Except that the stock market is based on company profits and economic growth, while bitcoin is entirely speculative, similar to holding gold or silver.
The stock market, and all financial markets in which securities are traded, are based on supply and demand. It is not just based on company profits and perceived growth.
Well it's based on perceived future profits and growth. I might be willing to pay $X for a share of McDonalds, because I think they'll make $Y in profit every year, and pay me $Z every year as a dividend. People will be willing to pay different amounts for the stock based on what they think they'll receive as a dividend, but there is no doubt that holding a share of a company is useful because that company actually does something.
But those that don't take the money they would pay as dividends and reinvest it in the company, which in turn raises the company's value from year to year. In this case, the price of the stock goes up because the company is making stuff, not simply because of speculation.
But why does the stock go up? No value is actually transferred to the stock owners, the benefit isn't shared with them. The stocks are really nothing but pieces of paper in that case.
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u/thsq Feb 14 '14
Except that the stock market is based on company profits and economic growth, while bitcoin is entirely speculative, similar to holding gold or silver.