Bitcoin is, was and always will be a highly manipulated penny stock. It spiked from $1000 to $20k for absolutely no reason, and now it is dropping down to $10k for absolutely no reason. Any price bitcoin spikes or drops to has no reason behind it... what kind of "store-of-value" / "currency" does that?
To the limited extent that Bitcoin helps Chinese citizens out-maneuver the capital controls that the Chinese government has tried to enforce, then it could be analyzed as a shadow of the Chinese currency, but since the action is illegal, the data is dark. Thus Bitcoin, and other crypto currencies, are the world's most opaque investment.
There are many stocks that belong to companies that have no mechanisms in place nor could they be reasonably expected to introduce mechanisms to directly return profits to shareholders. These stocks have the same form of "intrinsic value" as gold or Bitcoin: whatever the hell the next person is willing to pay for it.
Pretending that an underlying asset that doesn't throw off any yield or return of capital is somehow more rationally valuable than another doesn't make sense.
Whether stocks pay dividends or not is not terribly relevant, see Modigliani-Miller.
Thus, share prices are rationally anchored to economic reality. Of course, there's a lot of estimation involved, and people can get it wrong for a while, individually or collectively.
Lets say I have a company with 1 billion dollar worth of assets and a 100 million dollar profit per year. I have issued 100 million shares during IP. How much is a single share worth? At the very least $10.
Next year I have a 1.1 billion dollar company. How much is a single share worth? At the very least $11.
You have 1000 shares worth $11000.
I can now either pay the profit out as dividend or not. Your shares will be worth less by exactly the amount that was paid out. Your 1000 shares will be worth $10000 and you will have $1000 in cash or alternatively I don't pay out a dividend and you still have 1000 shares worth $11000.
Where did that growth come from? With a company it's easy to answer. They sold more of their existing products. Released a new product. Reduced costs through technology. We have more stuff now. Investing in a stock helps a company indirectly even if stock buybacks never happen. The company receives better lending conditions from banks.
What about cryptocurrency? A currency shouldn't move in price at all. Where did that growth come from? From other people. Nothing new was created. Existing wealth merely gets redistributed.
From that perspective, taking control of Bitcoin may have a measurable monetary value but as I understand the system the value isn't in the coins, it's in the miners.
Is that bitcoin's problem or a traditional economists problem?
Behavioral economics does have frameworks for thinking about bitcoin price, but then again, behavioral finance is not traditional and highly controversial. For once, it dispenses with the myth of the rational investor (homo economicus)
So, how does behavioral economics supply a price for Bitcoin?
As in "why is the price what it is". Saying "because of supply and demand" is useless, unhelpful pedantry.
In case you don't know, things like https://en.wikipedia.org/wiki/Market_manipulation exists..
I've seen this consistently touted as a structural advantage to (bit)coins, but have yet to see a compelling technical explanation as to how/why this would be the case. The Satoshi paper doesn't discuss middlemen at all.
Very few people (relatively) are actually mining and most are just buying with USD from an exchange which by default is a middleman. Many of the other coins are pre-mined so aren't decentralized at all, which takes that whole point out of possibility.
Where's the proof of this claim?
It's like expecting people to trade goods with gold etc...
The products so far have been a failure.
It irritates banks not, by the way, because they're oh so scared about this fantastic new competitor to "their" money and money related businesses, but because it's often used (when it's used) for illegal transactions.
The only downside to it all is if whoever handles your "account" (or wallet) is breached, or someone steals your "money".
Right now - no one will insure it. It'll come, and when it does - it'll likely be decentralized again, because that's entirely possible - throw 1% of your "account" into "insurance" and suddenly everyone is paying for their own insurance and third-party investigations into claims. That in itself will be heavily regulated by the companies running it, and I think the lower the fee - the more information they'll want from users.
Every single thing in your post makes zero sense.... it is all breathless hype.
Not true. Most of the post makes sense. Trustlessness and decentralization are pretty much the only benefits to bitcoin and others like it. There are obviously real costs for these features, but also real benefits. Do the benefits justify the current valuations - only the market can determine that. I personally am quite bearish on almost all cryptoassets (so I would not be considered a "pumper"), but certainly you must see the threat they pose to the incumbent masters of the monetary system?
Another example I've seen in real world use is the "startup" retail banks popping up throughout Africa that have no offices, and are purely operated over mobile.
The lack of regulation in these countries have lead to massive leaps in innovation in the banking space. Seriously, you can read articles about it - but until you go to countries like Nigeria or Kenya and try it out, it's incredibly impressive.
I'm not a major investor in crypto anything, I think most, if not all, coins created right now are completely pointless - but blockchain as a public, auditible ledger and fiat-backed crypto/tokens I think we'll see some very cool innovation that own't overhaul the banking industry completely. There's too many smart people in banking to get "caught out".
However I do think we'll see some new contenders in the space as the industry begins to break down into smaller units. And that'll be good for everyone.
Your "only downside" is enormous! I'd never consider paying my salary or keeping my savings in an organisation that has no regulation. My money could just disappear overnight.
You add that I could put 1% of the account into insurance, but that is essentially a 1% (yearly?) cost. Why would I do that when I can have a GBP bank account regulated by the FCA for free? In fact, the FSCS guarantees up to £85,000 per banking group (eg. HSBC).
We've seen entire banks collapse and people lose their money in the past decade alone. The early days of banking was rife with fraud and scams.
I don't expect this to change in the short-term, however think about the convenience you'd see on day-to-day banking and how fast new features could be developed compared with our current banking system. Even if you only held a very small amount in a "new bank" and "currency" and kept you significant savings and assets in a traditional bank, I could see this slowly chipping away at existing banking services very quickly once a consensus on currency is reached within a community.
Though if you look at todays charts e.g. in ETH, it's clear someone's probably made good money intraday buying dips.
But as a general rule I'm conservative with how much I put into these things, just a small amount each month. I can afford to be very confident and very wrong about Ripple.