There is in here a good case that an investment in Bitcoin is better than an investment in Bitcoin mining equipment. Unfortunately it is a common error in investment analysis to compare a potential investment to another bad investment and then mistakenly conclude it is good merely because it is better than another bad investment.
There is a good case here that Bitcoin is a much better investment now than it was when it cost 2x or 4x or whatever x as much as it costs now. The fundamentals have not changed, so clearly however good it is at one price, it is better at a cheaper price. It is fallacious to conclude from this that this means it is now good.
A problem with bitcoin is that it is impossible ( I think) to come up with a fundamental value for it. And no attempt is made here to present one. Essentially, the entire case here never gets past what is called the “greater fool theory” of investing. We have no idea what it is worth, but we know some other guy, presumably every bit as ignorant as we are, was willing to pay more a few months ago. So all we need is another bunch of guys like that, with no idea what it is really worth but a willingness to pay more, in order to justify our investment.
So even if there is a good fundamental theory of value of bitcoin, it is not presented here either explicitly or by reference. So this means it there is no good case that Bitcoin has found its bottom or even that it is more likely to double in price than to halve in price.
The evidence is that Bitcoin price is, even now, supported by stupid money. People continue buying mining equipment even though a rational analysis shows this is an inferior investment to bitcoins themselves. So money flowing in to bitcoin mining is stupid. So if the market in bitcoin is dominated by people who can’t even figure out simple comparitive valuations, why would you ever think the price determined by people like that speaks about rational future expectations? You shouldn’t. This is bubble pricing, no fundamental valuation underpinning any of it. And historically, all bubbles burst no matter how many years they provide great returns to their participants before their burst.
So if you want to invest in something, AAPL would be much better. At least they produce items of calculable real value, and sell them by the millions.
This is NOT a good case for investing in Bitcoin.
There is in here a good case that an investment in Bitcoin is better than an investment in Bitcoin mining equipment. Unfortunately it is a common error in investment analysis to compare a potential investment to another bad investment and then mistakenly conclude it is good merely because it is better than another bad investment.
There is a good case here that Bitcoin is a much better investment now than it was when it cost 2x or 4x or whatever x as much as it costs now. The fundamentals have not changed, so clearly however good it is at one price, it is better at a cheaper price. It is fallacious to conclude from this that this means it is now good.
A problem with bitcoin is that it is impossible ( I think) to come up with a fundamental value for it. And no attempt is made here to present one. Essentially, the entire case here never gets past what is called the “greater fool theory” of investing. We have no idea what it is worth, but we know some other guy, presumably every bit as ignorant as we are, was willing to pay more a few months ago. So all we need is another bunch of guys like that, with no idea what it is really worth but a willingness to pay more, in order to justify our investment.
So even if there is a good fundamental theory of value of bitcoin, it is not presented here either explicitly or by reference. So this means it there is no good case that Bitcoin has found its bottom or even that it is more likely to double in price than to halve in price.
The evidence is that Bitcoin price is, even now, supported by stupid money. People continue buying mining equipment even though a rational analysis shows this is an inferior investment to bitcoins themselves. So money flowing in to bitcoin mining is stupid. So if the market in bitcoin is dominated by people who can’t even figure out simple comparitive valuations, why would you ever think the price determined by people like that speaks about rational future expectations? You shouldn’t. This is bubble pricing, no fundamental valuation underpinning any of it. And historically, all bubbles burst no matter how many years they provide great returns to their participants before their burst.
So if you want to invest in something, AAPL would be much better. At least they produce items of calculable real value, and sell them by the millions.