Bitcoin Forum

I'm John Nagle, the person behind Downside (http://www.downside.com). Over the last decade, we predicted, well in advance, the dot-com crash (company by company), the oil spike, and the mortgage crisis. We've also explored some financial scams - Enron, Madoff, and their ilk. Downside was written up in Business Week, CNN, Fortune, etc. Our track record speaks for itself.

I've been looking at the Bitcoin world. It's amusing watching the classic forms of financial trouble happen in miniature. I have no financial position in Bitcoins, so I'm looking at this neutrally.

So what's wrong in the Bitcoin world?

First, it looks like a bubble. Here's Bitcoin before the Mt. Gox debacle:

http://www.downside.com/charts/bitcoinjun2011.png

That just screams "bubble" to anyone who's seen one. Bear in mind that the Bitcoin system generates no revenue. All funds must come from new investors. This is not like a startup company. This is a zero-sum game. If you've been in the game for half an hour and you don't know who the patsy is, you're the patsy.

Second, Bitcoin is supposed to be a currency, but it's actually a speculative vehicle. If Bitcoin were a successful currency, there would be many merchants using it for small transactions, with perhaps some speculation on the side. In practice, the speculation dominates.  This is the real problem with Bitcoin. If it had been launched as the payment system for something like music tracks or smartphone apps, it might have worked out better.  Or not; "Digicash" and "Beenz", the two previous rounds of this idea, also tanked.

Third, the organizations in Bitcoin's ecology are very flaky. Mt. Gox is two guys in Tokyo who are in way over their heads. We don't know much about Tradehill, which is somewhere in Chile. Neither of these "exchanges" has a published business address, a Dun and Bradstreet rating, published audits, or regulation as a bank or money transfer firm. Yet they're acting as depository institutions for sizable funds belonging to others.

It's amusing watching the Bitcoin community flail around. Most of the classic financial disasters are being re-enacted in miniature. We have pyramid schemes, tulipomania, bucket shops, pump and dump... This would be fun if it were an MMORPG.

why does everyone make this mistake when it's clearly a

John, I agree with most of your points.  The only point I would question is if Bitcoin is truly a zero-sum game.  While it does appear that way, I think the aspect of mining or creating ("minting") bitcoins means it is not a zero-sum game.  It will be once all Bitcoins are mined, but not in the meantime.  

I'm going with 'It sure looks like some profit taking after each substantial run-up.
Looks like standard hard asset trading to me.

BUT what do i know. I'm just a miner.  Keep loosing them in your lost wallets. I'll mine more for ya.

I agree for the most part: yes I think bitcoins are overvalued, they will go back down in price, most of the recent increase is speculation, etc.  However, I think you fail to take into account the rabbid 'fanboy' nature of many people involved in bitcoin.  They are so zealous about seeing bitcoin succeed, they often do irrational things to try to 'keep bitcoin alive', eg. mining at a loss, holding bitcoins to artificially reduce supply, buying bitcoins to keep the price afloat, accepting bitcoins for items at less than market value, etc.  So while I think the price will come down perhaps significantly, I think there is a core of fanatics that will keep bitcoin afloat to some degree despite any rational reason for doing so as compared to stocks, etc. where people are merely in it to make money.

I see you have the ability to post a candlestick chart, any other analysis besides the usual newbie - "It's a bubble"?

You'd think you were just parroting people in the forums, honestly. I look forward to your next post filled with fundamental and/or technical analysis.

This comic could not have a better timing:

http://a.yfrog.com/img737/6146/3zng.jpg

On a more serious note, how do you explain that TradeHill has been trading for days after the MtGox hack, and both volume and price are rising.

sorry but bitcoins have a use.  Because of bitcoins I have a capability I did not have before. I can easily send money to someone in a random location on earth with NO logistics troubles other than getting their address.  If you don't think that this marks a major turning point you are simply small minded.

Bitcoin is still an infant, there are big things to come.

There a couple of other "values" to bitcoin as well... it's naturally deflationary, uncounterfeitable, decentralised...

We can all predict bubbles that have already happened. Few of us can predict them before they do.

People are so stupid. No one cares about your pathetic analysis. You know nothing about this technology, and the reason for the speculation and market bumps is because people like YOU.AKA People who don't understand what this is, and will probably never will. Just keep "speculating", god knows that's what you do best.    ::)

kiba, we need you! :D

Of course, Bitcoin does not generate revenue - but neither does gold, right?
Bitcoin has unique properties that make it useful in some contexts (just like gold) and that is its baseline value. Everything above is speculation or hope of growing use in the future (again the same as with gold).

Bitcoin is a new web-technology that enables people and startups to do new things which were previously impossible. Nobody can accurately determine the true value of this, but we all place our bets and that's what makes up the price.

I personally would not underestimate the creative potential of the community which Bitcoin has managed to gather.

Hi Mr. Nagle, I dont think you should own a computer, being IT illiterate and making claims about something that revolves around IT experience is very important.

On a more genuine note, you are no different from alot of other so-called experts who are making claims about something that isnt even remotely provable.

The U.S. Dollar doesn't generate revenue. Gold doesn't generate revenue. Oil doesn't generate revenue. Are they worthless?

Anything that reduces transaction costs has monetary value. The patsies are the miners who sell cheap.  

Bitcoin is still a 'baby' in its development stage. It would be folly to judge where it will stand in even 2 years from now.

Your criticisms could be levied against gold or any commodity as an investment vehicle. Yes, Bitcoins are not stocks, but that doesn't mean they aren't worth investing in. Or are you suggesting that every non-revenue generating asset is a zero-sum game for patsies?

For a guy whose entire raison d'etre is dooming everything to failure, this is a piss-poor example of the art.

Money has to have revenue?  What are you on about mate? ???

Not possible.

If you're in, you're in and if you're out, you're out.
Nobody is neutral.
Next you'll be telling us that there are no absolutes.

The counterpoint to this is that all money is in a state of permanent bubble - the value of money is always higher then it's substrate - that's like the very thing that defines money.  Also that additional value comes from speculation - the source of money value is the speculation that in the future someone will accept it as a payment for something else.  Historically (as it is very well explained in http://szabo.best.vwh.net/shell.html) this additional value was gained gradually.  It was growing from real barter value of things and from how easy it was to use something as money.  But this small steps process is only the way evolution works - it is reasonable to think that we can also 'engineer' money and leap over the many evolutionary steps.  It is also plausible to think that the appreciation we have of art (and of gold as something used to make it) is the evolutionary effect (or co-effect) of the fact that it is useful as money.  Of course all of this is very risky - and there is no guarantee that the value of bitcoin will not drop down to zero very quickly (due to it's bubbly nature) - but this is fair for a 'startup' currency.

Another possible counterpoint is that bitcoin in it's core is also a money transfer mechanism that can be used in all the places where PayPal is now used.  Sure it is not yet there - but again - this is the startup phase.  A $1.5 billion evaluation for a system like that is not unreasonable - as we have seen.

Gold is tangible.  Bitcoin in intellectual property.  More specifically, intellectual property with no patent.  

For Bitcoin to be successful, it must not only provide a service that differentiates itself from other payment mediums, it must also protect it's business model or concept.  You can't create gold, alchemists have tried for thousands of years.  You can create an exact copy of Bitcoin and just slap some other name on it.  That's the real problem here, some of you are so amazed by this idea that you can't see the simple fact that while it may have been a really ingenious idea, it can be copied to infinity.

Gold has value because of its scarcity.  Everyone is so hung up on the fact that Bitcoin is naturally deflationary when in reality it's exponentially inflationary because anyone can copy this idea at any time.

John, if these problems are as classic as you claim, then surely their solutions are also classic, and will be straightforward to implement.

What then is the issue here?

He did recommend a movie back in September...... Gordon Gekko's back!!!

ooo, oo, that looks just like another graph I have seen.

http://www.chrismartenson.com/files/u4/Exp_Money_Exponential_Money_v2.jpg

Dear John,

you are right on everything. But you forget that we love the idea of a decentralized crypto currency. I don't trust in dollar, yuan or euro. Everyone for a particular reason. The dollar is just printed like the us government needs it. Yuan is good protected and artificial underrated by the chinese government. And the euro isn't safe, because eu isn't really stabilized. Where is the world currency, which we need for a global connected market?
No it isn't bitcoin. But i see it as worldwide crypto currency version 0.1 and somewhere it has to start.

one thing is for sure, nobody on this forum is actually good at making money in the real financial market.  If you are good, you would not be here, you would be managing portfolios and dishing out advice for wealthy clients while raking in huge consulting/management fees.

I think your right, I think most of the people here are expert IT people who understand the technology that is at hand. Sure there can be competing crypto-currency operators who can duplicate our code. Just how gold and silver compete today, we will be the gold standard, and any other crypto currency that trys to ride off our backs will be silver or bronze.

The "rabid fanboys" certainly do exist, as can be seen from the replies in this thread. To prop up Bitcoin, they have to back their rabid fanaticism with substantial amounts of hard cash.

The OP was entertaining, to say the least.

First, you can look at Bitcoins in a lot of ways.  But to compare it to Digicash and Beenz really shows that you haven't done your homework.  Probably a lot like predicting "the dot-com crash over the last Decade".  (That would have been a little more impressive if done in 1998, and not over the last decade.)  Digicash and Beenz have only a very little bit in common with Bitcoin.

If you look at Bitcoins as analogous to the Gold Rush of 1849, it might provide a better parallel.  Early miners made a lot of money, while later miners "made a living".  If you had never heard of a gold rush, and 1849 hit, and you heard of a lot of people getting rich on gold, you (as an uneducated person) might be tempted to buy gold.  This, of course, would be silly, except that a lot of people buying gold drives the price of gold up, and so as gold gets attention, people see that others have made money buying gold, and so you get the bubble.  People buying Bitcoin is a lot like people buying gold in 1849 - it doesn't make a lot of sense, unless you believe that it either is a) a good store of wealth, or b) going to rise in utility /value in the future.

Bitcoin is going to get more attention primarily because it has solved a problem that has never been solved before - Beenz and Digicash didn't solve it.  Paypal and Mastercard didn't solve it.  Cash doesn't solve it.  Bitcoin has a very clever solution to a very difficult problem.  And it's the first to solve it.  So Bitcoin is going to get attention.  And with attention comes investment.  And with investment comes a rise in value.  As long as Bitcoin continues to GROW in the attention it gets, chances are good that people will try to figure out how to invest in it.  And to see that there were only 61,000 accounts in the Mt. Gox leaked database, that shows how truly tiny the Bitcoin community is.  In fact, there were less than 10,000 prior to May 15th or so.

It will take YEARS for the Bitcoin infrastructure to approach that of regular currencies.  That's obvious.

Many people who have taken a close look at Bitcoin from a mathematical standpoint see the beauty of it, and instantly want to "invest".  Unfortunately, there's no "Bitcoin Corp" that is a reasonable investment, so the best they can do is buy the currency.  This will continue until some obvious leader becomes "invest-able" at which time, a significant amount of "Bitcoin speculative investments" will go that route.



Currency speculation isn't the best way to make money in Bitcoin.  Building the infrastructure is.  (There's a reason why the remnants of the Gold Rush of 1849 are Wells Fargo and Levis Jeans.  They made sound investments "around" the gold rush, not in it.)  But there's a short term opportunity to make some cash on speculation, and there's nothing wrong with that.

If Bitcoin reaches Paypal's level of success in a decade, then you can do the math - there's a limited number of Bitcoins, and that number needs to support the sort of environment that Paypal supports.  So that means they will be worth over $100 in about 7.5 years.   Not thousands.  Not mllions.  But between $100 and $200.

But if you build a nice Bitcoin Company that will benefit from this trend, and go public, the public will flock to you (assuming you have a decent plan, and Bitcoins keep gaining in mindshare.)

I think the reason why he's wrong, and your wrong for believing him is because bitcoin is not some type of company, or group of people trying to take advantage of an original idea. I think that bitcoins are a divine currency that everyone has equal access to, whether it's praise or concern, this community proves it. We are all bitcoin, bitcoin isn't some exchanger, or business, or group, bitcoin just is, like the Internet itself. We are creating an entirely new web of powerful encrypted transactions that not even the best hackers in the world can crack. Tell me how that's not value people?

Or, you would have made enough to comfortably surf the forums and watch everyone get BTC valuation completely and utterly wrong. I haven't seen so much 'bubble' talk since reading up on the South Sea Trading Company. I wouldn't be in equities if you paid me, because the dollar is about to keel over and die a horrible death. Good luck moving anything out of that deathtrap once it collapses.

That goes for standard banks too, I wouldn't have anything in there you aren't prepared to lose. Because when it happens, you better believe they'll clamp down on anyone pulling out any funds at all.

