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Comment by alexasmyths | Hacker News Reader

I'd like to know how on god's green earth they did the 'valuation'. Because there are certainly no generally accepted ways of doing that - hence the volatility.

"Here are a set of numbers that you can own and rigorously control (i.e. establish ownership). You can possibly exchange them as value, like a currency, but not many people will do that. Start the bidding!"

It's the most pure form of speculation imaginable.

Most other forms of speculation are derived, yes, from what we think 'others' will pay, but what 'others' will pay is usually derived from some economic value: i.e. a home is a place to live, a building a place to work, shares are rights to future profits, bonds get 'repaid' and pay 'coupons' ... so you can try to figure out 'what they are worth'.

BTC ... it's literally just worth what some other guy will pay - and that's 100% of the story. That's a difficult thing to predict :)

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Bitcoin is no more speculation than gold. Gold has its price. It is rarely used (I have not seen anyone exchanging value using gold). It cannot be eaten, drunk, lived in, or used as a tool (I guess you can use it as a weapon like a brick). Yes, it is used to make jewelries because it is expensive not because its intrinsic usability or functionalities (there are other metals or plastics that look better and weigh lighter than gold). Yet it is expensive. As a matter of fact, it is harder to use gold to exchange value than Bitcoin because you have to weigh gold and test its purity.

Our entire high-tech industry relies on gold because of its amazing physical properties. To say it's rarely used is not accurate.

If gold was less expensive, I'd use it for a roof on my house!

http://www.usesof.net/uses-of-gold.html

And of all gold that's mined, what % of it goes towards industrial usage for its amazing physical properties?

Before high-tech industry even existed, gold was expensive. Clearly, the demand from high-tech industry did not make it expensive.

It's a metal that does not tarnish, which makes it good for making pretty things, like monuments and Jewelry. That it is rare, gives it's high price.

"It is rarely used "

???

If you walk down the street you will see literally hundreds of people wearing it on their fingers as Jewelry.

BTW - it even has a high degree of utility as Jewelry because it does not tarnish.

Also - it has some industrial use.

And yes, it's highly speculative, but nowhere near BTC.

And finally - it's use as a currency predates recorded history, across countless civilizations and cultures. Which counts for a lot of credibility.

If you walk down the street you will see literally hundreds of people owning it as an asset. BTW - it even has a high degree of utility as an asset because it cannot be tampered or destroyed. Also - it has some real life uses (Everledger, MiVote etc.) And yes, it's highly speculative. Imagine the first people using gold as a currency - crazy right?

If you walk down the street of my city (population close to 2 million, outside US) you will probably see zero people using Bitcoin. If you are extremely lucky to find one that uses it, it is someone that speculates in it, and never ever thought of using it for "real" transactions.

Gold can be tampered with. Debasing gold currencies (and other precious metal ones) has a long tradition. Likewise producing jewellery from cheap substitutes as opposed to 24k. As has plating with it.

All other things aside, gold has a several thousand year history as being used as currency. To pay for grains, hostages, to buy protection, raise armies, pay people etc etc.

Bitcoin on the other hand...

The way I see it is that bitcoin's potential value is the share of the economy it will manage when bitcoin adoption is widespread. Then the current value is some fraction of this potential value, the product of the likelihood that the state of widespread usage comes to pass. As more people become aware of bitcoin and buy it, that future becomes more likely, and so the current value increases.

"the share of the economy it will manage when bitcoin adoption is widespread"

Nobody will use BTC as a currency. It's too volatile and has no underpinning.

Much for the same reason Gold is not used as a currency.

Currencies are designed and managed for economic zones. Having a second currency for any zone is unwieldy.

Think: you sell Milk and Bread. You make 5% margins. You sell in USD. Now - if you price in BTC - the price of BTC is fluctuating all day! So how do you even do that? You don't. You could 'accept' BTC and just do the calculation on the spot - as many Canadian stores accept USD at some specific exchange. But - with 5% margins - you can't afford to hold on to those BTC, quick, you have to convert to local currency. So the whole BTC thing is a useless exercise.

Granted - there are some business entities that could use BTC, but again, they'll almost always have a local currency problem and given the inherent volatility of BTC ... it will never go away.

The 'more people that hear about BTC buy it' - true for now, but has nothing to do with economics. It's just a speculative mania.

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