They still don't get it. I think partly because they live in the first world country.
The initial reason why BTC took off was pure speculation based on the fact it's fixed supply + unknown but may be bright future.
As speculators started gambling, people who sell drugs and other illegal goods saw a great potential in moving their money as they know they eventually can exchange it to fiats by dumping BTC to speculators.
At this point BTC got its real value as self-fulfilling prophecy.
Following speculators and drug dealers, wealthy people living in countries like China, Russia saw great potential to move money out of their countries.
Self-fulfilling prophecy continues.
If there was no war on drugs and over-regulation of cross-border money transfers, BTC would not be taken off.
As first crypto-currency, BTC didn't need fast transactions, low fees etc, since there was no alternative for these people anyway.
Currently, there are technically better crypto-currencies than BTC but BTC is still alive because of strong network effect and it's safety was tested by time (after all it has longest chain in the world).
The whole story about discussions around BTC showed that you can have Phd in Economics and still suck at economy and simple reasoning beyond standard stuff you've been taught in university.
I could be wrong, but I think you’re missing the real point here. Wall Street firms are in the business of influencing markets to their favor. When I see Jamie Dimon or MS slamming bitcoin, I assume they’re also readying a big buy in case their statements move the price a little bit lower. That kind of arbitrage is not illegal in bitcoin world (yet). I don’t think you should parse these kinds of statements in earnest. In fact, I think they indicate the opposite of what they say on their face.
Because of the immense amounts of money involved, there will always be some nation which will allow crypto exchanges back to fiat. In fact this is the problem the "big boys" have in regulating crypto...create a tight noose and a smaller country will see the opportunity and set itself up to be crypto coin financial center. Once you convert to some form of fiat (JPY, CNY, EUR, whatever), you can then convert to anything else on the global markets. None of this requires you to travel to that remote country as it all happens on a website.
This is a relatively minor problem that big central banks have....they would rather have this problem then the other problem: Create a really tight noose and people stop bothering to even convert back to fiat and simply pay each other in crypto. At that point the game is up and 100 years of deficit spending, political graft, inflation...all of "modern" finance ends.
Alternate explanation. These "rich" are in fact criminals. Now let's qualify that statements, but some things have become big business:
1) sending drugs ("real" medicine drugs/actual drugs/fake drugs) across state lines. You see, the government doesn't really check the mail very thoroughly, so you can just order heroin and have it mailed to you. (and these people also transact along themselves, for obvious reasons. That used to be a big weak point in the system and a way to trace it)
2) hostaging things (and, I'm sure, people). IT has become critically important for pretty much everything, and can be sabotaged. Properly sabotaged you can demand a ransom.
3) avoiding government scrutiny on things. This can go from tax evasion to just outright being an enemy over the government, or simply protecting what's yours. Now keep in mind that, despite people thinking otherwise, governments are the same type of organisation from a game theory perspective as a mob. Avoiding these might be judged moral, even by you, and may even be a necessity for life (e.g. Venezuela).
You might think "third world country", and mostly you'd be right. But do include Greece, Venezuela, Russia, Ukraine, Turkey and Cyprus as markets where it is seeing very significant usage. For significant portions of the population, governments took away their ability to transact in their local currency (in Greece's case there was at least a plan by mr. Varoufakis to provide a "local" currency, but all others have simply not provided a usable alternative, instead denying there is a problem). So bitcoin has filled a serious and necessary void there.
You see, governments force you to transact in their currency, but they provide no support at all. In reality, dollar transaction either happen in a way that was not even new in 300 BC, and probably was not new in ~4500 BC (ie. cash), or using for-profit institutions of questionable integrity (VISA, ask any online merchant).
The fact that an underground economy like this can exist at all, with people unable to easily defraud each other allows for such economies to exist and grow.
As for the value, it is generally accepted that a currency's value is a direct result from the movement of value (not money) in said currency (so savings destroy a currency's value, and having money go around and not be hoarded anywhere increases a currency's value). This is why the dollar is so much higher than most other currencies. So conveniently, for most altcoins you can get a decent guess for the value of the currencies by counting the transactions. Because transactions aren't free, this can't be scammed for free, so there must be some level of truth in this.
Clearly, bitcoin is comparable in value to many fiat currencies.
Now you might ask if a bitcoin economy is useful or if we should support or oppose it, and of course all bankers will oppose it. Now of course there's 2 reasons for that. They may personally believe or not believe this is a good idea, but keep in mind that most are intelligent enough to understand that their livelihoods depend on bitcoin not growing too large.
