Bitcoin Forum

I'm quite surprised to see that there are so many people here worried about the recent rise in price. Of course, there has been an increase of 50% in just a few months, but to be honest, I think the rate at which Bitcoins are increasing in price is still quite slow. It will go much faster in the nearby future. This may not happen for another few months or even years, but if Bitcoin survives, which I believe it will, there will be a price explosion of epic proportions.
 
Think of it: the total Bitcoin market is somewhere north of 200 million USD, divided over almost 11 million BTC. From the Ron/Shamir paper we know that around 7 million BTC never move. That means that the total amount of fiat invested in Bitcoin is well below 100 million USD. In every possible scenario where Bitcoins are known to the general public, the total amount of money invested will be in the billions. The online gambling market had a turnover of 21 billion in 2008, according to Wikipedia. The online shopping market is at least tenfold that number, as is the amount of money people wire through Western Union and the like. And think of the money which could flow in the system once the drug cartels, hedge funds and tax evaders find out about it.

Although Bitcoin is still very young, it has survived to the point where there is enough wealth in the system that people will go to great lengths in order to repair or save it, once it will be struck by some disaster. This could either be an internal threat, such as scalability issues, or an external threat such as legal issues. In any case, Bitcoin will survive, simply because it has proven itself to work. Alternative currencies are irrelevant at this point, because any enhancement they might offer can and will be implemented by Bitcoin if there is even the slightest threat to it. The network effect will make sure Bitcoin won't allow contenders on the block. Whether you like it or not, Pandora's box has been opened and not even Satoshi himself will be able to close it.
 
When we look at Bitcoin in terms of expected value, the odds are thus astronomical. The only reason Bitcoins don't trade for 100k USD right now is because most people either haven't found out about it or don't understand it yet. When they do, there will be a rush from people afraid of missing the boat. Remember that never before in the history of mankind a new currency came on the market so suddenly and right there for everyone to pick up for a bargain. Once the banks and governments of this world find this out, there will be a race to get in on it as fast as possible. This will be the tipping point, where we can expect to see an exponential increase in value. As long as this point has not been reached, it is incredibly silly to worry over a few dollars in a few weeks.

Interested in what you mean by a bitcoin singularity is near? Thats a provocative title. I attributed the price rise to the mining reward halfing from 50 to 25 but now I think thats only part of the story and more psychological than anything. Starting to think another steep rise is on the cards, possibly a scaled up version of what happened in 2011.

What I basically mean with that title is that the price rise of bitcoins will not be steady. Once it reaches a tipping point, or singularity, that fact alone will cause a rapid acceleration. We might already see this happening when we get above the 2011 high because this will generate a lot of positive media attention. First hedge fund managers will wake up and come to realize that this bitcoin thing they heard about a few years ago ought to be taken serious. Then banks will find out that this may one day be the backbone of international money transfers and that it will be essential for them not to miss out. After that governments want to maintain their economic power and if they can't shut it down, they better get in on it.
 
My point is that we compare Bitcoin with things we know, like shares of Microsoft, Apple or Google. We are afraid of a bubble when it goes to fast. However, the potential Bitcoin has cannot be compared to anything we have ever seen before. Bitcoin is the ultimate positive black swan.

I think it could be a number of things, possibly a mixture of any of these too.

1) People hearing viraly about how those of us who hold BTC have made big 'gains' in the last 2 months or more and wanting in.

2) Organised crime getting heavily involved as they can see its potential for laundering / transferring their money.

3) Bigwig investors / rich kids buying up loads... because they can.

4) Day traders seeing easy profits from noobs who have little understanding of markets (pump and dumps etc.)

5) The Silk Road growing

6) (And a paranoid one) The Government secretly buying loads, then selling loads to cause instability to try and put people off Bitcoin.

Personally I am very excited as I see massive potential here. I just read that Venezuela had devalued its own currency by 46%.
If Venezuelans invested in Bitcoins they could 'save' their savings! And that is only one small country!

Even though there is currently very little to buy with Bitcoin, (especially in my country)... things move fast on the internet.
The problem is, with prices rising so rapidly I don't even want to spend my coins!!!

Oh yea, I nearly missed off a massive one... Gambling!!!!
I think Americans are going to lap this up!

