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Bitcoin Businesses The Almighty Buck

The Case that Bitcoin Is a Bubble (economist.com) 264

An anonymous reader shares an excerpt from the Economist: It seems that every day, Bitcoin seems to hit a new high. But the reported price can move up and down by $1,000 or so within a few hours. This might have made it a great investment for those who got in at the right price and are nimble enough to get out in time. But it doesn't make it a useful means of exchange (Editor's note: the link could be paywalled; alternative source). When the price is rising fast, those who use bitcoin will be reluctant to part with it; when the price falls, those who sell goods will be reluctant to accept it.
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The Case that Bitcoin Is a Bubble

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  • by SlaveToTheGrind ( 546262 ) on Monday December 11, 2017 @12:33PM (#55717087)

    I found this part of TFA a bit more illuminating than the summary:

    The arrival of bitcoin futures on the CBOE and the CME might have been expected to bring maturity to the market, and to establish a reliable price. But the FT reports that some of the biggest banks including JP Morgan and Citigroup are unwilling to act as market-makers. That is not too surprising. Any market-maker has to hedge its own positions and that looks very hard when the underlying market has such wild swings.

    • by gweihir ( 88907 )

      And that means no stability and basically anything can trigger the inevitable crash, just as before. The hope was that the big players that actually have enough financial clout to ensure stability would do so. That seems to have failed, likely because the big players actually understand what is going on. Might be because they have some experience with bubbles.

  • by Excelcia ( 906188 ) <slashdot@excelcia.ca> on Monday December 11, 2017 @12:35PM (#55717105) Homepage Journal

    Bitcoin, with the limitation is has on the final number which can be issued, has no real future. Governments are reluctant to legislate it right now for several reasons. One reason is because of the lobby of exchanges who are currently making a killing off it. The other is that legislators, as stiff and out of touch as they may seem on the outside, are quite well aware of the ability of this to go underground and they don't want that. However, once bitcoin's ability to increase is exhausted, it has no real future. Legislators will have no choice but to step in and either modify it, or ban it.

    To see this, look at the best case scenario for bitcoin. Let's say that it is 100% successful and becomes the de facto world currency. Can you really have a world currency where a few individuals control a set percentage of the world wealth? Owning even one bitcoin in that scenario means you own one 21 millionth of the entire wealth of the world. Now think of those individuals and institutions that own chunks of this.

    No, bitcoin cannot continue without an extension. The split that was going to happen was averted when greed got the better of common sense of those who were going to expand it. They think if they can just hold on, if they can just get it accepted by enough people, that they will have a shot at becoming fabulously nouveau riche - as in world-class monetary controlling rich. Not going to happen. The existing money structure will kill it from behind the scenes before this happens. You'll see a sudden spate of exchange breaches financial manipulations (or both) that make it volatile and end up tanking the value, then legislators will step in to protect the market from the failed experiment.

    • by Baron_Yam ( 643147 ) on Monday December 11, 2017 @12:51PM (#55717263)

      >Bitcoin, with the limitation is has on the final number which can be issued

      Also the incredible resource wastage, no way to adjust it to affect the economy, lack of mechanisms for consumer protection, impossibility to use securely in any practical way, the transaction rate limit, the transaction time problem, the transaction cost issue, the storage needs, and bandwidth requirements.

      But if you can get past all that, it's ALMOST as good as a debit card.

  • It doesn't even need to be argued; if you're not willfully blinded by greed or some bent philosophy, it's obvious.

    And I'm kind of happy regulators aren't doing much about it. There are people who know it's gambling and I don't care about them. So long as Bitcoin isn't big enough to harm the economy in general, the bag holders can suffer for their stupidity (it's not like they haven't been repeatedly warned).

    On the other hand, I'm not particularly keen on letting the scammers 'get away with it'. The peopl

    • Re:The CASE? (Score:5, Interesting)

      by Mashiki ( 184564 ) <mashiki@gmail.cBALDWINom minus author> on Monday December 11, 2017 @12:57PM (#55717325) Homepage

      You're right it doesn't need to be, because everything like this has a bubble of some kind. The real question is just what will the ripple be when this bubble pops. How many people have say mortgaged off equity in their house to try riding the bubble? You can bet your ass that people have. How many companies have sunk short-term possible high-loss futures into this as well?

