whose store-of-value functionality is the dominant factor in their price. Gold, silver, land and internet domain names are the only others I can think of that vaguely fit there.
Don’t think land (which is productive and “consumable”—in the sense that you can live on it) fits in here. I am also not sure that silver has much store-of-value role nowadays.
In different times in different societies the store-of-value function was fulfilled by different things. For example, right now empty housing is a major store-of-value in China. US dollar banknotes are a notable store-of-value around the world, e.g. in Russia. Government bonds, especially of reputable governments, are often used as store-of-value.
All in all it’s fairly complicated and context-dependant :-) In the West the predominant store-of-value right now is financial securities (stocks and bonds).
But I wonder why are you focusing solely on the store-of-value function, you don’t think Bitcoin will be valuable as a medium of exchange?
It’s quite possible to be anonymous with BTC
Depends on the resources brought against you, threat model still matters.
the full distribution is at least the size of the rectangle defined by my point estimate
Huh? I don’t understand that. And, by the way, what is your point estimate? A mean? A median? Mode, maybe? :-)
In the West the predominant store-of-value right now is financial securities (stocks and bonds).
Mostly, yes. But gold still has a $7t market cap. But this does open up an interesting argument: that gold is on the whole dying as a store of value and it’s being propped up almost entirely by tradition; in this case central bank gold holdings will probably decline 90%+ over the next century. In this scenario, BTC has no chance to replace gold because there’s no new interest in gold anyway.
However, I would still argue that there is diversification value in BTC if it simultaneously manages to (i) have value increase proportionately to economic growth in the long term (that basically requires maintaining constant salience in a growing society), and (ii) be countercyclical to stocks; if that pattern repeats over two or three business cycles then I could see investment specialists advocating it in place of gold as part of an “all seasons” portfolio (essentially replacing gold here: http://mebfaber.com/2014/10/24/the-all-seasons-portfolio-aka-the-tony-robbins-portfolio/ ).
But I wonder why are you focusing solely on the store-of-value function, you don’t think Bitcoin will be valuable as a medium of exchange?
A couple of reasons:
MoE usage brings much lower valuation prospects. You can see a currency getting to $10 billion simply from people trading it, but the serious $1t+ valuations come from people actually holding it in huge quantities. MV = PQ (where currency value is P^-1); M is constant, so the use cases that push P^-1 high are the ones where V is very low.
With MoE you can make a credible case that it will simply be continually replaced by superior technologies that improve on block time, scalability, anonymity, transaction cost, functionality, etc. Blockstream’s sidechains project potentially allows protocol upgrades to come together with continued BTC use, but that itself is a bet. Also, for MoE people desire price stability much more, so my bets as far as cryptocurrency goes have been on stablecoins ( https://blog.ethereum.org/2014/11/11/search-stable-cryptocurrency/ ). So because of that last point particularly I would place MoE dominance probability at under 5%.
Depends on the resources brought against you, threat model still matters.
Agree. Anonymity depends pretty much completely on threat model in our high-info-inequality society.
Huh? I don’t understand that. And, by the way, what is your point estimate? A mean? A median? Mode, maybe? :-)
$34000 is my “5% chance it will be above this” target (though my discussions here and in that debate have revised me a bit down to 2.5-4%). My mean is around $5000 I suppose, though I include only the 34000 * 0.05 rectangle in my final answer of $1700 as a sort of way of giving myself a safety margin. Median is under $200, mode is $0 :-)
that gold is on the whole dying as a store of value and it’s being propped up almost entirely by tradition
I think this is a reasonable assumption to work under.
there is diversification value in BTC
Maybe—that entirely depends on whether BTC actually has value and that hinges on, as you put it, “maintaining constant salience” which is the real issue.
$34000 is my “5% chance it will be above this” target
Ah, so $34K is your 5% (or 3%) quantile for the distribution, right?
Maybe—that entirely depends on whether BTC actually has value and that hinges on, as you put it, “maintaining constant salience” which is the real issue.
Okay, this helps. So “will BTC be able to (i) maintain constant salience, and (ii) be countercyclical in the long term, and if it does what value will it have?” seems like the object level issue; definitely makes things clearer than some abstract notion of replacing gold.
Ah I think I’ve been misunderstanding you. I was thinking in terms of the probability distribution over BTC’s long-term value, but I think you’re referring to about my probability distribution over the probability that BTC will get to the $34k (or more precisely, my probability distribution over what probability estimate I would have on the topic if I knew more and was wiser). Is that closer to correct?
Well, most any kind of asset has some diversification value. I see no particular reason for BTC to be countercyclical (not to mention that the traditional business cycle of the late XX century seems to be dead at the moment, or at least much transformed) and in any case there’s too little data to tell.