But yea, this could be a perfect storm with an upward trajectory... meaning more news reports causing a feedback loop :)

It would one hell of a thing if we achieved a "hockey stick" exponential curve that ended in a new plateau instead of retracing immediately after. I think this is what you're suggesting, and I can see where you're coming from.

What was the actual wording on that Ron/Shamir paper?  I can't remember if they said that 7 million bitcoins had never moved, or that 7 million hadn't moved for a particular time period.

Regardless, I think if the US doesn't change its stance with regards to online gambling, Bitcoin will continue to see exponential growth in that area until it makes up a significant portion of online gambling activities (say, 25%).  Gambling turnover of $21B divided by BTC turnover of ??? multiplied by BTC price multiplied by 25% = new price.  Blockchain.info shows transactions per day of around 250,000 BTC/day.  Some of that (maybe half) is people sending to themselves (I know I do it all the time).  So, 125,000 in legitimate BTC activity daily.  $2.5M/day.  $912.5M/year.

So then, our calculation...

$21B / $912.5M * $22.82 * 25% = $131.29/BTC.

Hmmm... anything I'm missing?

Anyone else think this is the new "I am pretty confident we are the new wealthy elite, gentlemen." thread?
Don't get me wrong, I am very bullish on bitcoin, and haven't sold any yet in the current rally, but tell me how this https://blockchain.info/charts/market-cap?timespan=1year&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address= is not already an exponential rise? 
This makes my 'sell' finger itchy...

From Ron/Shamir: "If we sum up the amounts accumulated at the 609,270 addresses which only receive and never send any BTC's, we see that they contain 7,019,100 BTC's, which are almost 78% of all existing BTC's."
http://eprint.iacr.org/2012/584.pdf (http://eprint.iacr.org/2012/584.pdf)

They made a couple of other calculations in regard to dormant bitcoins, but basically the point is that all the fiat ever used to buy bitcoins is substantially less than the total Bitcoin market cap.

I used the number on online gambling to illustrate the difference in size with the Bitcoin market cap. Even a small increase in amount of money going in the system might be enough to have a large impact on the price, especially when account holders decide not to gamble away all their bitcoins but perhaps safe a few. Given that the Forbes article by Jon Matonis on the SatoshiDice profits is now a few weeks old, my guess would be that we are currently seeing the results of it.

You may well be right in most of what you say here but your time-scales will probably be well wrong. Mega-banks and govt.s are not going to be hopping on to any "crypto-currency" band-wagon any time soon and the infrastructure does not yet exist inside bitcoin world to support them anyway. That is not to say that they never will however.

The great thing about this experiment is the little people can enter first, and to the fullest they wish to risk, but the big guys have to wait ....  :D ".... it is easier to fit a camel through the eye of a needle".
Just by the logistics involved, the system will grow naturally and the size of entrants to the system will be commensurate to the size of the system at the time.

It will look like an exponential singularity if it all pans out, but you will have to look back from 2035 and scale the chart accordingly.

On the little details, I think we are in a rather powerful wave 3 of 2, heading for a re-test of $32 June 2011 high from first wave up. I'm expecting a blow-off to the $25.88 area and collapse back to re-base around $20.8 region ... fwiw. (Longer term in an unknowable time-frame waves 4 of 2 and 5 of 2 should takes us past the $32 to finally top out around $51.7.)

That doesn't sound very accurate. Receive and never send would include all change addresses and newly generated addresses. The majority of those bitcoins are likely accessible... I never reuse addresses (as evidenced by my 20MB wallet.dat) so every one of my coins is in that count.

In spite of the recent rise, BTC as a product/technology is still grossly undervalued due of (warranted or not) fear over government intervention and leftover perception as rogue and shady.  To the extent that uncertainty is cleared via increasing non-black-market usage and more balanced media coverage, look out, marketcap is going straight into the many billions.  Could happen over some time, or could happen rapidly in a vertical phase transition: if a major consumer brand like Google or Amazon were to announce that they'll start accepting Bitcoin, the price could easily go up 10 fold within a short time, WordPress effect times 10.  Singularity right there.  It just needs the right catalyst.

But everyone is having so much fun.   :D


Speculators reassured by an increase in gambling revenues, what could possibly be missing?

