The reason is simple: the Bitcoin system delivers nothing to the holders of its units (BTC).
Every financial system that issues units delivers something to the holders of those units. If the market price per unit is much higher than what that system can actually deliver, we call it a bubble, and sooner or later it bursts.
But with Bitcoin, the delivery is zero, while the price is enormous, which is a recipe for the most spectacular bubble burst, a total crash.
To understand this, let’s look at how financial systems deliver to the holders of their units and how this is connected to the market.
Companies that issue units as shares deliver through dividends, share buybacks, or liquidation. If a share is priced at 100 dollars, but the company could only deliver 1 cent in dividends or 1 dollar in liquidation, what would happen to the price? A decline would be inevitable.
The same applies to monetary units, whether issued by banks or platforms like PayPal.
Banks issue their units as loans, and through borrowers they deliver goods, services, and labor to unit holders whenever those borrowers obtain units to repay their loans. If borrowers fail in that repayment and thus in delivery, the banks deliver themselves by selling seized assets at auctions. If a bank needs to close an unpaid loan of 25,000 units and offers collateral in the form of a Toyota Camry, no one would give a house for that number of units. Otherwise, it would be considered an irrational market exchange.
The same irrationality would apply if someone paid more for one unit of PayPal money than what PayPal pays out. For 1 USD on PayPal, they will pay you 1 USD to your bank account. No one in the market would give you 2, 10, or 100 dollars for one unit of that electronic money.
But now consider how people act in the case of Bitcoin.
Neither its pseudonymous creator, who designed the protocol for issuing units, nor the network that maintains them in a decentralized database, pays anything to unit holders. If you hold 1 BTC, you will not receive even a single cent from the system, let alone a dollar, as in the case of PayPal.
Furthermore, BTC is not issued as someone’s loan, so the system does not directly offer you borrowers’ collateral or indirectly their goods, services, and labor.
Finally, BTC is not a share in a company, so you cannot receive even a single cent in liquidation or dividends.
And yet, people currently pay a staggering $70,000 for one BTC unit. The delivery per unit is zero, while the price per unit is enormous.
This behavior is often justified by the scarcity of the units, their decentralization, speed, and lack of control by authorities. But this is ironic. It is like a company going bankrupt and being unable to pay anything to shareholders in liquidation, while management addresses them with these words:
"We have a limited number of shares and will never issue more, and we have also introduced blockchain technology to store them. It is an unbreakable, decentralized, cryptographically secured system, so no one in the world, not even any government, can take your shares."
Positive rhetoric would be used to hide a completely negative reality.
Although the Bitcoin market is currently under the influence of such positive rhetoric, it cannot erase the negative reality of zero delivery, to which the price will inevitably yield. A complete crash of that market is inevitable.
Why a Complete Crash of the Bitcoin Market Is Inevitable
byu/BinaryLyric ininvesting
Posted by BinaryLyric
25 Comments
https://bitcoin.org/en/bitcoin-paper
Blah blah blah
i hear that since over a decade now…cool story bro, nobody cares.
Your logic apply to gold too no?
Bitcoin isn’t 37 trillion in debt like the entity that issues dollars.
How does gold deliver value to its holders? Besides a few lab applications and looking shiny. Genuine question
Yes crypto has been around for long enough now and there is no real world use for it therefore it is useless overall, however it is still treated as a speculative asset, one where people generally hold 5-10% of their portfolio with it “just in case”. It’ll be the first thing to get ditched in a market collapse, but for now it’s a laggard bull runner
I don’t invest in BTC, but this take completely starts with a wrong assumption. At this point, BTC is basically a digital gold, 100% speculative asset. As long as people keep considering that it has a value, it will have that value.
You can argue it has other risks, such as 51% attacks, or quantum computing being able to hack into wallets one day. For individuals, the risk of simply losing the keys, getting stolen also exist.
Another pseudo intellectual anti Bitcoin post from someone who hasn’t done the research and just types long paragraphs.
Think of Bitcoin as a network rather than a unit and it might help. Like TCP.
It’s a network that allows people to transact in a secure, P2P, network that can out be manipulated by any one bad actor. It’s a public ledger that is verified continuously in a decentralized way. There’s value in that for many people which is why it’s sitting at 70k.
And all these individuals and all these companies that promote it or build solutions/services on top of it are in a way working together to promote the network, just as all of these people who use the internet to do business are promoting increased use of the network.
Which of those arguments wording apply to gold too? Owning gold has no dividend, doesn’t deliver value per unit. But it’s been expensive for roughly all of human history.
This post is dumb. There may be a bitcoin bubble, there may not, I tend to not be a big believer, it may crash at some point. But that will be totally unrelated to your ramblings in this post. Things are valued what someone is willing to pay for them. No more no less.
I’m excited for all the money you’ll make shorting it!
Sounds like someone sold the bottom 😅
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Bitcoin is not a stock. It’s money.
> Every financial system that issues units delivers something to the holders of those units.
Not true. The standard financial unit is the US dollar. What does the dollar issue to its holders? Nothing. Unless you want to count inflation as something being issued.
You seem to be assuming that fundamentals actually matter at this point
I remember back when one BTC could be purchased for .10 cents USD. You’re right…it has delivered nothing since then. 😆
The compute token based AI economy presents a real use case for crypto currency.
Sounds more like a story OP tells themselves to beat down the regret of not buying btc a few years ago.
Gold delivers (almost*) zero value. But somehow people (and more importantly Central Banks) have been assigning gold substantial value for centuries.
*: yes, it can be used for electrical circuits and jewellery, but if price was only linked to these utilitarian uses , it would be probably a tenth of its market price.
We are in the belief era of our financial system. For that reason you are wrong today, and will be proven (mostly) right at some point in the future. No one can time the market.
Here’s one (of many) ways it delivers value: [**Bitcoin, Financial Freedom, and the New Global Divide**](https://www.btcpolicy.org/articles/bitcoin-financial-freedom-and-the-new-global-divide) – a definitive study across 25 countries explaining how Bitcoin serves as a practical “financial self-defense” tool for those facing hyperinflation, high remittance fees, and exclusion from the legacy banking system.
Bitcoin is digital global cash.. more people believe in this concept the higher the price goes because of supply and demand.
Now write that as a poem
bitcoin pays nothing back gold pays nothing too, but people still buy it if people stop wanting bitcoin, the price can fall if they keep wanting it, it can stay high
I have heard this quite a lot. Put your money where your mouth is and buy shorts, we could use the liquidity.
*If* Bitcoin did pop and crash (not saying it will), where do you think all the resulting money would go?
Gold perhaps, or bonds (t-bills \ gilts)? Gold is probably a better hedge against inflation. Just wondering.