I want to believe it's an investment myself, but haven't been able to-- and by sitting it out we've of course lost a lot of money in forgone gains.
Where I get stuck, and maybe someone could help me here-- generally, you don't have to try to hard to imagine a future with cryptocurrency being more useful then it is today. That is, it is more valuable. BUT, why should that mean that its price should be higher? It's like looking at the pithy saying, "price is not value" in reverse.
the value of something like bitcoin is generally going to be related to the value of the network. if you can envision it being more useful in the future, consider what the function is, and what it means for the value of the network as a whole.
some examples to explain what i'm saying, not necessarily what i think will happen per se
bitcoin replaces, or at least augments, gold as a "store of value inflation hedge" - in theory it should be a great inflation hedge. there are a limited number of bitcoin, 21 million max, but we keep printing trillions and trillions of new dollars. gold also doesn't do anything productive, it just sits there and acts as a hedge on inflation.
in this scenario, the market cap of gold is something like 8 trillion. if bitcoin takes some of this job, it's market cap must get a lot bigger. functionally, we have 8 trillion "dollars" of wealth that are currently stored in gold. if we wanted to "store" 8 trillion "dollars" of wealth in bitcoin, we can't currently. the entire market cap of bitcoin is only a few hundred billion. For it to be an inflation hedge on the scale of gold, the price has to rise tremendously.
this same calculation can be done for whatever potential usefulness you come up with. Like if you think it can replace the USD as a reserve currency for setting international oil trades, the market cap of bitcoin has to get exponentially bigger just to handle the scale of those markets.
now, i don't think it's likely to become the world's reserve currency, certainly not anytime soon, but if it were you can see where it would have to have more value to be able to do so. I do think it is a great inflation hedge, and I think lots of money managers are going to start recommending to client to put 1-3-5% of their portfolios into bitcoin as a hedge. That's happening right now. IF that goes mainstream, the market cap of bitcoin HAS to go up significantly to handle all that new demand, given that the supply is capped.
Is Bitcoin not infinitely divisible though? So it would just be inflated by dividing infinitely. It's the same as having infinite amount the other way.
how is that the same? having more spots after the decimal is not the same as having more in front. cut an apple in half you don't have 2 apples, you have 2 halves. 21 million total bitcoin and breaking them apart is not the same as printing 5 trillion more dollars.
Are you disagreeing with the fundamental economics argument of supply and demand? More demand assuming a constant (forecasted) supply means the price will be higher.
Different cryptocurrencies are not fungible. New altcoins don't increase the supply of Bitcoin. It's not like they siphon much demand from Bitcoin either. Someone discovering a huge new source of Platinum doesn't fundamentally effect supply/demand of gold.
Where I get stuck, and maybe someone could help me here-- generally, you don't have to try to hard to imagine a future with cryptocurrency being more useful then it is today. That is, it is more valuable. BUT, why should that mean that its price should be higher? It's like looking at the pithy saying, "price is not value" in reverse.