Well I guess you're right, it's much harder to predict when anything will happen than to predict what will happen. However, we are used to thinking events will develop on a gradual scale, while in fact it may happen suddenly, all at once. And this can be next month or not before the end of the decade, but it will happen eventually.

From Ron/Shamir: "If we sum up the amounts accumulated at the 609,270 addresses which only receive and never send any BTC's, we see that they contain 7,019,100 BTC's, which are almost 78% of all existing BTC's."

This is way way different from saying that 70% of 'coins' (whatever that means) never move. If every bitcoin moved every single hour but everyone always used new addresses then every single address with coins at it would receive but never send!

Hoarding can help fuel Speculation Bubble 2.0, but not a true Bitcoin Singularity.
Where is the real economic development, Satoshi dice? Now that is change I can believe in.   ::)

Of course you are right, but then again you'll find that one of the conclusions from their paper was that many bitcoins are in some way dormant, while a much smaller number is very active. The point is that this is a clue to the amount of fiat invested in Bitcoin, which I believe is much lower than number of mined coins * price (I would guesstimate somewhere around 100 million USD).

As the price goes up further, some of the currently dormant coins will wake up. If I were an early adapter in possession of 25k BTC, a price of 24 USD would probably be a good moment to sell a small percentage to cover your initial investment. As the price goes up even more, I might sell some more to buy a car, a yacht, a house or whatever. The fact of the matter is that right now, bitcoins are far more scarce than we believe them to be.

I have a feeling this won't be embraced by banks. If anything, I think they will be the greatest threat to bitcoin by either lobbying governments to stop it, or a direct attempt to sabotage it.

||bit

Except for the small, upstart, 'renegade' banks that are shooting for the fences and adopt the disruptive superior bitcoin tech. to intentionally out-compete and bring down the big, entrenched, dinosaurs. It's how capitalism is supposed to work.

I believe it is unavoidable. And banks aren't all that bad, they do provide useful services. They are simply much too large and costing all of us too much money due to the fact that they are so close to the money creators at central banks. Bitcoin will take this away from them and there is absolutely nothing that can be done about it. Sabotage is highly unlikely to succeed and lobbying governments won't work either, just look at the war on drugs.

Bitcoins are probably a great long-term 'investment', but...

1) Many people have good reason to not trust MtGox.
2) Go back to #1, it's a huge problem.


Some of us remember May/June/July 2011, so it's a wise idea to sell some into big rallies, or BETTER yet, spend some BTC and/or help build the economy with useful projects.

Haven't logged into my MtGox account in over a year.  I've bought and sold many bitcoins in that time and find the alternatives to be quite good.  I don't see how not trusting MtGox is a huge problem.  I hope they lose more trust and marketshare.

just curious, did you use the mtGox price as a baseline? thanks.

I hope they lose marketshare too, they control way too much of BTC's trade at the moment.  Until that changes, I agree with Bit_Happy.

Bitcoin hasnt increased in value fiat has dropped in value  ;D

The thing is, this is actually true. Of course the effect of Bitcoin on the value of fiat is still insignificant, but I can imagine a future where Bitcoin becomes a serious competing currency.

I don't believe this will be a zero-sum game since the technological advantages of Bitcoin will be good for the economy and thus create wealth in itself, but I have to admit that most of the wealth we as early adopters gain, will be at a cost to all the fiat money in the world. However, since there is so much of it, I doubt anybody will notice. And fiat has a long history of becoming worth less every year anyway.

It's perfectly possible to do wihtout MtGox in my opinion. Hope the competition keeps growing.

Nope, I base my prices on what I can replace them for on the markets I do use.

What is a fucking singularity anyway?

There seems to be multiple definitions.

This is also the normality.

I was under the impression singularity meant stabilization? I have been wrong before though

As you approach a singularity, value approaches infinity.

In other words, Bitcoin will eventually be worth more than any amount of fiat currency in the world combined? :o

x/0 = ∞

you all might be posting in a sockpuppet thread.

you know the guy who posted that a graphic that included
"the new paradigm" comes before "big selloff"

OR

its just my usual paranoia.


Anyway
Bitcoin Singularity
is an anagram for
sin city abultion rig
which clearly refers to the end of fed-printed money
by butterfly laps (pun)asics - could it be anymore clear?

