not meet the minimum requirements to be used as exchange and calculation unit. For this purpose, the currency must either have an intrinsic value (for example, gold pieces), or there must be a credible entity which will always accept the currency as a means of payment and make every effort to keep the currency's market value (purchasing power) stable or relatively stable Evolves (eg 2 percent inflation per year). With the euro, the government obliges everyone to pay taxes in euros and the ECB, which increases or decreases interest rates if prices rise or fall too much. I'll save you the technical details, but with the bitcoin there is no mechanism that creates a stable market value and the buying power of the currency. There are infinite many possible equilibrium prices for the bitcoin, including scenarios with hyperinflation and deflation. The headsteps of its course on bitcoin markets illustrate this problem. It is impossible to paste a value. This does not matter that we will ever pay with digital coins. The ECB and other central banks have also noted the numerous benefits and potential of blockchain technology for transactions in the meantime and are fully researching how to put them into practice and what their consequences would be. Only will be the digital euros issued by the ECB, and not bitcoins or other existing crypto coins. A digital euro is then worth the same as a classic euro, and the stock is off. The bitcoin explosion explosion has all the features of a pyramid game that has spread throughout the world. Buyers are seduced by groundbreaking technology, but ignore the economic fundamentals. As long as buyers enter, the party will last. Early or late, the price of an investment always evolves towards the net asset value. It's hard to predict when this will be accurate, but one day the bitcoin rate will be less than the 0.000000000000 clenbuterol found in Alberto Contador's blood at that time.
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