It's fun... for us geeks and nerds.  The vast bulk of the population just doesn't care, and may never care.  Bitcoin is a nifty concept but whenever I tried to seriously explain it to anyone they have two comments: "so, why do these things have any value?" and "sounds like a pyramid scam".


Whoever created bitcoin (Nakamoto, or whoever uses that alias) created a great novel commodity, but not a viable currency.  People by definition are reluctant to spend a currency that increases in value the longer you hold it.  Assuming its value versus other currencies follows bitcoin's natural deflationary curve, why spend it if I can buy more stuff with it tomorrow than today?


Bitcoin matches all the criteria of a high risk investment.  Small and thin market, easily swayed 20%+ in a day by one participant or event, highly volatile, formed an exponential growth bubble that popped, off 70% from its highs, has a well known attack vector that allows anyone with large resources to hijack the entire chain.

The $30 price was completely irrational.  It wasn't supported by any fundamentals and coincided with publication of positive news in Daily Reckoning and other media outlets.  Some people believed bitcoin could sustain an exponential growth curve.  We would be buying cars with one bitcoin by the end of 2011.  Fortunately most people didn't buy into the madness.

People would be happy to unload bitcoins for $1 if they believed the whole thing had become worthless.  Imagine those early adopters sitting on tens of thousands of bitcoins.  They wouldn't be too pleased to see their paper fortunes vanish in a selling frenzy.  Better to take a bit of something than a whole bunch of nothing.  I don't think we're even close to that point however.  But the most dangerous thinking in investing circles is 'it can only go up' followed by 'it's fallen as far as it can go'.

This forum is called Speculation.  I agree endless posts speculating about bitcoin's value would be out of place in a software development forum, or product ideas forum.

Is bitcoin a competition to government currencies or Visa/Mastercard/etc?  Maybe one day, in the distant future, if everything goes right.  The outside world doesn't have to be successful in keeping bitcoins down.  It sounds like a conspiracy theory.  Bitcoin needs to prove its worth by doing something useful.

The curious thing about the 'rent due at end of month, bitcoin down' theory is that it assumes most people pay rent on or around the 1st of every month.  Mine is due on the 9th, and I know other people with payments sprinkled throughout the month.  I don't buy the theory.

The other thing is bitcoin is so far a nerd's and geek's playground.  People living pay cheque to pay cheque are unlikely to be involved at the moment, and certainly not willing to fork out a few thousand dollars on computer hardware while they're struggling to pay rent. 

A large majority of dotcom stocks didn't generate any revenue either :-)  They were rather brilliant at burning cash however.

That doesn't work.  Let's say there's a bunch of Bids at $9, $8, and $7.  I put in a Bid of $4, because I think I can fulfill that order myself and dump the price.  It only works if I can fill the $9, $8, $7 and all other orders above $4 until I get to my bid.  Do you have enough money to fill all those bids?

I don't think bitcoin can be described as a pyramid scheme.  It's more like a dotcom stock in 1999.  There's a lot of hype, a big push towards the 'new paradigm' by supporters and those with vested interests, and very little real economic activity to support it all.  The dotcom bubble didn't burst because it was a pyramid scheme.  It burst because people opened their eyes and looked at why they should keep investing in it.  They saw nothing, and left in a mad rush.

Most traders keep money in the exchanges ready for market moves such as this.  We know the price tends to fall on or around weekends.  The traders know this.  Why would they pull money out of the exchanges and think, for maybe the 20th time, 'Damn, if only I could get money into the exchanges.  Now I need to wait until Monday!'  The answer is, they don't.

Watching MtGox Live atm.  I haven't seen the bids and asks so unbalanced for a long time.  Nice 'wall' at $8.50.  Of course, if the long blue ask tongue takes even a lick of that 'wall' it will come crumbling down within minutes.

BTW, the same people are claiming bitcoin is being manipulated by one or maybe a few large bots.  Has anyone delivered any evidence of this, or is it simply inferred from looking at the trading action and thinking 'this must be rigged'?

It's just like bitcoin, but even less people use it for anything useful.  I missed the original bitcoin generation feeding frenzy so when IXCoin appeared I fired up my GPUs and produced a solo mined 96 IXCoin block.  Woohoo.  They're completely useless, as are all imitations of bitcoins.

This volatility is very bad for bitcoin in the long run.  If it can rise and fall 20% within a couple of days, why would anyone use it as a currency?  It would be a silly move.  The only real purpose bitcoins seem to serve right now is a vehicle for highly speculative investing.  There's nothing wrong with that of course, and participants seem to be enjoying the action, but anyone looking on would think this whole thing is far too unstable.

If nothing else, I enjoyed that.

People sell into panics for various reasons.  The key reason is this: if a commodity or stock is falling, will it fall much further and could it fall to zero?  People gladly sell up at a loss if they think the next price they could get is $0.00.  It's the only logical thing to do.  Buying into a falling market is often dismissed as catching a falling knife.  That describes the scenario rather nicely. 

I'm just here for the money.  Turning natural gas into bitcoins through computer hardware while sitting back and doing nothing while the meager money rolls in.  As soon as the party stops I'm out of here.  No libertarian views here.  Just business :-)

Working and not speculating?  That all sounds a little bit too much like hard work.

Yet, that 'boring' stability is exactly what serious users of bitcoins need.  Imagine being a trader and every day waking up to bitcoins being worth $6 today, $9 tomorrow, maybe $11 the day after, and back again.  That's the kind of action we've seen in the past few weeks.  Imagine trying to price your products in something falling or gaining 20% in a day.  The trader would have to add a thick margin to insulate themselves from probably losses, which begs the question why they would want to use bitcoins in the first place and not just use something very stable by comparison such as the US dollar.

What if they gave a bitcoin conference, and nobody came? 

As predicted, that 'wall' fell quite quickly.  It's just a logical reaction to the buy/sell price point approaching the 'wall': why stick around at a higher price when you can see it'll fall below very soon.

I'll adjust the bot a little higher.

Yeah, by buying bitcoins.  The South is quaking as we speak.