I think there will be a correction before we hit infinity.

made my day

The singularity is not the value of bitcoins being infinite in real terms, it is the value of a bitcoin approaching infinity in terms of fiat, since the value of fiat approaches zero over time.

I used the term singularity to compare the future of Bitcoin with a technological singularity, where increased (artificial) intelligence leads to an acceleration in technology. For Bitcoin, the singularity is point at which Bitcoin becomes mainstream, which could end in a price explosion much greater and much faster than is currently expected.
 
I don't know for certain when or even if this is going to happen, but I do believe it is a plausible scenario due to the fact that most people simply follow the herd and don't want to be left behind. And because we haven't reached that point yet we are either the lucky few who got a first class ticket on the greatest ride ever in financial history or we will simply lose a lot of money.

Thanks for that explanation.

We used "Paradigm shift" in the day. I'm getting old.

Well it is a paradigm shift as well, obviously. The trouble with using terms like singularity, paradigm shift, black swan and tipping points is that I'm going to sound like the Pointy-haired Boss from Dilbert :)

A singularity means a place where the behaviour changes completely and suddenly from what it was before. The its not a gradual change, its a single place where the change happens. Its often used to mean a place where the behaviour becomes unspecified or multivalued.

The OP says that he expects bitcoin to explode in value soon, and I agree. Here is one way I explain why this is going to happen.

The demand for Bitcoin is very much determined by *how many* people are involved. The supply for bitcoin, is pretty much fixed, or if you like, determined by price becauce to a degree higher prices do release more coin on to the market, but not as much as you might think. Sure, some will sell if the price goes up, but plenty of other fol will also say, well if its gone up this far I shall hang on. Yes, some bitcoins are mined, but I dont think thats very significant these days.

So price is very sensative to the number of people involved.

Now what is odd about this is that each person involved talks to other people, and over time perhaps at a linear rate, some more than others, gets other people involved. Consider bitcoin like a bubble, it started with a person called Satoshi Nakimoto and his friends, and gradually the word has spread. I see it like a circle. Inside the circle, everyone knows bitcoin. Outside, nobody does. At the border people talk, and after some talking some of those people move inside the circle, it gets a bit bigger. This is a bit inacurate because all the people in the circle know and talk to people outside (and suck them in!!) but you get the idea. Now here is the whammy: As the circle gets bigger, not only does its circumferance get bigger, read the conversations and conversions of people outside the circle but, and thei sis the important point the rate does as well its an upwardly accelerating curve that (on this model) has no bound.

Of course nothing accelerates without bound. What are the limitations? Well the main one I see is that the world is not an infinit sea of people but a finite one. Once we get to the state where everyone either knows about or already uses bitcoin, well the model doesnt work any more. (Something different is needed. This is called saturation.) You could think of it that the circle expands to fill or nearly fill the paper. Or perhaps it fills a corner of it. Point is we are noweher near that yes,  If bBitcoin reaches 1% of the size of paypal, an explosion will have happened and we will still have a long way to go!!

Mathematically the rate of expansion is proportional to some power of time, so it will go up at a massively increasing rate.  Focus on this relationship, because it is key to what is going to happen.

And the number of bitcoins in existance? Still Fixed!!

There is another anology here. Bubbles that form in a beer sitting on the table. The surface tension on the bubble is inversly proportional to the size of the bubble. So a large bubble has low surface tension and it can easily get bigger. But a small one has high surface tension, and its tricky to form. You can prove in fact that its impossible for a zero size bubble to form, and without the tiny bubble, obviosly there can be no big ones, so we just proved beer can never have bubbles. Haha! Its the same with bitcoin, If I had thought of this, all my friends would have laughed, not even bothered reading it I would have died a frustrated man, and all my friends would still be laughing about it long after I was dead. Bitcoin? Cryptographic currency they could say in their ignorance. Satoshi managed to get this thing started and once started, the bubble will grow and is unstoppable.  Focus on the dynamics, because I belive it will go ballistic.  (Dont get me started on ballistics!!)

Why does beer have bubbles in then? Its because the bubbles form round tiny particles of dust, perhaps on the sides of the vessel perhaps in the liquid, but mostly they need something to form around, just ordinary beer will not do it. Once a tiny bubble forms it rises to the top geting bigger all the time. Its the same with Bitcoin, ordinary beer wont do it needed Satoshi!!