Personally I think bitcoin is a very typical early market currency. It is a "gold standard" and it'll crash, for similar reasons the gold standard crashed. Ironically, because bitcoin is a criminals currency, people seem to be very reluctant to actually store value in bitcoin, and this is currently a great strength of bitcoin the currency. There is no other currency where the entire money supply circulates every 2 month (e.g. that's ~12 times as fast as the US dollar), and that's a lower bound in the bitcoin case and an upper bound in the US dollar case, to that factor could and should be larger.
To be fair: if you are being locked up, having your money in crypto isn't going to do you much good. Apparently Swiss banks have been working overtime to repatriate Saudi funds that have been held there for over 50+ years.
Does you no good, yes. But to your family? Friends? Conspirators? More importantly if you store ur illicit gains in Crypto, it becomes that much harder for the govt to seize. No Swiss banks here to help the govt seize your wallet and private keys.
I've spent lots of time pondering why Bitcoin's valuation is going up in the face of an ever-increasing number of technically superior options and the continued degradation of the Bitcoin's performance for transactions.
I don't think network effect is the right answer, or at least not from the obvious perspective of the users. Those of us who actually transact with crypto tend to use Bitcoin as a last resort because of the transaction times and fees. A newbie entering the space should learn that very quickly and seek out superior options for transferring value.
The real network effect is on the side of the exchanges. BTC is the universally available trading pair, and many times the only option. So right now, if you want to invest in any other cryptocurrency, you will very likely need to go through Bitcoin to get there.
Someone versed in Econ 101 might say that buying BTC in order to sell it right away for another token should have no net impact on the price of BTC. To counter that, let's look at what happens when I want to invest in token X with USD.
To do so, I most likely need to first buy BTC with USD, driving up the price of USD/BTC. When I go to sell my BTC for token X, the price of X in BTC goes up, or the price of BTC in X goes down. This happens without any immediate effect on the price of BTC in USD.
The ever-increasing price of BTC captures one of the fundamental problems with this space from the perspective of the inventor. It's much easier to get your fiat into crypto than it is to get it out.
This is why I'm a huge fan of Coinbase and GDAX. Being able to trade LTC for USD is great for LTC, and being able to trade ETC for USD makes it relatively easy to get into alts without having to touch Bitcoin itself.
> wealthy people living in countries like China, Russia saw great potential to move money out of their countries.
Fun will start when the Chinese government will start to monitor bitcoin transactions and jail people for working around capital control. With the perfect transparency of bitcoin transactions, it looks like a really poor choice to escape China IMHO.
I'm kind of hazy on what the "self-fulfilling prophecy" you mention is. Half your comment implies that Bitcoin has value only because people think it has value, and the other half details legitimate use cases while ignoring them in the next sentence.
Agreed - this MS analysis is weak. More of a press piece without much critical thinking. See this link below for the best analysis I've read on Bitcoin, from a hedge fund that started buying it in 2015 and now has it as 50% of AUM.
“While other payments networks typically charge the greater of ~3% and $0.15, Bitcoin’s transaction fee tends to be a negligible fraction of the transaction, if any at all.”
That article seems quite dated (2015). The fees and transaction times for btc today are much worse:
* An alternative for the increasing number of situations where governments have made transacting in the local currency impossible or impractical, usually for political reasons (ironically, bitcoin is losing this function because of transaction fees)
Examples: Greece, Cyprus, Ukraine, Venezuela, Russia and others.
If there is no viable alternative, can you at least understand why bitcoin (or more likely ethereum actually) is superior to a lot of other things ?
* A way to move money internationally (buy on exchange, send bitcoin, sell on different exchange)
* An asset that can be moved internationally freely
* A currency that supports economies that wouldn't be able to exist without a bitcoin currency (which of course includes the drug trafficking thing)
Let's assume bitcoin remains at ~13k USD for 6 months and the exchanges keep going. Don't you think that being paid in bitcoin would be a lot more practical in a number of cases, the most obvious one to me would be cross-border freelancing.
The initial reason why BTC took off was pure speculation based on the fact it's fixed supply + unknown but may be bright future.
As speculators started gambling, people who sell drugs and other illegal goods saw a great potential in moving their money as they know they eventually can exchange it to fiats by dumping BTC to speculators.
At this point BTC got its real value as self-fulfilling prophecy.
Following speculators and drug dealers, wealthy people living in countries like China, Russia saw great potential to move money out of their countries.
Self-fulfilling prophecy continues.
If there was no war on drugs and over-regulation of cross-border money transfers, BTC would not be taken off.
As first crypto-currency, BTC didn't need fast transactions, low fees etc, since there was no alternative for these people anyway.
Currently, there are technically better crypto-currencies than BTC but BTC is still alive because of strong network effect and it's safety was tested by time (after all it has longest chain in the world).
The whole story about discussions around BTC showed that you can have Phd in Economics and still suck at economy and simple reasoning beyond standard stuff you've been taught in university.