Post
Topic
Board Speculation
Re: Investor Cycles of Emotion, Ignorance
by
ravenjt
on 30/09/2014, 11:50:58 UTC
While it tends to be in my experience in this subforum as a lurker that this is no place for discussion of any depth, I am making an attempt. Indeed, that is to be tangentially relevant to the theme of this topic.

I am consistently astonished at the lack of understanding of the Bitcoin ecosystem and markets in general from users who have stuck through many cycles, and others who claim and otherwise air a general sense of economic learning. Case:


What are you? Some kind of mock-Victorian dandy, with long frilly shirt cuffs?
With all your flowery and pretentious language, not to say deeply arrogant and self-obsessed, you are making one fundamental flaw.

All of your thinking around behavioural finance, and in particular endogenous cycles due to herd behaviour, are based on experience from real commodity markets, equity markets and foreign exchange markets. All of these underlying assets have a real value - an anchor - to the wider economy.

Firstly, commodities have a fundamental real economic value to major users outside of the market. Copper is useful to manufacturers who are not speculators, for example. This role of copper cannot be easily replaced, not without massive investment in alternative technologies at least.

This is categorically not the case with BTC. In theory, BTC might gain an important role in the economy in the future, as a payment system, but this is not the case at present. BTC has no intrinsic value at present. It only has value as (some) people expect it to have value in the future.

Equities are similar to commodities, as they have real value to investors, who are not speculators, as the company continues to produce profits (dividends) whatever the share price. BTC produces no dividends.

Nor, like a currency, does BTC have a government managing its value. No one is going to increase the interest rate (there is no interest rate typically) to defend the value.

It's all down to what people perceive it to be worth, with no anchor.

Without an anchor, all of the dynamics change. Now you have a pure bubble situation, which is not often witnessed, but examples like the Dutch tulips come close (tulips have real value, but far lower than the bubble prices).

This means there is no reason to think that the price will rebound in the next few weeks. Frankly, the price could do anything, as there is no anchor. It's a pure gamble.

But history teaches us that late entrants to such bubbles lose money. This tells me that the price is more likely to keep falling, than rise strongly.

No doubt my negativity will be written off as trollism...