Bitcoin Forum

Been watching BTC on a long position and watching things daily since it was last at $8.  I was happy on Mar 9th when BTC hit $50 as it was a steady climb and monitoring Silk Road usage not unexpected.  Stocks are always overvalued on P/E and I figured BTC was a bit overvalued but, this is not a bad thing as an investment.  As adoption and usage increases the price should continue to rise, I was a happy bull.

I saw BTC flat line around $50 for about 9 days until Mar. 17th and thought good things are levelling off and making sense, perfect!  If you go to Google news and search for Cyprus you'll see this is the day (Mar 17th) the Crisis was announced to the world.  In one week price jumped to $75.  Then two weeks later the price is over $100.  Today it hit $148 on MtGox and is at $118 as I write this.  I sold a chunk at $103 yesterday and this crazy fluctuation today means for me time to move another chunk based on past investment experience.  I believe the price over $50 is people who had money in Cyprus trying to get it out as fast as possible.  Also there is quite a bit of evidence that Spain is moving money to BTC.

http://www.wired.co.uk/news/archive/2013-03/20/bitcoin-spain-currency-run

So with all this evidence of speculation, I keep digging for evidence to back up the bulls.  Claims of $1000 or $10,000 and I'm can not find fundamentals to support this kind of rise.  In fact this huge surge based on so little and now crazy fluctuations looks identical to every speculation run I've ever seen (I prefer the term "Ramp-up then Cliff" to bubble).  Also the bulls accuse everyone of trying to discuss evidence of speculation as trying to drive prices down to buy more.  This reminds me of how a politician doing something will start yelling his opponents are doing the same thing to divert attention from their own actions.  Like how a cheater in a relationship accuses his/her partner of cheating.

So bulls, I ask, where are the fundamentals to support the above $50 price point for BTC?  Honestly I really would love evidence to support the price so I don't sell any more and can cash out $1000 or $1000000.  Start pointing me in the right direction, maybe I missed those informative posts at some point.  Oh and I know about BTC ATMs and Western Union but, those are maybes at this point, no decisions yet made, which is called speculation.

The total amount of fiat currency in circulation is some on the order of 10 trillion dollars (this changes over time so really one order of magnitude is all the accuracy needed for this estimation). Because there is a limit on how many bitcoins there will ever be of ~20 million, if bitcoin one day replaces fiat and has a similar market cap, each bitcoin would be valued at ~$500,000. It isn't really expected for bitcoin to become an entirely universal currency anytime soon, numbers like $10,000 or $100,000 show up.

Before Fiat currency, money was based on Gold.  I believe that change happened in 1973 and dollars didn't rise at this rate before then.  Gold is a limited resource like BTC.  Why is BTC expected to rise soon to $1000 or $10000 when limit currencies have not behaved that way in the past?  A good article I found today on why these speculation based rises actually will more likely hurt Bitcoin as viable currency than help.  Bitcoin is going from currency to commodity it seems at the moment.  I'll be happier if it goes back to being more of a currency again.

http://blogs.reuters.com/felix-salmon/2013/04/03/why-bitcoins-rise-is-nothing-to-celebrate/

Thanks for that link wuji, interesting read

More people finding out that Bitcoin can protect their wealth against hyper-inflation and outright deposit theft is all the reason we need to support prices many orders of magnitude higher than now.

And more people are definitely finding that out - we've had mainstream press pieces flooding in over the last few weeks.

Other recent fun things:
Bitcoin ATM's being mass produced and ordered for 30 countries.
Malta-based Bitcoin hedge fund allowing big money in through a means non-tech people are comfortable with.
Bitpay doing 5 million in transactions in March.
BitcoinStore.com making enough sales to keep their contract for another quarter.
Expensify integrating Bitcoin.
Western Union announcing plans to integrate Bitcoin.
Thousands of new small businesses adding Bitcoin support.
Real estate companies accepting Bitcoin.

And most fun: Every family member and friend I've talked to about Bitcoin calling me in the last week. It only took a 5000% rise in value.  :-\

Our little "experiment" is snowballing in a huge way, and people insisting it's "just a bubble" have no clue what's going on.

I think today's jump is a bit much, but overall

- Bitcoin inflation cut from 25% to 12.5% in late November.
- Internet celebrity and million Kim Dot Com unequivocally endorses bitcoin.
- Gambling world on fire with bitcoin news from Satoshi Dice making $500k/month to large internet poker sites accepting bitcoin for funding/cashing out to even opening bitcoin tables.
- Spanish hedge fund announces they have $3m in bitcoin holdings and are seeking the ability to sell to Americans.
- FinCEN releases a statement legitimizing distributed virtual currencies.
- Euro troubles indicating hard times for the fiat currency in the future.
- Bitpay announces $5m in sales in one month. Bitcoinstore shows $500k for their first quarter 2/3rds of which they were in beta. Basically, there is strong evidence that you really can get sales and that the white market is eclipsing the black market.

Does it add up to a $1.5b market cap? Maybe not, but markets tend to be forward looking (meaning the price rises first and then the support comes after).

"Bitcoin can protect their wealth against hyper-inflation"

I myself have long been concerned about eventual hyper-inflation however, that is not occurring with USD at the moment.  Nor do I know of any indicators that suggest it will happen in the near future.  The past two to three weeks I'd describe BTC as the currency hyper inflating.  In fact at this point I consider it an over price commodity and my link above will explains it in great detail if you go to the full article.

- I already included some of your fun things like Western Union and ATMs which is being considered but hasn't happened (Speculation).
- Many in mainstream think of Kim Dot Com as a criminal.  His greed and actions did cause him a lot of problems.  While he has had success his business methods differ from mine.  I'm more curious about those who see no risk in BTC.  Using a huge risk taker like him as an endorsement makes me think you must see the risk.

