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Possum577
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Re: What gives bitcoin value?

Tue Dec 01, 2015 1:38 am

This is nice!

I think their first comment is a bit misleading, answer this question:

Do you own bitcoin because it is a collectible of a defined quantity? No.

Bitcoin was established as currency, which is why people accept it as currency. The value that currency has is driven directly by the daily demand vs. supply. The fact that bitcoin has a defined quantity will help support the value and may lead some to consider it an investment asset equal to or more so than currency.

The point i'm trying to make is that bitcoin is successful (therefore has value) because it is a collectible with a defined quantity.
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Re: What gives bitcoin value?

Tue Dec 01, 2015 6:10 pm

The graphic is nice, but I think it doesn't work because of the first stage:
Bitcoins built-in limit of 21 million coins makes it SCARCE, which gives it demand as a collectible.
Technically, everything is scarce (except perhaps U.S. Dollars), so this in itself doesn't create demand. My daughter makes crochet oven-mitts, and she has only made a few of them, but there is no demand for them other than from me and my wife. :)

I would argue that the infographic should be a continuous circle. Initially, there was demand for Bitcoin because people believed that it could be useful. You then go through the infographic to the last stage, where Bitcoin's usefulness has grown exponentially due to network effect, which in turn stimulates more demand...

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Re: What gives bitcoin value?

Tue Dec 01, 2015 7:23 pm

The graphic is nice, but I think it doesn't work because of the first stage:
Bitcoins built-in limit of 21 million coins makes it SCARCE, which gives it demand as a collectible.
.

I second this.

Demand gives bitcoin value, be it because of utility (usefulness) or speculation.

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Re: What gives bitcoin value?

Sun Dec 06, 2015 5:36 am

Rephrasing the question as 'what gives bitcoin a non-zero price?' ...

It's price is determined by supply and demand rates as we would expect.

Imo, 'utility' provides a minimal demand rate. I suspect this demand is small and quite inelastic with price (people would buy no matter what price in order to use bitcoin and then be rid of it). People using it keeps it off the exchange for some time, and somewhere in the cycle some even keep it).
This demand is likely much less than the supply rate, so by itself this would drive the price down to near zero.
But not actually zero (at equilibrium), so there's a quick, but unsatisfying, answer to the question.

A more interesting question (since we already have the proof of bitcoin's nonzero value in real life) is 'why is there enough demand for bitcoin to support the high prices we currently see?'

The price individual people are willing to pay is like the net present value of their view of the function of the price against future time. The market mixture of optimistic and pessimistic, long term views, short term views and stupid views is what determines the actual market price.
I'm in the optimistic, long term group, so I agree that the current price is appropriate, in fact, too low.
Why the average npv is this high is to do with people behaviour. I've never been too good at that. :)

The opinions above are mine alone, and can change at the drop of a fact.
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Re: What gives bitcoin value?

Sun Dec 06, 2015 3:00 pm

I really like all the cool info graphics that holy transaction is currently making.
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