Bitcoin Forum

The increase in price is not due to an increase in the exchange of goods and services for bitcoins or favorable news, the two traditional causes for rallies.

Everyone is buying BTC to get in on pirate's scheme, pirate passthroughs, and other pirate like "lending" schemes.

Obviously earning 3300% a year on BTC is more attractive than 0-10%/year with USD.

The entire bitcoin economy is shifting towards lending and various financial instruments.

If pirate were to default, would the price crash?  There would certainly be less incentive to buy BTC.  Of course, pirate might have all of the coins by then... so there might not be many sellers.

Oh so you mean, it's an end to itself. This could get dirty when the bitcoin generation rate halves.

If you're right, his interest rates will fall until he only has as much BTC as he needs.  If he's generous (and selective), he may just limit deposits and new accounts.

this rally is not a pirate bubble
this rally is a pirate bubble
this rally is maybe a pirate bubble

True, but isn't this a healthy sign? I mean, even in the gold-backed-money days, didn't most people keep their money in a bank which lent it out to earn interest?

The great thing about bitcoin, though, is that unlike fiat money, you're aren't forced to lend it or suffer loss of purchasing power. Due to its deflationary nature, with BTC you can take the risk of lending, or you can just hold it directly with essentially zero risk. Everybody wins :)

If pirate is selling them again, as many assume, those bitcoins are already back in the market.

That may well be, but anyway, this rally doesn't sees to have hit the PPTs on the exchange. Prices there don't look especially high at the moment.
But if you're right, could be people are looking to deposit directly instead of through the pass-throughs of course.

Schrödinger's bubble ?

impressive :-)

nahhh just a over due correction, How many bought again higher than 10 when you sold below 9.50, supply and demand, we are in a bull market, wish I can enjoy this run but most of my bitcoins is trapped with bitcoinica

I wonder if pirate is the US government trying to buy up as many BTC as possible. They can afford to pay out 7% with their fiat.

there are still new people "investing" in pirate? i had the impression that the "market" is already saturated, and some believe that his "default" is imminent.

+1

there are some strong hands holding onto BTC and the reward for mining has not even cut in half

Let me be the first to have the honor to welcome you to the halls of this forum, kind Sir!

hahahaohwow.jpg

Well, some people were withdrawing (eg MageD) and everybody was nervous about his vegas meet-up. Since it seems to have taken place, its likely there will be a wave of new investors. But that doesn't mean default is no longer imminent, indeed it could very well be. It just depends on the market (both the PPT market and the bitcoin market) and pirate's exit strategy.



There is an unhealthy amount of lending schemes going on right now, but I think you might be overestimating the proportion of new buyers they are attracting.

I see evidence for a variety of new investors: the reuters article mentioning the ip addresses of wall street firms visiting mtgox at the beginning of the year, silk road forum post count supposedly 50% of the bitcointalk post count, butterfly labs mining investments, coinLab investment by Ycombinator.

The fact that price has held up so well against the utter vaporization of bitcoinica shows that the bitcoin is market is more resilient and decentralized than I had anticipated (unfortunately for myself, 20% of my funds were in a long position on bitcoinica). So I don't think that a crash of pirate's scheme would affect the market. And actualy from that, one can infer the converse that the success of his scheme is not what's currently driving the price increase. I may be way underestimating the size of his scheme, but I think its fair to say that bitcoinica had a far greater market penetration than pirate does. Of course, MtGox remains the greatest centralized point of risk to the bitcoin price.

One more thing, my new best guess for when pirate defaults is when we see a correction in the bitcoin price. Not mini-corrections in the uptrend, but a deeper correction followed by a trend reversal. This would be analogous to all the Wall Street ponzis which collapsed in 2008 when the stock prices reverses. Fear gripped the market, depositors wanted to withdraw from funds, and those withdraws exposed the ponzis.

That would be the latest estimate for when he defaults (most certainly before oct 2013), but of course it could be any time.

Wonder how many people read my 9 June 2012 (https://bitcointalk.org/index.php?topic=93839.0) post before all this got started.

Stop spamming your post everywhere. ::)

This is a very interesting thought. I did not know of that 2008 chain reaction, but it makes sense! The type of herd behavior is the same, so the withdrawals might correlate very well with trend-following sales.

