many bitcoin skeptics have knocked the virtual currency for its lack of “intrinsic value”, including world-class investors like Berkshire Hathaway Inc.'s (NYSE:BRK.B
) Warren Buffett (who called Bitcoin a “mirage”) and J.P. Morgan Chase & Co.'s (NYSE:JPM) Jamie Dimon, and venerated economists like former Federal Reserve Chairman Alan Greenspan and Nobel laureate Paul Krugman (“Bitcoin is evil”).
Having (obnoxiously, sorry) made my point, it is true that a similar point could be made in bitcoin’s favor with some more quick googling (although when I tried all I could find (from an established news site) was https://www.bloomberg.com/news/articles/2017-12-12/deutsche-bank-economist-hooper-says-bitcoin-isn-t-going-anywhere )
I think one big issue with the bitcoin bubble debate is that there is no real way to price bitcoin.
I mean, you can try, and google links show people have.
For example, this one does: https://www.luno.com/blog/en/post/how-bitcoin-price-determined … but in the end it boils down to “because there’s demand (and supply) for it!” Which, I mean, is true, but the question is why there is demand for it. For example, the oil price is determined by the demand for oil, but the demand for oil is based on super concrete needs for oil (like cars, electricity, planes, etc.) which is firmly grounded and unlikely to change easily. Demand for bitcoin, on the other hand comes from… libertarian post apocalyptic doomsday preppers??? (And also, speculative investors I guess, and just a touch of illegal use).
This article: https://www.investopedia.com/articles/investing/050914/easy-way-measure-bitcoins-fair-market-value-doityourself-guide.asp also tries and does a much better job, but at the end of the article it makes this important note:
Under the assumptions we used above, Bitcoin may seem as if it is close to fairly priced today.
But what if we think the monetary base will reach $2 trillion in ten years and investors prove willing to settle for annual returns of 30%? Suddenly BTC’s current fair market value skyrockets to $7,250! Conversely, if we think the monetary base will reach just $500 billion in ten years and investors only touch Bitcoin when they expect an 80% annual return, the current fair value would plummet to $70.
The Bottom Line
If you’re a risk-tolerant Bitcoin believer, today’s prices are probably enticing. If you’re a more conservative skeptic, you will likely steer clear of an asset class that looks as if it is in a speculative bubble. But either way, you only need to make two basic assumptions to come up with your own fair market value for Bitcoin: its future monetary base, and your risk-adjusted rate of return. Good luck!Under the assumptions we used above, Bitcoin may seem as if it is close to fairly priced today.
So again, we really can’t make very good price estimates on bitcoin.
Unable to make price estimates on bitcoin, any price on bitcoin becomes a reasonable price (especially when you’ve got a lot of money riding on it being a reasonable price).
Congratulations for your former coaching partner, they seem to be making a much better use of their time than my current use of writing overly long BTC bubble posts to make me feel better at having missed out.
Having said that, just because it’s a bubble doesn’t mean you can’t make money out of it. By definition, a bubble rises extremely fast; the worry with bubbles isn’t that you can’t make a lot of money from it but that it also might suddenly disappear.
…How else am I supposed to spend my summer holiday???
(Also, sorry for diverting the thread again. I guess the answer to my question of spending the summer holiday will be re-freshing VEXpro a lot.)