      30 years ago people were selling equity in their homes at high interest rates to try cashing in on the condo bubble happening in major cities around the world. Believing that they could "sell out" and still get a head. Now just think what happens if you have a several thousand people in a major city who've done the same with the stupidly low interest rates we have and were already say $50-100/mo difference from going under, but believed they saw this as a quick way to cash out. And directly lied on the line of credit for this. People did the same thing with NORTEL stocks.

      Not really gonna know just how much of a mess this is going to be until that bubble pops, but as a warning to anyone who knows someone who's done something stupid like buy into this believing that "it can only go up" when they've lost all that money, they'll probably become suicidal.

      • > they'll probably become suicidal.

        In which case I feel for their family, but I have an amazing lack of sympathy for them.

        "Ignore the world telling me this is a bad idea, I could get rich quick. If it fails, instead of taking responsibility I just kill myself and leave my dependents to suffer for my stupidity".

        I really don't miss people like that when they die.

      • by reanjr ( 588767 )

        I don't think anything like a systemic critical mass of people have been buying BTC on leverage. People buy BTC with credit cards, sure, but that's just because that's how people buy everything. The rumblings of a leveraged BTC collapse are probably specious. Every step of the way, everyone and everything is warning you that BTC prices can crash at any moment. Not too many people have the balls to risk their house on something like that.

        30 years ago, people thought of real estate and telecoms as a safe

  • by xxxJonBoyxxx ( 565205 ) on Monday December 11, 2017 @12:47PM (#55717231)
    Please give us one more BitCoin story today. I want the hat trick.
  • Full disclosure: I dont invest in btc, but have seen some friends get in on the action and make some safe cash by exitting precautiously. I don't have any regrets not investing myself, as I don't have that much cash to gamble, even now that I knew it raised so much from the moments I considered it. I always saw it as gambling my family's future in a feeling, and being in IT, I like more deterministic ways of spending my hard-earned savings.

    Opinion: I think cryptocurrency is being the victim of professional

  • by amorsen ( 7485 ) <benny+slashdot@amorsen.dk> on Monday December 11, 2017 @12:57PM (#55717333)

    The fundamental problem with BitCoin is not its volatility. The volatility will eventually go away if the underlying technology turns out to be sound.

    The fundamental problem with BitCoin is that the number of transactions it can handle is orders of magnitude below what is necessary for a reasonably liquid currency with a total value in the billions of dollars. As it is, BitCoin only works as long as most of that money either sits still or moves around in huge transactions of at least thousands of dollars at a time.

    It is entirely possible that the problems get solved. However, a quadrupling like BitCoin Cash has done is just nowhere near orders of magnitude improvement.

    • The world has $7 trillion worth of gold, most of it sitting quietly in vaults. Bitcoin could survive in a similar fashion.

    • The software algorithm is part of the tech, and the designers of bitcoin chose poorly for making a scalable system. The crash of bitcoin will make most people think the other better designed systems are too risky. Bitcoin will ruin the concept of "cryptocurrency" even though it never attained the status of a real currency.

    • >> The fundamental problem with BitCoin is that the number of transactions it can handle is orders of magnitude below what is necessary for a reasonably liquid currency with a total value in the billions of dollars.

      Parent is spot on. The root problems are that there aren't enough transactions in blocks and the blocks aren't frequent enough. The people that insist that Bitcoin should just be a settlement mechanism are stunting the most revolutionary technology in the last 20 years.

      I can't understand

  • The next time you're casting around for arguments against fixed-supply currencies, you can just reprint this line: "When the price is rising fast, those who use bitcoin will be reluctant to part with it; when the price falls, those who sell goods will be reluctant to accept it."

  • It's not a fiat currency. It's a matter of when it pops, not if.

    It is not backed by gold. It is not backed by the faith of a government (The US dollar is backed by the faith in the US government). This thing is backed by nothing. We don't even know who created it.