Best of luck!

Hmm, low startup 100%-1000% profit margins(if you started by early may) compared to high trading startup fiat currency markets ?

This is more fun, more profitable with low startup funds(big margins on trades), damn its so obvious why this is worth doing. I dont say if you succesfully trade other markets that you should invest all your time in bitcoins however investing a few hours a day can bring you alot of profit for very little stress.

Or talent.

And we are all working as a community to show our talents now that the currency is actually worth something. Go check the developers section. I bet all you finance types NEVER GO THERE.

The OP is just trying to drum up traffic to his site.  I'll save you the time ... there's nothing there but Amazon referral links.

Digicoin and Beenz failed because they were centralized, and had investments in the technologies and companies themselves.  Bitcoin cannot fail, because the technologies were developed for free and they are decentralized and open source.

It may devalue to the point of buying pizzas with 10k BTC again, but it will never fail completely.  Bitcoin can't file for bankruptcy.

Perhaps we don't like some idiot telling us that we're a bunch of naive, know nothing, amateurs. It's insulting. Not only is it insulting but you're wrong, wrong, wrong and wrong again. You've added nothing new to the debate. You've just offered up the same flimsy arguments that have been trotted out a thousand times already.

The great thing about all this is that one day we'll know what the truth is and we all have an opportunity to put our money where our mouth is. Bitcoin has good fundamentals. If you can understand why that is then buy some and see what happens. If you don't understand why it's unique then don't. Go away if you're not interested in learning.

Nobody is forcing anyone to invest in Bitcoin. What do you hope to achieve here?

I'm clipping your post but you make a lot of valid arguments.  I think the biggest "infrastructure" Bitcoin needs right now is a reliable and secure exchange.  Somewhere that will provide volume and liquidity while at the same time giving investors confidence that their funds (currency or BTC's) are safe.

The Mickey Mouse exchanges we have in operation right now are just not going to cut it.  The first group to make a legitimate exchange will not only greatly increase Bitcoins chances of survival but likely make a nice profit as well.

OP is jealous b/c he struggles against all the other add-no-value-types to beat the S&P, while some risk-taker punks have invented a whole new market right under his nose.  Of course he has to come here and shit on it.

Put your money where your mouth is OP - Short BTC if you think it's going to fail.

I think MTGOX will be better than ever when it comes back. They are taking the necessary time it takes to properly secure their website, so the clowning won't happen again. I think its amazing that people think that bitcoins are "invaluable" only because one exchanger gets hacked. Look at the price on Ebay, Bitcoin7, Tradehill, and every other exchanger. It's almost like nothing ever happened. You know WHY? BECAUSE BITCOIN PRICES ARE NOT PEGGED TO ONE EXCHANGER.

I've seen several posts that echo this sentiment. What the authors of such threads fail to recognize is that fringe ideas are not embraced by the mainstream. If we all waited for Dun and Bradstreet, Goldman Sachs, etc. to enter the fray, BC would not be a new, radical idea. It would be part of the establishment. Oh course it's going to start off with two guys in the basement on a shoestring budget. How do you think Kinko's got started? Was Linux backed by Microsoft?

I imagine that centuries ago people were saying stuff like "You put your money in a Swiss bank? Are you crazy? Those guys are flakes without any established reputation or credentials."

Is there risk with BC's? Yes! Is there risk with any new, unproven idea? Yes! IMO, the author of this thread misses the whole point of BC's.

Matt

Fixed.

I'm not an economist bs-filled or an economist at all, sorry for that, however I'm connected to web developing and even not being a designer. Man! You're even using Comic Sans for your headers... I really don't know what can be more amateurish than that, except maybe one or two marquees rolling without any relevant information.

You do know that in order to be taken seriously outside of the geek circles, Bitcoin needs people like the OP, right?

Understanding the technology does not a viable currency make.

I think people who predict failure can never see past that.

The most classic part is Human Nature: After an extreme boom (greed) there is always extreme bust (fear)
Bitcoin will be fine, but short to medium-term you can expect to eventually see BTC for ~$2.50 (give or take 100% in either direction)

I felt like responding to thank you for making a thoughtful post, if for no other reason than you're predictably getting the broad dismissal from the bulls. I definitely agree with analysis of the fundamentals of the market, though one thing struck me as I visited your site:


This rather plays in to the criticism of many long term bears, in that it's said if you predict a big crash, correction or recession sooner or later you're bound to be right at some point and you can accept your 15 minutes of fame. Trying to act on those regular predictions can be much riskier though, as the classic quote goes "Markets can remain irrational a lot longer than you and I can remain solvent". Which isn't to say that I suggest speculating in bitcoins or participate in it myself, merely to suggest that bubbles are much easier to identify than to time. If you accept a rather straightforward analysis that there is no fundamental value represented by bitcoins and that it's entirely priced by speculation, then that suggests the bubble has been ongoing for quite some time and could easily hold out longer than the recent top might make it seem.


I agree that this makes the entire phenomenon fascinating. The communities openness to such transparent hucksterisms like the pyramid schemes seems to speak volumes about the main interests in bitcoins. And while I'm not schooled in such things, this also seems to be a rather unique twist on the pump in dump where there appears to be no central actor with the pumping actually done by all the market participants themselves through some kind of ad hoc understanding. It really feels to me like it's been taken hold at least in part by penny or otc manipulators. Very interesting to watch, seldom do you get such a raw view of it because of the legal implications. I just hope nobody is risking their retirement of college fund.

Cheers,

Yes, but we don't need people like the original poster who provide a chart with nothing to back it up. Oh, and an 'investment pro' that thinks currency has 'revenue'. You've got to be kidding me. Sounds more like someone got out of business school and is a junior analyst somewhere...

True because then it would mean that they have to admit that they're wrong. When I'm wrong I admit it, but man people outside of the IT world NEVER admit their wrong. And sometimes they don't even shut up knowing that their wrong lol. Look at the tea-baggers
http://cartoon4all.files.wordpress.com/2009/11/i-want-my-america-back-cartoon-obama1.jpg?w=500
http://www.members.authorsguild.net/delorys/images/i-want-my-country-back-protest-sign-330.jpg

Maybe the thread title should read: "Watching finance types with amateur websites fail"   :D

;D ;D ;D ;D ;D

Ok, you kept trying and got it. By the same logic I can predict oil to fall to 5 USD or less, as eventually people will find technological alternatives and will give it no more use. Just that I would be saying this every year for 20 years(?) until eventually get it right.

That you may not like the solutions.

I will redo your entire website for you, custom design and everything. Check my work at http://tweetforum.com . I will ONLY take BTC's and I will only charge you 10BTC for this (which is less than 200 bucks for someone redoing your whole site.)Honestly it looks like a joke, and undermines the entire validity of your post. Let me show you why BTC's are valuable.. I put my time AND money where my mouth is.

This is an excellent post. Very well said. I'll be saving this one as well...

I posted this elsewhere, but it bears repeating:

http://imgs.xkcd.com/comics/security.png

The technical hubris in this thread is quite amusing.

Look at the dates on Downside.com's "deathwatch".  Deathwatch ran from 2000-2001, starting at the peak of the dot-com boom. We predicted the crash when others were hyping the boom.
Digicash came close. They had an anonymous digital currency. The technology was good enough. but David Chaum, who owned the technology, botched several potential big deals, including ones with Microsoft and Visa.

How issuance of a digital currency should work isn't clear. Digicash and Beenz were centralized.  Bitcoin is based on compute work, with a heavy bias towards early adopters. That doesn't seem to be leading to wide adoption as a transactional medium.  Beenz got much further in adoption, and it tanked. If coins were somehow generated by doing useful work, that would be better.
Ah, the Big Four. Huntington (hardware), Stanford (railroads), Hopkins (hardware), and Crocker (iron). The real remnant of the Gold Rush is the Southern Pacific Railroad.

There's something to be said for that.  

The experience of PayPal is significant.  PayPal is all infrastructure.  PayPal is really a security company. They started by building authentication tokens. Money transfer came later. Most of what PayPal does is deal with security problems. Processing a successful transaction is very cheap. Dealing with trouble requires call centers, investigators, and substantial automated systems looking for fraud. PayPal originally offered peer to peer transfers, but the security problems associated with that were too great.

The Mt. Gox debacle indicates the same may be true for Bitcoin.


August 16, 2001: "If you've earned any Beenz on your travels around the Web, you'd better hurry up and spend them." (http://news.cnet.com/2100-1017-271741.html) "Internet surfers have only 10 days to use up their Beenz after the company announced Thursday that its online operations will cease Aug. 26. Any outstanding Beenz will be worthless after that date. A short message on the Beenz Web site announced the close and said any Beenz in a member's account after Aug. 26 "will be invalidated by Beenz.com, and the member will not be entitled to any compensation of any kind for such invalidated Beenz."

Although Bitcoin is distributed as to generation and transfer, it's centralized as to exchanges.  A sizable level of activity is required for an exchange to have market depth. So there's a network effect which tends to keep the number of exchanges down. (Yes, potentially there could be a combined ticker and a consolidated limit order book. Those only work when there's a separation between brokers and exchanges.) So, if Bitcoin winds down, it will be because it becomes illiquid.

Heh, good point.  But instead of a $5 wrench, you just use OS or website exploits.

Indeed. BTC currently is only as strong as the exchanges (because there is hoarding and no liquidity), and let's face it, they are amateurish at best (and no, I'm not equating BTC with Mtgox, but the others do not fill me with confidence either).

Was my first thought as well 'is he talking about himself?'.

The points in this topic have been discussed to death many times, I don't understand why people keep putting up with it.

Both people plugging bitcoin and people like you that try to talk it down have their own agendas. Don't tell me that you posted this out of altruism to warn us :')

That's a problem with CENTRALIZED ISSUED CURRENCIES, actually you can see that to happen with US Dollar, Euros or any fiat/country currency around the World. Bitcoin is immune to that, nobody can say from date X on you can't use bitcoins.

Or that you CAN use it :)

I like how many these posts are just flaming the guy who started the thread. Great community!

Nagle, everything you've mentioned has already been discussed ad nauseum on this forum. None of your obvservations are anything new. I'm trying to figure out the point of you posting this. Was there one, or did you have something new to contribute that you perhaps forgot to mention?

Agreed.  But that wasn't the situation with the housing crash. There was this weird mind-set that housing price increases created wealth, while in reality they were just a form of inflation. What we saw was that historically, the median house sells for 2 to 2.5x the median income. When that number hit 4 across the US, and 10 in some areas, it was blindingly obvious that something had to give. Nobody could make those payments.

The housing crash was delayed two years by Greenspan, who had the Fed cut interest rates when it should have been raising them. ("It is the job of the Fed to take away the punch bowl just as the party gets going" - William McChesney Martin, early Fed chairman.) When the crash came, it was much worse.

The dot-com crash was straight cash flow. There were people saying "revenue doesn't matter." What mattered was "clicks".  When the initial funding ran out, so did the company. It was a very strange time. I'm in Silicon Valley, and watched it all happen.

The current real-world economic situation is so driven by public policy that we've given up making predictions.
 

Agreed.

I was being dead serious about my offer to rebuild his site for 10btc.

He has no understanding of the coins. He thinks that the computers mining these coins are operating a "useless task". How is securing millions of dollars worth of transactions a "useless task".

You have no understanding of the currency Mr. Nagle , and I mean that with all sincerity and respect.

+1.  In fact, Mt. Gox is keeping a lot of money extremely secure!!!

John N -- you've got great insights into the world of finance & trading it seems.

So please help us wrest control of money away from the elites (AKA powerhungry bloodthirsty homocidal maniacs).
Bitcoin seems to be the only solution to this persitent problem.
Got anything better? Any other ideas?

"Give me control of a nation's money and I care not who makes the laws." -Baron Rothschild

P.S. No one would help the poor, freshly robbed & hunted european jew in the late 30's. Now, a jew with coins stashed offshore, which the "authorities" couldn't confiscate -- was a very different story.

So bitcoin is the answer to preventing the holocaust?

Come on Anduril, you troll, defend the dollar and fiat currencies.....

Allude to other threats with weaponry and drugging people. That's what the US does is it not. The value of the dollar down the barrel of a gun..... Nice.

Bitcoin could have prevented many things if it would have been around in the past. I think it would have been impossible for Hitler to go as far as he did, if he wasn't able to confiscate the "hard funds" that he took from every country he conquered.

lol wow.  Wish I had heard about Silk Road before it went down - sounds like you've been getting some KILLER dope on there!!!

Lol, I don't do drugs :).
And if I did I wouldn't buy them from silk road.  ::)

Maybe if they had invented Zoloft back then is a more plausible sollution than BTC preventing the holocaust.  I mean seriously.  Bitcoin wouldn't have prevented paintings, jewelry, real estate, and many other things from being confiscated.