So far none of the points show me that BTC is going up based on its value as a currency.  Many new services may accept it but the volume before this run up does not indicate to me that this run up is not (above $50USD/BTC) speculation.  I counter the claim that those insisting this is a bubble don't know what is going on.  In return I say those claiming this is not a bubble do not understand that massive speculation always ends with disaster.  I'm sure I don't need to rehash all of the past run ups based on speculation we saw die.  Every since the 1990s I've made money shorting speculators.  It is a very simple method that makes a lot of money.

The adage buy low sell high has never once failed me.  Yet over and over again I watch the herd buying high and then selling low.

USD is experiencing a dramatically increased rate of inflation. Google Tomato Soup Index.

Bitcoin ATM is absolutely happening. Not speculation. Keep up.

The wonderful thing about Bitcoin is that if you're too dense to understand the problems with your statements, you are the one that suffers. It's another reason Bitcoin is going to succeed. People who are in the right finally get rewarded.

Have fun sticking to the "it's a bubble" nonsense, I've been hearing it since the price went from $2 to $3. You guys don't understand what Bitcoin is.

Sorry to get off topic, I'd just like to congratulate you on an epic choice for a sig... :)

Food is not the only thing used to measure inflation (in fact I think it is factored out as unreliable) as the price of food is determine by an enormous number of variables, thanks globalization.  Even tomato soup prices over the last 50 years which I just checked out are no sign of hyper inflation.  Make your own real graph and place it on top of a BTC chart and tell me which one is inflating at a faster rate.   ;D

i do not have any fundamentals to support a higher value.

but looking into the future Bitcoin has IMO endless potential!

please watch this video:

http://youtu.be/mD4L7xDNCmA

Mike Hearn discusses "The future of Bitcoin: new applications and rebuilding the banking system"
at the London Bitcoin Conference 2012.

i have not bought any Bitcoin myself  ???

"Bitcoin ATM is absolutely happening. Not speculation. Keep up."

Are you manufacturing them or is this something you read?  Can you post a link to show proof or is this just what the Jeff Berwick said?

Since I'm not keeping up perhaps you can enlighten me on how the regulations and licensing, government cooperation, functionality, exchange rates, social demand, fees, etc. are going to be handled?  At what date can I make a withdraw?

Strikegold, Yes I believe in the future of BTC.  I started buying in at $8 and stopped at $14.  I'm very happy and have no regrets dumping 20% at $103.  I'm only trying to find more info on short term reasons for value increase vs. speculation.

Since hyper-inflation and Fiat were brought up, here is another article which helps explain why I don't see any near term USD hyper-inflation coming:

http://www.businessinsider.com/treasuries-are-not-in-a-bubble-2013-4

Probably just dropping value of fiat currencies :D  USD among them going to free fall soon.

Treasuries are not in a bubble (tons being printed every day) but BTC is (strictly controlled quantity by math). Yea, that makes sense.

Great link!

Lots of places have already stopped accepting USD. 

You may want to read this (https://bitcointalk.org/index.php?topic=93839.msg1728497#msg1728497) and consider this (http://www.runtobitcoin.com).

Another landscape changing fundamental are the FinCEN guidelines. This basically gives companies the green light to accept bitcoins and VCs the green light to innovate with Bitcoin so long as they follow particular rules. The dispelling of the pall of potential legal liabilities should not be underestimated.

Thus, Bitcoin is in a melt-up right now and the extremely illiquid market does not help the case of efficient price discovery. The bottom line is that tens or hundreds of millions of dollars want to come into this space and it is not large enough for that at current prices.

Remember, there are only two variables in the price function: transactional and speculative demand. Transactional demand is price agnostic and since prices are set at the margin this can go ballistic and likely is with all the free publicity Bitpay (March $5.2m versus previous monthly record of $700k) and Silk Road are receiving to stimulate the Bitcoin economy. Which leaves only speculative demand for determining the price. And Bitcoin holders can save them indefinitely. So the price melt-up could happen really fast.

So, who wants to be like the Litecoin trader with seller's remorse? One guy wrote a sad tale about how in January he bought 80,000 litecoins at $0.068 and sold them at $0.20. Litecoins are selling for about $5 today. So he took a 194% return, or $10,560, but missed out on a 7,250% return, or $394,560. and is feeling seller's remorse.

So likewise we could pretty easily see a similar melt-up in the Bitcoin price to $1,000 by the end of summer. Which VC is going to fire the first shot in the Mexican standoff?

I like the idea of indexes like this. But for people not trying to be alarmist, showing a logarithmic chart would work better.

This shows that the recent trend is higher than average, without resorting to hyperbole--just the facts:

https://i.imgur.com/uCj8lJC.png

You don't by chance have the R2 of that line? /nerd

My fundamental analysis is not super technical at all, but it helps when I'm talking to people new to bitcoin understand the potential value:

I roughly estimate (google) the M2 money supply of the top 4 economies in the world (US, EU, China, Japan) to be somewhere between $20-30 Trillion dollars. I know that's a huge variable with about a hundred asterisks that should be tacked on the end, but you get the idea.

Next I assume that 1% of those nation's population decide to adopt bitcoin for 1% of their monetary transactions, for one of the many benefits that bitcoin offers. (Most of these are well known by now, so I won't include that here).

If we take the low end of my M2 estimate (and I'm leaving out most of the world here), $20T * 0.01 * 0.01, we get; $2,000,000,000 (Two Billion dollars). This would be the bitcoin market cap in my theoretical example.

So, we can take that number, and divide by the number of bitcoins in existence (I'll use 11 million for simplicity) and you get a rough valuation for a fair bitcoin price; ($181.82).

