I think my dislike of Bitcoin and the poor arguments I’ve heard on behalf of its value has clouded my judgement on this topic. I still don’t understand the actual value argument for Bitcoin. It doesn’t work as money both due to its volatility and the transaction rate limit. It’s basically digital gold.
But why is that valuable? I don’t want to hold gold unless the financial system is collapsing and inflation is spiraling out of control or something like that.
My current theory for what happened is that everyone bought into this delusion about the value of bitcoin, but that unlike other bubbles it didn’t burst because Bitcoin has a limited supply and there is literally nothing to anchor its value. So there’s no point where investors give up and sell because there is literally no point at which it’s overpriced.
Am I still missing something? I just have no idea how to apply lessons from Bitcoin to anything else. What lesson is there to draw from this other than “buy into things with fixed supplies and no intrinsic worth that are going up in price”?
Another of my biases that caused me to miss the train was my belief that Bitcoin is fundamentally bad for the world. The only way the price goes up is if everyone buys into the delusion that it has value. And once you’re bought in you have the incentive to pressure other people to buy into the same delusion. And what is the end-result? The only thing Bitcoin ever facilitated was Silk Road and other black market exchanges. And even for those use-cases it has been superseded by other crypto designed to actually function as money.
The end-result of Bitcoin getting more valuable is that a ton of talented people spend time building exchanges and building mining rigs and thinking about Bitcoin and consuming a shit ton of power to mine more Bitcoin. On net it’s just a huge loss for world productivity.
Furtheremore, everyone I talked to or whose work I read on this subject made these really poor-sounding arguments as to why I should buy bitcoin that just set off all my epistemic alarm bells. I disliked these arguments so much that it made me start to actively dislike the idea of cryptocurrency.
What is your advice now? Do I just buy in anyway and give the proceeds (if there any) to some effective charity? It seems like the only limit on the price of Bitcoin is the liquidity of the entire world economy. How do I think about when to sell?
My current theory for what happened is that everyone bought into this delusion about the value of bitcoin, but that unlike other bubbles it didn’t burst because Bitcoin has a limited supply and there is literally nothing to anchor its value. So there’s no point where investors give up and sell because there is literally no point at which it’s overpriced.
This actually sounds pretty close to what you might call the “bubble theory of money”: that money is a bubble that doesn’t pop, that certain (relatively) useless commodities can become money if enough people think of them that way, and when that happens their price is inflated, relative to their use value.
This isn’t something that will happen to every commodity. Whether it happens depends both on the properties of the commodity, and also on things like memes and Schelling points.
Bitcoin has enough useful properties (it’s like gold, but digital), and, because of its first-mover advantage, is the Schelling point for digital store-of-value (not that it couldn’t be replaced, but it’s a very up-hill battle), so it has become money, in this sense.
Portfolio construction theory says optimal allocation to gold is generally not zero. Gold you can email seems clearly valuable.
As for the heuristic that leads to thinking bitcoin is a good idea in general it was ‘if you see a new mathematical result that enables a new/different kind of payment layer invest some time and money to understand it.’
if some people you have some trust in argues loudly about an idea
that this occurs rarely enough
then it’s worth putting 100$ into it (or whatever amount you’re confortable, that would not make you tick if it’s lost) just in case
Same thing as usual. If the cost is low, return potentially quite high, and there is good reason for you to expect the indication not to be well known, then it’s worth giving a try. If it only works one in ten advice, you still make huge
I think my dislike of Bitcoin and the poor arguments I’ve heard on behalf of its value has clouded my judgement on this topic. I still don’t understand the actual value argument for Bitcoin. It doesn’t work as money both due to its volatility and the transaction rate limit. It’s basically digital gold.
But why is that valuable? I don’t want to hold gold unless the financial system is collapsing and inflation is spiraling out of control or something like that.
My current theory for what happened is that everyone bought into this delusion about the value of bitcoin, but that unlike other bubbles it didn’t burst because Bitcoin has a limited supply and there is literally nothing to anchor its value. So there’s no point where investors give up and sell because there is literally no point at which it’s overpriced.
Am I still missing something? I just have no idea how to apply lessons from Bitcoin to anything else. What lesson is there to draw from this other than “buy into things with fixed supplies and no intrinsic worth that are going up in price”?
Another of my biases that caused me to miss the train was my belief that Bitcoin is fundamentally bad for the world. The only way the price goes up is if everyone buys into the delusion that it has value. And once you’re bought in you have the incentive to pressure other people to buy into the same delusion. And what is the end-result? The only thing Bitcoin ever facilitated was Silk Road and other black market exchanges. And even for those use-cases it has been superseded by other crypto designed to actually function as money.
The end-result of Bitcoin getting more valuable is that a ton of talented people spend time building exchanges and building mining rigs and thinking about Bitcoin and consuming a shit ton of power to mine more Bitcoin. On net it’s just a huge loss for world productivity.
Furtheremore, everyone I talked to or whose work I read on this subject made these really poor-sounding arguments as to why I should buy bitcoin that just set off all my epistemic alarm bells. I disliked these arguments so much that it made me start to actively dislike the idea of cryptocurrency.
What is your advice now? Do I just buy in anyway and give the proceeds (if there any) to some effective charity? It seems like the only limit on the price of Bitcoin is the liquidity of the entire world economy. How do I think about when to sell?
This actually sounds pretty close to what you might call the “bubble theory of money”: that money is a bubble that doesn’t pop, that certain (relatively) useless commodities can become money if enough people think of them that way, and when that happens their price is inflated, relative to their use value.
This isn’t something that will happen to every commodity. Whether it happens depends both on the properties of the commodity, and also on things like memes and Schelling points.
Bitcoin has enough useful properties (it’s like gold, but digital), and, because of its first-mover advantage, is the Schelling point for digital store-of-value (not that it couldn’t be replaced, but it’s a very up-hill battle), so it has become money, in this sense.
(On the memes-and-Schelling-points thing, see also: The Most Important Scarce Resource is Legitimacy, by Vitalik Buterin.)
Portfolio construction theory says optimal allocation to gold is generally not zero. Gold you can email seems clearly valuable. As for the heuristic that leads to thinking bitcoin is a good idea in general it was ‘if you see a new mathematical result that enables a new/different kind of payment layer invest some time and money to understand it.’
How about looking at the posts that he writes? https://www.lesswrong.com/posts/MSpfFBCQYw3YA8kMC/violating-the-emh-prediction-markets and https://www.lesswrong.com/posts/ybQdaN3RGvC685DZX/the-emh-is-false-specific-strong-evidence are posts that advocate concrete trades.
Looking at the other posts it seems he shares some other advice at some EA groups.
I believe the advice would be:
if some people you have some trust in argues loudly about an idea
that this occurs rarely enough
then it’s worth putting 100$ into it (or whatever amount you’re confortable, that would not make you tick if it’s lost) just in case
Same thing as usual. If the cost is low, return potentially quite high, and there is good reason for you to expect the indication not to be well known, then it’s worth giving a try. If it only works one in ten advice, you still make huge