The Bitcoin Bubble (economist.com) 284
A reader shares an Economist article: More people will trade in Bitcoin and that means more demand, and thus the price should go up. But what is the appeal of Bitcoin? There are really three strands; the limited nature of supply; fears about the long-term value of fiat currencies in an era of quantitative easing; and the appeal of anonymity. The last factor makes Bitcoin appealing to criminals creating this ingenious valuation method for the currency of around $570. These three factors explain why there is some demand for Bitcoin but not the recent surge. The supply details have if anything deteriorated (rival cryptocurrencies are emerging); the criminal community hasn't suddenly risen in size; and there is no sign of general inflation. A possible explanation is the belief that blockchain, the technology that underlines Bitcoin, will be used across the finance industry. But you can create blockchains without having anything to do with Bitcoin; the success of the two aren't inextricably linked. A much more plausible reason for the demand for Bitcoin is that the price is going up rapidly. People are not buying Bitcoin because they intend to use it in their daily lives (Editor's note: the link could be paywalled; alternative source). People are buying Bitcoin because they expect other people to buy it from them at a higher price; the definition of the greater fool theory.
Did you really just link to goo.gl? (Score:2, Informative)
Really? Dick move.
Unshorten.it [unshorten.it] reveals that the actual link is: https://getpocket.com/redirect? [getpocket.com]
Haha! a spam link to a product completely unrelated to the supposed story.
Nice "work" there msmash...
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*correction: full link: https://getpocket.com/redirect?&url=https%3A%2F%2Fwww.economist.com%2Fblogs%2Fbuttonwood%2F2017%2F11%2Fgreater-fool-theory-0&h=f46558eae82843f2d97ae0f83b27d5c96431d25a77a4cce46b92217422addada&nt=b7fecU93gH942ym [getpocket.com]
So it appears the story is actually on the Economist. So someone posted a link to goo.gl which redirects to getpocket.com which finally redirects to economist.com.
Wasn't Chrome going to put a stop to this asshattery?
Re:Did you really just link to goo.gl? (Score:5, Insightful)
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Well done and well said. You catch a lot of undue flack.
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Re:Did you really just link to goo.gl? (Score:5, Insightful)
It is a blog post hosted on economist.com that did not appear particularly coherent to me.
Spotted the Bitcoin speculator!
The Economist nailed it. BTC would be valuable as an anonymous digital currency if the ratio of coins to everything that can be traded for coins remained stable. Traditionally, this is what the central bank of a national currency is supposed to do. BTC has no central bank, and limits its money supply mathematically. The advantage of this is that BTC cannot inflate, but it also means that as the currency trades more widely (is exchanged for for more things), the money supply grows only very slowly through new mining. It is DEFLATING, so people have taken to buying it only because they hope to sell the coins themselves for more later on.
As soon as you avoid buying a beer for BTC because you think you will get more for your coins later, it stops being a currency. It becomes a speculation, and by now it's tulip time.
Re:Did you really just link to goo.gl? (Score:5, Insightful)
As soon as you avoid buying a beer for BTC because you think you will get more for your coins later, it stops being a currency. It becomes a speculation, and by now it's tulip time.
Bitcoin is just a sort of an ersatz "fiat Gold". I'm surprised that we aren't seeing those doom and gloom gold investment infomercials on Television get competition with Bitcoin investment infomercials.
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Are we hearing bitcoin commercials on conservative radio yet? It's hard to imagine how they could spin it to compete against "GOLD", but I'm sure they'll think of a way.
They do spin do they not? I've been having trouble listening to conservative radio recently. Angry old men yelling gets boring after a while.
I suspect the shrill level is through the roof after Tuesday's election results. MAybe I'll tun in thisafternoon to see how they blame it on not enough candidates hitching their wagon to the rising star of Il Duce the second.
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Wrong:
https://www.facebook.com/OccupyDemocratsLogic/photos/a.1647169182167657.1073741828.1646874365530472/2001221336762438/?type=3&theater [facebook.com]
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Wrong:
https://www.facebook.com/OccupyDemocratsLogic/photos/a.1647169182167657.1073741828.1646874365530472/2001221336762438/?type=3&theater [facebook.com]
So the conservtive radio hosts aren't complaining at all? You are a completely typical Trump voter, Yoiu seem to think that complete non sequitars are somehow relevant to the discussion at hand. My post just to have some tiny yet hopeful wish that you might engage in conversations wirth adults, is that I was remarking on the reactions of people like Limbaught and savage. Not some douchebag outfiut like Occupy Democrats. Don't rtefer to them, and I won't refer to Trumps NeoNazi and White Supremacists fine p
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One difference between gold and bitcoin (and there are many) is that gold is the currency of last resort for all superpower governments. Why do central banks still bother with gold in the age of fiat currency? Because they understand fiat currency better than us, and ultimately they don't fully trust it. Hence the backup. (It doesn't matter how much gold they own relative to fiat currency -- what matters is how much gold they own relative to other governments' gold supply. In a worst-case scenario, that's the bottom line.)