Amazingly enough, that is pretty close to where we are at! Now to facilitate rising prices, you really only need to consider "adoption" becoming more than 1%, or those adopters growing confident enough to use bitcoin for more than 1% of their transactions. For me, that's not hard to imagine. Bitcoin adoption just in the people that I know is up probably 300% this year over last year. Of course you might have a different experience, adjust values accordingly.

Sunnakar,

There is still a lot of faith involved with Bitcoin as with so many things.  The fears most large market investors I talk to are the unknowns of trusting sites like MtGOX, initially mined coins, the feds to take action as BTC sky rockets, and the possibility of someone to alter the code to increase the number of coins.  Not to mention other ways the code could be altered.  I still believe the rush up from $50 is Cyprus and Spain moving money to BTC which I suspect is a temporary fear based move until they find something else.  It is too much of a coincidence this started on March 17th for it to be US investors.  Past run ups I've noticed always seem to happen after Bitcoin is in the news like now.

As for FinCEN I don't think they have fully green lighted anything to be honest.  FinCEN's role in government is to try to prevent money laundering.  The Federal Reserve, the FDIC, and the Secret Service are who I'm more concerned with as far as regulation of Bitcoins go.  Also each state has their own Money Exchange laws to contend with as well before mainstream implementation.  I'm quickly responding here so, I'll try to come back later to check for follow ups and offer more in depth thoughts.

As for your link to gold I did an analysis when gold was approaching its peak and determined a bubble.  My prediction was that gold should be at around $1200 and it seems headed that direction.

I honestly feel this is where bitcoin is going to level out at in the next 6 months(hard to believe but possible) to 2 years(much more plausible). It is slowly gaining a measure of value and that is all gold is..just a belief that it will be worth tommorrow what it is today. Once businesses mainstream the use of bitcoin for transactions we will see parity between bitcoin and gold prices.

In the long term bitcoin will continue to increase in value while gold will fall to next to nothing. I'm basing this assumption that eventually mankind will eventually travel to nearby planets and asteroids for resources. At that point any metal based currency will become pointless. This is not tinfoil hat fantasy's...just as digital currency's are not. These things will happen in the next 10-50 years.

Also, miners will sell some part of newly created coins to cover their running costs.   This is your third variable.  This one grows as the price of bitcoins grows.

yes bitcoin needs a permanent Energy inflow to keep it alive
who's going to pay this :D

Sorry, no. I had excel put in a trendline, but I don't know how it does it.

At least with older version of excel, you could go in to table properties and add things like equation and r^2

"I honestly feel this is where bitcoin is going to level out at in the next 6 months".

Well I agree Bitcoins could easily be worth $1200 a piece someday, I think 6 months is being a bit exuberant.  Now if the government entities I spoke of before calm down investor concerns I might change my mind.  Once I see real life BTC ATMs working and getting through all the real world issues I mentioned early in this thread I'd change my mind.  If Western Union really accepts them after a year no gov. entity interference I'd change my mind.

I love Bitcoin and want it to succeed and go up.  I didn't sell off today but the increased volatility today does have me watching charts by the minute now and I'm ready to dump anywhere near $100.  Those of us in technology and watching BTC for a few years feel fairly safe at this point.  The problem though is many investors can't grasp the basic FAQs on BTC that I have talked to and the ones that do have major concerns.  

As much as I think gold is not that useful and about as useful as paper (very little gets used industrially), it does have a track record of thousands of years as a limited currency.  I seriously am amazed by those confident that one BTC could equal an ounce of gold in the short term.  I just don't see widespread adoption or trust happening and I've been investing for decades and discussing this with everyone I know.  Keep in mind there is only enough Gold mined so far to fill 3.42 olympic swimming pools (165k metric tons).  Now imagine how many people have jewelry, coins and own gold in underground vaults in NYC.  That is a very limited commodity with an extremely long track record, maybe the longest of any commodity/currency.

We live in such a black and white world I feel I need to recap my thoughts for those not taking time to read the whole thread.

- I'm a long term bull on BTC but getting more bearish as price goes up.
- I'm not a bull on gold and feel it is overvalued for the same reason as the BTC run-up.  Fear and a place to put Fiat currency for now.
- I'm only searching for tangible reasons why BTC should continue to rise to feel safer about my current BTC holding.  Like anyone else I don't want to sell off and lose.  But I also don't want to be that guy that holds on back down to $50 instead of selling high and buying back in at $50.

I just wanted to point out something extra on the tomato soup index which has had me laughing all day today.

In the US we used to grow all of our own food.  Now we get most of our tomatoes from Mexico as they are not a winter crop.  They have to be shipped on trucks with diesel fuel and go through inspections.  Of course as oil spikes up imported food does as well.

Florida produces a lot of tomatoes but, has had problems for the last five winter growing seasons due to hurricanes or freezes that seriously hurt domestic tomato supply.  This is some reasoning why that is a very silly indicator of inflation.  Florida growers are currently trying to curtail NAFTA policies and cut Mexico off which will cause that index to probably triple, while real inflation will remain at it's fairly low growth rate.

Outside of growing up on a farm mostly as a soybean and rice farmer I gathered the rest of this info from articles like this one:

http://www.freshplaza.com/news_detail.asp?id=105346

1 metric ton = 35273.9619 ounces    35273.9619*165000=5820203713.5 ounces of gold planet wide. Why....thats not enough for every person to have 1 ounce..and its only valued at $1550 per ounce. So once you look at it like that...with only 11 million units available presently and probably 70% of those in cold storage....whew. 3300000 units to play with...    I am thinking a great number of people are now struggling to get some and will continue to do so.

70lb hideabelts or a usb stick?  Its a no brainer.

