Steam stops accepting bitcoin
Warning: Don’t take anything in this post as advice to sell bitcoin. My advice on this stuff is always wrong. I thought bitcoin was overpriced when it was worth one-tenth of what it’s trading for today. Boy was I wrong about that!
https://www.cnbc.com/2017/12/07/valve-steam-drops-bitcoin-support-cites-high-fees-volatility.html
As you may know, Steam is a computer game download service. Until today, they accepted bitcoin, and because gamers tend to strongly overlap with the kind of tech nerds who love the idea of bitcoin, if it makes sense for any legitimate business to take bitcoin, it would be Steam.
However, even though bitcoin is supposed to be a way to transact electronically without the unconscionable fees of credit card companies, the reality is that bitcoin is more expensive than credit cards and Paypal. So it turns out that, right now, bitcoin has not practical legal uses. It’s only a speculative gamble that the price will keep going up, or a way for criminals to transact online without their transactions subject to tracking or confiscation by law enforcement.
Lion of the Blogosphere 
I guess I don’t see the point in Bitcoin. From what I understand, it’s a currency with limited issue. The problem, though, is that has become a commodity people demand and hoard, whereas money today is simply the means of exchange. As such, there’s little incentive to actually use it, which destroys the point in having it.
I don’t doubt that Bitcoins have been increasing in value, but again, they seem to be more of a commodity than a means of exchange. That seems like a bubble waiting to pop – buy Bitcoins cheap and sell them high before they lose all value. If that’s what you’re into, go ahead, just be wary of getting burned.
If I am misunderstanding Bitcoin, feel free to correct my thinking, but right now it just looks like a bubble people can play around with.
Sid
December 7, 2017 at 11:08 AM
I’m highly skeptical of Bitcoin. I don’t generally hear rational arguments for buying it other than “it keeps going up” and “it’s the way of the future”.
The thing about speculative bubbles though is that if the price of something worth $10 reaches $10,000, and you tell people it’s grossly overpriced at $50, then you end up looking stupid for a long time. This is partly how speculative bubbles can get out of control; all of the rational people have been laughed off as idiots, and everyone starts listening to the lunatics who predicted the increase from the start.
The one semi-rational argument that I have reached is that IF it replaces, say, the dollar (an event to which I’d assign a probability of 95%), then the total value of Bitcoins would presumably be roughly equal to the value of dollars (M0 in Fed terminology, which is about $1 trillion). The supply of Bitcoins is constrained to about 20 million, which would value a Bitcoin at about $50,000.
So if you think that event has a 100% chance of occurring, then you might argue BTC has a 3-4x increase ahead of it. Though other people are arguing a Bitcoin should be worth millions. I think their math is wrong, even in the spectacular scenario where their predictions about BTC are otherwise right.
But then there’s its other practical use: as a medium of exchange for criminals. Presumably its value there should converge towards the M0 of dollars that it displaces. I don’t think anyone knows the M0 of criminal-linked currency holdings is. If we assume that BTC replaces 1% of all dollar-denominated balances for purposes of engaging in criminal or other shady activity, that would value it at $500. But 1% sounds high to me.
The other problem though is that even for these purposes, demand for BTC could be replaced by another crypto-currency (e.g. Ethereum) for some reason, or for no particular reason at all. Presumably such a thing wouldn’t be too different from Facebook replacing MySpace.
Wency
December 7, 2017 at 12:45 PM
I think M1 is the right thing to compare, not M0 as bitcoin is not a fraction-reserve system.
The global M1 is around 35 trillion or so. If we think bitcoin would replace all worlds M1, this would put the price to around 1.6 million dollars per bitcoin.
tmmm
December 7, 2017 at 1:06 PM
$100 of bitcoin in 2011 is worth $4 million today. Having said that, I never had a need or saw a use for bitcoin. Therefore, I never bought any even as a speculative play. I still don’t think it’s practical. If it were to somehow transition to something practical for which it’s actually better than paypal or credit cards then it might have value. Otherwise, I think it’s a novelty and a bubble.
destructure
December 7, 2017 at 8:26 PM
Using bitcoin is somewhat on the prole side, given it’s semi legitimacy as accepted currency.