It just makes you look not only ignorant of BitCoin, but really shows you have absolutely no knowledge of what the holocaust entailed.

I think if bitcoins were around that war would have never happened, genius.

You're thinking of Bitcoin as the modern equivalent of "the free and unlimited coinage of silver". (Read up on the Free Silver movement.) That was a different problem, though. That period had a growing economy with a fixed money supply tied to gold. The result was severe deflation. That's not the problem in the current US economy.

Your quote has nothing to do with what I said BTW, I think you replied to the wrong post.

However, the xkcd cartoon is in jest to exemplify that the currency can be as secure as you can make it, and there will still be problems with security (like with unencrypted wallets and website exploits). Just as with everything in the world. It is simply a reminder that all of this hubris must be met with sanity.  

By the way, look up tu quoque fallacy (http://en.wikipedia.org/wiki/Tu_quoque). Just because there are problems with fiat currencies it does not validate BTC.

And ffs people, not everyone who is critical of Bitcoin is a troll. I am very interested in it from various perspectives, yet it seems like it has become impossible to even post a cartoon without receiving an insult!

I'm aware of what I did and it was intentional. And I don't mind critics of BTC. I think I'm pretty realistic about the risk involved. I also have a pretty decent memory and recognize constant negativity. Perhaps you are just an observer but others are observing you as well. You're an experiment just like BTC.

I'll read your link.

Guess this makes you a professional attention seeker. What other motivation do have to be here other than to appease your immature attention seeking?

An "aha" moment for you.....now use it to grow into a useful human.

Just a side note, that site resembles those car chase commentators on TV to me: «And now, he his behind bars! Will do no more harm!»

What amuses me are are watching people like you that believe they have it all figured out.  See, the upside is that this truly is the first pure money civilization has ever seen.  But, you wouldn't be able to see those fundamentals looking at your daily charts and bollinger bands.

Nasdaq peak March 10,  2000 at 5048
Nasdaq a decade ago:  2035

If you had been "predicting the dot-com crash over the last decade", you would have predicted a crash, as the Nasdaq went UP from 2035 to its current 2652.

In other words, "predicting the dot-com crash over the last decade" means you did it after the crash.

That has got to be the worst site I have seen since Netscape 1.0 was still cutting edge.  
What is with the terrible graphic at the left top?  This site just screams financial professionalism to me... ::)
Really I think that site should be taken down. Whos with me? ;)

Because they're reading the letters in their head: "em em oh are pee gee".  So it's "an em ..."

See also "an RPG" (About 4,350,000 Google results) vs. "a RGP" (About 2,380,000 results).

Why not put this into simple words?
I guess this video sums up all that site's content in 20 seconds:

http://www.youtube.com/watch?v=dQ3acvz5LfI&feature=related

Dear Mr. Nagle,

I am not a financial expert, but like many here on this forum, I do have a lot of experience and knowledge in IT.

While your credentials and financial advice may be sound, as others have pointed out, your current website seriously discredits you. From the color scheme to the layout, it screams amateur and unprofessional. If you want people to take you seriously, it would be in your best interest to have someone fix it for you.

On to the matter of your post contents, if what you say is true, why would you bother to register on these forums and deign to even give an opinion to the Bitcoin community? I think we all have a hard time believing that you are doing it out of some notion of altruism toward your fellow man.

I think most of us here like Bitcoin, minus the occasional troll, and I wonder if you fall into the latter category. It's about more than just the economics. It's about the technology and the ideals that could potentially move us forward into something new and exciting.

If you don't want a part of it, please leave. No one will be sad to see you go. We probably won't be visiting your site anytime soon either ;)


Sincerely,
One Bitcoin Community Member

Against!
I like to see mid 90's early frontpage-like sites. It reminds me of a time when I was much younger  ;D
(Missing my SEGA GameGear now... sigh!  :'( )

EDIT: If I've to point a flaw, is the site to not have several marquees (a LOT of them) saying stuff like «visit us» or «look! this text moves!»... would improve it a lot.

I hear bitcoin bubble!? It's time for a bitcoin bubble comic (http://bitcoinweekly.com/articles/comic-reaction-after-dramatic-rise-of-bitcoin-s-value)!  :D

Can we get some price graphs on other things that people thought were money that turned out to be ponzi schemes? I'd like to compare.

"First, it looks like a bubble."

Yeah, it looks like a bubble. Until you learn about it and realize it's not.

"Second, Bitcoin is supposed to be a currency, but it's actually a speculative vehicle."

Actually, it's both. Just like dollars, gold, etc.

"Third, the organizations in Bitcoin's ecology are very flaky."

I totally agree there. Opportunities abound.

I for one think that having my public keys lodged in the most elegant mathematical structure ever created by mankind is worth something.

I wasn't clear enough, it seems that the Free Silver Movement was interested in inflation, legislative control and dictating the monetary policy to its liking. I'm quite the opposite.

At this point in time, every nation-state has a central bank backed by a ruthless punitive apparatus, in order to enforce its monopoly on money (medium of exchange & store of value) on its subjects.
Bitcoin seems to be the only thing that could drive those central banks into obscurity if possible, or destroy if necessary. By enabling common folks to interact with each other without the overlords.
Globally accepted, non-inflationary, free of customs controls, ruled by no one -- it's a thing of beauty!

yep, definitely needs more animated gifs, scrolling banners and "click here" buttons.

XLF, for one.
http://4.bp.blogspot.com/_nSTO-vZpSgc/SFy4RzQiORI/AAAAAAAACz4/8v0MzNz1AiM/s400/xlf-weekly.png

Actually yes, inflation played a significant part in the rise of Third Reich.
So having access to non-inflationary common currency could've prevented a lot of misery.

n/m

Take note of the last post in his amateurish blog, called:

 "20011-06-11 - Bitcoin looks like a Ponzi scheme"

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

Wow, Thats the 201 th century! This guy is not only an expert in finance, but also owns a time machine! By the way, I am extremly worried about the ponzi scheme that will happen in 18000 years...  ::)  Must reconsider my investment in Bitcoin due to this fact.  ;D

Actually before seeing this "downside", I used to believe this one: http://web.archive.org/web/20040407003135/http://www.tecnilog-service.com/ was the worse site of internet.
Luckily the Web Archive hadn't store the java applets, in its "pure form" you could find there scrolling banners applets along with flash... it looks now definitely better that when it was live.
Took me 5 whole years to find worse, surely deserves an award...

You'd just ruining my day! Not only we come to find within 18000 years BTC will be a Ponzi scheme as we also found that 18000 years from now design will be that low  :-[

Just started reading the thread. This is the first post I have to quote, for posterity. I agree.

Very, very true,

If you were pronouncing MMORPG as a word ("Morpga?") then you'd be correct.  

However, reading the letters alphabetically, the phonetic "ehm" starts with a vowel sound, as opposed to B,C,D,G, etc.  Same story for F, H, L, S...."

"It's a BFG" - correct
"It's an L-29" - correct
"It's a MMORPG" - incorrect

You can't make money in managing "debt", all you can do is accumulate more "debt". Duh!

http://www.downside.com/cryingman.gif

^That was my reaction when I entered downside.com  
And funny thing, OP says something about amateurs...

I think some big important internet council somewhere needs to designate comic sans as the official sarcasm font of the internet.

It can never go that low again, because people like me will buy them all up before they ever get that low.

Bitcoin is NOT a currency!!!

It is USED as currency.

I have one I'll sell for BTC. ;)

as a daytrader for 12 years i know exactly what this guy is saying. I actually predicted my own demise when I bought at 30 bux but I took the gamble since this is not like stock trading...(i only invested around 10k which is fuck all in trading terms) this market acts as a share market with all the classic signs and follows, and also is different.. all i can say is if your not a professional trader i would suggest you sit on the sidelines for now or you WILL be fucked over.. I am waiting for gox to open and cash in on the panic selling. what i have lost so far is nothing compared to what I expect to make cashing in on inexperienced computer geeks or first time traders in this market. I will have your scalps.

The reason I am in the hole atm is because I didn't think a decentralised, deflationary currency would exhibit the same traits as a commodity, but it does. Human behavior is the single point of failure in this situation.

as stated in the OP my biggest worry is the exchanges, they are the next single biggest point of failure you people need recognise, more exchanges are needed that are backed by someone big.. or this will remain in the realm of a fantasy nerd currency..

I like how the guy who started the thread just flamed the community. What a cunt!

Voted # 1 bitch slap
Voted # 1 humor

True. We all know this. But few months ago Bitcoin actually was only fantasy nerd  currency, so we need time before someone serious joins this game.

'Exact copies' are not a problem. Currencies exhibit network effects that protect them from competition with an exact copy. Bitcoin is not well-protected from copies that add improved features (e.g. built-in derivatives, opt-in protection from large coin transfers, people will think of more). Network effects could protect bitcoin if bitcoin is already too large when entrants emerge. That is a huge if. Bitcoin could also protect itself by copying features added by future entrants. Copying features in entrants will require forking the block chain. I worry that the developers will not respond quickly enough, especially because many bitcoin holders will not understand why they have to act to forestall collapse (if it ain't broken...).

True. There are many that have no biz trading here. Some of the really young see an exchange and participate.....why? They should just mine/buy and hold. Conduct biz if they can.

Traders are going to get shredded.

If the exchanges can keep it together BTC should evolve positively. If not............

Well, the site is DOWNSIDE, why should it make you feel upside?

I'm thinking we should seize the opportunity here! From now on forget HTML5, CSS3, revert to Tables and use only Comic Sans, Arial and Times new Roman and sh*tty Windows 95 color scheme. When the customer says anything about how "great" it looks, just say: Back off man! This is the design they use in 20011! Want something more futuristic than this?!  ;D

Because the forum doesn't use nofollow links, so anyone wanting to build backlinks can do so here with trollbait like this.
And after 11 years online, Nagle has only managed about 15 backlinks to his home page and <750 to his whole site.

And since BitCoin is a trending topic people like OP want to capitalize on that search volume.

He thanks any of you who quote the OP, btw.

@hawks5999,

Talking of web statistics, does Alexa shows an "Average time on site" or an "Average time running away from the site" to his... thing?

Mr. Expert Financial Analyst,

As for your "track record", you begin writing in mid-2000. That is not well-before it happens. Simply echoing the bad news with a tweet-length article. Yes, it's ironic that you have 'Amateur Finance' in the title.

Also,

You have made 3 financial opinion piece over the past 2 years.
One of them is about a movie.

LOL

So now that you recognize that Bitcoins act like a commodity (only you have even more noobish and predictable folks in this market than you would in a typical commodity market), you're going to sell everything you have, buy back when the price hits rock bottom, and then play the market as if it were any other commodity?

I'm not a daytrader, but if I was, I'm sure I would be doing the same thing.  This is by far one of the best places for daytraders to make money, simply because so many people here are so new to commodity trading and rely on emotions more than anything else.

why whoudl i sell.. the price will go higher longer term, i will just average down and see what happens...

Mr. Nagle must be extremely busy as I see he had no articles to add to his site for the last 9months until the recent bitcoin drop.

Seems the industry you prefer is doing much worst haha

Corrected.

wow, it's like over 9000 X2  :)

Sorry, my brain self-corrected his inept website designing skills ;)

Value doesn't need to go up to make money, it just has to move.  As others have said, the money isn't in the speculation, it can be found in solving problems bitcoins presents so long as there is a demand for them.

No wonder he could predict all those bubbles... he's a time traveler! But good sir according to your logic BTC won't be a fad. For if the ponzi schemes of today last for another 18,000 years, then truly BTC will be one of the most enduring currencies of history.

I think some more important questions than the dead-horse ones you pose are as follows...

• Why travel back to the year 2000 AD?
• You use this "we" in your self-promoting introduction... who are these cohorts of yours? Are they also time travelers?
• Were your options limited because your kind saw it fit to destroy/detain you, and your Flux Capacitor (http://en.wikipedia.org/wiki/Flux_capacitor#Flux_capacitor) was damaged when you left in your time machine?
  
• Do you need help fixing your time machine and have you consulted Christopher Lloyd? Though he denies he could fix a real DeLorean there is clear proof in the American documentary "Back to the Future" that he in fact can!
• When the Doc is killed by Libyan terrorists in the documentary in the year 10985 was it due to the current unauthorized military action against Libya?
• Was there a major historical event that erased the web history of the 2000-2010 period that you had to resort to an 1990s design for your website?
  