Competition of Currencies and market penetration

/thread

It is late and I'm not up for crunching numbers tonight but, I just want to point out that the large holders of Gold are nations.  I'll have to do research to get a full total of all nations holdings again as I haven't research gold in over a year (it is not an interest of mine).  This is why gold is the high price it is, not because it is used like BTC as a currency.  Because there is faith in Gold nations use it to backup their economies.  Also again Gold prices are high because no one knows where to put money and many feel it is safer than most currency.  Sorry this is a sloppy answer and hopefully I can provide data tomorrow when I'm more awake.

The main point is Gold is insurance and fear and speculation drove the price to $1800 an oz.  I'm drawing a parallel to BTC and saying it is used currently as a place to store money based more on fear and speculation than as currency.  The huge difference is BTC has been around a few years where gold has millenniums of history.  In other words BTC seems far more susceptible to volatility like we saw today than Gold is.  Less units of a commodity is not really a good thing if it isn't proven long term and trusted worldwide by a majority of people.  Less units means it is easier to manipulate by the wealthy and more susceptible to volatility.

I hear you on the late and tired. :)  

The point I am trying to get at I suppose is that gold has been a great currency with a remarkable track record..yes. But, in todays world it is rapidly losing its value do to fact that its hard to transport and exchange for other fiat in large amounts. It's hard to get out of town quick with a few hundred pounds of the shit strapped to your back. Also..it will not be long before the markets are flooded due to space exploration and development.

http://www.wired.com/wiredscience/2012/04/planetary-resources-asteroid-mining/ (http://www.wired.com/wiredscience/2012/04/planetary-resources-asteroid-mining/)

Nearly 9,000 asteroids larger than 150 feet in diameter orbit near the Earth. Some could contain as much platinum as is mined in an entire year on Earth, making them potentially worth several billion dollars each. The right kinds of investment could reap huge rewards for those willing to take the risk.

http://qz.com/47232/the-crazy-economics-of-mining-asteroids-for-gold-and-platinum/ (http://qz.com/47232/the-crazy-economics-of-mining-asteroids-for-gold-and-platinum/)

Currencys as we knew them..sea shells, cattle , tulip's and gold are going the way of the dinosaurs. Digital currencys are the only thing that makes long term sense to me.

You would think with the openness of Bitcoin that there would be enough metrics to get a good idea for the market price based upon mining difficulty/cost of mining/daily Bitcoin transfers/MtGox daily volume.

There should tend to be some link to the price of mining. There is the auto corrector if the price goes too far beyond the price of mining that more people will start mining instead of buying on an exchange.

Though with the current ASIC delivery unknown, the price has sort of decoupled from the mining cost. Though you could certainly calculate the price compared to the cost of mining with GPUs to get a tidbit of information.

The amount of money coming into Bitcoin would be the main indicator of market value. Though that is hard to pin down. Daily volume of the blockchain and MtGox can give some indicators.

I so totally agree with you here.

Places like bitcoinstore scratch the surface of what the economy really needs.

How can BTC flourish as a currency when it is currently not being used as such? All speculative projects aside, what do we REALLY have to spend BTC on? When I say we, I refer to the public, not us coin-nerds.

I'm talking about important services and everyday tangible goods. These are what we lack at-the-moment. The general public is not spending money on VPN subscriptions and Bitcoin t-shirts.

zif33rs, I agree completely with your last post which is why I love BTC.  This is why I'm long on BTC but just not seeing the adoption rate yet and trying to find more concrete answers to the run up.  I re-read your post on Gold vs. BTC and noted you bolded my comment about "very limited currency".  I need to look at the ratio closer for supply vs. demand tomorrow for a real comparison.

Elwar, good points and we need more respected trading place to trade BTC soon and I really hope that happens.  We need other large legitimate MtGOX type exchanges based in the USA.  We also need to get more vendors to adopt BTC.  This will be a good litmus test for the government (agencies I referenced earlier) to see what kind of legislation they come up with.

ruggedman_dan, Sounds like we are on the same page.  If we want BTC to go up in value we need to focus on how to make BTC a viable currency and get more vendor adoption.

The Internet needs a currency. Bitcoin is the best solution.

Scarcity. Bitcoin is perhaps the scarcest global digital resource on the planet. Hence we can assign it value- because we know how scarce it is.

The one fundamental that's supporting Bitcoin's high price:

MtGox verification queue.

(This is also called demand.)

It is difficult to get at any reliable data, but when you guess how much of the media coverage is based on increasing bitcoin use and how much merely on increasing bitcoin price, the picture is not encouraging.

Take the Cyprus myth, for example. It implies that the Cypriots are buying bitcoin. Even a bitcoin ATM was reported to already be there or, in other messages, going to be there very soon.

Nothing of this is true. The Cypriots could not get at their money, so they could not buy bitcoins. Even if they could, they would not buy bitcoins; they would buy gold. No bitcoin ATM will be there any time soon.

Spaniards are allegedly buying bitcoins. This was said because some kid wrote in his blog that he saw more bitcoin-related apps being downloaded on iPhones in Spain. There was and is no evidence that the Spaniards actually bought significant amounts in bitcoin. It is all only the wildest speculation.

Namecheap.com, wordpress.com, Reddit now accept bitcoins, but the latter two only for some add-on service. But who is going to pay with bitcoins there? Very few. I did pay one bitcoin to namecheap.com just for fun, because I'm one of their customers. But it needlessly complicates my bookkeeping, so I will perhaps not do it again. The estimate is that very few bitcoins are actually moved into any of these services.

Some time over a year ago the actually running bitcoin services, mainly Silk Road and some others, were running fine with a bitcoin value of $3. If their transactions doubled or tripled, they would justify $6 or $9 per bitcoin. If you add some more optimism, you may even get into double digits. But I find it very hard to justify a bitcoin price above $20 at this time. And the current bubble will damage bitcoin's reputation once more. Take your pick.

The sad truth is that the media report on bitcoin because its price rises. People read this and buy bitcoin because its price rises, so it rises more. Then the media report more, and more people buy bitcoins because they want to get rich quick. This is how bubbles are made.