Both gold and bitcoin are independent of any central authority, and both are resistant to having their value diluted by a central authority. That would seem to make bitcoin a substitute for gold in some cases, but ultimately, the showstopper for central banks is that digital things can go "poof".
One of the biggest problems with gold as a backup currency is that it represents a nuclear option. Because the ability to immediately exchange whatever amount of money you have for an equivalent amount of gold means that there must be no more wealth than can be covered by an immediate transfer from that wealth to gold
The total amount of gold in 2014 - 183,600 tonnes of stocks in existence above ground".At $1,075 per troy ounce, 183,600 metric tonnes of gold would have a value of $6.3 trillion. So to go t
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One of the biggest problems with gold as a backup currency is that it represents a nuclear option. Because the ability to immediately exchange whatever amount of money you have for an equivalent amount of gold means that there must be no more wealth than can be covered by an immediate transfer from that wealth to gold
The price of gold isn't fixed. As soon as you buy some, the price of gold goes up. This is imperceptible for small amounts of gold, but the price will grow up dramatically.
Re:Did you really just link to goo.gl? (Score:5, Informative)
Nope, not fixed at all
2/1980 - $2,077.93/oz
2/2001 - $367.67/oz
2/2011 - $1573.27/oz
2/2016 - $1,168.00/oz
Tell the guy that bought in 1980 that the price always goes up.
These are inflation adjusted dollars.
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No matter how we measure it, there is simply not enough gold to support the US economy, much less the entire world's.
No, you're wrong.Suppose the world's currency were entirely backed by gold. A single ounce would be worth $200,000. You wouldn't be able to buy an ounce (at least, most people wouldn't, which is unfortunate because it's nice for decorating purposes).
The economy wouldn't collapse. People would start selling "micro-ounces" of gold, or use a bi-metallic standard. Banks would issue paper backed by gold, but each bill would only be worth a milli-gram or even micro-gram of gold. These strategies have been us
Re:Did you really just link to goo.gl? (Score:4, Interesting)
No matter how we measure it, there is simply not enough gold to support the US economy, much less the entire world's.
No, you're wrong.Suppose the world's currency were entirely backed by gold. A single ounce would be worth $200,000. You wouldn't be able to buy an ounce (at least, most people wouldn't, which is unfortunate because it's nice for decorating purposes). The economy wouldn't collapse. People would start selling "micro-ounces" of gold, or use a bi-metallic standard. Banks would issue paper backed by gold, but each bill would only be worth a milli-gram or even micro-gram of gold. These strategies have been used for millenia. No matter how much the value of the world increases, the current amount of gold (or any other thing) can scale up to represent it by further dividing it.
Magical stuff this gold. So it's value can increase infinitely it seems. And soon we will be trading atoms of it. At which point, what will you do that has true value with an atom, or even micro ounce? And how are you going to store that micro ounce, if it is a certificate for it, well welcome to fiat.
There is a reason we don't tie the world to gold. There isn't enough of it, and it's volatility is too high because people ascribe magickal properties to it.
Anyhow, I guess some people do eat it, so it's the equivalent of bread?
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That is only a temporary phase.
Once price adjustment is over, near 100K USD or so, things might change.
Or will we go to 1M USD? (I prefer €)
Re:Did you really just link to goo.gl? (Score:5, Informative)
Pretty much. Nobody is buying bitcoin right now to make purchases, you simply don't buy something that's experiencing value increaases like this to use to buy a hamburger tomorrow.
Tons of people are buying into it precisely because its shooting up... which makes it shoot up higher. That not only speculation... its bubble behavior.
Re:Did you really just link to goo.gl? (Score:5, Interesting)
Pretty much. Nobody is buying bitcoin right now to make purchases, you simply don't buy something that's experiencing value increaases like this to use to buy a hamburger tomorrow.
Tons of people are buying into it precisely because its shooting up... which makes it shoot up higher. That not only speculation... its bubble behavior.
Yep, and I can't wait to see what happens when it collapses and they all find out it will take several days to sell their stock because the entire bitcoin network is limited to about 7 transactions/second. Several days watching it crash, unable to sell unless they _seriously_ undercut everybody else to jump the queue.
It'll be a thing of beauty. A death spiral never before seen in any other 'bubble'.
