Don't panic

Originally posted by demoniaco ↑

Nature of the investment.. The best way to describe this is actually to counter some of the very popular arguments against bitcoin, these comments typically come out of ignorance:

1) "Bitcoin has no intrinsic value" - Correct, it doesn't have intrinsic value.
Neither does the $20 note in your wallet which costs 12c to make yet holds $19.78 more worth of value. The value comes from trust. For bitcoin it's absolute trust that: A) There are only ever 21M coins in existence. B) The cryptography is unhackable (should it ever come time that it can even be close to hacked, the crypto can be strengthened as needed). C) There is no central authority, the entire network is built on trust. That your coin is your coin and that it cannot be duplicated or spent twice.

2) Any entry level economics class will tell you what the definition of value is: Scarcity + Utility.
People will whinge that the utility of BTC doesn't exist anymore because fees are too high and the transaction speed has slowed down. However the utility of bitcoin and the blockchain goes beyond these two things. BTC removes the middle man entirely in every transaction and it is pseudonymous. Scarcity is explained in #1

Anyone who calls bitcoin a ponzi scheme, or whatever unintelligent words they want to use, they simply do not understand what Bitcoin is. If you try to ask someone like @thebarry111 why they think Bitcoin is a ponzi scheme, they fall short in their explanation. They can't justify their understanding of what bitcoin is and how it's a ponzi scheme. They falter because they don't understand and they are a little tragically upset that others are making incredible wealth while they sit their money in their bank accounts making 2.5% a year on their savings. Holding their money in the system that is designed to oppose the banking system.

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Thanks for the explanation.

Having studied economics (but never professionally practiced the dismal science), I could immediately relate to your "Scarcity + Utility" descriptor.

However, is this thing really that scarce? I see numerous potential proxies for it; it seems every day I read about this stuff I come across a new and/or different cryptocurrency that presents as an alternative to bitcoin. Seems to the knucklehead in me that some smart people are "creating" (for want of a better technical term) cryptocurrency and therefore the number of potential cryptocurrency variations is limited only by the number of smart people that exist in the world.

And then, the question of its utility value: here I am a bit flummoxed because I can't see what bitcoin does/can do/will do that will render the role of the current suite of good, old-fashioned currencies obsolete? I readily concede that, being the wrong side of 50, I am handicapped by being a techno-Luddite as well as by a genetic pre-disposition of a distinct lack of visionary ability.

Finally, Part B to my question: even if it is accepted that bitcoin is both scarce and useful, we then get to the all-important question of how it should be priced.

For a "regular" [*] currency, there are economic backings to the level at which that currency is roughly priced (give or take 25%). For example, when the A$ weakens/strengthens materially - say by 50% either way - against cross rates, there are practical outworkings of those movements on the real economy, meaning that there are certain self-moderating mechanisms that naturally come into play.

So economic participants can make a very good determination of the shape of the bell curve for the level of the A$. Ditto for other currencies.

But for bitcoin?

Is it worth $1,000?
Or $10,000?
Or $100,000?
Or $1,000,000?

And, most importantly, why?

[*] Or "fiat", if one is so inclined