Yesterday the buying frenzy got absolutely crazy with the bitcoin price rising 20% in three hours. People bought bitcoins for up to $148 each. How insane is that? Did real-world bitcoin use suddenly rise by 20% in those few hours? And still many bitcoin holders have not sold. It seems to me that an incredibly large fraction of the bitcoin-holding community is hare-brained.

The up-side is that a hare-brained speculator soon loses his capital. The market automatically rids itself of stupidity. The problem arose only because new, completely inexperienced "speculators" streamed into the bitcoin market. Many of them are now, or will be soon, out of it again, but I expect the next, similar bubble again in two or three years. Too bad that it is impossible to predict at which price a bubble will burst.

Just because a commodity is not being actively traded for products or services does not make it a bubble, nor does it mean it will never be traded as such. People will pay fiat for btc, and theoretically btc should hold its value better than fiat die to limited suppy in the long term. Just that alone is enough to not only justify its current price, but to indicate that further price jumps are pending.

https://bitcointalk.org/index.php?topic=143973.0

In a very theoretical sense you are right, but a commodity that nobody really needs can fall to a price of zero at any time, if anything starts a sell-off panic.

If you have some basic need, however, the price cannot fall below the required value. In the case of bitcoin, if some people need some bitcoins for actual real-world trades, the total market valuation cannot fall below the total value of those needed bitcoins.

By the way, it is interesting to note that Satoshi may have been a genius also because he set a very limited maximum speed for bitcoin transactions, so there can be no "inflation" due to increasing speed of transactions.

A lot of Cyprioits did get there money out before the media even knew about the problem.

http://peoplestrustaustralia.blogspot.com/2013/04/list-released-with-132-names-who-pulled.html

Also Spain turned to Bitcoin as well following Cyprus's lead.

http://www.newstatesman.com/economics/2013/03/spain-turns-bitcoin-prompting-incoherent-discussion-today

Also the banks reopened and the public was able to withdraw money after it was announced they were not going to do the 6.75% on all accounts.

http://www.huffingtonpost.co.uk/2013/03/28/cyprus-bailout-banks-reopen_n_2970564.html

The guy behind BitcoinATM did say the first would go to Cyrpus.  However, I have yet to see a working prototype, not to mention answers to how to deal with world government regulations, exchange fees, and many other issues like local legislation.  This seems like a lot of groundwork that has not been laid.
http://www.businessinsider.com/cyprus-bitcoin-atm-guy-responds-2013-4
http://www.businessinsider.com/cyprus-bitcoin-atm-guy-responds-2013-4

I agree Bitcoin is either a prototype of or the currency of the Internet and the future.  The problem is normal people have spyware on the PCs and if they tried to use BTC would probably get robbed and discouraged and more bad press.  For those of us tech nerds who can secure our coins it is already useful.  Until my dad who taught me computers in the 80s can even figure out how to buy a bitcoin and feel safe I don't see a slow adoption rate outside the tech community.  Even many I know in the community have unanswered concerns I addressed early.  I've been using Magic the Gathering Online Trading card Exchange for long time and they make me nervous.  I always immediately get my USD to BTC or vice versa.  Everytime I use bitinstant I wonder just who is this person I'm sending this cash to, hope I can trust him.

TL/DR - I'm positive long term Bitcoin will become used everywhere.  I not positive we are at that point yet.

"Just because a commodity is not being actively traded for products or services does not make it a bubble, nor does it mean it will never be traded as such. People will pay fiat for btc, and theoretically btc should hold its value better than fiat die to limited suppy in the long term. Just that alone is enough to not only justify its current price, but to indicate that further price jumps are pending."

- If I search back I bet I can almost find this post word for word when I was telling gold bulls at $1700+ gold was a bubble.  No way man limited currency man it wont EVAH go down, impossible!




If a commodity is going up at a very fast rate (Exponentially higher than the past) based on speculation and/or fear (running from bad Fiat etc) it is not only a bubble the name for it actually is speculation bubble.


Definition of 'Speculative Bubble'
A spike in asset values within a particular industry, commodity, or asset class. A speculative bubble is usually caused by exaggerated expectations of future growth, price appreciation, or other events that could cause an increase in asset values. This drives trading volumes higher, and as more investors rally around the heightened expectation, buyers outnumber sellers, pushing prices beyond what an objective analysis of intrinsic value would suggest.

The bubble is not completed until prices fall back down to normalised levels; this usually involves a period of steep decline in price during which most investors panic and sell out of their investments.

May also be referred to as a "price bubble" or "market bubble".

Source - http://www.investopedia.com/terms/s/speculativebubble.asp

Those people buying APPL at $700 were pretty confident as well I bet.  Today it is at $428.  They have been around for decades, sell Billions in product, have an enormous amount of followers as if it were a religion.  Man I wish I had been buying up puts at the $700 range.  Tech bubbles are too hard to predict often though and makes options quite risky without some leverage.  Although I am thinking about now buying some S&P puts as I'm smelling a new bubble there.  :D

These sell-off panics are by very definition short-term. For the reasons stated in my previous quote Bitcoin is superior to currency even if they don't need to pay people with Bitcoins, as long as either (1) others need to pay people with bitcoins (2) they think in the future either they or others will need to pay people in bitcoins or (3) they merely believe that they will continue to be able to exchange Bitcoins for fiat.

What I'm trying to get at here is that just that third condition is enough to justify bitcoin's high price. Sure, MtGox going down suddenly (as it did yesterday, but honestly, who believed that it wouldn't come back?) can cause scares and since Bitcoin is so reliant on this third condition and has not yet diversified its value between all three Bitcoin's price will be affected, these scares will by definition become short-term as long as the exchangers DO come back.

