I did mention that much (i said most) of the news was either good or neutral.  I did not mean to claim that it was devoid of bad news, nor do i feel that Gavin Anderson's discussion with the Council on foreign relations (http://www.coindesk.com/gavin-andresen-governments-control-bitcoin/) should be considered "bad" news. 

There is a bit of a contradiction between the statements of your that i quoted: "help us move beyond" and "not average consumer friendly" are a bit at odds with each other.  I agree that finding a way to bypass the banking system would be a great advantage to the average human and that something like bitcoin might achieve that someday, but not without a fight, and not without a huge restructuring of the way government debt works.  You do realize that banks are an integral part of Government financing through bonds, right?  Gov needs cash -> sell debt to the Fed (at a discount) in exchange for cash -> Gov gives cash to employees and contractors -> employees give cash to banks where it is multiplied through fractional reserve -> banks use cash to buy more bonds.  T'izz a closed system, all of it hinging on the Gov's ability to pay back debt in the form of bonds.

It's crazy and unsustainable without controlled a positive inflation and constant GDP growth.  And since infinite growth in a finite system is not possible, then at some point, the house of cards colapse and something new takes its place.  That something may very well be bitcoin, or more likely, some evolved version of bitcoin.

In the near term i see something more along the lines iterated by Mr. Anderson:

“If Bitcoin turns out to be a miserable failure, but it does encourage some government to realize that our payment systems are broken and archaic, and some country decides we’re going to make a payment system for this century, I think that would be a huge success.”

Bitcoin and its family of altcoins are a fascinating subject and watching the development, both in terms of the 'gold' mining craze and the introduction of a decentralized, public ledger trading system have me captivated.


the best show in town.

As a former broker, your interest is speculative, yes?

You believe that confidence (or its lack) drives price, and news drives this confidence in both directions.  What recent news do you think has been driving the confidence down, do you think?

As far as i can tell, the majority of recent news has been either neutral or positive.  I fail to see what new information has been recently causing a downturn in confidence other than the lack of price movement in general.

I also wonder if the US gov has started dumping their confiscated silk road coins...

Conversion to fiat is not always preceded by conversion from fiat.  In fact, i do wonder especially lately if, outside of exchanges this is even true at all. Why buy bitcoin at market prices (+fees) only to spend them with merchants who would accept the original currency? It seems far more likely that coin transferred to merchants come from miners who acquired their coin sans fiat, or from those who purchased coin at very low prices some time ago (which makes it a very non neutral exchange).

Merchant acceptance and rising prices are a chicken egg question, at least in the near term, and looking historically at the last few months, i'd argue that it was the higher prices that caused merchant acceptance, not the other way around.  News of merchant acceptance builds confidence and drives speculation, but at least for now, i fail to see why *anyone* in the first world would buy bitcoin now in order to have access to merchants... edit: unless said merchant was selling illeagle goods.

They might buy bitcoin to transfer wealth across international boundaries, but not to make mundane purchases.

There needs to be a clear and present advantage for an average human (other than gold rush speculation) in order to adopt this currency and further, acquiring and holding bitcoin needs to be made easier.  I'd like to see the VC money go into software to make this easier, rather than stuff like exchanges that simply make money off the existing user base.

or : using bitcoin in the market place results in its drop in exchange price?

I think that few people would argue that the recent increase in bitcoin's market price has been driven by speculation:  mainstream news begets awareness leading to interest and then entry into ownership.  More buyers = upward price movement, feeding back into increased speculation interest and further price rises.  This fact seems clear enough when comparing the charts that track bitcoin use in the market place (brick and mortar) vs. volume in the exchanges (http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2013/12/20131205_btc2.jpg).

So, a rise in the price of a bitcoin encourages users to hold and a stable price or falling price encourages users to spend.

Also, when reading opinions speculating on the going forward value and adoption of bitcoin, the consensus seems to be that the success or failure of bitcoin as a generally utilized currency will depend upon its adoption by the wider brick and mortar market place.  Not much use in a currency that cannot be used as a means to buy real world necessities (or luxuries).  Given this widely held opinion, bitcoin enthusiasts are exited when the brick and mortar announce acceptance of bitcoin in their stores because this confirms the practical use of coins and their eventual practical utility (unlike tulips).  Indeed, news services like Coindesk frequently announce bitcoin adoption by major online stores, so much so, that these types announcements outnumber others by wide margins lately.  And given the meteoric rise in bitcoin price (and hence the total market cap), it makes sense that stores like Overstock accept bitcoin:  a new large market makes for increased sales and profit.

So, more and more stores are accepting bitcoin.

Yet, any fool who looks at the historical prices of bitcoin concludes that it is a volatile market and for a merchant operating on thin profit margins, converting bitcoin to fiat as quickly as possible is the safest course of action.  Indeed, many recognize this need and have created services to make this process nearly seamless for less tech savvy merchants.

Recently the price of bitcoin has been relatively stable hovering in the 850/800 range (most of January).  Volatility has been low (relatively speaking) and prices have been stable or slightly downward trending.  This fact means that the speculators are discouraged and those users that acquired their coins in the past (whether it was early in 2013 or before) now have a huge asset base in which to acquire actual useful real world items.  Couple this fact to the large increase in merchants who are accepting bitcoins (and exchanging them for local fiat) and we can see how bitcoin use as a currency might outstrip bitcoin purchase as an investment leading to a downward trend rather than the expected upward trend.

In addition, as far as i can tell, the smart VC money (and lately there is a *lot* of interest here) isn't going into purchasing bitcoin as an investment, but rather, into businesses that can take advantage of users who already posses coins.  And it seams reasonable to assume that once these coins are acquired, they are converted to fiat and used for investment elsewhere or simply to pay for ongoing expenses (this being particularly true for the mining hardware companies).

Speculation waning, conversion to fiat increasing and we have a general downturn in price.

Will this feedback loop further scare away the speculators and encourage the real world use of coins until a new stable low has been achieved?

I think so.

And until entry into this currency becomes less intimidating for the average user and until even more merchants allow for bitcoin's use, i just don't see bitcoin rising anywhere near the 1000$ mark we saw in December.


...oh the wailing of new miners becomes audible even from afar....

I agree that their offer seems like a good one on the surface.  God for everyone, particularly since the outside shares completely pay for their machines, and for the share investor, (assuming a Feb or mid March delivery) a decent return.

Assuming that they uphold their side of the agreement.

'Tiss curious that the site seems to be down right now....

The long term viability of bitcoin as currency interests me, because ultimately, it is this quality that will sustain or derail it after all the speculation has moved on to more interesting pastures.

The theory of money, therefore, is an important one to contemplate for those interested in the long game.

Money theory can be complicated... and controversial.

Let's add this thought to the mix:

"Enter, bitcoin, a cryptography-based currency and technology developed by someone with the pseudonym Satoshi Nakamoto. It has been designed to have a limited rate of growth in the total quantity of currency, up to a predefined cap. There can never be more than 21M bitcoins. The Quantity Theory says that this will make prices of goods measured in bitcoins stable.

One problem with this theory is that the real costs in terms of land, capital, and labor to produce things is steadily falling. Every productive enterprise is constantly seeking to drive cost out of production. If a currency had a constant value, then prices in terms of this currency would be falling.

As we shall see below, the value of bitcoin will be anything but constant. Without a mechanism for responding to increased market demand by creating more currency, there is a fatal flaw."


excerpt from:  http://monetary-metals.com/bitcoin-gold-and-the-quantity-of-mone/