JS
December 7, 2017 at 11:40 AM
And computer games are prole too.
Lion of the Blogosphere
December 7, 2017 at 11:52 AM
Do you think there are any noticeable class divides when it comes to playing video games? i.e. Nintendo is SWPL because it’s fun and light, computer gaming is prole because it’s an expensive nerdish hobby, etc.?
Sid
December 7, 2017 at 11:57 AM
Winklevoss twins are on prole side too?
cannotwest
December 7, 2017 at 5:21 PM
America and the Anglosphere are prole domains, simply because the average citizen hustles to stay alive.
JS
December 7, 2017 at 6:18 PM
@ JS: What does it have to do with bitcoin? It’s the most traded in Japan in S. Korea, which are not prole.
cannotwest
December 7, 2017 at 8:43 PM
If you think bitcoin is overpriced, look at this chart. Although it is couple of months old.
http://money.visualcapitalist.com/worlds-money-markets-one-visualization-2017/
tmmm
December 7, 2017 at 11:51 AM
And what I expect we will see maybe next year or year after that is bitcoin-nominated securities and derivative exchanges. Securities and other derivatives will be tokenized (like ADRs) and traded in such exchanges in bitcoin.
There seems to be already some projects for that:
https://www.ankorus.org/
tmmm
December 7, 2017 at 11:57 AM
Yep. My comment here from 9/21/17:
Bitcoin makes for fun speculation and if you buy and sell at the right prices you can make a lot of money (in dollars of course). But it’s just gambling. Remember, Bitcoin is supposed to facilitate anonymous peer-to-peer payments. Why would anyone use Bitcoin to pay for something (something mundane, most people aren’t arch criminals) when the value could go from $3,000 to $4,000 in a week? You’d just hold (or hodl) onto it for the chance at capital appreciation. No, it will be a fun rollercoaster ride while the $IMF system still exists but it will never become a currency or a money or a store of value.
And to the extent that the public really wants a distributed ledger digital cryptocurrency for the convenience and the anonymity that they would provide (assuming the technology can be worked out) then the central banks will just adopt the tech and offer their own cryptos as part of their base money supply as an alternative to cash money at the ATM. See here for instance:
https://www.bis.org/publ/qtrpdf/r_qt1709f.htm
Andrew E.
December 7, 2017 at 11:57 AM
Ethereum or one of the truly anonymous currencies are the only ones that are potentially actually usable. Bitcoin is just pure speculation at this point.
Sic
December 7, 2017 at 2:19 PM
From what I’ve seen on other forums, people who got in early on bitcoin are feeling really happy now, while many latecomers are looking for ways to get rich quick. If you don’t mind the risk, you can still make some money with it right now. And while blockchain technology will have some value, I’m also reminded of all those news stories about people making money day-trading stocks in the late 1990s, before the dot-com bubble burst. Some people in countries like China may be funneling any gains they get from corruption into bitcoin, and I would not be surprised to hear of the same being done in Greece, Venezuela, and the Middle East.
Yankee
December 7, 2017 at 5:07 PM
Is there any way to short Bitcoin?
It seems like a futures market in Bitcoin might help reduce the currency’s volatility.
John D'oh
December 8, 2017 at 1:36 AM
“Is there any way to short Bitcoin?”
Found the answer. CNBC reported yesterday that the exchanges will be offering derivatives in Bitcoin at some time next year.
John D'oh
December 8, 2017 at 9:17 PM
in 2010, my calculation was that there were a market of 2 000 billion for crypto. Than first player would get 50%, that is 1 000 billion. That the amount of money being caped 0,021 billion (21 million), the bitcoin price would be 50 000. Then money being deflationist, no more new money, it would be a reserve value much better than gold. It should go up to 150K the unit. The risk were prohibition, big fraud/security pb or a better competitor with best technology or service who would take the first spot. I estimated it had 10% chances of being ok. So I calculated it was sound for me to invest 10K euros at 5 cents a bitcoin. And then, I told all that to many people, some dit, and I didn’t do anything at all. Ideas are so cheap. And it was my unique big idea in investment. That’s life ….
Bruno
December 9, 2017 at 11:31 AM