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BTC would be valuable as an anonymous digital currency if the ratio of coins to everything that can be traded for coins remained stable.
Or if the world bitcoin network could support more than single-digit number of transactions per second. Which it can't, not even in theory. (blockchain theory says real world transaction rates could be around 7/sec, or maybe even as low as 5/sec)
I don't think Bitcoin will be so valuable when a lot of people try to use it to buy stuff and find out there's a waiting list of several hours/days to complete their transaction.
Re:Did you really just link to goo.gl? (Score:4, Interesting)
I've been hearing the same argument since 2011.. (Score:5, Insightful)
"7 cents? That's outrageous, the bubble will pop soon!"
"70 cents? Such foolishness, who would ever pay that much for a single bitcoin?!"
"7 dollars? Bitcoin is a scam, who's fool enough to fall for it? Stay away!"
"70 dollars? Look, it's definitely a bubble, it will pop anytime now."
"700 dollars? That's like the tulip mania! Don't ever touch bitcoin unless you want to lose a lot of money"
"7000 dollars? Again, it's a bubble, only a true idiot would buy bitcoins, trust me!"
When a single btc will be worth $70k, those idiots will still spew their usual nonsense.
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I don't think that the argument you replied to suggests it will go on forever, it is a fair critique of the "soon" crowd.
That crowd always picks some subjective reason why bitcoin will fall apart. Some of them are hilarious....like that it isn't backed by a government. They also never set even a rough date when this falling apart will happen.
Essentially they are making claims that can't be disproved, which alone is enough to ignore them regardless of how many bitcoin one owns.
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It will be spectacular when it does go down.
Bitcoin is different in that the global number of transactions per second is limited. Only about 7 people can sell per second, in the entire world.
Wanna sell yours? Either you sell for cents on the dollar or you ain't selling at all.
When that happens I'm gonna put in some _really_ low bids for bitcoins.
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Only about 7 people can sell per second, in the entire world.
Wrong. When your bitcoins are on an exchange, there's no limit to how fast you can trade.
Besides, why would you want to sell ? Anybody who's been holding bitcoin over the last couple of years has already seen a crazy rollercoaster ride. People like that don't freak out easily.
When that happens I'm gonna put in some _really_ low bids for bitcoins.
And someone else will do the same, but with a slightly higher bid.
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"Against the dollar" really is the key phrase. There's a scenario where bitcoin holders can basically take over the federal reserve functionality, if Fed keeps printing money and Wall st. keeps stashing it in bitcoin, inflationary signs will never appear because if they do it right they've created a parallel economy the Fed is pumping up. There's a seemingly absurd point where the valuation of bitcoin becomes higher than the valuation of the tech that supports it, but really you can't say where the ceiling
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How do you "trade" with it when the network is limited to single-digit transactions per second? How much will it be worth when people start getting stuck in queues, waiting several hours/days for transactions to complete?
same argument since 1622 (Score:5, Funny)
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Gold has risen to half a million for a bullion bar, and shows no sign of a "bubble"
Re:I've been hearing the same argument since 2011. (Score:4, Insightful)
Actually I'm lately hearing this line of argument:
"7 cents? That's outrageous, the bubble will pop soon!"
"70 cents? Such foolishness, who would ever pay that much for a single bitcoin?!"
"7 dollars? Bitcoin is a scam, who's fool enough to fall for it? Stay away!"
"70 dollars? My barber recommends Bitcoin, and so does my dog walker..."
"700 dollars? Okay, now I'm buying in."
"7000 dollars? I'm riding this to the stars. Desert Rat Blog is calling for $100,000 BTC by 2020!"
Re:I've been hearing the same argument since 2011. (Score:4, Insightful)
Just because the price of Bitcoin keeps rising does not mean it's not a bubble. Literally every other bubble has the same evangelists spouting off the various reasons why it's not a bubble and why this time it's different.
The argument that the recent meteoric rise in Bitcoin is due to a herd speculators rather than demand for Bitcoin currency as a currency vehicle is probably the correct one. And if there's one thing that herds do is stampede. Sooner or later, they are going to stampede for the exit and your $7,000 bitcoin is going to plummet back to somewhere near what the true transactional and holding value of BC is.
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"The market can stay irrational longer than you can stay solvent."
Now, that's a quotable quote.
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When a single btc will be worth $70k, those idiots will still spew their usual nonsense.
Why not just say $70 bazillion gillion trillion? Oh, because maybe then everyone would see how fucking ridiculous it is to think that a commodity can go on increasing in value ad infinitum.
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There's a difference between "worth" and "price". Bitcoin has near zero worth and lots of price. Such a disparity cannot go on forever. With so much of the supply in the hands of so few, price manipulation aimed at robbing small players is a real possibility/probability.
