The "true" value of bit coin is close to nothing. It lacks purchasing power and doesn't pay a dividend. For it to have a (psuedo) share price value north of most large companies is a real head scratcher. Sure, its purchasing power could increase in the future, but until then you're buying a fantasy.
Gold had value even before we had real-world uses for it. The value was in the rarity of it. Bitcoin, while admittedly just a bunch of bits on a storage drive, has a limited supply of 21 million coins. Its rarity is even more secure than gold is, because we know exactly what the total supply is and will be. It's also very valuable as a transaction mechanism. You can transfer bitcoins very quickly with extremely low transaction fees. The bitcoin "miners" are supporting and verifying the network while they mine their bitcoins. Now there are ASICs in existence designed solely to mine bitcoins, and there will always be the transaction fees to earn. If nothing else, it's an interesting experiment.
I think it's likely that bitcoin might maintain value as the first digital commodity. For some time, it will be the most widely held, and the one with the most extensive infrastructure built around it. People buy and sell gold based on the strength and weaknesses of other markets, not based on a change in the perceived value of the metal itself. In that sense, BTC could serve the current role that gold does, but even better. Currently we scoff at people trading bits, but someday I would guess that it will seem equally bizarre that we traded these: Although they are pretty.
I think the problem is that if its value is solely derived on people investing in it then it will never be stable enough to be used as a real currency. I think the crash (if it continues) is good for people who want bitcoins to be used as real currency because it will hopefully scare away people that are just using it as an investment. W
I don't see stability until a couple more halvings of the mining rate. However, when the total number of BTC approaches the 21M max, I think it is more likely that the price will settle down. Personally, I see BTC having more value (and being more practical) working as a commodity than a currency, but it could exist as some of both.
I can imagine bitcoins as a currency, but it is really hard for me to imagine it is as a commodity. Commodities need some sort of underlying value (currency doesn't) and bitcoin doesn't.
I disagree. The price of gold doesn't reflect a practical value. People employ it as a commodity as it has a limited supply, and do so based on the sentiment in other markets, not on a perceived rise in the underlying value of gold. I see gold's underlying value being its limited supply and as it cannot be duplicated. BTC shares the same characteristics, but is easier to exchange.Commodities need some sort of underlying value (currency doesn't) and bitcoin doesn't.
The recent bubble in gold is most likely due to speculation, but gold has an underlying value. As of now the majority of gold demand does not come from investment demands but from jewelery and technology. Here is a chart with the demand in tons
This is also a very new trend for gold. If you look at this PDF you'll see that investment demand for gold has gone from like 10-20% to 40% in the last decade.
I agree that it is an interesting experiment. But value does not exist when a commodity can't be traded fro anything useful. Right now, BTC has to be traded for currency before using it, so it isn't really adding much. As (if) adoption becomes prevalent, then BTC could be quite useful. To be clear, I don't think it's a bad idea, I just think that the internet buzz is driving this thing batshit silly.
I agree, the true value is next to nothing. I'm secretly hoping it crashes under $20, even though I still think that's overvalued, it's low enough that it would rise again from that point I think. If it drops below $10 I'd honestly buy a grand worth. That's 100 BTC, if it even go to $20 again I'd make a quick grand. But at these current prices? No way, it's a fools bet. Sure, some people are getting rich quick off it, but it's still way too risky for my tastes. It's true value is somewhere between $1-$5 in my opinion. Like you said, it lacks purchasing power, and if I'm not buying drugs or other illegal contraband, why do I care about it's anonymity? I simply don't. It won't pay my mortgage, or my bills, or anything important unless I convert it back to USD. And since it's constantly changing what it's worth in USD, it's silly to hold it as a usable currency. The only reason I'd even consider holding them would be as a temporary investment with the hopes of selling at a higher price. And that's how the vast majority of it's participants are using it, as a speculative commodity for return on investment, and that makes for an AWFUL currency as far as utility goes. The people who know what they are doing will come out of this fine, the people who think it's rising in price because it's so edgy and useful are going to end up sad, broke, and with a good life's lesson under their belts. Also, two words no bitcoin believer wants to hear: Government Regulation. It will happen at some point, and since it can't be regulated, look for making it illegal. It's already illegal to circulate paper currencies that compete with the dollar, it's only a matter of time til that legislature gets updated to include digital currencies. People can't just be making money hand over fist and avoiding taxes. The government WILL do something at some point, and it will destroy the bitcoin market back to underground where only people who buy acid on the Silk Road will be using it again.