Menger

Agreed. Not a scam nor a ponzi: a speculative instrument that will test zero before it becomes money. Like a tulip.

Two quibbles: The money does not “go” anywhere after purchase of crypto, other than into the pockets of the person who sold the crypto (and from there into the hands of anyone he subsequently purchases goods and services, including more crypto, from). Crypto does have “intrinsic” value in that it can be used as speculation or as a (very short term) means of exchange. But it cannot be used for savings due to its volatility and so cannot be “money” itself. So it will test zero before it becomes money (which it won’t).

National currencies are fiat currencies and so exclusively mandated by law for the settlement of tax and legal liabilities in the jurisdiction. This is a tether to reality - a real demand for the given supply. That real demand (like the real demand for gold, to fill teeth or make jewelry) prevents price action being arbitrary and purely speculative. Fiat currency can be inflated to zero - but for a given supply it has a demand separate from any purely speculative demand. Prices of fiat currencies can go up and down (denominated in gold or other fiat currencies) but not to the moon or (absent aforementioned inflation) zero. This gives them relative stability, so they can be used for savings. As such, they can be generally accepted as a means of payment - “money”.

I don’t think the hedge funds are acting differently from anyone else: they are speculating. They are not seeking to substitute bitcoin as a form of “money”. As speculators, Hedge fund can go short as quickly as they can go long. It is precisely this “speculative” essence of bitcoin which means it can test the moon, or zero - and will test the latter before it becomes “money” (which it never will).

Yes - but those taxes are denominated in fiat currency. Only if bitcoin becomes a fiat currency (so that the taxes are denominated in bitcoin, and not a $€£¥ equivalent) would bitcoin have an equivalent “intrinsic” value that could save it from testing zero. Alternatively, if some dentist devises a way to use bitcoin to fill teeth, it will also have a safety net.

Nobody has lost £1k. Same as if you bought a pre-decimal coin from Peter and the sold it to Paul for £1k profit. Peter wanted the money you paid him more than the coin; Paul wanted the coin more than the money he paid you. Otherwise, neither transaction would have taken place. It is a win-win-win situation. 😊 Of course - there is buyer’s remorse. But that is another matter …

Certainly I never expected that, for the reasons I have given in this thread and in this forum before. But that was indeed the basic premise behind the initial launch, hype and speculation. Now the speculation itself seems to have taken over as the reason for the speculation (bootstraps) - nobody anymore claims to acquire bitcoin as a better, less traceable, inflation resistant, convenient form of “money”, but because they hope to cash in for (real) money at a higher price.

Certainly I never expected that, for the reasons I have given in this thread and in this forum before. But that was indeed the basic premise behind the initial launch, hype and speculation. Now the speculation itself seems to have taken over as the reason for the speculation (bootstraps) - nobody anymore claims to acquire bitcoin as a better, less traceable, inflation resistant, convenient form of “money”, but because they hope to cash in for (real) money at a higher price.

More than the greenhouse gas hysteria, inflation is perhaps the greater theoretical risk: as I have explained, tethered only to speculative wim and not reality, nothing can stop bitcoin price action being chased to the moon (except that wim). Bitcoin is produced at a cost linked to the cost of power - because “mining” Bitcoin involves a process of running computers. So it makes no sense to mine Bitcoin where the cost of power is greater than the value of Bitcoin mined. That is why much of the mining is done in China where there is abundant coal-fired (CO2 intense) cheap power. But imagine if the price of Bitcoin did go to the moon - then “mining” bitcoin would pull in more power as it would become profitable do so in places where it was not before. This would be inflationary. Imagine if Bitcoin went to infinity - it would make economic sense to dedicate all power production to bitcoin. Perhaps that is what AI will do. The entire thing lifts itself up by its own bootstraps - until it stops … God help us.

Money means a “generally accepted” means of exchange. Like USD or GBP or JPY in their respective jurisdictions or (in the old days) gold or silver. Everyone accepted it - including those looking for savings. The fact some people, or even many people, accept bitcoin in payment does not make it “money” - for that it must be generally accepted in payment. I suspect most businesses that accept bitcoin in payment convert it to USD - because businesses need money not speculation. I think share portfolios have also be assessed as collateral for loans ….

Yes. Filling teeth was tongue in cheek. The point is that people speculate with gold - but it has a value to people (to fill teeth, make jewelry or Royal Mint gift sets). That value (subjective as it is, in the same heads as the teeth, necklaces or commemorative tokens) is a connection with reality. That tether to reality stops the speculation of gold going to the moon, or to zero. It gives it relative stability - perhaps even enough to be money (so it can be used not only for exchange, but also for saving). Bitcoin lacks that: so both the moon and zero are possible. Which is why not only the grannies, but also their grandchildren, will never trust it as a “store of value”, for their savings. The grannies and their grandchildren may both acquire bitcoin for speculation (it is perfect for that) but they will exchange it for dollars (or gold) if they want savings. For completeness - fiat currency (dollars, GBP) would suffer the same fate were it not mandated as the form of payment for taxes and damage awards. That mandate tethers fiat currency to reality - there will always be a demand for it (unless the mandate, or the regime behind it, ends).

Yes - the “price” is determined by supply and demand, but that supply and demand itself is determined by the (subjective) “value” to the people supplying / demanding. In the absence of anything else (cannot be used to fill teeth or pay taxes, for example) that value will be based on the value as speculative instrument. This makes for volatile price action (just watch) which makes for a terrible store of value (grannies don’t trust it) which means it will not be generally accepted - and so cannot be “money” (generally accepted means of exchange). The technology is fantastic. But the initial premise was that it would become “money”. That premise fueled the initial speculation. Now the speculation itself fuels the speculation. Not good. Speculation can go to infinity (or zero) if not tethered to reality by some reference value aside the speculative value itself. The initial premise was wrong and one day the market will discover the price that properly reflects its worth.

Agreed. It is that absence of intrinsic value (for want of a better word) that distinguishes it from gold or even fiat money (which has intrinsic value to fill teeth or settle tax liabilities and damages awards, as the case may be). Without something against which to benchmark premia or discounts, the market can only price on the basis of speculation of future prices based on past prices (which is what the technical analysis chart above in this thread is doing). That speculative price action is inherently unstable - which is fantastic for speculation but terrible for “store of value”, which is one of the requirements for something to be generally accepted in payment; i.e., to be “money”. Without that benchmark, the speculation can take it anywhere - to the heavens or to hell …

I believe that was me. What I predicted was that Bitcoin would test zero before it became money (indeed it would never become money; and would test zero one day). I explained at some length what I mean by “money” (generally accepted means of exchange, like dollars) and my reasoning based on first principles behind the prediction. I chose my words carefully. I never offered any view on what price action might occur before it testing zero - because I have no basis to make a prediction on that. I am certainly not surprised by recent price action. Tulips also were proffered as “money” and went to the moon before testing zero. I stand my my initial prediction.

I love Paris. I lived there over 20 years ago and went back for the first time since last week. It has not changed. I ate in the same Jewish delicatessen on rue des rosiers (4eme) as I used to 30 years ago as a student. The fashion is identical as it was then; and I suspect then as it was in the 60s. It is a marvel to me how somewhere can be connected by the Eurostar, yet be so categorically different from London. Vive la difference! I love both.