Tulip bulbs went through a similar price/worth mismatch.
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What is the currency value of the BTC you have cashed out?
I see tons of talk about holding or buying , but if you're not able to get it out, you're just financing speculators, not yourself.
Re:I've been hearing the same argument since 2011. (Score:4, Insightful)
"It isn't manipulable -- If someone had 51% of the BTC mining, then one would worry."
Wrong! China holds most of the hashrate and processing power. They can easily hit a 51% attack if they wanted.
"It is secure, and far more useful than most fiat currencies."
It is digital and thus it can be hacked. People have had their bitcoins stolen through electronic means. Security is a fallacy in a chaotic system such as a computer.
"The value isn't going anywhere but up."
And anyone that paid attention to any economic history will quickly say "This is a bubble that's going to leave a lot of 'investors' high and dry."
"When you get paid, you stay paid."
WRONG. [elidourado.com] To boot, plenty of fraud involving exchanges of goods for bitcoin has already happened, leaving plenty without recourse.
"BTC only will go up in value."
That you use the qualifier 'only' demonstrates you really have no fucking clue about economics.
"BTC is verifiable independent of a bank."
Verifiably stupid with no government insurance if your bank gets robbed, like Mt. Gox.
"If you avoid Mt. Gox like exchanges, your BTC is far safer than a bank."
Given my fuzzing audits on several exchanges - you're better off with a bank. And as stated above, banks come with insurance if you lose your money.
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The value isn't going anywhere but up.
This is economically impossible.
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OTOH, it's the same with every stock. The difference with a bubble is that it crashes hard.
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Nota Bene: Real Estate never really loses value, since it represents a *tangible* and *useful* item that has a finite supply.
N.B. #2: Yeah, the Dow Jones Industrial Average. See also 1929, 1991, the dot-bust, etc. Very easy to get burned if you speculate on stocks, even when sticking to just the DJIA for your trading portfolio. Also, there was no war in 1930 for the US - that would have to wait at least 11 years. ;)
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Really? So what's negative equity about, then?
If you really believe that ... just short it! (Score:5, Informative)
Re:If you really believe that ... just short it! (Score:5, Interesting)
It's not easy to short obvious bubbles, like the subprime mortgage market.
Once somebody figures out how to, that's probably the end of the upward spiral.
Re:If you really believe that ... just short it! (Score:5, Interesting)
It's not that you can't short a bubble, it's that you need huge reserves to do it. You'll constantly be making a loss until the bubble bursts and having to increase your investment to continue to both recover your previous investment and earn a profit. In a bubble markets are irrational so that can be a very long time. It'll eventually pay off (if it really was a bubble), but you'll go bankrupt first. On the other hand if you can spot the bubble really is about to burst and it actually does you can potentially profit from a much smaller investment (so 'obvious' bubbles are actually easier to short), but just because there's a Bitcoin bubble doesn't mean it's going to burst yet.
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Actually, shorting will actually drive up the price of an asset in an increasing market. Consider this:
Investor one owns the stock, and intends to hold it for a long term, but would like to make some additional money, and loans it to the short seller, who pays him a usage fee (think rent) for the stock, when he then sells but is contractually obligated to return to the buyer after he has reacquired it at the market price when he buys it.
The shorter, then sells the stock creating negligible downward pressure
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The subprime mortgage market bubble was incredibly obvious, just not to those whose entire net worth was leveraged to participate in it (i.e. those buying McMansions with no money down and no way to afford the adjustable rates).
In a few years you'll be telling us that no one say the bubble in higher education either when it has been blindingly obvious for more than a decade.
Re:If you really believe that ... just short it! (Score:5, Informative)
A short strategy might not work anyway... As a wise man once said, "The market can stay irrational much longer than a man can stay solvent."
This isn't even a story (Score:5, Informative)
"People are buying Bitcoin because they expect other people to buy it from them at a higher price; the definition of the greater fool theory."
False. Bitcoin circulates, it has underlying value, and it is deflationary. Every day bitcoin goes out of circulation as people lose access to wallets. I myself have lost access to at least 25 bitcoin over the years and nobody else has access either... that would be $187,500 at the $7500 per 1.0 btc I saw the other day. Bitcoin has had a number of bubbles and when those bubbles pop people panic and sell at a loss. When those buy in to the next bubble they buy at higher prices. This create a floor where people are generally invested at a higher price and their willingness to sell stops at a higher price. Also because bitcoin has been following that bubble, pop, bigger bubble cycle consistently since it's inception with first notable bubble being dollar parity the confidence in bitcoin is increasing over time, this too will slow the selloffs and when combined with the fact that genuinely new investors eventually slow to a trickle will mean smaller and smaller bubbles.
