I've been aware.of the concept of crypto-currencies for a number of years (and actually remember someone taking to me about bitcoin at work about 10 years ago, don't keep in touch with the chap but hope he made his fortune), but I still don't understand where the value is and therefore am reluctant to invest.
The arguments events I struggle to get round in my mind are:
1) Given the finite volume of bitcoin will the value continue to increase? And if so, how does will this work as a currency or is it more likely to resemble a commodity forever.
2) I get the whole decentralised bit, but how can these currencies attract market trust (and therefore value) when there are so many of them.
3) Bitcoin is the biggest but also the first, other digital currencies have already improved or resolved flaws with how bitcoin operates, why is bitcoin still the most talked about?
4) Economies and therefore the consumer do better with a stable currency. The centralisation of currency houses allows for an element of currency manipulation to help protect the currency and therefore the interest of currency holders. The fact that there is no governing body means that crypto-currencies will answer only to the market, would this inevitably lead to close given that global economic strife is fairly close cyclical.
5) The strong correlation between bitcoin value and other cryptocurrency surely indicates the level of speculative interest underpinning the value. Are there any traditional ways of measuring or assigning value? This compined with the relative market illiquity compared to other financial instruments (i.e. blue chip stock) surely mean there is another value collapse coming?
6) Does the complexity in regulation create a greater risk that Governments will intervene negatively given that there would be little upside available for them to intervene positively? Are we just waiting for a government to be the first to go balls deep in legislating the use and application of crypto-currencies before we see them fail?
7) Why could the US for example not simply create a digital aspect to the USD which would immediately garner more institutional backing than even bitcoin?
I understand the potential applications of crypto-currencies but don't understand how they will survive, and the 'bitcoin is too big too fail' doesn't really fly given previous economic issues that have occurred. Any help understanding any of these points would be appreciated.
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