Thanks for sharing this.

What if we start a new thread trying to get people to pledge to withdraw 50k coins from pirate on a certain date, September 1 for instance. This would create lots of fear of a collapsing ponzi therefore even more withdrawals than the pledged amount. If Pirate would not be able to take the loss (because of a ponzi), he would simply stop allowing withdrawals and run, probably a day or two before the planned mass withdrawal.

How many coins does he have, anyway?

So now Pirate's Ponzi is fucked if the prices go UP and when they go DOWN! lol

A Pirate default would likely to be triggered by a sharp increase in the BTC / USD price and in many scenarios could even trigger a BTC buying panic rather than a crash. De-leveraging makes the remaining currency more valuable not less so. During the recent downturn in 2008 prices went down making cash in the form of say USD more valuable. By the way I believe this rally is in spite of Pirate not because of him.

Not until after BTC hits about $13....  ;)

You also warned us not to pay too much for bitcoins.  You being a lawyer I can understand why you would say too opposite views in a subtle way such that you cant be wrong. :)

If this rally is indeed a bubble created by gullible "investors" entering the BTC market in order to "invest" in Pirate's scheme, it's going to be hilarious when the bubble collapses and everyone who bought high first withdraws from Pirate and then sells quickly, triggering the collapse of Pirate's ponzi scheme. Here's to hoping that the bubble takes BTC price to unprecedented highs!

Lol I can actually see this happening

The case that would crash the price the most would be if pirate shuts down his operation and returns everyone's money.  This would result in a huge supply to sell and a bunch of people looking to take profits.

thats assuming everyone would sell ..........

i think if pirate returned everyones coins many people would look for some other way to grow their balance by investing in something else ,even a mining op which pays 1-2 % a week would probably be overloaded with newcomers

thats assuming the btcst doesnt default though and thats a pretty big assumption when you think about those glorious interest rates ......:)

Where would these coins come from? After interest payouts that already happened?

So what is the estimated amount that is in the Pirate fund?

500k btc.

Note that such high estimates are paper coin estimates. I doubt BS&T collected so many actual BTC. We just see interest on former interest, and probably neither ever really existed.

Juggling coins to investors and receiving them back again as re-investment makes the impression of more coins being "inside". This can repeat for quite a while until people notice.

Then why does he only pay 7% a week. Lately he revealed to buy 18650BTC per day on average. So that would be more like 26%, and still he pays only 7% :D

And if you are selling at these prices?

So pirate has borrowed enough coins to give him the weight to manipulate the market and thus profit enough from his up an down game to pay off his lenders and make profit?

Everyone could just call their coins back.

Why would they when they are essentially in cahoots with the pirate and making good money?

How?
He'd need to be making in excess of BTC30000 profit per week to make this thing a legit business.
Check out the volume on Gox. If you were on the right side of every single move the market makes and made up 50% of the entire gox volume, you wouldn't make that. So where's he making that? The silk road doesn't even make that amount of profit.
It just isn't possible to make the numbers fit anymore. If anyone can work out a way that fits within the basic confines of reality that'd give 30000BTC per week whilst having no known customers and no obvious signs of market activity then please do tell.

He does not have to make a profit every week.  One week he might lose 5% but the still owe's his creditors 7%.  Then the next week he might make 20%, enough to cover the 2nd week and the negative funds from the first week.

Because when pirate makes a really bad bet (JPMorgan Chase style and he will one day) he will probably default.  Then everyone will lose a portion if not all of their money, and Pirate will be labeled a ponzi scammer even if he is not.  When it gets to serious cash like this then it is hard to come back from big falls.  If he lost a little before he could pay back out of his own funds to make up for a profit later on, but a loss that he can't handle will doom the whole operation.  All of pirate's creditors could do the same thing he is doing except without the manipulation and potentially make more than 7% a week.  I don't borrow or loan money anyway and I will only invest with people or institutions that are transparent, but I would hate for this to hurt the bitcoin economy and tie a lot of people's coins in limbo like with Bitcoinica.

