I don't get why bitcoin is worth so much.Bitcoin is called a store of value like gold, but gold has inherent uses. If the price of gold went to zero then you could still use it to make jewellery or use it for electrical conductivity. If the price of bitcoin goes to zero then it's worthless. It's also not environmentally friendly and bitcoin mining uses up 0.21% of the world's power supply. And all of this energy is used to calculate billions of hashes per second out of which all but one will be discarded. There is also increased regulatory focus from governments who see it as a threat , with India even going so far as to suggest they would ban it.
Yeah this confused me for a long time as well. I then realized that there is tremendous value in something that acts as a reliable store of value.
For example, rich people are known to buy expensive art and then lock it away in a warehouse. Why do this? You're not getting any value out of the piece. The reason is that the sole purpose of the art piece is to be a reliable store of value. You're paying a lot for something that you know will hold its value.
This is what Bitcoin has become. It's valuable because it's valuable. And the fact that it has become more valuable over time (despite volatility) makes it even more valuable.
Sorry but I disagree about your analogy with an art piece. An art piece is unique, especially the antique ones made by an artist who is no longer alive. And that artpiece will always be the only one to ever exist. There are many other cryptocurrencies which can do what bitcoin can, dogecoin was made just to illustrate that point.
Literally mining gold is also not very environmentally friendly and uses a lot of power, probably not as much as Bitcoin though.
And Bitcoin will always remain what it is now, a system for transferring bits in a decentralized fashion over the internet. Even if Bitcoin is worth $0, as long as there is a sender and a receiver (and at least one miner online), you'll be able to transact Bitcoin, this is hardly worthless.
> governments who see it as a threat , with India even going so far as to suggest they would ban it
This for me is a huge selling point for Bitcoin (et al). If famously shady governments like India and the US starts talking about banning something, I immediately start looking into why and how they are banning it. So far, the arguments seems to be that they are scared of loosing control, and if it gotten that far, it's because they genuinely believe cryptocurrencies could replace their centralized currencies. More reason to get involved in it.
Gold is unique, few metals can match it's shine and electrical conductivity. But there exist many cryptocurrencies which can act as "a system for transferring bits in a decentralized fashion over the internet". Many also do a far better job than bitcoin. So shouldn't they be more valuable than bitcoin? Etherium, Monero etc
Yes, but you really can't fight the government and run a parallel currency. If the government bans it then you cannot use it for any legal transactions.
Other coins will have to not only be technologically better than Bitcoin but also work to accumulate the same level of trust that Bitcoin has. We can see this already happening with the success of Ethereum
> Yes, but you really can't fight the government and run a parallel currency. If the government bans it then you cannot use it for any legal transactions.
But even in that situation, you would still be free to bring your money into the control of a different government instead, who has laws you find more favourable. You wouldn't be victim to currency controls and bank runs
Interestingly enough, with Ethereum, countries could create their own national currencies as Ethereum tokens. And easily exchange with other Ethereum tokens as well.
Gold's inherent value represents less than 1% of its total value. The rest is monetary premium. Bitcoin is 100% monetary premium, ie. inter-subjective value.
Another thing to consider is that people buy gold jewellery as a store of value. You don't spend $30k on a watch if you don't think it will keep its value.
Yes there exists jewelry that can be bought mainly as a store of value, but your argument was the much stronger statement:
>Another thing to consider is that people buy gold jewellery as a store of value. You don't spend $30k on a watch if you don't think it will keep its value.
This isn't true because the vast majority of retail jewelry, which is the majority of jewelry sold is a terrible store of value.
The average person that spends say $10k on a diamond ring isn't going to be able to get that value back again. Even beyond the issue with how much it's marked up, there's the problem that jewelry stores tend to sell on consignment, so they have little incentive to buy and resell used jewelry.
And if you look specifically at gold watches, a small fraction of the price is actually the price of gold itself.
Yup, you're right. The "store of value" aspect only accounts for the price minus the premium, and the premium is typically large, especially on vintage watches.
Bitcoin (still) isn't worth that much compared to gold : gold's (above ground) reserves are around 12T$, while Bitcoin's market cap is (currently) 0.6T$.
