I couldn't agree more.
The value of the electronic currency Bitcoin has hit a new high of $340.
This is not surprising.
Earlier this spring, when Bitcoin was in the middle of its last price spike, I "raised my Bitcoin target" to $400.
This was an inside joke — I don't have a Bitcoin target. But I was getting at a more profound point. $400 is a perfectly reasonable target for Bitcoin. As is $1,000. As is $10,000 or $100,000 or $1 million.
And as is $0.01.
This is because Bitcoin has no inherent value. It's adherents refer to it as a "store of value," but Bitcoin is only a "store of value" because, right now, its price keeps going up. Unlike gold or dollars or other things that have widely accepted utility, Bitcoin's price is determined entirely by what someone else is willing to pay for it. Right now, because Bitcoin's price is going up, and Bitcoin is in relatively short supply, people are willing to pay $340 for it. And the ever-increasing demand for Bitcoin will keep driving the price up until people don't want to buy or hold it anymore.
At that point, by the way, the price of Bitcoin will collapse. And anyone who thinks it can't collapse all the way to zero is delusional.
Read the rest here.
Friday, November 8, 2013
Bitcoin Could Go To $1 Million
It is a rare day when I agree with Henry Blodget, but today is such a rare day. He writes:
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The price of everything, including dollars and gold, is determined exclusively by what someone else is willing to pay for it. That is what prices are - the ratios between what people are willing to trade for each others goods. Rothbard makes this clear when he talks about the "horse price of fish" and the "fish price of horses" in Man, Economy, and State.
ReplyDeleteThe old intrinsic value argument is wrong. Gold does not have intrinsic value and no, historic and empiric evidence of gold being used as free market money for centuries does not prove anything. It only proves that gold has some attributes that free people valued and used for indirect exchange for centuries and continue to use and will probably continue to use for the foreseeable future. Dollar has no intrinsic value and therefore needs the coercive power of state to make it valuable.
ReplyDeleteI agree with you on almost everything but not on this one. What if fungibility, easy transferability and privacy (we can argue about how private or secure bitcoins are and will be) become more valuable to people than the other attributes gold has? To say that bitcoin will never get widely adopted and therefore become an easier alternative to gold is as wrong as any keynesian economic prediction.
The old intrinsic value argument is wrong. Gold does not have intrinsic value and no, historic and empiric evidence of gold being used as free market money for centuries does not prove anything. It only proves that gold has some attributes that free people valued and used for indirect exchange for centuries and continue to use and will probably continue to use for the foreseeable future. Dollar has no intrinsic value and therefore needs the coercive power of state to make it valuable.
ReplyDeleteI agree with you on almost everything but not on this one. What if fungibility, easy transferability and privacy (we can argue about how private or secure bitcoins are and will be) become more valuable to people than the other attributes gold has? To say that bitcoin will never get widely adopted and therefore become an easier alternative to gold is as wrong as any keynesian economic prediction.
Couldn't agree more??
ReplyDeleteYou agree with this statement?
"Unlike gold or dollars or other things that have widely accepted utility, Bitcoin's price is determined entirely by what someone else is willing to pay for it."
Is not the price of any good determined entirely by what someone else would pay for it? Are you rejecting subjective-value theory?
*Nothing* has inherent value; valuation is subjective and requires an actor to do the valuing. Also, money's use as a store of value is derived from its use as a medium of exchange.
ReplyDeleteY'know, you should read this new economist, named Ludwig von Mises!
BTC users: it has no inherent value because it doesn't inherently exist. it is not real. it does not exist. gold exists in a very physical and real way. BTC is just the techno-fad of the hour. When the current tech/internet bubble bursts, expect BTC to drastically deflate as well.
ReplyDeleteWrong and Wrong. Do prime numbers exist?
Deleteprime numbers have no physical form. they are a concept and inherently worthless.
DeleteI'll be sure to let mathematics know that prime numbers are worthless. These guys have been so wrong for so long. How did we not see this earlier? Thanks for helping out humanity.
DeleteHold the phone, did **Henry Blodgett** just admit that gold has value and is a widely accepted medium of exchange???
ReplyDeleteLike it or not, there is a market value for Bitcoin, and it doesn't fluctuate on a daily basis. So all this discussion on what the value of Bitcoin could or should be is totally unhinged. Instead, it would be much more interesting to explain why people value Bitcoin at $340 at the present moment, or over the range of $40 to $400 over the last few years, rather than at $1M or $0.02.
ReplyDelete~~YL