There is no absolute reason for any particular price on bitcoin to be a ceiling so long as the market is fluid. In fact the 1.0 BTC mark needs to grow quite a bit more for price stability so that there aren't investors who can notably move the market. I believe I calculated something like $10,000 per 1.0 BTC back when SR1 was operating. If there is too great a disparity between where most people bought and the current price those people will cash out when the growth appears to slow.
The recent bubble is largely because financial institution scale investors have begun investing. I don't know how safe it is to assume that can't continue to feed for quite awhile. Bitcoin is not open to the puny little wallstreet stock market type investor, it is open to global investment on a Forex level scale. It is not unreasonable at this point to think Bitcoin is only proven cryptocurrency or blockchain implementation at this point and will not go away in the forseeable future. That leaves room for a multi-trillion dollar market, not a few billion.
Re:This isn't even a story (Score:5, Insightful)
The thing I find hillarious is the belief in anonymity which, while effectively true for a short time, is actually counter to the whole concept of what is a blockchain.
If you have a real blockchain, transactions are anti-anonymous.
Re:This isn't even a story (Score:4, Insightful)
underlying value,
This is entirely false, bitcoin only has value because people think it does. Copper has an underlying value, even if markets aren't speculating on it there will always be a buyer with a use for it as a conductor willing to pay something for it.
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It is comforting to me that one of the pro-bubble arguments the author makes is:
People aren't buying bitcoin to use in their daily lives
Protip: we don't buy stocks to use in our daily lives either. Or gold, or bonds, foreign currencies, or futures of any sort, or shorts, or MBS, or mutual funds, or.....
The author doesn't seem to have thought his whole argument through very well.
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None of those things you mention claim to be currency (except foreign currency, which literally its only value is that other people use it as a currency and as such is the most risky of all your examples for investments). A currency that you don't use in your daily life is pointless. But bitcoins only value is as a currency. Seriously, what is the point of a currency you don't use? Every one of your examples you don't buy to use as currency. You buy gold as an investment (a poor investment at that, but
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There are more than three reasons. The question begging here assumes the only legitimate usage of bitcoin is among criminals. This is patently false. There are nations with less than ideal currencies where bitcoin is commonly being used as exchange currency.
I'd like some real, verifiable examples of how bitcoin is even useful in an ordinary person's every day life in one of those countries rather than "It's true because I say so".
False. Bitcoin circulates, it has underlying value, and it is deflationary. Every day bitcoin goes out of circulation as people lose access to wallets. I myself have lost access to at least 25 bitcoin over the years and nobody else has access either... that would be $187,500 at the $7500 per 1.0 btc I saw the other day.
I'm sorry but this is going to be really mean spirited. What exactly does this say about both you and bitcoin that this even true? Should we even be paying attention to a person who basically admitted that through either his own incompetence or the insecurity of bitcoin that over $187,000 worth of bit coins went into the bit bucke
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I think you've misread the article. The author doesn't assume the only legitimate usage among criminals. Rather, he posits three potential contributors to the high value- one of which is potential usefulness to criminals.
The article also addresses the deflationary aspect. Yes, Bitcoin itself is deflationary by design, but nothing prevents other cryptocurrencies from being issued- and they are indeed being issued on a fast and furious pace. At the end of the day, the only thing that really distinguishes bitc
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Um, no. While Bitcoin does circulate - it's has precisely no underlying value. It's completely hypothetical.
And what Bitcoin shills fail to grasp is that deflationary is a bug, not a feature. Being deflationary limits the maximum size of the economy that can be built on it. Being deflationary encourages people to buy in and hold with the intent of recouping that investment at a higher price. (This removes currency from ci
Who Trusts Cryptocurrency Evangelists? (Score:4, Insightful)
When cryptocurrency ultimately gains traction, it'll be because some major institution or government decides to implement it on scale. The world is never going to trust their money to the good folks who brought us Magic The Gathering The Online Currency Exchange, Dogecoin, and "oh, that's bad--well let's just try to get everyone to agree to fork the entire danged currency." They just won't. There's a fundamental, irreparable lack of gravity, responsibility, and accountability in the cryptocurrency world today.
People on the outside see cryptocurrency as one part hobby, one part religion, one part social experiment, one part speculation, and one part black market. Frankly, they're right--and they're right not to touch it with a ten-foot pole.
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An elemnt of it maybe (Score:3, Informative)
Firstly Bitcoin is NOT anonymous and all payments CAN be tracked. The tools to do so are not terribly accessible and when they are then they are not sophisticated enough.