So yes I expect a singularity, and it may not be far wrong the quote. "A Bitcoin is worth an ounce of gold, just that most people do not realise it yet. "

i just got around to reading the OP.

long and short of it is:  GREAT POST.

Thanks for bumping this thread up for me. I too just read it first time. Not just OP is excellent but follow ups are really great too. This is the thread of the year for me so far.

Thanks!

I wrote it just over a month ago, and with all the good news from the last couple of weeks, combined with the Cyprus story, we might be at the beginning of something absolutely massive.


And thanks to you as well!

Great OP by the way, but I think your analogy breaks down due to use of the term singularity. To my mind the singularity would be a point in the far distant future. The black hole where there is nothing else. ie Fiat is dead Long live the Bitcoin King. Whereas, if I may, the term Event Horizon would seem to be the point you are describing. The point of no return for our rocket ship, where the space, light and Fiat around us can no longer escape bitcoins inexorable pull and we are sucked in. We still have a very long way to go to get to a singularity, but you may well be right, we do seem to be fast approaching the main Event. If that's the case then there's a whole lot of fiat around us to be pulled in too, and become compressed at one point in the future to a single point only 21 mil coins across.

Just keep an eye out for larger black holes appearing with a greater gravity.

There are only 3 possibilities for currency:

1) Inflationary, see $
2) ~stable, see €.
3) Deflationary, see bitcoin, the only case resembling a blackhole.

What would be a larger blackhole?

A different and better cryptocurrency.

True, let's hope bitcoin is the one!  ;D

I honestly doubt it would be possible for a different and better cryptocurrency to overtake Bitcoin. I can't imagine which kind of features this currency would possess which are so superior that people would prefer it to Bitcoin, yet somehow cannot be adopted by Bitcoin itself. Bitcoin is build on consensus and if there exists a serious possibility that it would lose it's value due to people abandoning it for something better, consensus would dictate that Bitcoin should adopt those features. And as the Bitcoin core developers are some of the wealthiest Bitcoin owners I'm confident they'll act swiftly should any threat emerge (as they did last week).

The limited Bitcoin supply is also Satoshi's greatest trick. He realized that if the block reward would never end, there would always be a risk that Bitcoin users would prefer a deflationary altcoin since that would be more rewarding to it's miners and holders.

Just made a thread about exponential growth before noticing this thread:


A singluarity (mathematically) means the price would start to diverge; i.e. much faster than exponential. There is no indication of that in the graph.

How do you include a graphic directly in the post?

The Bitcoin price performance so far is largely irrelevant (and graphs by extension as well) since there is currently an asymmetry in information. Only when every potential investor in the world knows about and understands Bitcoin, you could try to predict prices according to some valuation model.

"The only reason #Bitcoins don't trade @ $100k right now is because most people either haven't found out about it.."

This is huge! :D

I kind of agree.  There's definitely something to be said for critical mass, and if Bitcoin gets big enough, it'll have plenty of momentum to carry itself through any feature advancements made elsewhere.  Sometimes the king can be dethroned though... (MySpace)

great post OP. i had some of the same ideas but you nailed them down :)

Great thread, Zomdifros, and a great post.

FYI, if you're not familiar with the backstory; Vladimir was the first person to apply the term 'singularity' to bitcoin...

Thanks, I was unaware of that.

I do think we are currently in a phase which could be described as a singularity or an event horizon. There is a lot of media attention right now, venture capitalists are already investing heavily in Bitcoin or Bitcoin-related startups and we are just a few steps away from institutional money investing in Bitcoin.

The best part of this, is that once people realize that Bitcoin is safer to have your money in than other currencies, there is less reason for them to sell any. It's not like Bitcoin is a stock which can perform badly if the earnings are disappointing. It could really only go up from here. The only thing threatening Bitcoin is having a bad reputation due to hacks, exchanges messing things up or technical difficulties, but this will correct itself over time. I'm getting more and more convinced that Bitcoin is the greatest investment in the history of capitalism.

This.

Nice post OP :)

Bitcoin needs to pass certain evolutionary stages before it reaches the singularity.

