Bitcoin Forum

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Seriously.  If ever there was a time to look at bitcoin fundamentals, it is now.  We all know the merits of bitcoin, which is why I'm a long term bull.  But in the short term, the reality is, all the press is bad.  Few people understand how it works.  Few people have even heard of it.

This will change.

But for right now, Bitcoins are just not all that useful for the average person.

This will change.

And while we're at it, this drop is great for Bitcoin.  It allows new investors to hop in and motivates the people holding 100,000 coins to sell off a few.  While I would in no way advocate a forced "spreading of the wealth", it's difficult to trust a currency where a large percentage might be held on a CD by its inventor or a super early adopter.

These are fundamental growing pains.  And in 10 years, when BTC is well understood and widely used, we'll look back and chuckle.

At some point, there will be blood in the streets (we're not anywhere close to that yet), panic, and fear.  The forum will be about "the end of Bitcoin".  And that's when I'm a buyer again.

It's not often that someone articulates my thoughts so precisely. Agreed 100%.

Yet very few seem to (want to) see all the issues it has.


Fixed for ya.

You lose, you laugh!

The problem is that if you look at the fundamentals you see that the bitcoin system as a whole is losing about $500K a month on electricity without producing much (beside providing another betting game - which might be a nice and addictive past time - but it is zero sum).

I was about to post something very similar but you beat me to it.  I agree - if you don't believe in Bitcoin for the long-term, sell off your coins, get this over with, and let's carry-on to the next, inevitable phase in what will no doubt be an amazing run for Bitcoin.

I agree with the OP as well. Same thoughts. In fact if the price drops a little bit more for a "total crash", I just might increase my investment on Bitcoins. So tempting. :)

Shared sentiment.

In June/July, Bitcoin picked up a lot of people just looking to profit off it, and don't care at all about the prospect of decentralized money (and all its implications). What BTC needs is a slow, steady growth amongst people who BELIEVE in its potential... people who won't sell off at $30 just to make a "few" bucks. Sure, taking profits here and there at the price fluctuates is fine, but I'm pretty sure most people are here because they BELIEVE that Bitcoin will play a much bigger role in the future of currency.

-Jix

+1 OP

I especially agree with the legacy of large long standing account holders as a security risk to the value.... any1 who disagrees must be a..... :-)

Though those account holders are a necessary evil to how bitcoin had to grow from a very slow and obscure start

+1

so will everybody else

That is exactly why it will never go back down to $1. If everyone knows that everyone is buying at that point, then we can safely say that a range of $2-3 is the lowest it can possibly go. The only exception is the death of Bitcoin and that can only happen if some major technical flaw is found in Bitcoin itself or governments start banning the trade of Bitcoin to Fiat currencies. Only a mega event of that sort can make the price go below the $2-3 range.

The question is then, at what price will everyone buy at?  If you're saying 2-3, I think you need to give a reason why.  And did you think the same thing from 7-6?  Every will buy when it's the end of the bitcoin world.  I think more like 1 cent, which is why I have a huge order at .01001.  That is when there will be blood in the streets.

You forget two things. Everyone says they will buy at X when the price is 2X - doesn't meant they will.
Bitcoins are ultra-inflationary right now. Incredible amounts of money need to come into bitcoin every single day just to keep the price stable.

Also from savant Technomage

To Surawit I already answered here, a nice troll move to post the same thing in two threads: https://bitcointalk.org/index.php?topic=42514.msg520702#msg520702

My answer here will be to lemonginger. I view the whole issue of miners causing "massive inflation" very differently. The amounts miners produce cause inflation, that's true, but it's far from massive. Especially now that the volumes are back up the amounts that miners produce have little effect. In a period of any kind of decent growth the effects of added coins are pretty much irrelevant.

Now the thing is, due to anticipated Bitcoin growth and its long term deflationary model it is likely that there are a significant amount of miners who do not sell 100% of their mined coins or even close. I will use the plan I personally use as a template and do some calculations. I sell 50% and save 50%. If we assume a 50% sell rate is average, which is most likely at least closer to the truth than 100%, we come up with 3600 mined coins per day.

Now compare that 3600 to the recent volumes of all exchanges combined and you will start to understand that it's not that big of a deal. Even in fiat money it's not a lot, with current price it's around $22000. For the big players in the market that is candy money.

People in these forums tend to talk about tens of thousands like that is a lot of money, give me a break.

With a track record like yours, I wouldn't base anything on your assumptions. 

If you have something tangible to base that number on, please do enlighten us, instead of simply wasting space with a useless comment. I'm very interested in the actual number of mined coins miners regularly sell for fiat money.