The WizTec team have found the Mt Gox stolen funds and that has lead to Alexander Vinnik's arrest. So No, it is not anonymous.
Gold and BTC has some commonalities. There is no particular reason to buy gold beyond a store of value. That in itself is a utility.
Yes, gold is used in other application but those are not the main reason for its price. There is a limited availability, supply rate and a finite amount of resources. That is very similar to BTC. BTC has an advantage because it's so much easier to transfer. Try moving 100kg of gold between borders as a method of payment...
As BTC demand grows because of its utility to store and transfervalue easily without a centralised authority to control flow so will its usefulness grow. More tools and methods to handle BTC will reach every day people.
BTC IS A BUBBLE. There is no doubt it is a bubble. Stocks are a bubble, bonds, the housing market and in deed the economy is a bubble too. Should we simply not invest in anything because its a bubble?
The greater fool is a classic example of the Tulip bubble mania and the psychology behind it. This does not fully apply to BTC because BTC has a utility that utility gives intrinsic value. There may be much better ways to do the same exact thing that BTC does today, indeed from a technological perspective there are except they are not as well know and are not as widely endorsed.
History is riddled with superior failed products. So BTC has the advantage, has an amazing Dev team. They are in the lead in multiple fronts and recent shakedowns with BCH and SegwitX2 etc are passed.
We know BTC is resilient, we know large financial bodies cannot crash it and we know its growing in adoption.
I recommend that each person evaluate and do their own research as to the utility of Bitcoin. You may find that buying $1000 worth of it today can make for a very nice retirement bonus.
It is unclear which currency or token will come to dominate but we all know the blockchain and by extension distributed ledgers will replace fiat money.
One parting comparison to tulips. In the tulip mania you had to buy 1 whole tulip at outrageous price without any utility. You do not have to buy a whole Bitcoin. You can buy fractions. If buying a fraction of something to sell at a greater cost, like stocks, houses etc, is only for fools then investors anywhere are fools.
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"There is no particular reason to buy gold beyond a store of value."
Spoken like someone that doesn't work in the lapidary industry. Meanwhile, I'll continue my solder work on this $100 22k hand-hammered chunk of gold shank, put in a nice little 2 carat imperial-grade fire agate, and sell it for about $1,500 in a week or two.
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Exactly. Practically no use for it. It's a utility in some boards perhaps.
You can coat a phone in gold and sell it for $20k too. Still just a phone. If it came with 2 BTC in a "cold wallet" it too would sell for as much in a week or two.
What about pearls? Do they have value? - they didn't until they were MARKETED next to expensive social status items.
Social status items give a status "utility" but it's mostly a fashion. It has no true utility. BTC does.
In some way your work and BTC are very vulnerab
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"Exactly. Practically no use for it. It's a utility in some boards perhaps."
Or as a dental agent, or as a binding agent for vaccines or antibiotics or other medications, used in makeup (so you can get laid and reproduce) and much more than your narrow viewpoint demonstrates.
"What about pearls? Do they have value? - they didn't until they were MARKETED next to expensive social status items. "
Wow your lapidary history knowledge is highly lacking. The pearl trade was quite alive and well for a very, VERY long
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The problem I see is where all the bitcoins are currently - as I can tell by research, China has been mining them for years, and their computational capacity sure outweighs the solar-powered PC in some guy's backyard. This MUST preclude the US government introducing any federal acceptance of bitcoins as legal tender, simply because the US
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South sea bubble (Score:3)
The very same characteristics are displayed by bitcoin. The most important one is increasing artificial scarcity fuelled by late comers and secondly there is no intrinsic value.
Blockchain has a future, just like the concept of joint stock companies survived the Southsea bubble.
http://www.historic-uk.com/His... [historic-uk.com]
Correction: Not anonymous (Score:3, Interesting)
Not sure why people think Bitcoin is anonymous, but the blockchain is necessarily completely public and it's not that hard connecting transactions with real people and organizations.
Easiest bubble signal - when noobs give advice (Score:3)
Same can be said of your mattress (Score:2)
Psychology of Investing (Score:2)
Its a well known phenomena that investors will often buy in high and sell low. When prices are high people feel they need to get in on the action so they don't miss out.
The value of bitcoin is a medium of exchange (Score:2)
Just like cash, but you can ship it between continents in less than a second. If this use of bitcoin rises as more people try out cryptocurrency, exchange rate against dollar will also rise. It's true that pure speculators holding lots of bitcoin passively can inflate the value further, just like with any currency. Also, bitcoin could concievably fade to obscurity because another cryptocurrency wins people over. But we can expect cryptocurrencies as a whole to appreciate as they gain adoption in the coming
The "value" of Bitcoins (Score:5, Interesting)
It's actually pretty easy when you ponder for a moment.
