How and why Bitcoin will plummet in price

http://marginalrevolution.com/marginalrevolution/2013/12/how-and-why-bitcoin-will-plummet-in-price.html

by clarkm • 13 years ago

16 10 13 years ago

He's predicted the crash before and got it wrong.... How many times does he have to predict it before you realize he doesn't get it ?

nbody• 13 years ago

I guess he's following the logic of "throw enough mud at the wall, some of it will stick".

hoers• 13 years ago

This seems to become another Hacker News cliché

Why bitcoin will [..] in price.

I'm full.

Udo• 13 years ago

Wow, this is probably the most ignorant thing I've read in a while:

"Let’s say it costs the QuitCoin company $50 in per unit marketing costs for each arbitrage of this nature. (Alternatively you can think of that sum as representing the natural monopoly reserve currency advantage of BitCoin.) In that case both the company and the buyers of QuitCoin are better off at the initial transfer price of $400 and people will prefer that new medium. Over time the price of BitCoin will have to fall to about $450 in response to competition."

First, BitCoin (and pretty much any other crypto currency) is not a company. It doesn't have to market anything and there is no bank-like entity necessary to drive it. I'm not sure why that's so difficult to understand, but it seems to be an issue.

However, the biggest WTF here is the idea that the "cheaper" currency will win out. That's the reason behind someone arguing you should, say, only buy Rubles and never Dollars: because they're so much cheaper!

Now don't get me wrong, BTC may well (and did) go down and up again dramatically during its time, but the argument here is ridiculous to the point of being indistinguishable from satire.

mikegioia• 13 years ago

Plus, there are currently other competing currencies and we can see that just because litecoin is cheaper it's not driving the bitcoin price anywhere.

saalweachter• 13 years ago

I agree.

Price per unit is completely irrelevant to users, because everything is priced in dollars. It only matters -- psychologically, at that! -- to speculators, who think that there is more room to "grow" at $50 than $500.

On the other hand, I do think (hope?) that the "cheapest" digital currency will eventually win, but "cheapest" is "lowest transaction costs", not "lowest price per unit". I think there are several ways which matter to consumers wherein a digital currency could compete with Bitcoin:

  * Lower transaction costs.
  * More stable values.
  * True anonymity.
  * Faster transaction times.

"Price" isn't one of them.

VMG• 13 years ago

I initially thought his arguments were more sophisticated and he was describing a scenario where an alternative currency would win because it had better incentives for the holders due to competing deflationary pressures, but it seems that he really just fails to realize that Bitcoin is divisible.

Very surprising to see this coming for Cowen, something about Bitcoin triggers a shutdown in the brain of economists.

tapertaper2• 13 years ago

Producers do make money off the currency. Who will mine it if it's worth nothing? And who will hold it if its value will collapse?

reedlaw• 13 years ago

There is thus a new theorem: the value of WitCoin should, in equilibrium, be equal to the marketing costs of its potential competitors.

Apply that to anything else and it easily breaks down. E.g. the value of iPhones should be equal to the marketing costs of its potential competitors? Luxury cars? Brand name clothing?

tapertaper2• 13 years ago

Those goods are all highly unique with no easy substitutes. One currency can buy something as easily as another.

How and why Bitcoin will plummet in price

Related Stories