As far as I know it's impossible to know the number but the point is that the number is between 0 and 7200 regardless and when the volumes are up, like now, the effects of such amounts are negligible. On low volumes the effect is much higher and in that case I accept the fact that the current inflation of Bitcoin causes significant pressure for a lowering price. It's all dependent on the growth and activity of the Bitcoin market.

So far inflation has not been an issue in the long term. Bitcoin has experienced constant periods of growth, with the next one likely just behind the corner. These growth periods will negate the effects of inflation. And it's less than a year before we see the reward from a block halved to 25 BTC. When that happens the economy requires significantly less growth to have a stable price, which is good.

In fact I'm surprised how good the timing is, the largest periods of growth coming during the time of highest inflation. After the rewards go down we do not need the kind of growth we saw a few months ago, which is fine, because percentage wise it's very difficult to produce that kind of growth continuously.

Why don't you make a poll in the mining forum? 

All those who see benefit in a return to low valuation should dump their coins and help drive the hoped-for trajectory. If you truly think this correction is necessary for the success of Bitcoin, then surely you see that the long-term benefit made by dumping your coins will outweigh the loss you will incur in doing so. Am i right?

If, not when.  I think it is very likely that another cryptocurrency may eclipse Bitcoin.  The wild speculation may prevent Bitcoin from being widely adopted.  Demurrage and dynamic inflation could fix it, but they're unlikely to be adopted in the current block chain.  And if they are adopted, it would prevent the staggering returns you hope for.



Yes, and I have.  I only have a small slush fund for micropayments.  Until the market returns to what I consider to be the fundamental value based on utility (cents, not dollars, see my analysis in other threads), I'm keeping my money elsewhere.

The remaining questions are 1) what does the endgame look like, and 2) does anybody care?

In the venture capital community, there are successful startups that achieve over a 10x gain, and failures that go bankrupt. But those aren't the most common case. The most likely outcome is a "zombie", a company that generates just enough revenue to pay their operating expenses but has no hope of paying back their investment.  VCs usually have a stable of zombies, which they view as annoying; they need attention, but don't make money. The founders often continue to dream of a big win, and keep trying to get more investment capital.

The endgame for Bitcoin will probably look like that.

Bitcoin has been dropping about $4 per month for three months now. With the price at $5.80 today, the end is in sight.

Just a month and a half until I can buy all the coinzzz!

I agree that it's a zombie, but I'm not sure the end is in sight yet.  I'm about as bearish as you can be and still post here, but I don't think the linear fall will continue all the way down; it'll eventually reveal itself as a hyperbola.  The small valuation makes it easy to prop up with little influx, and naive speculators will think that it's finally nearly as low as it can go and it's time to buy back in, and/or that the pittance of value they have left isn't worth selling until the Great Recovery.  I think that will become apparent and slow (but not reverse) the fall around $2-$1.

I know the bulls are pushing the log charts lately, but I love them too:

http://bitcoincharts.com/charts/chart.png?width=1169&m=mtgoxUSD&k=&r=360&i=Daily&c=1&s=2010-01-01&e=2012-01-01&Prev=&Next=&v=0&cv=0&ps=0&l=1&p=0&t=S&b=&a1=&m1=10&a2=&m2=25&x=0&i1=&i2=&i3=&i4=&SubmitButton=Draw&

When people think "it can't possibly go any lower now!", log charts show that there is indeed a whole lot of empty white space on the bottom right where it can, in fact, keep going.

There's an argument for that, and it's usually made about companies in the pink sheets, where penny stocks trade. The remnant stocks of failed companies can trade there for years.  For example, the remnants of General Motors after the bankruptcy trade under PINK:MTLQQ.  The price slowly declined from $0.75 right after the bankruptcy to $0.04 in March 2011. (http://www.google.com/finance?cid=14194)  Some people were hanging on hoping that somehow assets would emerge from the liquidation. They didn't. The market cap was still around $25 million at the point the stock was no longer quoted. That was what you ended up with if you owned General Motors stock.

Funny you should mention the pink sheets.  I've been comparing BTC's behavior to the pinks for some time.  The comparison will hold as long as BTC's price is driven mainly by speculation.

There is a difference between BTC and MTLQQ.  After you strip all the speculation away, BTC actually has a small fundamental value that will support a nonzero price as long as people continue to use it as a currency.  The thing is that price is well under a buck.  I estimate it generously at about $0.001 to $0.01.  Due to a large number of coins out of circulation (hoarding, deleted wallets), and ongoing speculation, we'll hit bottom well above that price.

So don't get me wrong, I'm not saying it's going down forever.  I just don't think that it's valid to look at a linear chart and extrapolate a line down until it crashes into the ground in a month and a half.