• Is it because post-2011 design is so different that it would give away your ability to time travel and thus compromise your mission to warn us?
• What is that reason for which you warn us?
• In 18,000 years how many BTC do you own and spend each day?
• I doubt you actually make money via Amazon links to justify your hosting costs. Does money not exist in the future or does the USD miraculously recover starting with a reform period began by Ron Paul?
• Is the website a cover to make you appear to be an earthling from 2011 engaged in normal non-martian activities?
• Why would you warn us of the bubble if it will still allow the currency to last another 18,000 years?
• How does BTC manage to fight quantum computers from cracking the encryption over the next 18 millenia?
• Now, the question I promised I'd ask perchance I met a time traveler... will they still have Dr. Pepper in the future?

Lastly what do you have to say about this graph from your website that was recently cracked by the bitcoin network's furtively pooled cryptoanalysis power?

http://uploadpad.com/files/alienearthling.jpg

When the bubble pops will you all drink kool-aide and return to the time traveling mothership?

I can't continue to pretend these trivial things you post are of serious importance, so answer my questions instead.

The rules for "A" and "An" are not based on the actual letters, but on whether your mouth starts open or closed on the following word (which USUALLY corresponds to vowel/consonant), and in this case, since you say "Em Em Oh Are Pee Gee" not "morpig" (or something), it is "an MMORPG".  There are some other examples, but they don't come to mind.

EDIT: Also, wow, I'm late to the party, I totally didn't realize this was 7 pages long and that I was responding to something from ages ago.

1.  OP's website isn't that bad, it just lacks recent content.

2.  The comparison to Digicash and Beenz is not fair.  Neither was open-source nor decentralized.  And those aren't mere buzzwords.

3.  The comparison to a bubble and/or pyramid scheme is fair and accurate.  However, in these days everything is a bubble or pyramid scheme: Gold, the US dollar, real estate, NASDAQ, S&P 500, Enron and WorldCom, LinkedIn and Groupon, Bernie Madoff and  the SEC and their hedge funds, etc. etc..  So this point is moot.  Every investment is speculative.

What differentiates Bitcoin from the other pyramid schemes is its total public transparency.  Bitcoin is the most transparent pyramid scheme in modern history, and for that reason could turn out to be the most successful.

This. +1

Number one, my cashouts thus far prove different.  Number 2, coins are a trade vehicle, much the same as Paper Dollars, or Gold and Silver.  More akin to Gold and Silver though as you just can't create those items out of thin air as dollars can be.  They must be mined just as Bitcoins, and are of finite amounts.

Think of it in regards to a World Reserve Currency.  Oil is bought and sold(mostly, and soon not to be at all) in USD.  Countries must buy USD to purchase Oil from suppliers.  Think of Bitcoins as an Internet Reserve Currency.  You buy and/or mine Bitcoins to conduct business transactions online.  While the market at this time may be small and in some cases shady, it does exist and will continue to grow.

The fact that it has value, is finite in quantity, can be produced at expense, and is currently used in a Free Market community for Commerce proves that it does generate revenue.

__

"Bear in mind that the Bitcoin system generates no revenue."




-If you like this post please donate-

Watching professional finance types flail (http://www.zerohedge.com)

It's 7 pages...but since when is 1 day "ages"?  :D

(I made the same point on page 6) 

apparently time collided and we can interact with some folks from the future in this thread =)

No, it's not.
"an em em oh arr pee gee"

It's about how you pronounce it, not about how you spell it.

i like your attitude

I quote that, i've never seen a faster, simpler and more secure (if you know what you are doing) system to transfer money

Make a list of all your major predictions that didn't materialze in over the last decade, and a list of the ones that did materialize.  Weigh them by how much money you personally put behind each prediction.   Then tell us the ratio.

If the ratio of correct/incorrect predictions isn't higher than 0.5 you have no credibility IMO.


Logical fallacy:

Ponzi schemes exhibit exponential growth
Bitcoin exhibits exponential growth
Therefore Bitcoin is a Ponzi scheme.


No it's not. My bitcoins don't just have speculative value. They have value to me because they give me a low friction, low cost way to send money to any other bitcoin user in the world, without filling out paperwork or asking anyone for permission. That's a powerful tool.


This statement shows that you are clueless about bitcoin and haven't properly researched the technology you are advising your investors not to invest in.  



So they haven't encumbered themselves with endless red tape and unnecessary overhead.  Boohoo.

When I use a service, all I care about is whether the business delivers. The rest is unimportant.

Mtgox has always delivered for me so far, and that's why I will keep using them.  As an adult, I can judge for myself whether a business is trustworthy. I don't need a royal stamp of approval.

Obviously this is a very young economy and I can't expect bank-level security from a startup like mtgox.  But I wouldn't keep more than $1000 USD on mtgox either.

It's "A Massively Multiplayer Role Playing Game"

OP's "points" are garbage. they boil down to:

1. look at the chart, if you don't know who the sucker is, its you. Not an argument.

2. BTC is "supposed to be a currency, but _actually_ its a speculative vehicle". What does that even mean? What distinguishes a "currency" from any other asset (hint: the relevant subset of the population USE it as a common value of store. And many currencies are widely treated as speculative vehicles.  Not an argument.

3. Organizations are flaky, my evidence: "2 guys in tokyo run one website" (False, insufficent research), "We don't know much about Tradehill (Again, "I haven't done much research"), "they don't have published addresses" (How would a published address make a greater case for legitimacy?)

The "classic signs" he mentions (pump and dump, bucket shops, pyramid schemes) exist WIDELY in otherwise trusted ecosystems ("trusted" might be a loaded description, but the majority of America still has money in the Wall Street money machine).

The one comment by the OP that is worth discussing is: "The system generates no revenue". Bitcoin is not a BUSINESS. It doesn't have to generate revenue to _create value_.  This is an important distinction. If a subset of the world population decides to adopt BTC as a store of value for barter, and have decided that anonymity and instananeous transfer are desirable characteristics in an asset to the point they are willing to pay for it, then it has value.  As the set of users who value BTC's characteristics grows and creates an ecosystem around that particular asset, it increases the utility of BTC and continues to encourage valuation growth.  Its not about "generating revenue", its about creating value for its users.

xD +1

Correct.  But it's "An MMORPG".  You don't say the entire acronym out in your head when you read it, hence you pronounce it as if it started with a vowel.  It's the same as something like "Give me an M!  Give me a U!".  M is a consonant, but when you say the actual letter, it begins with a vowel.  U is a vowel, but when you say the actual letter, it starts with a consonant.

It's "an massively waste of time to still be arguing about this" when it's not germane to the economics of Bitcoin.

Also (http://owl.english.purdue.edu/owl/resource/540/01/).

Technically, the sound of U doesn't start with a consonant, but with a diphthong, which for the purposes of the a/an rule is about the same thing... A Euro, not an Euro.

And this is only because we're all bored out of our minds waiting for 15:00 Zulu (gmt), and then we can sit and watch the fireworks.

But didn't you see the chart?  That means it must be a ponzi scheme!

Nagle: Those are quite possibly some of the worst straw men I've seen against bitcoin. They all boil down to, "if bitcoin is supposed to be X, then it is failing miserably at that!" But bitcoin is not supposed to be X, or Y, or Z, or any of the other things you claim it to be.

Seeing as I am coming into this discussion 8 pages late, I will leave it at that, as others have already elaborated on the specifics (e.g. user ezl above).

Now you have me wondering how to pronounce "diphthong".

My eyes !!!


I can't see anymore!

I prefer this chart:

http://forum.bitcoin.org/index.php?topic=22404.0

it's funny what qualifies as a rebuttal on this board.
the best thing you can come up with "you don't understand this technology".

well, you don't understand manias. you assign value to something based on the potential of a technology.
good read: http://en.wikipedia.org/wiki/Railway_Mania

if you leave fantasies of what "could be" aside the fundamentals dont justify a price exceeding 1/100th of what is currently paid for a bitcoin. probably less.

rest of it here http://forum.bitcoin.org/index.php?topic=21702.0

Bitcoin could certainly be in a mania, or in a bubble, or could ultimately fail to be widely adopted, etc, but it is certainly not a ponzi scheme, not an investment, not meant for speculation, does not pay a return, and is not a business. So much for Nagle's arguments.

Then we should argue about what the "fundamentals" are of bitcoin.  Your argument seems to be that the fundamentals are some napkin estimates of money supply.

I argue the fundamental is the network difficulty, or hash rate:  http://bitcoin.sipa.be (http://bitcoin.sipa.be)

Growth in the fundamental sustains the rise in price.  At least, it has thus far.

Do you agree or disagree with this line of argument?

P1:  If something's exchange-value is derived from what enough people believe it's use-value could be in the future, and enough people belief it will be more useful in the future, then it's exchange-value is greater than it's current use-value. (i.e. price is largely determined by speculation).
P2:  Bitcoin's exchange-value is derived from what enough people believe it's use-value could be in the future, and enough people belief it will be more useful in the future.
C1:  Therefore, Bitcoin's exchange-value is greater than it's current use-value.

And:

P3:  If something's exchange-value is greater than it's current use-value, then it is probably bad*.
P4:  Bitcoin's exchange-value is greater than it's current use-value.
C2:  Therefore, Bitcoin is probably bad.

*I'm using 'is probably bad' as shorthand for whatever negative thing you want to say about bitcoin.  So, you might replace 'is bad' with 'will probably fail' or 'will probably collapse in the near future', or whatever.

did you even read it? he said pump-and-dump, not ponzi.
if you wanna pick nits, the entire system qualifies as a pyramid scheme UNLESS bitcoin is hugely successful. I've gone into the likelihood of that happening, and how "huge" this success would have to be in my other thread.


well, people here treat it as all of that. if something is not "meant" to be for speculation, but all it is currently used for is speculation, I might just as well see whether this speculation might pay off and compare it to other "investments".

Apparently it is you who didn't read it. Top of the page at Nagle's site (http://www.downside.com/): Bitcoin looks like a Ponzi scheme.

Apparently, someone stealing a bunch of bitcoins and trying to sell them all at once, causing it to go bidless, is equivalent to a pump-and-dump or a Ponzi scheme. Except that neither is the case.

Just because bitcoin looks like X, Y, or Z, doesn't mean it is any of those. An analysis of the fundamental properties of bitcoin is necessary to determine what it is. But you won't fund any such deep analysis from Nagle. Just a stupid cherry-picked chart.

No, in the context that was used, that's a valid rebuttal. Anything that compares Bitcoin to centralized services that were shutdown or went bust obviously doesn't understand Bitcoin at all, because Bitcoin is not any more related to these services than it is Paypal.

What's fucktarded is people arguing about inane bullshit like the correct grammar for "an MMORPG" like it even has any place in the discussion. Ad hominem attacks make Bitcoin cheerleaders absolutely no better than the naysayers who can only say something like "well they're a Bitcoin user so honestly they don't know anything."

I tried to treat botcoin as what it claims to be: a monetary system.
if you have a better way of judging a monetary system please add to that thread.

I don't claim to have the holy grail on bitcoin fundamentals and my thread was just rough estimates, but the hash rate definitely is not a "fundamental" (of the underlying value!) of bitcoin.

the difficulty results from the hash rate which is a function of the price, because miners (should) only install hashing power that is still profitable.
i.e. hash rate is a function of BTC/USD, not the other way around.

agree.


don't agree.
my whole argument is that these prices are ridiculous. whether bitcoin as a technology holds any merit (aka is "not bad") remains to be seen. we still have railroads even though there was a mania.

my guess is that bitcoin isn't even the myspace of e-currencies but one of its predecessors.

I just wanted to +1 the OP / John Nagle.

If it helps - there have been people (me, e.g. but obviously also others, but I don't have their nick or posts atm) bringing up the same arguments (about lack of backing, ponzi nature, bubble look, no economy exists etc) BEFORE the 30$ => 10$ "pop".

I also recently posted the core problem of BTC again(i.e. someone has to keep propping the thing up with his own real world cash to continue the merry go round) in a thread that remained pretty much unaddressed.

Well, miners were installing hash power long before BTC even had a price.  And difficulty rose faster than the price.  There will always be some miners willing to hash at a short-term loss for the potential reward of long-term gains.  That's how all business works.

History does not show the hash rate to be a one-way function of BTC/USD.  They are correlated indicators demonstrating two-way causality.

Cool, so if we trade above 30 you're wrong?

I'd just like to hear the qualifier of where your thesis falls apart.

Yup - an economic carrier needs to derive its value from the rest of the world (unless it grows in complete isolation).

Its a core problem BTC shares with every other asset: dollars, houses, gold, silver, sugar, gasoline, etc..

The "no backing" argument doesn't really fly with me, because it's voluntary participation. You should understand all the things you mentioned about Bitcoin before you part with any hard earned cash (haha) for some - if you didn't go in with your eyes open, you're just another chump. About the "ponzi" thing, I don't think it's the same thing - to my knowledge no one authoritative is claiming any type of guaranteed return in the way ponzi marketers do. Everyone I see promoting it in a big way is saying the same thing: this is a huge risk, with the potential of a huge reward. Disregard Rick Falkvinge being authoritative on Bitcoin.