    It's going to tank and in splendid fashion. Just wait for the panic selling to start at some point.

    • At this point your either a crook or a complete idiot to even mine"do math calculations" at this point. The cost to get 1 cost more then its claimed value so we have been told.
    • The US dollar is backed by the faith in the US government

      This sentence has zero information content without proper definitions for the following terms:

      "backed"
      "faith"
      "US government"

      While you are working on that, please consider that once upon a time, the US dollar was "backed", in gold, by the "US government", and despite our "faith" that our notes could be redeemed for money (gold) at any time, that faith (and backing) was broken nearly 50 years ago.

  • by bjdevil66 ( 583941 ) on Monday December 11, 2017 @01:20PM (#55717583)

    Corollary: When everyone - usually including your neighbor or friend down the street, or your grandma - is trying to buy in and ride the wave, but they can't really explain how commodity X works or will make money, it's over. It's time to get out. You've missed the wave as an investor, and you're going to get burned joining too late.

    Bonus: If the "everyone" people wanting to buy commodity X can't even really explain how or why it will make money, it's going to get REALLY ugly.

    The following fit the pattern:

    Microsoft and other internet/tech stocks (2000)
    Housing (2007)
    Gold (2012)

    Bitcoin (2017) will likely be the next big entry to the list.

    • We are so far away from the shoeshine boy [fortune.com] stage that it isn't even funny. Also, bitcoin is an odd blend of tech-adoption, which follows an S-curve, and an investment, which does not. (Note that I don't consider bitcoin to be an investment and don't encourage it, I'm discussing a conceptual model used by "the masses" here.)

      Usage of bitcoin for commerce is growing by leaps and bounds, still very early in the S-curve. In other words, more people are buying bitcoin to use as money than ever before. I don't

      • I don't mean this as any kind of attack on this poster, but there are just too many red flags here. I mean, replace "Bitcoin" with whatever you want below (tulips, gold, whatever).

        * _______ is "growing by leaps and bounds."
        * It's "still very early". (buy in now - you're not too late)
        * "more people are using ______ than ever before". (Bitcoin? Not in my neck of the woods yet. Nobody I know would even know what it is, let alone how to use it anywhere the average suburbanite would go.)
        * "I don't know how to

  • The funny thing with BitCoin is that you have technology specialists mostly talking about it, instead of economists or historians. Some history is helpful: https://www.youtube.com/watch?... [youtube.com]
  • We need a currency that can be used to buy goods, that is traceable, safe, global, and stable. Last couple months proved that Bitcoin failed miserably here. What are our options? Go back to gold? Bitgold anyone?
  • If Bitcoin manages to be successful and achieve widespread adoption, it will necessarily need to increase in value, due to it's scarcity.

    What we are seeing could be a bubble, but it could also be due to adoption. Volitility was very low for 2015 and 2016, and with the exception of a few short dips, has been fairly consistently up in 2017.

    If Bitcoin is successful, it will eventually find an equilibrium, and plateau, much like gold has.

    • >If Bitcoin manages to be successful and achieve widespread adoption, it will necessarily need to increase in value, due to it's scarcity.

      But here's the funny thing nobody seems to notice - Bitcoin is just a ledger, nothing about it really cares what 'a bitcoin' is. You divide by ten and move on. There's no real scarcity so long as you can move the decimal place.

  • I think the entire sentiment of "it's rising, so no one will spend" is overblown. I spend BTC most when it's rising towards what I expect to be a peak or crash. It's a cheap and easy way to take a bit of profit without bothering to move BTC onto an exchange. When it's stable, I'm more likely hodling for the future or completely divested.

  • Money is an umbrella term for things that have certain properties. An instance of money generally meets all or most of the desired properties. Other than that, the only sensible definition that I've ever seen is the circular definition that money is what people use as money. What gets used as money can be predicted, somewhat, by understanding the desirable properties.

    Bitcoin is an electronic system that attempts to implement as many of the properties of the abstract platonic concept of money as it practi

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