Bear post of the Day

[Spaceman_Spiff]

The Bitcoin market cap is usually quoted as every BTC currently in existence times the current market price. This is not true because the majority of BTC were never traded for currency. Even worse during a rally the supply dries up because people do not want to risk having the price surpass their ask significantly.

And how is this different than stocks?

You can't really compare it with stocks. Owners of a company's stocks or other securities, actually have a claim on the company's assets, some of which are always physical (larger percentage for an airline as an example, smaller percentage for a software firm, and so on). Even if stock goes to zero, there is always some recoverable value. This is why, when companies have substantial physical assets (plants, equipment, inventory, etc.) their stock cannot go to zero. Someone will buy them before that. Debt changes the variables, but even if the company defaults, some debt is recoverable.

"Market capitalization" in that context is a useful metric when compared to the actual asset base of the balance sheet, to gauge whether a stock is richly or poorly priced (and in the case of things like FB as an example, to try and justify it  ).

Owning bitcoins (which is a very vague term anyway, the "owning" part I mean) does not represent a claim on anything of value. If their price ever goes to zero, we probably won't even talk about it with anyone anymore.

So, terms like "market cap" have no meaning when talking about BTC, but for a different reason, IMO, than what the OP suggested. There are many more differences between bitcoins and securities, such as what happens if the grid shuts down for a while...

I was mainly referring to the price discovery mechanism being the same.  Whether the asset in question is of a different nature is not that important imho.

And BTW, Spiff, nice to see you here :-). KAFA 4 ever ;-).

I am afraid you have mistaken me with one of my alter egos.  I don't know what KAFA is.

[oakpacific]

Glad that my point was so well understood.  


As for today I'll try to tackle yet another myth:
The claim that bullish market participants can drive the price up infinitely, arguably because they can keep their coins forever without ever selling them back.
In an ideal world where everybody only invests the money they can afford to lose this would be true, but in RL that is not the case...

Because of relatively low interest rates in the fiat money economy there is a substantial amount of people who buy Bitcoin on credit. This tendency increases with greed and bullishness, the more somebody thinks the price will go up shortly and the higher the longing to get rich quick the higher the risk for somebody to fall into this trap.
And because many people either have other loans for more essential assets (like housing) or use these assets as collateral to get the loan in the first place they have no other alternative to sell their BTC down the road, either by taking profit or worse to cut losses.

I'm bullish but I agree with this. Infinitely? Doesn't sound realistic anyway. The truth is a lot of people will cash out of bitcoin and that will cause the bubble to pop...... but that is the price bitcoin has to pay to become an elite currency. Over and over people will suck money out of the bitcoin circulation and prices will rise and fall but eventually it will still be worth more than it is now. I only say I'm bullish because I don't think the price will drop that far. There are lines of people waiting to buy at 15........ so that means I doubt it will drop that low if the price does crash.

Yes, it was cypherdoc one of the most prominent bulls here who brought that to my attention.
What you do must understand is that essentially this behavior can lead to a debt trap for speculators who weren't careful enough and depending on the entrance price of the people who did this it can lead to a very deep drop potentially. In a way the positive feedback we have seen in the past weeks would reverse and work against them.
I think if it gets that far we would drop very deep, potentially close to the 2011 crash.

I beg to differ here. I think the number of "healthy investors" could match that of reckless investors who would be deeply in debt and panic sell to cut losses, so the healthy guys could easily stop the price from falling that low by buying off at a higher, though still quite low bottom price(e.g. $7.22),  if the reckless investors were such a  dominant force here, their collective buying power would already have pushed the price way higher than it's now, like in June 2011, when the price jumped 20 dollars in just one week.

[Melbustus]

...
And because many people either have other loans for more essential assets (like housing) or use these assets as collateral to get the loan in the first place they have no other alternative to sell their BTC down the road, either by taking profit or worse to cut losses.

[emphasis added]

No alternative? How about default on the fiat, but keep the btc? For the set of people buying btc on credit with no ability to repay if they get squeezed, I contend that there's a large demographic crossover with the sort that simply defaults on credit-cards.

[ElectricMucus]

...
And because many people either have other loans for more essential assets (like housing) or use these assets as collateral to get the loan in the first place they have no other alternative to sell their BTC down the road, either by taking profit or worse to cut losses.