About the "no economy" - well of course there's a scarce economy (it's not accurate to say there's no economy, it's just paled by the rampant speculation). It's a currency without inherent worth, with no authority telling you you must accept it. Businesses are rightfully nervous about entering into it, particularly with the demonstrated ability to swing wildly in value in a matter of hours.

It's a bit of a catch-22 that most of the speculation revolves around it having a useful economy, and that useful economy is being strangled by the speculation. Many of the heavy investors seem to simply want to buy as many as they can to hoard, expecting that someone else will do the heavy lifting of bootstrapping an economy.

I still think the project has merit as a currency, but I'm not going to hold any long term. I will leave it to others to speculate, though I have been having a pretty good time being a wannabe day trader. I'll keep accepting it in manageable amounts, liquidating it as I get it (or trading it off as quickly as I can for something else of value) and only gambling with what I can afford to lose.

people do all sorts of irrational stuff, or might even just have been investing for the future in this case.
this doesnt make the hash rate a fundamental of bitcoin.
this is a fallacy you see quite often here and in articles about bitcoin. people think that bitcoins are created from computing power and that's what gives them value because computing power is expensive.
even if bitcoins were created from hashing this wouldnt give them value. and they aren't.

This line alone shows you don't fundamentally understand the currency. The Cryptographic hash of the transaction block exhibiting specific, tunable properties (matching a number less than 'x'): was not chosen at whim. You should read the first reference in Shatoshi's Paper:
W. Dai, "b-money," (1998) (http://weidai.com/bmoney.txt)

It explains that you can't do useful work while protecting the integrity of the system. The requirement to do "useful work" would allow dishonest participants to "cheat" by not actually doing the "useful" part of the computation.

Exactly. What a stupid, stupid argument. There is no other way to describe it. To say bitcoin needs more dollars to keep it going is to ignore the purpose of bitcoin. What bitcoin needs is more people willing to accept BTC in exchange for goods/services. It is not a "flaw", and it is not specific to bitcoin. It is a simple economic fact.

And I've just been reading this highly entertaining thread thinking that bitbot got cut off in mid sentence until your post :) The whole ensuing grammar discussion became a kind of fascinating ongoing cognitive dissonance.

You do realize the irony in your nick though, right? Dig Dug blowing up and popping monsters like a bubble, er, balloon :)

right. and if you take into account that there is a monetary inflation of bitcoins of 40% this year alone, or an (exponential) 18% each year for the next 5 years, you can make your own judgement whether the "bitcoin economy" grows accordingly (after it started existing) to maintain bitcoin's value relative to other assets.

Finally, someone with common sense.  Nagle put so elegantly into words what I've been thinking more and more this past week.

I call bitcoin more of a "digital commodity" as opposed to a "currency" and most of its value is speculative.  It's not being used for purchasing goods.  It's being used to generate more wealth.

I use it primarily to purchase goods.  I have some savings, but I spend as many as I can.  Being able to buy food for bitcoins has moved a significant portion of my spending into the bitcoin economy.  I just buy replacement coins with the fiat I would have spent.  It is sometimes a little more expensive (<5%) but it helps the value of my savings to encourage the real economy.  Quit complaining no one does it and join us.

I recognize in OP's argument my original doubts about Bitcoin.
But there is one major thing OP seems not to have considered : the demographics behind Bitcoin, and its motive.
People at the core of Bitcoin are not your average gullible Joe.
People at the core of Bitcoin are geeks, and many are also traders, scholars, hackers, businessmen or a mix of all these traits.
And they know what they are doing when they decide not to drop Bitcoin at the first occurence of the usual financial troubles.

This is the kind of demographics that has, countless times in the past, taken over huge slices of power from the hands of the establishment.
Free software that was seen as an amateurish nerd hobby, and an economical non-sense, is now the new paradigm that dominates the industry.
Peer-to-peer file sharing, this phony and illegal extension of private copy, is now maintream and on the verge of abolishing copyright.
Blogs may be perceived as amateur journalism, but they effectively shreded the business of major newspaper.
Hacktivism left the underground and is acting openly in the wild, leaking state secrets, crusading against liberticid laws, pushing transparency and accountability in government agendas, and triggering revolutions in despotic countries.
Influent black hats are in crontrol of armies of machines in the tens of thousands, that can lay waste at will in the digital economy.

Finance and monetary policy have remained surprisingly untouched... until now.
What you are seeing here is the first sizeable attempt by the geeks to take over the banking system.
That may sound unrealistic, but past occurences of such bottom-up revolutions show that this is a very possible outcome.

OP, you are right when you tell Bitcoin is a bubble.
But what you fail to understand is that unlike natural bubbles driven by greed, and broken by fear, Bitcoin is a programmed bubble driven by logic rules that guaranty a steady deflation for the years to come. We all know it, and we all know that this built-in mecanism gives us a few years to push Bitcoin into mainstream before it reaches the critical point where it can not anymore sustain alone its expansion.
If we fail to push Bitcoin in the mainstream, the bubble will burst before it gained enough momentum, and all we will have left is exhilarating memories of an epic ride (which in the end may account for more subjective value than the money that was lost).
If we success, the bubble will merge into the real word economy and stabilize before it has the time to burst.

Bitcoin may not generate value, but there is a huge slice of the real world economy at stake.
That is more than enough potential value to keep everyone on board until the end.

Wait, then I'm not sure I see any practical conclusion.  You say that your "whole argument is that these prices are ridiculous", so, then, is this your argument:

P3':  If something's exchange-value is greater than it's current use-value, then it's exchange-value is ridiculous.
P4:  Bitcoin's exchange-value is greater than it's current use-value.
C2':  Therefore, Bitcion's exchange-value is ridiculous.

If that's your argument, then here's my question:  So what?  Even supposing I accept the argument, and therefore accept the conclusion, how should I then behave with respect to bitcoin?  Should I not participate?  Should I participate?  Should I expect it to fail?  Should I not expect it to fail?  If something's exchange-value is ridiculous should I expect it likely to significantly decrease in the (near?) future?  Besides attributing ridiculousness to the exchange-value, should your readers conclude anything else?

usoundmad.  99% of bitcoin activity is speculation, obviously.  I personally can't use it for day-to-day stuff because no business in town accepts bitcoin and I do business locally, with the exception of big-ticket purchases at shoppes such as NewEgg, who also don't accept bitcoin.

Link me to a gas station, laundromat, grocer, hardware retailer, hospital, college, etc., that accept bitcoin.  ....... ustillmad?

I don't have to tell you what you should do, do I?
my own conclusion is that I don't want to time a market, especially not a bubble market. so I personally don't buy and would get out as soon as possible.
you might be a trader who wants to profit from the psychology of other people during a mania. your choice.

I'd expect the trade value to significantly decrease if no other significant changes appear, yes. bubbles have lasted for years in the past, so again, this is hard to time. but given the high inflation of bitcoins during the next couple of years I'm guessing it's sooner rather than later.

Of course you don't have to tell me what I should do.  But, that's what an argument is - i.e. an attempt to tell people what they ought to think or do if they accept the premises of the argument.

incorrect. whether the computation is 'useful' is an externality; it has no direct bearing on its suitability for use in bitcoin.

a thought experiment: suppose computing sha-2 hashes below certain values were discovered tomorrow have a very important benefit to the progress of applied mathematics, or (more fancifully) to curing a disease or searching for extraterrestrial life. would that undermine the use of sha-2 in bitcoin? the answer is that it obviously wouldn't.

likewise, it is not possible to rule out more 'useful' substitutes for sha-2 hashing as proof-of-work - i.e., substitutes that have more positive externalities. some good analysts in the development thread have occasionally proposed alternatives (like the computation of mersenne primes) that seem at least potentially workable.

what a lot of people fail to understand is that mining is a cost of bitcoin. it may be a necessary cost, but someone in the system has to pay for it. it is unclear in future whether the costs of bitcoin's mandated proof of work will outweigh the benefits of the currency. for example, the costs may be so great that the transaction fees that need to be paid to miners will be greater than the transaction fess of paypal or mastercard. that future comparison is, among the developers, an open question.

bitcoin was designed to be entirely decentralised, and decentralisation has substantial costs. it may also have substantial benefits. time will tell.

thats a little OT but an interesting question. if the official client makes no default minimum of a transaction fee and keeps relaying all transactions that means everyone sending a transaciton decides what transaction fee he pays. miners might reject some transactions, but only if there are enough other transactions that do have a high transaction fee.
eventually that will be the only income of a miner, and by mining the miner makes it less likely that the bitcoin network can be attacked, so he is a benefit to the entire network.
but network security isn't a benefit to the 1 guy who is right now sending a transaction. so why would there be any significant transaction fees as a whole?

why doesnt the mining community dry up and a large number of transactions are secured by very miniscule computing power?

I guess(!) initially the network was supposed to be secured by each client doing some mining and specialized hardware wasnt anticipated. correct?

My view is that the money spent on "security" (mining) will closely follow the stored value of all Bitcoins. If Bitcoin displaces the US dollar, large corporations and governments will dedicate datacenters filled with computing clusters to the problem. If Bitcoin crashes due to (for example) a widespread security compromise, forever tainting the blockchain, Bitcoin mining will only be carried out by a few hobbyists once again.

The problem with doing "useful"  work like looking for large primes is that discoveries are more unpredictable. If you reward people for doing "shares" of work, dishonest participants a can say "nope, didn't find anything" without actually doing the difficult computation.

The use of hashes also guards the transaction block against corruption: a single-bit error, deliberate or not, will be detected. The hash function also allows the difficulty to be lowered if needed. Any task involving otherwise "useful" work can be pre-computed. This is very bad from a security point of view. With the problem changing every 10 minutes or so, it takes about 50% of the total network computing power to successfully take over the network. If the "useful work" can be pre-computed, somebody with only 10% of the network computing power can toil away in isolation for 20 hours for every hour they spend attacking the network.

why? maybe governments but that's a longshot.
large corporations don't have a history of spending big money on something that benefits all instead of themselves. only
there is the same lack of motive as with the sender of an transaction.

this might be the best argument for (unlimited) inflation of bitcoins so far.
(I don't see a deflation spiral happening)

Corporations control a lot of capital. It make sense that they would want to act as their "own bank." If nobody else, the banks will turn to Bitcoin mining to get the transaction fees. They may even refuse to process "no fee" transactions.

Edit: To be clear, I don't think will happen unless Bitcoin replaces a major world currency.
Edit: Bitcoins can't inflate indefinitely: There is a hard limit of 21 Million (The value of each can't pass 0). Over the last two years, Bitcoin has experienced hyper-deflation.

it hasn't so far. i've explained why in other discussions, and how it could lead to exploits. the incentives do not directly align the 'security' of the network with the wealth of the network. indeed, the suggestion that economic incentives discourage attacks on the legitimate network for a block chain is perhaps the only significant flaw in satoshi's original paper outlining the design of bitcoin.


this is, again, not a property of 'useful' work, just a property of some kinds of useful work. there is nothing magical about sha-2, and it is incorrect to suggest that cryptographic proof-of-work cannot have positive side effects. all work has side effects, some negative and some positive.


there is a difference between cryptographic proof of work and integrity checking. the same technology does not need to be used for both.


again, hashing is not the only thing that allows for difficulty adjustments, and it is also not the only thing that prevents precomputation, this has been discussed time and again in the development forums.

perhaps this is too harsh, but you very much sound as if you're reaching to defend the details of the current implementation of bitcoin at all costs, without understanding them fully. this is a very common attitude in the forum, but it's inexplicable to me. if bitcoin needs blind faith to survive and to be promoted, it's already failed. i don't understand why people refuse to evaluate its costs and benefits with open eyes, to consider changes to the protocol that would improve the technology, and so forth.

for example: the future costs of transactions is potentially a considerable problem, and nothing guarantees that bitcoin will be superior to its competitors in that respect. it is an untested, empirical question. bitcoin doesn't magically prevail because of some genius in the design.

indeed, decentralisation is almost always far more expensive than centralisation. a system like bitcoin is adopted not because of cost-minimisation but because lack of trust may be desirable. i am not clear that the extreme lack of trust that bitcoin establishes is in fact desirable to most consumers, but that is the question: do the significant costs of decentralisation pay for themselves in terms of a network structure that people want?

for what?

I guess part of my attitude comes from the fact I expect Bitcoin to fail in the medium term and be replaced by something better. Monkeying with the experiment too early will change too many variables, making the ultimate collapse more difficult to interpret. I don't really expect Google and world governments to set up datacenters dedicated to mining because I expect it to fail before it replaces a major currency.