So while Bitcoin won't reach its full potential or have a very stable price until condition (1) is satisfied, the lack of condition (1) being satisfied does not necessarily make Bitcoin some form of a bubble.

What about the value of the work already done? It would take millions of dollars worth of electricity to remake the blockchain and vast numbers of computers to crunch the numbers again. What is that worth?

Who says the current fundamentals have to support the current price?
I think it is obvious that the current price is based on the expectation that bitcoin will have a higher market cap and is going to be used extensively for payments -in the future-.
That is not at all the same as a bubble. It would be a bubble if those expectations never materialize and the price remains high.

If you wait for mass adoption to actually happen first, you are not going to profit. The profit comes from having the foresight that bitcoin is going to be great. The profit is the reward you get for having that insight and actually betting on it becoming true.

What we are currently seeing is just a lot more people getting that insight and betting their money on it. At some point, most people will have some bitcoins, however much they feel comfortable with , just like everyone now has an internet connection or a mobile phone, and then the price will level off. Probably we will see a few oscilations as the price stabilizes, as we see now on a smaller scale after every jump. Then, we are all set for large scale use. Everyone has some, the price is more or less stable, and the current objections currently often raised (hoarding, unstability, etc) have vanished .

I think you misunderstand how Bitcoin works.

There is really no value to the blockchain, it is a fundamental part of Bitcoin but it has no value on it's own.

If you set up Bitcoin2 tomorrow you would start with a fresh blockchain.

The points I made are why I don't see it likely mass adoption will happen due to the risks I outlined in previous posts.  I think a much more open virtual currency will come along not created by Satoshi (whoever that is), not with mysterious early coins that are hibernating, and owned by a large reputable company with years of history in the financial world (yes I realize many financial companies are evil but widely trusted).  A company that will guarantee it wont raise the number of coins with insurance.  

Mt. Gox has a long way to go before I fully trust them, for starters why are they not on CloudFlare??????  The very real possibility of a more legitimate replacement is a concern for me.  BTC would get traded over and the price would plummet.  If you weren't watching and in the initial rush, that could be some huge losses for you.  I'm not trying to spread any FUD only addressing my own real world concerns on my current investment.  

If there is one thing I have learned in 40 years it is to question everything and never put blind faith in anything.  If there are mysteries and unanswered questions I tend to remain a sceptic but I still have 80% (after a 1000+% increase) of my BTC so I'm a leveraged risk taker as well.  In other words in many ways your preaching to the choir I'm just not a big a zealot as a lot of people.

Oh I am well aware of how it works. I am just saying that all the infrastructure and the proof of work in the blockchain must have some value. I have no real idea how to monetize it however.

Sorry but the two are mutually exclusive. You either understand how Bitcoin works and therefore understand that the blockchain and all of the historical compute power that has gone into it is worth nothing.

Or you don't fully understand how Bitcoin works and therefore you believe that it must have value.

I don't mean to be a dick about it.... I'll happily be proven wrong but I'm quite certain that there is absolutely 0 value to the historical compute power or the blockchain by itself.

Of course there is value. Thanks to the blockchain and the computing power we have an element which is scarce and impossible to counterfeit. Through human history things that hold these properties have been valued by people and used as currencies and commodities (for example gold and silver). Something bitcoin has that gold hasn't is being able to send it anywhere in the world in seconds.

And people are complaining about bitcoin price being to high but in my opinion the price is fully logical. If we want to see bitcoin succeed as a mainstream currency it HAS to increase it's marketcap. There is simply no way it can be used globally and by alot of businesses with todays marketcap. Since bitcoin inflation is limited of course 1 bitcoin will rise in value. The marketcap will set a fair value for bitcoin but i'm just saying it will never become mainstream if the marketcap doesn't rise massively.

Another thing people tend to forget is that the bigger the marketcap, the more secure is the currency. Which also increases it's value. Just like people are fearing a 51% attack and adding hashes to the network increases security.

So we should just be happy with the price rise and hope for more. Not for the sake of us making money but for the sake of bitcoin succeeding as a currency.

When 1 Bitcoin is worth enough that it's a years salary $100,000, then it will make sense to spend Bitcoins if you have hundreds. When you work you'll earn a fraction of a Bitcoin, and when you spend you'll spend a fraction. Right now it's not being spent because it's still not in the range where spending Bitcoins makes a lot of sense because getting them is going to become a lot harder in the very near future.

So think of each coin as worth $100,000 in 5 years time. If you have 100 coins then you'll have enough for 100 years of $100,000 income minus whatever taxes of course. If you sell one coin every year you're set for life.

The reason there isn't increased use is because people don't get paid in Bitcoins so how exactly are we supposed to get the Bitcoins to use them if we don't buy them first? Then after we buy them we are broke for a bit so we aren't gonna rush to spend them when it costs thousands to buy them. However the way it works is you buy as many as you can afford, you save for as long as you can, and then when 1 coin is worth about a years salary then you can slowly spend your coins down.

But no one is going to spend Bitcoins unless they earn Bitcoins. So what you should be asking is when can I get a job and be paid in Bitcoins? 

No. It is based on the expectation of getting rich quick. People buy bitcoin because the price is rising.


The profit comes from recognizing a price bubble in time and getting out when it is still possible.


A "permanently high plateau". We can talk again tomorrow, after you will have seen what the bitcoin price actually does instead.


A beautiful dream. They hoped for it because they wished it so much. Reality is rarely so nice.

If bitcoin survives for long enough, this dream might actually come true to some extent. But do not think we are there already. That will take more years and more price bubbles.

Quoting another bear that cannot see the writing on the wall.
Adding you to my sweet collection.

I remember the jump from $0.11 to $0.17-19 and everyone was convinced it would fall/fail/implode/rot.