The best case scenario for Pirate's creditors is Pirate greatly lowers his payout.  7% per week or whatever people were mentioning last week is unsustainable.  It simply cannot be done.  Anyone believing a 7% weekly return is possible from any investment will quickly be parted from their money by get rich quick schemes.

True. Bitcoin is a traders wet dream. Sheep playing the market and no SEC.

+1

At the end of the day, if you put your money in a black box and get ripped off, it's your own damn fault.
It's very difficult to feel sorry for the investors in Enron, Madoff, or by the same token BTCST. If you invest in something you don't understand you might as well burn your money, the net effect will be identical  ;)

People (the majority )  may be stupid when it comes to financial investments but i dont think that automaticaly means they deserve to be  led into ponzi's and other types of scam

True, but I do think we reserve jerk status for the Enrons and Madoffs of the world (I will hold off pre-emptively judging the pirate).

I have to somewhat agree with the OP. With pirate's BTCST in place if you bought 10k bitcoins at $5 and you invested 100% of that with pirate you would have 20k bitcoins by now.

I believe much of the ramp could (not necessarily is) but could be a biproduct of people wanting to buy btc low and as the USD price rises not only do they get more bitcoins but each bitcoin is worth more USD.

Unsustainable in my opinion.

Just my take...

We will have many chuckles when the music stops and only one chair left.

+1 I can't see how this whole pyramid scheme can unwind itself in such a way that NO ONE gets burned.


I've got my popcorn ready. I think we will see much much drama concerning pirate etc. in the next 6 to 12 months if not sooner.

someone on another thread calculated that they would need $10,000 a month to retire comfortabley on

they then calculated that by giving pirate 379 BTC the compounding interest in a very short time would equal retirement

if thats not crazy enough for you ,heres another one :

if pirate continues to pay this interest for about 18 months he will have paid out moe than all the bitcoins in the world INCLUDING the ones that havent been mined yet and wont be mined for years 

So in theory he can run this ponzi for ~1 more year then pack his bags and disappear ? 
Sigh, I hate slow burn drama's.

investigators suspect madoff was fraudulant from the 1960s and he never missed an interest payment
for 39 years

Pirate = CIA and they are using btc to fund their black ops and pay their spies so they dont have to explain to the public where the money is going.  :)

It's virtually impossible not to see all the threads pointing out how likely this is to be a scam, yet Usagi decided to stop selling NYAN.C, which is at the moment essentially a fund of passtroughs, because it was selling too well -and he was afraid too many would blame him for losing their money, I guess. It was one of the most surreal post I have ever read, a share issuer mad at how well his shares were selling

Not necessarily.
At the moment every week the vast majority of his interest payments get immediately reinvested - in addition to people providing extra new investment.

In addition, there's a lot of smoke and mirrors surrounding things like the size of the exposure people have to BS&T, I tried to start a discussion on it last week (so all the numbers are presumably even higher now):
https://bitcointalk.org/index.php?topic=98225.0;topicseen

usagi found out what all of the PPT issuers have known for months, but have neglected to tell anybody: Pirate's deposits are growing more than 7% per week.

I have never used these services, I don't even understand them and yet I have been buying recently.

If he is short he would have to buy from the rest of us. Who knows I might even sell him just a few  ;). The latter of course depends on the price. Of course there may be also those that are buying in order to profit from a Pirate short squeeze, so in that sense the rally could also be due to Pirate.

Why would he buy fresh coins to pay depositors back?
If he was going to default he'd just up and leave.

It would make much more sense, if he's really scamming people, to sell of a little at a time and stretch it out as long as possible. It doesn't crash the market and it doesn't look that suspicious.

LOL...thanks...I think.

I am assuming this is not going to be a simple grab the cash and run or classic Ponzi type default. Pirate is a lot more sophisticated than many in the "anti-pirate" camp give him credit for. Something along the lines of what I mentioned in your other thread https://bitcointalk.org/index.php?topic=98225.msg1084866#msg1084866 (https://bitcointalk.org/index.php?topic=98225.msg1084866#msg1084866) on the other hand may well be what happens.

ArcticMine: Yeah, no. Honestly, if he's happy with pissing people off anyway, and contemplates a lawsuit, it's better to just squirrel the money away and blame default on "hackers" or thieving "business partners" that cannot be disproved.