I think using the hash as proof-of-work is elegant. It is useful to tie integrity checking to proof-of-work. I also think Bitcoin is useful, even if I wouldn't store all of my savings in it: I can't use other forms of electronic payment because I don't agree to the terms and conditions imposed on them.


I think a sleeper issue, more than computing cost, is bandwidth*. A few months ago I saw somebody on the forum from Africa saying they had cheap power, but expensive bandwidth. In North America, few people actually have a "real" Internet connection: residential ISPs say you are only allowed to use half of the connection (no server hosting). Residential and commercial bandwidth caps of 250GB/month or less may become a problem before the block reward drops again for the first time (encouraging more pooled mining).

I believe this has been discussed in the development forum as well. Maybe I should read that section more often.

Edit: Unk, in searching your posting history, I was not able to find any instances where you explain that mining capacity does not follow stored value and the security implications. The closest I have found is you saying the cost of attacking the network only goes up linearly with mining capacity.

I remember reading on the forum that mining capacity seems to have a two week lag where capacity is added to match any price increase.

*Topic: Why bitcoin cannot grow past 4 million users (https://forum.bitcoin.org/index.php?topic=16335.0).

The whole point is that bitcoin is something new. Trying to understand it strictly in terms of cash, banking, stock market, etc. is not going to work. It's also completely unlike previous forms of digital cash, but really not very many people understand that yet. As it becomes more widely understood, more people will want bitcoins. Where will they get them? The supply is limited.

we have lots of things to compare it to, not only previous e-currencies but other monetary systems throughout history and, quite frankly, other manias.
of course bitcoin has some new aspects, otherwise we wouldn't be talking about it, but "this is entirely new you can't use any existing method of valueation or compare it to anything" just isn't an argument.

if you think it is, look up what was being said during the "new economy" era and how many "page impression"-valued companies survived.

Thank you for providing an example of my point.

*lol*

impressive, really.
the fact alone that someone even tries to dispute your argument proves your argument (in your mind).
that's some self-defense you built up here.


BUY BUY BUY

http://en.wikipedia.org/wiki/Tulip_mania

There's always something "new" and "it'll work this time!" about whatever bubble.  Tulips, land in florida, dot-bomb stocks, CDOs, land in florida (again, now with air-conditioning!).  The current bubble-mania is Commodities, which spiked the price of grain and oil and sparked the Arab Spring.  Following closely on the heels of food is the student loan/for-profit-college bubble which is at it's early stages.

Bitcoins are as non-bubbly because of their "technology" as petsovernight.com was.

I plan to use Bitcoin to lower my transaction costs. Paying by mail costs about $30. It doesn't take many transactions before using Bitcoin pays for itself.

Nobody is going to make a professional exchange for BTC.   At the hype-peak of ~33USD the entire "market cap" for BTC was under 200 million dollars.   That's less than the commission a goldman-sachs type institution makes on an average deal.

All the pro-markets have billions or trillions in volume.   With the micro-scale of BTC, you're lucky to get Magic: the Gathering nerds to break financial laws to exchange for you.   I've yet to see anything AT ALL in the entire bitcoin ecosystem that isn't rank-amateur.   From the hilariously basic scams to the mining pools to the exchanges, it's all done by people with no experience in these things.   Even the design of BTC itself suffers from serious naivety in financial matters - an inherently deflationary system can't grow.   Even if (and it's a big if) the exchanges manage to keep going, as the mining rewards dwindle to nothing over the next two years and more and more BTC is lost to deleted wallet.dat files, where is the currency going to come from for new entrants to the market?  Every new good will be chasing scarcer and scarcer BTC.

 

You got me there!  :)  I didn't realize the circle I'd gone in.

let's leave the inflation-deflation debate out of this.
not beleaving in the deflationary-spiral BS isn't amateur. the rest of it is amateur, yes, but I don't hold that against bitcoin either.
my point is rather that I don't see a way it can grow anywhere near the order of magnitude the current trade price and monetary supply growths implies.

btw, a constant monetary base doesnt mean no inflation. compare M3 to monetary base in other monetary systems.
in a "grown-up" bitcoin economy there will be a (probably growing) multiplier, too.

note that bitcoin at present is not deflationary. it's quite inflationary, with more bitcoins being produced per bitcoin than dollars, pounds, or any other major currency. that inflation won't stop for some time.

(as i've described elsewhere, both the 'deflationary spiral' crowd and the austrian crowd are making significant mistakes. i'm just pointing out something narrower here because too many people speak as if the operation of the bitcoin market, or the speculative gains or losses they've received, are somehow tied to the operation of deflation. they are not.)

I tend to agree.

That's not the real problem, though. The real problem is that almost nobody is actually using Bitcoins as a currency. The speculators are playing a zero-sum game, and there's little motivation for anyone to use Bitcoins in a payment system. In fact, the volatility from speculation is a dis-incentive for merchants to accept Bitcoins.

If real-world merchants were to accept Bitcoins, they'd need volatility protection. This could be done via options, but that would probably make the speculation problem worse. A module for a shopping cart program which allowed quoting prices in Bitcoins, based on the current exchange prices plus a risk factor computed from volatility, could work. Bitcoin prices would be a little higher than other prices, and if and when the volatility came down, the spread would narrow. This would result in merchant pressure for market stability.

If there was some killer thing you could buy with Bitcoins, this might be worth doing. So far, there's nothing for sale for Bitcoins that anybody really wants badly. (Except maybe on Silk Road).

BTC is like any speculative asset:  Its only zero-sum if it goes back to zero.  If it stays high its considered wealth creation, not zero-sum.

I agree with you that merchants are at a disadvantage.  That's why its obvious that bitcoin, a floating currency, will probably remain as a speculative value storage and transfer system more akin to gold and silver.  Also plainly clear that merchant activity is not the economic activity supporting the price of bitcoin,  but the exploding volume of trading which occurs on the exchanges.

Maybe it will also succeed along the lines of a conventional currency or micropayments system, maybe not.  But a lack of merchants says little about the health of the economy.  The growth in volume of trading on the exchanges does.

OP, can you clarify the following quote?

"When Ponzi schemes crash, they crash fast, and they crash all the way."

Bitcoins "crashed" from 30 down to $12, and then back up to $18.  How does that fit in with "they crash all the way".

Later, mtgox hack/faulire occured.  BTC "crashed" again down to $14~ on tradehill, but worked back up to around $16.  How does that fit with the quote?

It doesn't seem to me that BTC have crashed fast, or all the way.  Either they are crashing really really slow, or they are not crashing at all, or they are not crashing "all the way".

 Based on your quote, BTc can't be a ponzi scheme, since it's crash didn't follow the standard model for ponzi scheme crashes.

Bitcoin is not a company or a stock so it never will "generate revenue" and will always fall short (for you) in this respect.


You are correct. The excitement in this teeny, tiny micro-community is due to the anticipation of bitcoin's use as a currency.  There is risk in speculating that it will be adopted as a currency but there could be huge payoff too!  Your criticisms of bitcoin seem based more on analyzing charts than on appreciating its fundamentals.

Bitcoin is the first of its kind.

If you read this very good article (http://paulbohm.com/bitcoin-decentralization/) you will learn that "Bitcoin isn't just a currency but an elegant universal solution to the Byzantine Generals' Problem[1], one of the core problems of reaching consensus in Distributed Systems." The "useless work" of mining (solving computations) is actually at the core of what enables bitcoin to "live out on the network" and maintain the fidelity of its ledger. It is a prototype of many decentralized applications that will now be forthcoming.

Bitcoin is (in theory) beyond the control of governments, so it can't be manipulated and inflated or killed by them. Unlike your other examples it is decentralized (as mentioned), and it is (or can be) private so it can move across police state or capital-controlled borders. 

Those are some of its technical points, but there is a certain morality at play here too. The invention of bitcoin is the response of humanity to the economic system that we were born into and which we now understand oppresses us and always has. A tiny financial class benefits enormously from the present system and seems to be so arrogant that they no longer attempt to hide their thefts from us, their victims. Something simply has to be done. So, you can be "amused" watching us little people struggle but what kind of man are you? What are you doing to right the wrongs of this parasitic class? Is the morality of an investment something you consider for your clients or do you have them invested in oil companies, Monsanto, uranium miners, defense companies, etc.?

Very well said, sir. Very well said. Many have confused the making of money as being a valid replacement for morals and ethics.

Hold on here. An immediate crash could occur if, for example, a flaw were found in the fundamental bitcoin logic such that it could be hacked. People would stampede out the door.

Actually, it's the third or fourth. Digital era predecessors in pseudo-currencies include Beenz, DigiCash, and frequent flyer miles.  Going back further in history, look into how the house of Thurn und Taxis got rich after inventing postage stamps. (They also built and ran the postal system).

The main new thing about Bitcoin is the generation mechanism.  DigiCash was equally anonymous, and had a comparable anti-double-spending mechanism. But it used a central "bank" to keep the transaction list.

It's also an illusion that Bitcoin isn't centralized. Some of the policy, such as transaction costs, is embedded in the client. The constants that drive the coin generation rate were set centrally at launch, and are embedded in the early coins. Those locked-in policies favored early adopters and set a ceiling on the number of Bitcoins which is not that far away.

The current model for Bitcoin exchanges is over-centralized, because the "exchanges" also act as depository institutions, and are sluggish about handling withdrawals. In the real world, a broker can execute a trade on any exchange, and the exchange can't tie up funds. Even limit orders are cross-exchange now; this is done through a "consolidated limit order book", where all the exchanges work off the same limit orders.

This isn't a magical new development. It's a minor advance over previous technology.

The main new thing about bitcoin is that it's decentralized. Digicash could fail if the company that owned the servers got hacked, went bankrupt or was shut down. Bitcoin cannot be shutdown because it is completely decentralized. There is no SPOF. As for how the protocol was originally created, that is about as relevant to whether it's decentralized as how TCP/IP was created and whether the internet is decentralized.

You don't even grasp the basic point about the technology and here you are criticizing it. This is FUD, pure and simple.

I'm curious what attracted John's interest in bitcoin. It's interesting to see so many financial experts are watching it. I see the main difference from previous attempts at digital cash is that there is no way to stop people from using it and its at least as untraceable (and untaxable) as regular cash.

you answer your own question:


...thusly:


he can't make any money from Bitcoin, other than as a miner or a participant.  "professional" finance types don't like exposure to <s>risk</s> reality.  they want to make money without touching, earning, or creating it.  and if one of their investments tanks, they were only advisors - not vested.

hence; naked credit default swaps.

Bitcoin isn't like that, is it?

What attracted John's attention is a crowd of people talking about finances that he could exploit to drive traffic to his own moribund site. Combine that with the likelihood of slow business and John is hoping that he can drum up some clients if he talks pseudo-intelligently about finances. This joker is all over the map though. In here he decries the bubble/ponzi/pump and dump nature of BitCoin while over here: http://forum.bitcoin.org/index.php?topic=21384.0 he gushes over the stability of the currency at $15.
He's either a) bipolar b) several people who aren't comparing notes or c) playing every side of the argument in hopes to attract a dupe to his services.
Whatever one of those things he is, he is primarily a troll.

Right. Now we have a stagnant economy (limited by oil resources) and a wildly out of control money supply managed by criminals in designer suits.

Oil scarcity is not our biggest economic problem. Not even close. What scarcity there is is exacerbated by poor policy rather than dwindling reserves.

It's lurking there like a ceiling that we'll bump against each time the economy gets on track and tries to push up through. So it doesn't get noticed or given attention except by the more abstract observers who don't have a vested interest in keeping the status quo and so aren't quite so blinded by mankind's arrogance.

[sigh] We didn't start using oil because of peak coal. There is reason to believe that the transition from oil will be based on the development of a new, superior technology rather than depletion of oil reserves. It's not a ceiling we will "bump" against. Marginal utility means that other technologies will slowly come on line and increase in use as the price of oil rises.  This will more likely be an orderly transition that a disruptive, abrupt change.

Not to say there isn't substantial risk of disorderly, abrupt change- just that it is likely to have little to do with oil.

Well, you're entitled to your view. I won't comment further here as it's getting off topic.

The condescension and smug superiority in the title of the OP's thread alone are insulting enough. He then compounds it with scorn, direct insults, belittling, and expressions of pleasure at unfortunate events. Inability to distinguish between a hack of an exchange and the operations of the bitcoin network itself are dead giveaways.

Bitcoin's elegance, distributed nature and the math behind it are powerful forces he doesn't begin to grasp, which is evident when he equates it with Digicash and Beenz.  I have my own doubt and misgivings about Bitcoin, but an attitude of epistemic humility is much more fitting.