Hmmm, nothing like this occurred. I assure you the drum of challenge is long and relentless. I was looking for Bitcoin before I knew what was a bitcoin. I learned of a theory that the current bottleneck of commerce was working against market forces. It led me to Bitcoin in April 2010.
The theory is based on the fact that the missing wealth of the current system would appear through technology and change, whether aided by us, or by steamrolling all protesters. Read up on technological change since the middle ages and you see many opportunities and pitfalls for entrepreneurs. We are actively forcing the door of change against all 6 centuries of financial repression.
I feel bad for the manuscript writers of the 15-16 century, saboteurs of the late industrial period, industrial modernists of current times, and the business elites of the past 20 years. Never saw it coming/no warning. Technology spares no mal-adapters, contrarians, ludites, or soapbox sideshow bobs. Enjoy the show and keep your wallet fat.

FF

People forget that the "proper price" of Bitcoin does not equal it's "transactional value" but rather transaction value + NPV of future transactional value. 

It is correct that the current transactional value of Bitcoin does not justify the $130 price.

BUT that is only half the equation, for the future transactional value discounted for the present must be factored into the correct price.

Or in other words, if the "proper price" for Bitcoin based solely on its transactional use in five years time is $500, then the proper value today is probably about $250, discounted both for time and for unknown risks (the whole thing could fail tomorrow, and this should be priced in).

Nobody knows what the proper transactional value in the future will be, but whatever it is, the proper price today is based in part on it.

Of course? Why of course? You must have it all worked out or it must be SOOO obvious to you.

You are getting confused like the other guy. Explain to me the value of all of the historical compute power which has gone into the blockchain and the blockchain itself?

There is 0 value to those components. That doesn't mean Bitcoin doesn't have value, but you cannot say that there is a residual value to the blockchain or to the power that went into crunching those blocks because there isn't.

Hmmmm perhaps more users on these forums than ever?

Yes, there will be many of those people. Heck, I was one of them in may 2011. And they will begin to watch the price, read about them, and in the process learn about bitcoins, their promise and their advantages. They will this have joined our community being the proud owner of a few bitcoins that soon will be considered cheap, and, importantly, having become enthousiastic about it, they they will spread the news.



Yes, you can make a nice short term profit that way, as many have (and many now curse themselves for doing so).
Ofcourse the price will go down some day. Perhaps soon. Perhaps even to single-digits (which I very much doubt personally).
But for this to happen, there has to be some extremely bad news. Otherwise, everyone will just view it as a great buying opportunity. Having missed the boat once, many will not make that mistake again. Interestingly, the fork chain did not do it. The news has to be REALLY bad. Government ban may do it, but the FinCEN statement shows that gov ban is actually not imminent, in fact they appear to be regulating it properly, paving the way further for mainstream adoption.

Even if there is a problem, we have seen in the last year they will be solved eventually, and bitcoin will rise from the ashes. This makes a huge difference. Last year, for all we knew, the crash could have been the end of it. It was the first time it went up and back down and many thought that would be all that ever came of bitcoin. Now we know that it can and will rise again unless there is a very good reason for it. So far, I haven't seen one.


Who cares about a dip tomorrow except for day traders? (especially on a friday/weekend). How about a few months from now? Next year? Ofcourse the price fluctuates. Has there been a 51% attack today? gov ban? somebody made cryptography useless somehow? So why should bitcoin crash to oblivion tomorrow?


Ofcourse we are not there. That was actually the point, you can benefit now from the insight that we are -going to be- there someday. And a few years only! That is a true revolution. Think back how long it took to implement internet widely, cell phones etc. These were recent examples of revolutionary enabling technologies that went from nerdy to mainstream. It took a decade or so, and I fully expect bitcoin to follow those examples (and put my money where my mouth is).

So you are telling me that in those three hours a lot of people suddenly saw the light and understood the essence of bitcoin, and therefore they pushed its price up by 20%? LOL.

The truth is that these newbie speculators want to get rich quick. They buy bitcoins because the price rises. Then the price rises because they buy bitcoins. That is how bubbles are made.

That said, I am essentially on your side and see the same things that you see. Bitcoin is an invention of fundamental importance. The idea of a high-tech currency that is independent from government meddling and from sucking banks will never go away again.

If bitcoin survives another couple of years, I agree that its price may well rise, and I am hoping for that just as you do. But in the short term we will keep seeing hordes of crazy pseudo-speculators, price bubbles, volatility, electronic theft, failing exchanges, Ponzi schemes, attacks from governments, the whole lot. And there is still the risk that bitcoin fails, for one reason or another.

The good speculator has a balanced view.

+ It's a very young market; young people tend to be more bullish, they usually live with their parents and don't even know what self-sustaining feels like

+ Internet effect (huge increase when this goes really viral) (look Mt. Gox queue)

+ People aren't investing big % of their wallet like they'd do with bonds and stuff like that, and are more inclined to risk

+ Bots placing offers at 0.1 push the price up while unexperienced pseudo-little investors just click "buy LTC"

+ DDoS attacks didn't cause a bubble 2 days ago

+ Prices are going up even though DDoS attacks happened

+ Even though prices are (very?) pumped now, BTCs are a great invention and will became the only internet currency in a distant future

+ People know about DDoS attacks/Gox lag and future raids will have smaller impact

+ We know bubbles can occur in wall street, but current BTC market is very different in many ways (2011 bubble was hack-induced)

Last post on this thread was 4/5 at $140.

Today we hit $258 (five days later) and I got out yesterday.