The difference is between a very clear cut and dry liability and one that may take years and an army of lawyers to figure out if a liability even exists.

There is no cut and dried liability if you can't prove wrongdoing. From a hypothetical Pirate's perspective, the outcomes are indistinguishable, so might as do the one that allows squirling away wealth.

So, in one moment Pirate is doomed above $10 - then he's just fine until we hit $13, or is it $20? Wait, I read on this forum that Pirate controls BTC prices, so there's no way they'd be trading so high... oh wait...

This stuff is so hilariously contradictory I can't even begin to laugh enough.

You're getting the idea...it's all speculation.

Actually it is paranoia.

Do not forget, that USD has lost over 96% of its value in the last 100 years or so and only! 33% in last 12 years.
Is it possible, that BTC just holds value better than this green funny money form your dear Fed printer?

no
,3400% interest on bitcoins can not be explained by fiat currency growing lower in value
not even at anywhere near those rates
just no

Alright- a question for those who think it's a pirate and pirate-like bubble: when will it pop? Just don't state the obvious.

2-4 weeks after reward drop.

Hard to say. If pirate is actually making real money it would be right after his first big screwup where he loses a large
percentage of the funds.

This is the way I see it. He has a way to make money (i guess). So he starts out using his own. He is making good money.
Instead of him digging up more resources himself or starting small and reinvesting his profits to grow to keep all the juicy
profits... he decides to borrow money from people.

Well I would not want to do this unless there was a large risk involved. Better to play/gamble/deal with other people's
money then for me to risk my own via a bank loan, savings, etc... That would be best for pirate. And the people borrowing
the money to him get ~8% interest per week because the risk is huge. Otherwise interest rate would be much smaller.

Thus there must be a large risk involved in his operations and eventually a string of losses, him getting scammed, or
what have you will cause the problem we are waiting for. Hard to put a time on this and I am making the assumption
that he is semi legit.

If a ponzi or some other type of scam... the math gives good info on an estimate.

Absolutely. In fact appreciation of BTC with respect to USD as has been the case this year makes the situation a lot worse. On the other hand if BTC were depreciating with respect to USD at a rate over 7% per week as was the case between July 2011 and December 2011 then at that time the 7% per week interest rate made a lot of sense and was perfectly sustainable.

In a finite universe exponential growth is never perfectly sustainable.

In a system with a hard limit of 21 million bitcoins exponential growth is especially unsustainable.

It is perfectly sustainable only as long as the BTC / USD rate keeps dropping at the faster rate than the BTC interest rate not for ever.

Please people, stop talking percentages. "It's impossible to pay 7% a week." No, it's not. Completely depends on how much you lent out , and how much money you're making.
If he's paying out 30k a week, discuss that figure. Is that possible to pay out? Yes, plenty businesses earn that much.
Is it suspiciously high though? Sure it is. But don't focus on the percentage figures, unless you have clear data on exactly how much his operations grows / shrinks / has grown / will grow over time.

You seem to be misunderstanding the velocity of money. Bitcoins can move multiple times, so a person can pay out more than the total number of bitcoins if they are also taking in bitcoins.

No it's specunoia!

I don't get it. People invest Bitcoin with Pirate. If he sells the Bitcoin it drives the price down, how does he drive the price up without using his own money? Is there a new leveraged short-selling exchange?

There are several, but none as big as bitcoinica was and certainly not enough to take a volume pirate would need.

There isn't as much to get about it, people buy BTC in order to give them to pirate. He accumulates them and pays out interest. If it is a straight Ponzi it makes sense the price is going up before the default.

We all know that if it isn't already being done it will be done in the future (pirate buying bitcoins on the open exchange).

So the price rising isn't a good thing if he needs to buy them on the open market. Then again he could be mining them through GPUMAX etc.

Agreed. If everyone bought bitcoin and invested with pirate (which I believe is true on a larger scale than people realize) the price has to rise. Pirate can only get bitcoins from three different places:

1. new investors

2. mining them

3. buying them

1) Discover way to get a shitload of cash
2) Make a run of your own FPGA boards in China to mine on a massive scale and then pay some hackers to DDoS the major mining pools.
3) ...
4) Profit.

this

There, fixed that for you...