As for the allegation of the exchanges (repleat with scare quotes) being flaky: partially true, when the standard of comparison is institutions that have been in existance for decades in a gigantic multi-trillion-dollar financial system. But when you consider that until two months ago, the total value of all bitcoins in existence didn't exceed the market cap of even a single publicly traded micro-cap stock, only modest operations could have possibly existed, and they are necessarily very new. As Bitcoin matures and grows, the system around it will mature and grow. Witness Camp BX as a promising development in this regard. And MtGox may have learned some lessons, and their recent revenue growth will likely fund commensurate improvement in their own service.

They are not a depository institution. Mt Gox has custodial relationship with account holders. The funds _are_ held in a depository institution, namely Sumitomo Mitsui Banking Corp.

The recent publicity brought what surely was a speculative blow off. There's a world of difference between speculative excess in valuation (which happens to many perfectly-valid asset classes), and collapse of the tulip bubble or a ponzi scheme.

His inept, mostly stale website is testament enough. But consider what he asserts.
And if it doesn't rapidly finish its collapse, as predicted, "all the way" to zero, will we see a retraction, an admission of error, and apology for the insults he heaped on Bitcoin users? Don't hold your breath.

that's a nice feature and technologically impressive.
do you think this is what makes bitcoin a 1 billion dollar economy within 5 years, while other e-currencies failed completely? decentralization does it?
a feature that isnt even apparent to the end user unless there would be an attack on the "central bank", which AFAIK never happened with any of the previous e-currencies.

(if anything, an end-user who wants to use bitcoin as a form of payment instead of speculation has disadvantages from decentralization)

Anyone who's had their paypal account frozen (rightly or wrongly) understands the value of decentralization.

...and doesnt answer the question

Yea.  Decentralization does it.  Its not just a buzzword, it means no central authority can seize an account.

E-gold failed because the Feds took it down.  Bitcoin can succeed because the feds can't take it down (or will at least have a much harder time).

Paypal fails for some because paypal freezes their accounts.  Bitcoin can succeed for them because noone can freeze bitcoin accounts.

How about _failure_ of the "central bank", which is absolutely going to be noticed by the end user, as it was in the case of holders of beenz.

Maybe John is just a doom-sayer because he's worked out some people are psychologically drawn to negative statements.  (plus I think his web site is hilarious)
I come across experts and their forecasts all the time.  Even this week I was re-reading an informed forecast of oil prices that suggested USD25 was an extreme value for the future (written in 2003).  Similarly, I have forex gurus tell me the cross rate to the USD should mean revert to the ten year average with no basis or likelihood.  If there is a fundamental, that's great, but saying it will crash (or anything else) is speculation on its own - certainly at this point in time.

K


Good way to start of neutrally.


So the price went up, and back down, and a 'bubble' fashion. Big deal. As you said, amateur finance types flailed after the hack and all sold out... while now the price is steadily rising. Bear in mind, the only thing that bubbled here is a very alpha pegging of the BTC to primarily (nearly exclusively), the USD. You seem to be implying that because the price bubbled that it is doomed to not gain value again, thus investors have lost all return. You haven't event attempted to elaborate the consequences you propose from the price flux.


You sound like you have no absolutely no idea.

Firstly, don't pull shit out off your arse. How many merchants have you talked to, have said they have heard about, researched and evaluated bitcoins for themselves (without your horse-shit of course) and speculated that it would fail.

Second, there are infact *many* merchants using bitcoins listed on the wiki, and many more projects, charities etc that go unheard, all which can classify to some degree as merchants. How many people do you really think have looked and researched bitcoins enough to make an informed decision as to whether their business model is appropriate or not.

Third, bear in mind this is an internet cash system and people doing small transactions generally do it by hand, thus physical cash is exchanged and no need for bitcoins is needed. That eliminates thousands of corner stores that have no need for such a system. However in the future when credit card type wallets are used, corner stores would accept bitcoins. Indeed millions of small transactions occur on the internet, however what proportion of those do you think have heard of Bitcoins thus far and is willing to invest 100% (that is all online transactions using BTC)?
There is also variable degrees to which people invest, so its not as black and white as you appear to think. 


Two organizations, by your opinion, are flaky. Bitcoins != Mt. Gox.

You state you dont know much about Tradehill but you say they are flaky, is that not you speculating that they are malicious? not trust-worthy? incompetent?
Flaky is a very general term and is no descriptive. Please choose your words wisely.
Shouldn't one greet others with an open heart? I'm not saying you must follow them blindly, however I am saying you can approach a situation with an open mind yet hold reservations.
Have you actually done business with them? Have they so far wronged you?
Would you not want others to greet you with openness as you yourself approach a new market with reservations?
No one forces you to do business with anyone so if you deem a party 'flaky', don't trade with them.

As for their credentials such as audits, regulation etc.. Do you really think the bureaucratic system as it stands can handle such a request for a Bitcoins based exchange?
Most governments want to eradicate Bitcoins because they fear losing power, they aren't going to say 'yeah here's some credentials for people to trust your Bitcoins exchange..'
If you reply saying that bcuz governderps think Bitcoins is evil, I will have great lulz.

You seem to oversee the fundamental concepts behind Bitcoins. Look from the system itself outward.
It is a beautiful design that could shake lot of peoples core held beliefs.

Have fun flailing.

~ Conf

I can tell, at this point, that you didn't read the article I suggested to you. Not nice. And yet you prattle on. Frequent flyer miles are a predecessor to bitcoin?!


Here you seem confused as to what "decentralized" means. The policies and protocols coded into software do not make the it centralized (or otherwise).

I'm particularly disappointed that you ignored my point about the morality of the current money system, which you seem to be defending. You are on the wrong side of history. Your Dun and Bradstreet world is immoral. You need to come clean of it.

Here Here.

That's an interesting legal point. Whether funds held by a Bitcoin exchange are debts of the exchange or a shared interest in a custodial account isn't clear. This matters a lot when an exchange goes out of business.

For a bank, a deposit is a debt of the bank. For a brokerage, a deposit not invested in some security is funds held in custody. This really matters when a brokerage firm goes under.  (I've had that happen, with L. F. Rothschild (http://en.wikipedia.org/wiki/L.F._Rothschild). Founded in 1899, went bust in 1989.  Getting all my assets out took a few weeks of daily phone calls and threats, but I didn't lose anything.)

For a money transfer firm in Japan, which Mt. Gox is, a custodial account is required. Mt. Gox isn't registered as a money transfer firm, although they should be. So we have only rumors that they have all their customer's funds.

There needs to be an internet poking stick so that every time someone writes "Here here" (it's really "Hear hear!"..as in "you should listen up", not telling your dog to come here or w/e it is people think they are sounding out) or uses "then" instead of "than" (as in "x is better than y") and "their" instead of "they're / they are", "your" instead of "you're / you are" and various other classics they get poked.
In evil places. Painful places.

Where, where did you see this mistake?

You are a true grammarian, aren't you?

What about the integrity angle? I'm thinking along the lines that if the calculation does something useful (i.e. other than cryptographic security), there may be an underlying pattern to the result. If there is a pattern, then it can be reduced, and therefore attacked (someone figuring it out will be able to do a lot more of it than everyone else). This might of course be wonderful (figuring out shortcuts to problems improves general use), or not (attacker keeps it to themselves while abusing it).


It may not be realistic to expect Bitcoin to replace everything else, for those cases where the disadvantages outweigh the advantages it could coexist with other systems, perhaps even Bitcoin like ones with tweaked parameters.

Short term, scarcity may or may not be a problem. Medium/long term, invasions of Iraq, at some point Iran maybe, and right now illegal bombing of Lybia should tell you that control of the largest available sources is playing a major role. If you don't think that is motivated by scarcity, here's some recommended viewing (http://www.youtube.com/watch?v=F-QA2rkpBSY&feature=BFa&list=SP6A1FD147A45EF50D&index=1).

+1

The mistake people make when they look at the Bitcoin price chart and scream "bubble" is that they fail to understand Bitcoin is still in the price discovery phase.

Nothing like it has ever been priced.  This is an awesome experiment and I am glad to be part of it.

PS:  I am a DBA with 25 years experience, a Futures Trader/Advisor in Australia and a merchant who accepts Bitcoin.

That is an excellent point. It could easily go up to $200 and then go sideways until the market decided that was fair.

How does trading volume translate into health of the bitcoin economy? If that trading volume is based on speculation and not trade, isn't it liable to collapse at any moment? This is not a rhetorical question, I am really asking because I don't understand the statement.

I don't know where the idea that most trading is speculation comes from? That sounds like something you just made up unless you can document it.

I did a quick look over the various exchanges (http://bitcoincharts.com/markets/) and the trades there today add up to a volume of maybe 6000-7000 BTC.

The total volume traded (http://www.bitcoinwatch.com/) according to block store is almost 5 million at this moment (last 24 hours). So where did you get your idea that most trades are speculative? If you cannot explain it then I'll assume you just made it up according to your own impression of the world.

Just looking tells you that most trades are BTC -> BTC.

One man's speculation is another man's fundamental.

Collapses are usually the result of poor information distribution.  Bitcoin seems to avoid that.

That figure is in fact completely meaningless. The vast - and I mean *vast* - majority of that figure always comes from people transferring their bitcoins from one address they own to another that they also own. Because of the way Bitcoin works you can only redeem complete transactions, so if you have an account that contains 50,000 BTC from a single transaction and you pay someone 0.1 BTC, the client automatically creates you a new address and sends the 49,999.9 BTC in change to that new address. It's intentionally impossible to distinguish change transactions from actual payments, so sites like bitcoinwatch report this as 50,000 BTC changing hands rather than the real figure of 0.1 BTC.

If you look at blockexplorer.com right now, you'll see the list of the biggest recent transactions is entirely made up of a series of transactions in which someone (181LntPGwi3fMEptutCwarxMNT1s1hEDws) with 44,600 BTC paid out about 800 BTC in total. Each of those transactions is reported as though the full value of his or her account changed hands, meaning the full series of transactions adds 880,000 BTC to the reported volume even though only 800 BTC actually went anywhere. (In fact, it's probably even worse - the account in question probably belongs to Mt Gox or another exchange and the payments are probably people withdrawing their BTC, in which case not a single cent really changed hands.)

Edit: In fact, it'd take less than a thousand typical withdrawals from exchanges for those transactions alone to push "volume traded" in the blockchain above 5 million BTC; the size of the withdrawals doesn't even matter.

So how can you come up with any figure about what is merchant or personal trade vs. speculation?

It's impossible unless there is a useful algorithmic check that be applied to the block chain to differentiate. And what are the large value transactions you see floating consistently along the top of bitcoinmonitor.com? I've seen steady periodic transactions in the near million dollar amount (converted).

(And, actually if you look at that monitor it show Forex as blue dots and other trx as red dots. I guess they know which addresses are the exchange ones. There is a lot of red dots but I wouldn't say it swamps the blues, considering that people doing purchases do often use red dots too. Not just speculators.)

The thing is you still can't buy much with bitcoins.  It's just a battle of who is going to waste money on electricity and who will buy their bitcoins to recoup that cost.  And don't tell me cause one restaurant in New York takes bitcoins that they are all of a sudden useful in reality.  I don't need drugs, dont' need web design, and I can buy my burritos with cash.

You can't. In theory you might be able to compare currency trade volumes on Mt Gox with the amount of BTC actually withdrawn, but that's not really practical and no-one's done it. What you can do is consider information like which discussion topics are more common on the forum (buying and selling goods vs. mining and speculating) and how much of the for-sale section is Bitcoin-related items, or how the likely demand for the goods available for sale compares to the total value of bitcoins in circulation. That gives some idea of how speculation-driven Bitcoin is.

The red dots are just the actual Forex trades, which are published by the exchanges and are carried out entirely internally with no matching transfer in the blockchain. BTC transfers to and from exchanges just show up as blue dots.

I was just looking thru the block explorer listings.
It seems pretty clear that the "change" address is always listed first as a destination. It may not be perfect but I think if you excluded that value in a transaction scan you could account for the actual "paid" amounts (mostly). I know there is no way to verify this but expect it would give a better picture of the real money flow. But the "purpose" would still be unknowable. It would at least allow reducing the "total value" to something more sensible.

You can buy anything on Amazon.com with bitcoins.

This is news.  How?  Without first converting to USD?

There's a few middlemen - you send them BTC and a wishlist, they buy it and (I'm guessing) sell the BTC. Amazon doesn't accept BTC directly.

There are importing businesses which work like that - you send them a wishlist and money, and they buy stuff for you in some foreign country and have it shipped over. That's useful because they can deal with sellers in another language, consolidate shipments into containers to save on shipping, deal with customs documentation, and physically get the stuff moved.