And if you think BTC has some extra special value because it will be {un|low|negatively} correlated to the S&P then you need to compare it to a different reference class.
With respect to the probability distribution, no, you were right the first time—we’re both talking about the probability distribution of the value of 1BTC at some long-term point (and you really should define what does “long-term” mean here, in years, for obviousreasons). I’m not talking about hyper- or meta- distribution of your credence.
Don’t think land (which is productive and “consumable”—in the sense that you can live on it) fits in here. I am also not sure that silver has much store-of-value role nowadays.
In different times in different societies the store-of-value function was fulfilled by different things. For example, right now empty housing is a major store-of-value in China. US dollar banknotes are a notable store-of-value around the world, e.g. in Russia. Government bonds, especially of reputable governments, are often used as store-of-value.
All in all it’s fairly complicated and context-dependant :-) In the West the predominant store-of-value right now is financial securities (stocks and bonds).
But I wonder why are you focusing solely on the store-of-value function, you don’t think Bitcoin will be valuable as a medium of exchange?
Depends on the resources brought against you, threat model still matters.
Huh? I don’t understand that. And, by the way, what is your point estimate? A mean? A median? Mode, maybe? :-)
Mostly, yes. But gold still has a $7t market cap. But this does open up an interesting argument: that gold is on the whole dying as a store of value and it’s being propped up almost entirely by tradition; in this case central bank gold holdings will probably decline 90%+ over the next century. In this scenario, BTC has no chance to replace gold because there’s no new interest in gold anyway.
However, I would still argue that there is diversification value in BTC if it simultaneously manages to (i) have value increase proportionately to economic growth in the long term (that basically requires maintaining constant salience in a growing society), and (ii) be countercyclical to stocks; if that pattern repeats over two or three business cycles then I could see investment specialists advocating it in place of gold as part of an “all seasons” portfolio (essentially replacing gold here: http://mebfaber.com/2014/10/24/the-all-seasons-portfolio-aka-the-tony-robbins-portfolio/ ).
A couple of reasons:
MoE usage brings much lower valuation prospects. You can see a currency getting to $10 billion simply from people trading it, but the serious $1t+ valuations come from people actually holding it in huge quantities. MV = PQ (where currency value is P^-1); M is constant, so the use cases that push P^-1 high are the ones where V is very low.
With MoE you can make a credible case that it will simply be continually replaced by superior technologies that improve on block time, scalability, anonymity, transaction cost, functionality, etc. Blockstream’s sidechains project potentially allows protocol upgrades to come together with continued BTC use, but that itself is a bet. Also, for MoE people desire price stability much more, so my bets as far as cryptocurrency goes have been on stablecoins ( https://blog.ethereum.org/2014/11/11/search-stable-cryptocurrency/ ). So because of that last point particularly I would place MoE dominance probability at under 5%.
Agree. Anonymity depends pretty much completely on threat model in our high-info-inequality society.
$34000 is my “5% chance it will be above this” target (though my discussions here and in that debate have revised me a bit down to 2.5-4%). My mean is around $5000 I suppose, though I include only the 34000 * 0.05 rectangle in my final answer of $1700 as a sort of way of giving myself a safety margin. Median is under $200, mode is $0 :-)
I think this is a reasonable assumption to work under.
Maybe—that entirely depends on whether BTC actually has value and that hinges on, as you put it, “maintaining constant salience” which is the real issue.
Ah, so $34K is your 5% (or 3%) quantile for the distribution, right?
Okay, this helps. So “will BTC be able to (i) maintain constant salience, and (ii) be countercyclical in the long term, and if it does what value will it have?” seems like the object level issue; definitely makes things clearer than some abstract notion of replacing gold.
Ah I think I’ve been misunderstanding you. I was thinking in terms of the probability distribution over BTC’s long-term value, but I think you’re referring to about my probability distribution over the probability that BTC will get to the $34k (or more precisely, my probability distribution over what probability estimate I would have on the topic if I knew more and was wiser). Is that closer to correct?
Well, most any kind of asset has some diversification value. I see no particular reason for BTC to be countercyclical (not to mention that the traditional business cycle of the late XX century seems to be dead at the moment, or at least much transformed) and in any case there’s too little data to tell.
And if you think BTC has some extra special value because it will be {un|low|negatively} correlated to the S&P then you need to compare it to a different reference class.
With respect to the probability distribution, no, you were right the first time—we’re both talking about the probability distribution of the value of 1BTC at some long-term point (and you really should define what does “long-term” mean here, in years, for obvious reasons). I’m not talking about hyper- or meta- distribution of your credence.