We're currently in a situation not unlike that of the late 1920s. There is an enormous amount of money pooled on the investment side that is sorely lacking anything to invest in, pretty much for the same reasons: WAY more supply than demand. With a lack of demand, there is nothing "normal" you can sensibly invest your money in, it is simply not very lucrative to open a business or to finance one if said business cannot make any business for a lack of demand.
Investors back then simply parked their money in shares which drove the price for shares up. That in turn caused the middle class to turn their head. Their motivation to invest was a vastly different one. They were usually not the ones to invest in shares, their form of wealth accumulation was traditionally more one of savings and maybe bonds, but with those pretty much being destroyed by a low interest policy (and back then also the fallout with war bonds that suddenly turned out to be worthless and thus destroying faith in that form of investment), they were now looking for an alternative too, and found one in shares that looked like it wasn't that risky because, hey, they keep rising and rising! And at worst, I'll lose what I put in, and I don't get any money for savings anyway.
This is basically where bitcoins are now. My hope now is that the third act isn't repeated. Because back then people thought "Hey. Interest rates are at an all time low, share revenue is between five and ten times the loan interest, the more I take out, the higher my profit!"
We know the rest.
Comic book collectible bubble all over again. (Score:2)
And once people realize this (ACTUALLY realize it, not the soft acknowledgement "but I can still make money right now"), it's going to course-correct SO hard.
You left out the biggest attraction (Score:2)
And the fourth: veto-proof reliability. IMHO that totally overwhelms the relatively weak reasons listed above.
If you sell a product or service over the Internet, you need some way for people to pay you. Every single one of those, except cryptocurrencies, are unreliable, because it requires a third pa
I've been predicting bubble popping for many years (Score:2)
Yes, but.. (Score:2)
Why is Slashdot posting opinion as fact? (Score:3)
More people will trade in Bitcoin and that means more demand, and thus the price should go up. But what is the appeal of Bitcoin? There are really three strands; the limited nature of supply; fears about the long-term value of fiat currencies in an era of quantitative easing; and the appeal of anonymity.
These are NOT factual statements; Bitcoin could have other appeals to people than acknowledge, AND this might be in error, and yet Slashdot is writing as if these are established facts, rather than stating what person's opinion this is. As a matter of fact, the "appeal of anonymity" might be even more bogus, since Bitcoin transactions are recorded and public forever.
These three factors explain why there is some demand for Bitcoin but not the recent surge. The supply details have if anything deteriorated
Because the author doesn't even bring in significant happenings and events related to the technology.
It's like "find reason to reject X other things I constructed, therefore this other theory I have must be true"
People are buying Bitcoin because they expect other people to buy it from them at a higher price; the definition of the greater fool theory.
Well, that might be true for some or not, maybe the expect to transact in it, and for it to gain in value as they transact in BTC.
"Bubble"...."A much more plausible reason" (Score:2)
What an obvious hit piece.
A much more plausible reason for the demand for Bitcoin is that the price is going up rapidly
Plausible WHY?
It's a brand new thing maybe there are brand new forces at work here....there is just zero reasoning in this article. "Bubble....speculation" repeated again and again.
This is just the establishment shitting its pants and trying to smear some on Bitcoin.
anonymity is good....for criminals
This is literally what it says.
"The only people who want to use Bitcoin and/or cash are criminals"
Yes, everyone who doesn't want to be a slave is a "criminal".
And as They try to codify this conception through their boug
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Monero, on the other hand...
Re:Author is an idiot (Score:5, Insightful)
The appeal of Bitcoin is that it is decentralised global money system that cannot be controlled or shut down by governments. The "three strands" are just a bonus. And no, Bitcoin is not anonymous, please stop repeating false claims.
It will continue to be a speculative investment until governments allow you to pay taxes with Bitcoin. Part of the reason the income tax came about at the same time as the Federal Reserve system in the US is that it forces people to use the new currency. You need dollars because you need to pay your taxes. It's the same reason the US fights so hard to keep oil traded in dollars. It props up and makes essential the currency.
Even now we use dollars to judge the value of Bitcoin. Perhaps some day we will judge the value based on how many you need to buy a car (for example). But for the time being and foreseeable future, Bitcoin is only worth what it can be traded for in dollars or another currency controlled by governments.