Going through some intermediary just to get a currency conversion isn't worth much. And it really complicates returns.

but that doesn't detract from the fact someone is paying for a service in BTC - how the middle-man organises thier affairs is their business.

Similar example, I trade $ for gasoline - I don't care about refinery margins, import taxes, shipping or even the well-head production costs (probably six currencies in that chain for me domestically).  If I paid $ or BTC, someone converts it into USD, SGD, GBP (and others) along the way.  (I actually don't pay dollars, I use a piece of plastic and some electronic transaction occurs - actual currency becomes irrelevant)

That's clearly not the same thing as being able to "buy anything on Amazon with bitcoins." It defeats the whole purpose of a decentralized economy to involve someone else in my commerce with a merchant.

Yes.

John , with all respect , your flat out wrong. New coins are created by securing the authenticity AND accuracy of transactions. Bitcoins are NOT generated from dollars coming in. You obviously don't know how it works so why don't you stick to what you know or do some research.

He's a Bitcoin outsider - what the heck makes you think he'd talk BTC when he says the word "revenue"?

He means no new value (currently being measured in USD) from the outside world unless it's through more investors - and at the present time he's mostly speaking truth. Mining secures the network, yes - but without some means of giving that network any sort of value it's all just meaningless bits... comparing e-penises in the form of GPUs.

My guess is you're alluding to that because mining costs you money your Bitcoins have to be worth something - no one gives a shit what Bitcoins cost to make, that's not what gives them their value.

Nagle is a troll, don't inflate his ego by replying.

Value is in the eye of the beholder and is completely subjective. My point about cost to make is that it is not creating something from nothing like fiat currency which is faith based. Nagle can redeem his Federal Reserve Notes for lawful money and then we can talk. He knows he can't even though it is Federal Law. They are the biggest scam ever. You have no legal recourse for non-payment within the US.

As far as meaningless  bits... how meaningless is ink formed in the shape of 100 versus 1? The ink is no more valuable . Whereas 100 bitcoins versus 1 bitcoins means the network is that more secure and the transaction (regardless of what 2 people choose to make them represent) that much more real.

Well, sure, but my point is, it's getting there.  Nearly every day, I see new services or products being sold for BTC.  There's more than 10,000 items indexed by some site that can be purchased using BTC.  And those are direct purchases too - no middlemen involved.

Wait till Christmas. I'm selling toys for BTC.

They're both equally meaningless - one is given value by decree, that you can use it to buy a shit-ton of things all across the country. The other is given value primarily through speculation, but also a miniscule but steadily growing market of things you can buy with it also. Without that steadily growing list of things you can actually buy directly with it, the only value it has is in your ability to find a greater fool to pass it on to.

Look at it another way - what do you think would happen to the USD if everyone outside the US's legal jurisdiction suddenly decided they didn't want to accept USD anymore? Even discounting the fact we'd still have a domestic market for them, there would suddenly by a whole load of people on the planet wanting to get rid of them in exchange for something more useful to them. Bitcoin's value is kind of like that, except you don't have the most powerful armed force in the world forcing you to use it.

You just described all money systems. They all depend on another fool to accept them.
It is 100% true that BitCoins need more utility if they are to survive it's infancy.
People are working on that.

But it does have some utility as well for people wanting to hide money. It just is a bit risky for that. At this point I would not consider BitCoins as an investment vehicle at all. That's just crazy. As a short term method of transacting it is becoming more viable as time goes on.

But it is battling a perception by most sane onlookers as a pyramid or ponzi scheme. That's only if you are silly enough to think that putting your life savings into BitCoins is a good idea currently.

We agree for the most part. My point was there is more intrinsic value in bitcoins (even though they are digital) than there are in paper USD. That's more of an indictment of US currency than anything else. However, USD does not have to be accepted at all by anyone. FRN's are not the only legal tender. The gov't just like you to believe it is.

Okay well whether it's by law or merely convention, and right or wrong, the USD currently has value in the USA. Pretending that Bitcoin is just as good now is folly - as I've said in multiple threads, the value of BTC right now is in what could be, not what is.

Uhm... it is just as good now. I've bought the exact same things I would normally buy with dollars. I've exchanged them for dollars. Right now they have the identical utility as far as I can tell. I can't use them as collateral for a loan but so what? You don't get rich being in debt.

This is highly misleading.  Amazon.com does not accept bitcoins, an UNAFFILIATED entity conducts the transactions.  

Hey guys, send me your BTC's and I'll buy whatever you want from Walmart.  Does Walmart accept Bitcoins now?   ::)

WOOHOO! Wal-Mart accepting BitCoins now!!! Sam would definitely be a BitCoin fan!!!

When you've lived 12 months as an adult* without touching your local currency, post a thread reporting on it. Until then, they're not "as good" unless you take an extremely narrow definition of "as good". Anecdotal stories of "I bought Widget X with it" aren't helpful. If you are being paid in USD then every year the buying power of one year's income drops a little bit, so hopefully you got raises to counteract that. If you are being paid in BTC, your buying power fluctuates wildly.

* Are you able to pay your rent in BTC? Living with your parents and surviving off beef jerky and whatever your friends will sell you for BTC doesn't count. A functional adult must be able to conduct 99% of their day to day business in Bitcoin before it'll be "as good" as $LOCALCURRENCY.

Edit: Note that I don't think it's required that Bitcoin be "as good" as any other given currency for it's survival, it just needs to be better than it is now - we need a functioning economy that is a major player so that speculation doesn't give it 99% of it's value. I'm only arguing this point because the claim that Bitcoin is "as good as" the USD is complete bullshit if you are an adult living independently in the USA.

This is a bit silly to anyone who's ever lived in a country outside of the G8... there are entire areas of the world where the local currency, while strictly used for local, small scale transactions, is not the de facto currency. In much of the world, when people assign value to anything of substance (a house, a car, the monthly rent), they do so in USD, because their local currency is ineffective.

In that sense, the only thing preventing BTC from being "as good" is a lack of exposure.

Touché... but I never said (I don't think?) that BTC can never be as good, or anything like that - I simply said it isn't now. Which is the crux of my argument - that real work needs to be done before BTC will become anything other than a geek toy and a speculative vehicle, and the majority of the community don't appear to want to do it. It's massively inconvenient to buy things with Bitcoin at the moment (beyond small person to person trades, particularly for digital goods, at which it's terribly convenient) and the only other argument for Bitcoin's utility is that it's a "good store of wealth" which is bullshit because the only reason it's keeping it's value hinges on it's possible future utility.

I guess the root of my point is that if you've invested in Bitcoins and you aren't actively working to make the Bitcoin economy better, you're actively sabotaging your own investment (or delusional, there seems to be a fuckton of that going around these forums).

My apologies, I didn't mean to imply that no one is doing the heavy-lifting - simply that if you step outside those boards and go look at what Bitcoin evangelists are saying elsewhere on the web, the majority of it boils down to: "invest in Bitcoins, nowhere to but up" and "we need to figure out a way to attract more investors", intermixed with the occasional "you should be mining Bitcoins too, it's the new gold rush".

I wholeheartedly agree that Bitcoin has value because of it's potentially bright future. I have, however, witnessed at least two people on this very forum say things like "who cares if the Bitcoin economy never takes off, it's still a great store of value" which is idiotic because that value hinges on the assumption of the bright economic future.

Aren't those investing in silver and gold (moreso gold) counting on it's future utility value (currency)? Or is that bullshit too? I suppose you'll say next that BTC is not a store of value like silver and gold is? True but only because a proper amount of time has passed. Silver and gold are largely recognized as they are due to the fact that they were the best alternative.

We are in a digital age now. BTC may develop to have it's value in a niche for certain types of transactions. Currency for others. Silver and gold yet for others.

I have no problem right now selling my metals if I need cash bad enough. I have to convert that into currency. Did I error in my ways when I bought silver at $9.00 and sold it for currency and then bought stuff with it? Trust me, I wasn't complaining.

Real work does need to be done and time needs to pass.  The fact that it's a speculative vehicle doesn't invalidate it. Au contraire, it demonstrates that there's a demand for it. Patience is the key, grasshopper. Trying to rush this into the mainstream is also delusional.

Amen brother!  ;)

This is a market and like any other market it goes in cycles.  There will be booms and busts based on people's speculations on where the market is going to go.  Some will be right, some will be wrong, some will profit, some will lose.  Yes, it is a zero sum game and the first step to being successful is to realize that. 

Buy low, sell high, and don't get emotional.  Very few people can take that to a market.  Those can can are called "successful traders."


You have an apt comparison.  These commodities are not at their present value because of their uses in electronics or astronaut visors.  The demand for these industrial uses is not high enough to represent the price.  The excess demand comes from people hedging their capital due to lack of faith in the dollar, equities, and other investments.  These commodities cannot be traded virtually thus are inferior to Bitcoins.  They are only superior in that they have been around for... a couple of years more than Bitcoin  8)

This Nagel is a grade A prick. He comes here and within the first few posts he is countered with several arguments. He addresses barely any of them but spews his own drivel.

As for his "predictions", I'm sure he's gotten plenty wrong too but keeps quiet about that. Anyone can be a doommonger, it proves nothing.

I've seen far more credible anti-BitCoin arguments elsewhere on this board. This guy just shows his lack of understanding. And I say that as someone who is impartial on it, not a miner and actually considered here my most to be anti-bitcoin and/or troll.

Is this thread long enough yet to include an anology to Nazis and/or Hitler (http://en.wikipedia.org/wiki/Godwin's_law)?  ;D

But really, seems like we should just wait a few months and have the market vindicate or disprove the OP.

Everything I've written on Downside is still there. It's all in the Internet Archive (http://wayback.archive.org/web/*/http://www.downside.com).  I have a verifiable track record. Do you?

Silver and gold are quite similar to Bitcoins in that sense (the only thing keeping the price high is because of demand, the speculative and/or "store of value" price is far higher than it's utility price, and as others have said in terms of a convenient 21st century currency Bitcoin is far, far more suitable than gold is), however the key thing that pro-BTC people miss when they compare Bitcoins to precious metals is that we've been conditioned for generations to covet precious metals. As I said in another thread (or perhaps earlier in this thread), despite it having absolutely no utilitarian purpose, rich dictators routinely gold plate firearms, because the gold is a symbol of wealth.

Bitcoins do not share these traits - there is no years of conditioning fostering the belief that everyone will want them in the future so you should want them now - the project itself is what, two years old? For that reason, the flimsy promise of "it has nowhere to go but up!" is not really enough to keep people interested. I can see the idea that a store of wealth that can be securely, pseudo-anonymously, and quickly moved around the world is useful, but many outsiders simply see it as a game of hot potato that'll eventually leave someone holding the bag. Why should they volunteer to be a part of the chain, taking the risk they might be the end of it?

A growing economy will start to sway people's minds that maybe the chain doesn't have to end, and do wonders to sure up it's value.


I agree with you in that respect, and I realize it'll take time - I would just like to see more people outside of this forum focusing on building the economy rather than roping in more investors. While it being a speculative vehicle has helped to an extent (giving it a dollar-value people can relate to), it's also hobbled adoption by varying the "value" wildly and been a PR-nightmare because there are many who view it as nothing more than a geek ponzi scheme.

It's my humble opinion the better thing to do to shut those people up is to show them we can build a sustainable economy, rather than telling them "see I told you it would break silver parity".

Close but not yet.  Maybe I'll sell my radioactive asbestos for BTC.

Funny, the Second Great Depression didn't begin on 4.14.2000. Missed that one.
Also, stupidity ended on 4.14.2000? Ever hear of the Option ARM. They were popular til about 2007 - and in most cases were stupid. Heck, ever hear of the housing bubble in general? Plenty of stupidity on display there too.
Returning to historical PE ratios? Apple Inc, quite possibly the most successful company since 4.14.2000 didn't have a P/E ratio below 20 until September 2008 (due to the GFC). Microsoft, who has done only Ok since 4.14.2000 didn't cross below a 20 PE until Jun 2006. IBM (one of the heaviest weighted companies on the DJIA) didn't have a PE <20 until Jun 2005. And it was only in June of 2010 that Google briefly touched below a 20 PE. So why was 4.14.2000 the magical date to return to PE Ratios in the 6-20 range? One would have missed some of the most profitable, fastest growing companies of the decade if they took to heart your view of what "Reality" should look like.

Thankfully, everything you've written on Downside is still in the Internet Archive. It enables people to verify your track record.
And then ignore you.

I too went back in time and randomly pulled up a few archived pages, as the site name "downside" implies, it's all downside predictions, what a depressing life!

One example:
       2003-06-26 - The bottom is still a long way down
This was clearly a start of cyclical bull market (in a secular bear market), it was completely off.

"Prediction is very difficult, especially about the future."

PLEASE let this thread die people!
I cant believe you helped this TROLL this much.