I was a bull and now I believe this bubble can not contain much more hot air.  Any other bulls starting to change their tune or are a lot of you guys still thinking fair market value is $1,000-$10,000, or maybe 5 billion (heh)?  A lot of people chimed in this thread and I read every word of every post.  Never did see anything tangible to support the price.  I only saw more unjustified speculation and ignoring of some huge risks.  The biggest risk I can forsee are, again, a more trusted source than Satoshi-WTF popping up over night.  If Silk road switches to another currency (with less unknowns and risks) I wonder what will keep the BTC value up?  Will all other vendors take note and jump on the bandwagon?  Will the BTC ATM guy who hasn't dealt with regulations yet decide to switch as well?  Are you going to be able to get out before the massive dump?  Will those of you asking people selling early if they regret it, later regret holding on if you can't sell fast enough?  After 15 years of non-stop investing the only regrets I remember are when I was buying high and selling low.  I never let emotions and numbers affect my decisions.  Only facts and evidence drive my strategy having made many mistakes holding on too long too many times.

I think these are very valid concerns and there are logically more likely paths than $1000 or more for a BTC.  With this high of price I would of expected to hear more from the current code developers.  Surely they own coin and don't want the price to fall.  There are unanswered questions still about many mysterious and I don't see those being addressed.  That has not helped my confidence level as price increases while value is speculation based.  And, don't worry if the price hits $1000 today I'll have no regrets.  I've already made more profit than any investments recently and I'm happy.  I would regret if I didn't already get out and the price hit $100 again though.  Anyway I'm out and will be watching the price for now and move on to other ventures.  I'm going back to lurker mode and just stay up on current events until something big happens, besides more price increase.  Happy investing folks!

With BTC at $250 it means that $900.000 are mined every day..

You're not supposed to know that

Was this meant to imply a support for the value of a coin or just an interesting tidbit?  If the former I say usage determines value not the worth of what is being mined.

I'm still holding. Not because I think the price will go up further or that the bubble won't pop. But because I truly believe my wealth is safer in Bitcoin than it would be if it were held in a bank. The looming bitcoin crash will look like nothing compared to the banking crisis, which has already started and has been escalated by Cyprus and shows no signs of slowing down... I used to think I would've cashed out into dollars by this point, but that's looking to be a lot riskier than just holding my bitcoins and using them to buy whatever I need.

of course there's also the risk of a bug in the bitcoin protocol causing a crash to $0, but that risk remains the same with or without a bubble.

The only sensible option for cashing out your bitcoins right now would be to convert them directly into a hard asset like gold, silver, or real estate. Those are all less convenient and harder to secure than bitcoins.

It implies that atleast 900.000$ is currently needed to go into bitcoin per day to keep the price stable at its current price for long term

if less than 900.000$ is poured into bitcoin per day, the price will go down eventually (as new miners profit margin diminish due to hashpower catching up to the price rise)

a fact greatly ignored by pretty much everyone advocating bitcoin

I have those fears long term for USD but not in the near future.  You think a devalue of the USD is likely in the very near future, more so than a bubble burst?


My research has shown golds value is speculation based only it has a lot of trust just like a USD.  I believe gold is also a bubble and will start buying it again at $1200/oz.  Maybe $1400 or so if it stabilizes there.  I'm not so sure it is safer than USD.  Gold does not have a lot of industrial usage and no one knows for sure if all of it that is "owned" actually exist.  A lot of people own pieces of paper that represent gold stored in underground vaults.  Whether all that gold exists has yet to be proven.

No, but I'm looking to store my wealth long term, and for that I find it safer to ride the BTC roller coaster wherever it will take me than to trust a bank with my money.

And then again, I'm sure the Cypriots thought "My bank savings are safe for the near future, at least" just the same as Americans are thinking right now.

Agreed, I haven't trusted a mainstream bank with money since 1998.  I keep it in FDIC backed CU's.  Looking to move it to Frankfurt in non-euro form possibly at the moment.

Well there is a huge difference.  Cypriots money was in Euro which they do not control.  They don't have to ability to print more to make payments like us Americans do.  It is impossible for a country to go bankrupt when they have fiat and print money.  It simply creates a long term issue of unsustainable debt.

Edit - Since you sound like a non-American I just wanted to add FDIC means my money is backed by Federal Insurance.  Based on our history and recent events in Cyprus I feel confident they will not suddenly try to tax my accounts.  Cyprus was a haven for money laundering which is why I think they thought about the tax.  I have no short term fear on the dollar or my accounts.

Well after the last run up and increased volatility I sold off last night as I said here this morning.  I think I came back to this thread about an hour before the sell off started.  Sorry to anyone who held on or lost money.  I know I've made the same mistake myself many times.  Investing and making money means never letting emotions affect decisions on when to buy and sell.  The board is crazy now with all kinds of post.  I'll be back buying coin once the price stabilizes again or if there is some better news on fundamentals.

I see a new record for searches as of Monday via Google trends for 'Bitcoin'.I also saw someone mentioned that Gox accounts were at the 18-19,000 count last I heard.

those are the old metrics, on with the new!   i have no idea what they are yet.

The "fundamental" value is probably no more than 30. Most of the value is speculative, which is fine; future adoption of bitcoin is looking more and more bright

I agree that sounds about right to me. 


As for Google searches, there are Google searches for Bitcoin because it has been a crazy ride and everyone is talking about it.  However, I wouldn't expect that to mean another big spike.  Most people even who don't invest will look at the volatility today $105-$266 and not even think about such a risky endeavor.  It would be great if they were worth $1000 and a lot of larger holders sold out for profit.  Then it would make manipulation and speculation more difficult.  Sadly I believe that is a long time away.  If Bitcoins were worth $1000 a piece then the actual usage of them at places like Silk Road would have already driven the price there.   I'm curious if anyone bought and sold goods today with Bitcoin.  I'm not sure how that would work but it sounds like a huge win or loss for one party or the other and not anything I'd want to do.

I use it, but I get on the exchange, buy what I need and send. They don't take BitPay (essentially the same thing on the merchant side just done for them at a fee). In and out of BTC is the key for merchants if you don't want to gamble with your revenues.