[emphasis added]

No alternative? How about default on the fiat, but keep the btc? For the set of people buying btc on credit with no ability to repay if they get squeezed, I contend that there's a large demographic crossover with the sort that simply defaults on credit-cards.

Good luck with that, don't drop the soap but if you do you can always think about your bitcoins.  

[ElectricMucus]

Todays bear post is about the so called uniqueness of Bitcoin.

There is not much to write about it, for all practical purposes Bitcoin is innovative but certainly not unique.
Take a look around at the Digital Currency Wiki and tell me why you think Bitcoin is destined for greatness and all those other solutions are not.

When doing that keep in mind that the rest of the world doesn't necessarily agree with libertarian ideology.

[humanitee]

Todays bear post is about the so called uniqueness of Bitcoin.

There is not much to write about it, for all practical purposes Bitcoin is innovative but certainly not unique.
Take a look around at the Digital Currency Wiki and tell me why you think Bitcoin is destined for greatness and all those other solutions are not.

When doing that keep in mind that the rest of the world doesn't necessarily agree with libertarian ideology.

Started looking through, seemed a quite a few were centralized (not all however).
"While Bitcoin’s critics are wary of it lack of commodity backing, its main advantage is its decentralized model. This decentralization makes it arguably the most resilient digital currency currently available."

[ElectricMucus]

"While Bitcoin’s critics are wary of it lack of commodity backing, its main advantage is its decentralized model. This decentralization makes it arguably the most resilient digital currency currently available."

Well yes, it's an advantage but it doesn't tell the whole story. For once I have yet to see a completely decentralized system of any kind, I would appreciate if if it were to exist some day.
Bitcoin is centralized at the source code and it is centralized in terms of wealth distribution, other system may be more centralized in more different kinds however that is not the only issue:

Many people do not want to use a decentralized system, for whatever reason. We live in the world we live in all we can do is try to change it while many people simply do not want that change.
I am an Anarchist myself (not a Libertarian though) and would very much like to live in a society where power isn't arbitrarily. I realize this is a chicken and egg problem but that's perhaps the topic for another day.

[arepo]

"While Bitcoin’s critics are wary of it lack of commodity backing, its main advantage is its decentralized model. This decentralization makes it arguably the most resilient digital currency currently available."

Well yes, it's an advantage but it doesn't tell the whole story. For once I have yet to see a completely decentralized system of any kind, I would appreciate if if it were to exist some day.
Bitcoin is centralized at the source code and it is centralized in terms of wealth distribution, other system may be more centralized in more different kinds however that is not the only issue:

and don't forget the mountain of gox!

[oakpacific]

Todays bear post is about the so called uniqueness of Bitcoin.

There is not much to write about it, for all practical purposes Bitcoin is innovative but certainly not unique.
Take a look around at the Digital Currency Wiki and tell me why you think Bitcoin is destined for greatness and all those other solutions are not.

When doing that keep in mind that the rest of the world doesn't necessarily agree with libertarian ideology.

It's exactly because you are living in the first world, that you may not understand why the rest of the world needs it, and its uniqueness.

[ElectricMucus]

Todays bear post is about the so called uniqueness of Bitcoin.

There is not much to write about it, for all practical purposes Bitcoin is innovative but certainly not unique.
Take a look around at the Digital Currency Wiki and tell me why you think Bitcoin is destined for greatness and all those other solutions are not.

When doing that keep in mind that the rest of the world doesn't necessarily agree with libertarian ideology.

It's exactly because you are living in the first world, that you may not understand why the rest of the world needs it, and its uniqueness.

Ohh that's gonna be interesting. Please tell me how the 3rd world population is supposed to benefit from BTC in any way because I cannot think of any.

I'm serious.

and don't forget the mountain of gox!

true dat.

[oakpacific]

Todays bear post is about the so called uniqueness of Bitcoin.

There is not much to write about it, for all practical purposes Bitcoin is innovative but certainly not unique.
Take a look around at the Digital Currency Wiki and tell me why you think Bitcoin is destined for greatness and all those other solutions are not.