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Re: Author is an idiot (Score:2)
Gold is inarguably a currency, and yet the same volatility concerns appy to gold. I may hold off on a purchase while it's low to realize some valuable gains in USD denomination. I may splurge spend when it's high. The primary thing differentiating BTC from gold is that BTC is still rising to its fundamental value of exchange. There are network effects and positive feedback loops. But until BTC actually begins to drop in price or stabilize over a period of more than a year or two, it's silly to claim it does
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Gold is inarguably a currency...
Is gold a currency? People don't carry gold around to buy goods & services. It *can* be traded for goods, but I think that must be rare. It's usually converted into a currency to provide its purchasing power.
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The appeal of Bitcoin is that it is decentralised global money system that cannot be controlled or shut down by governments. /p>
Can you tell me what the trigger was for most of the significant downturns of the last few years? I'll remind you if you didn't know - the Chinese Government closing down Bitcoin exchanges. It can absolutely be shut down by a government in a country merely by making it impossible to convert Bitcoin into local currency.
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Can you tell me what the trigger was for most of the significant downturns of the last few years? I'll remind you if you didn't know - the Chinese Government closing down Bitcoin exchanges.
Interesting. Can you give a source for that? I'd be curious to see it.
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Of course bit coin can be controlled by governments, if they choose, they can simply make it illegal, and throw you in jail or kill you if you use it.
The can also make there own crypto currency in which they can print money and make it legal tender.
I you think it is free from from potential government control you are mistaken.
Re:Incomplete analysis (Score:4, Insightful)
Eh... The usage of BC in areas with hyperinflation is not proof that it's detached from fiat systems because it's not. Areas with hyperinflation traditionally switch to using currencies other than their own one, meaning traditionally the dollar and other major currencies. In this case some have chosen to use BC, but most of the black market trade is still conducted using other major fiat currencies because they're more easily available.
You still need fiat currencies to purchase bitcoins. Without the exchanges (which can be regulated quite easily) bitcoin would be useless as without a convenient way of transferring back and forth between fiat-bitcoin-fiat the utility of BC (and hence, its value) will plummet.
What? Compared to regular debit/credit cards that are pretty much universally accepted and cash BC is terrible in terms of simplicity of use.
There's a problem with this incentive though: the more time passes, the more complicated and difficult the mining becomes which makes it increasingly energy-intensive and hence costly. For the mining to be profitable the price of the coin must keep going up to match the increasing difficulty of calculation, which means should the value of BC drop drastically in the future due to any number of reasons (competitors, increasing regulation etc.) the whole mining infrastructure may suddenly become massively unprofitable and collapse.
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One surefire indicator of a bubble in Investment X is when, after the price of X shoots up and everyone is recommending it, you start to see a proliferation of downmarket imitations of X. Buy X1 or X2, the reasoning goes, and you're in on that ground floor you missed in X.
Even if every imitation of X is just as solid an investment as X itself, you are effectively multiplying the supply of X with each new version. In Bitcoin, the reason it went up in the first place was limited money supply. Unwittingly, you
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Thing to remember about technology: It is always a moving target; something better always comes along; and the first to do it is almost never the one that becomes standard.
IMHO the problem with bitcoin is that it is way too dependent upon the underlying implementation. A lasting digital coin, which hasn't been made yet, will be more like a document format that can be supported by multiple underlying implementations. It also won't suffer from the increasing scarcity problem.
Bitcoin keeps surging because it i
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It also won't suffer from the increasing scarcity problem.
There is no "increasing scarcity problem."
Bitcoin keeps surging because it is hard to create more by design. It's like having one pie and as people come to the table you have to keep dividing it into smaller pieces. A true money does not have this limitation, as people work they create more pieces of pie, using the bitcoin philosophy they just work to divide the existing pie.
The closer you get to "true money" (i.e. a good valued solely for its marketability rather than direct use) the less important the units become. The "pie" is not the quantity of bitcoins, which is fixed, but rather their purchasing power. As more individuals "come to the table", bringing goods to trade, this pie automatically grows. Supply and demand creates a dynamic balance between the purchasing power of all the bitcoins in circulation and the total value of all
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Any fiat currency is backed mostly by the good faith people have in its value. You get goods for your USD because the person selling you those goods has faith that he in turn can use those USD to buy other goods. That's pretty much what gives money its value in everyday life.
That there is an economy behind it strengthens this faith and gives it support. But in the end, what matters is that I think the money I take for my goods is good enough to pay for my needs. Or I'll simply not take it, no matter how big
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You mean like, say, trojans that encrypt your data and only accept bitcoins for the key to decrypt it?
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Old joke:
I have 100 bucks, but is that money save with your bank? What if you go bankrupt?
Then our parent company will step in.
And what if they go bankrupt?
Then the national bank will step in.
And if they go bankrupt?
Then the government collapses!
Ok. That's worth 100 bucks.