When it has surpassed the evolution it requires (in the social/political/global scale) then it will be primed for the singularity.

There will still be certain stages that it will need to evolve past once past the singularity, which will be impossible before this time. But after this time, not only will it be possible, but it will be inevitable.

edit: and I totally agree with you, pandora's box, but inside carries freedom :)

What he said.

And concerning the banks - they can fight, and the more they do, the strong btc becomes, through acknowledgement, attention, printing of fiat, even governments trying to make it 'illegal' will strengthen it (via massive attention and unrest of general populace will draw crowds to whatever is disrupting their disliked governments).

It will be swim or drown.

It's coming. Soon price increases like today's will look very small in comparison to what kind of leaps we will take forward.

It's happening.

This guy.

Might very well be true.
Currently the "greatest investment in the history of capitalism" is that of the Rothschild family, having invested in the monopoly of monetary creation.
Bitcoin is playing in the same league.

I wish I had read this in February 2013! I wouldn't have hemorrhaged money on alts before trading back.

I realized this earlier today while driving my car.

The more people invest in it, the more people will want it to succeed.  Nobody wants to lose their money.  Nobody is going to *let* Bitcoin fail now.

This is a built-in protection for Bitcoin.  Probably the most powerful one possible.  

This is wonderful news.

-Burger-

The thing is people with on paper very different interests/agendas could have privately  invested in BTC , so they will protect it too.
thus corrupting the $ system.

 

https://bitcointalk.org/index.php?topic=323988.msg3625475#msg3625475

Too early?

The nature of speculative bubbles is everyone feels like a fool at some point, but the greatest fool is the one who didn't ever cash out (even greater than those who never bought any).

Selling 1/3 of my investment (purchased at ~$69) at $712 and buying it back today at $389 was one of the best moves I've ever made.  Nothing was lost and enough USD capital was freed to fund some of my future projects.  The fools are the ones that never acted at all.

Well it's starting, that's for sure. But this could go on for a few more years, going through multiple boom and bust cycles and reaching a higher platform each time. So far there's not that much money invested in Bitcoin yet, with individual investors still being the largest group. Even the venture capitalists seem to have invested more in Bitcoin related start-ups than in Bitcoin itself, never mind the really big institutional money.
 
Since the senate hearings I'm also more convinced the legal matters will be resolved in a way positive for the Bitcoin environment, as the politicians aren't complete idiots either and want to see economic growth, innovation and jobs. From this point on it's a waiting game until we reach much, much higher prices. The market will probably overreact at some point as it did with the dot-com bubble in the late nineties and enter a longer period of stagnation, but even the peak might still be a few years away from now.

7 million bitcoins never move? This is a confusing claim. First of all, the paper use a 3 month threshold. But it is too aggressive to say anything on a 3 month period. Second, 7 million is the number that is received by an address which never sent. But this is not quite related to the concept of dormant bitcoin. The reason why we have this high number, is because, most of the transaction, when the owner sends some bitcoins, the remainings will send to a new address, rather than keeping in the old address. If you look at Dormant Bitcoin Chart at dormantbitcoin.com (http://dormantbitcoin.com), you can have a clear picture how many bitcoins are dormant. 

Bitcoin is showing us the way to the Future and 100 years form now they will write this story as a great peace of advancement for the Human Race at least technologically speaking. Although more advance digital currencies will come into play they will all probably be linked to Bitcoin just like U.S dollars are mostly linked to the world currency prices and a marker for exchange. Remember also that BTC is not just an exchange of money it has so many other intrinsic values attached to it. I can easily see the price of BTC going towards the Million USD mark within the next 10 years as the market cap keeps increasing and the demand, services and companies grow using BTC as their primary currency of exchange or service. :)

+1 .. thanks qiwoman!

I think the amount of dormant coins is even much worse than this 7 million, if you take into consideration that the big-users have multiple addresses and move from one address to another occasionally - let's call this "sleep-walking"; it is something I noticed when looking at the top 100 addresses.

Yes, first it has to pass trough the pricedownduetominingularity phase.

In your sleep-walking case, the bitcoin should not be considered dormant. The definition of dormancy is the time duration since last sent.

Also, I believe the largest addresses are associated with some service provider, such as coinbase.