When doing that keep in mind that the rest of the world doesn't necessarily agree with libertarian ideology.

It's exactly because you are living in the first world, that you may not understand why the rest of the world needs it, and its uniqueness.

Ohh that's gonna be interesting. Please tell me how the 3rd world population is supposed to benefit from BTC in any way because I cannot think of any.

I'm serious.

and don't forget the mountain of gox!

true dat.

http://en.blog.wordpress.com/2012/11/15/pay-another-way-bitcoin/

The Wordpress guy pretty much got it actually, the status quo is if folks in my nation, and many other third world nations wanna pay for, let's say a wordpress or megaupload subscription, or just simply buying goods in a U.S online store, soon they will find many of the times their only option is to ask people like me(oversea students/workers) to help them out, all current payment methods would not work for one reason or another. Credit cards issued in many nations are not accepted, you can't blame the merchants for this, the issuing banks most likely would not give a shit once you are frauded, let alone pay for your losses, and even if you could locate the fraudster, the chance of a successful prosecution is superslim.  Paypal does not do business with perhaps more than half of the world's population, and is not allowed to process foreign currency transactions in China, even in those nations it operates, there are very often draconian restrictions, see here http://en.wikipedia.org/wiki/PayPal#Local_restrictions , the chance that other online payment business/digital currency issuers could operate where Paypal could not is, of course, even slimmer. And don't get me started on the wire transfer, even if the merchant accepts it and you are fine with the exorbitant fees, your fund could be intercepted anytime by an intermediary bank if the amount is slightly large, on the pretext of financial crime prevention of course, and you are left to find out yourself why your fund has not arrived, no one is going to inform you, i had personal experience with that.

Bitcoin, on the other hand, could prove to be very useful, I don't know about other nations, but in China, it's a piece of cake to buy bitcoins with existing domestic online payment system like Alipay, even if the government decides to crack down on the exchanges, the online shops could still sell them under all kinds of pretenses, it is nearly impossible the authority would find out what is the good really being delivered. On the oversea merchants side, all they have to do is to use a payment processor, which adds very little cost. Of course, whether bitcoin could really succeed will have to depend on the size and liquidity of the market, in the end.

Bitcoin, it seems to me, is basically a digital version of hawala http://en.wikipedia.org/wiki/Hawala, except that hawala is nowhere near as versatile as bitcoin is. The decentralization aspect is not just libertarian ideology, it's very tangible in nations where financial barriers are real.

[ElectricMucus]

So what you are basically saying is that 3rd would population being able to buy services from 1st world companies operating on high margins would help them?
If so how are they supposed to get their Bitcoins anyway? Oh they should issue T/T to mtgox paying premium transaction fees to western banks in the process?

This is brilliant! 

Bitcoin, it seems to me, is basically a digital version of hawala http://en.wikipedia.org/wiki/Hawala, except that hawala is nowhere near as versatile as bitcoin is. The decentralization aspect is not just libertarian ideology, it's very tangible in nations where financial barriers are real.

No that's ripple.

[oakpacific]

So what you are basically saying is that 3rd would population being able to buy services from 1st world companies operating on high margins would help them?
If so how are they supposed to get their Bitcoins anyway? Oh they should issue T/T to mtgox paying premium transaction fees to western banks in the process?

This is brilliant!  

Bitcoin, it seems to me, is basically a digital version of hawala http://en.wikipedia.org/wiki/Hawala, except that hawala is nowhere near as versatile as bitcoin is. The decentralization aspect is not just libertarian ideology, it's very tangible in nations where financial barriers are real.

No that's ripple.

What high margins? It's not about "helping" them, it's about a need that is already there. You do realize that oversea shopping, online or offline, is an enormous business in many developing nations right? A lot of things are way cheaper in developed nations, many are not even purchasable locally. I am not going to tell you the number of payment requests people like me are going to receive the year around, but suffice to say it is staggering. One of my friends runs a business just by doing oversea shopping for several skincare brands, and even he sometimes has problems with payments.

What I meant by "hawala", is that a wide variety of people could get in the money sending business, even yourself, as long as you can get hold of some bitcoins.

And yeah, as I have said, we don't need to rely on Mt.Gox.

[abbyd]

+1 Holliday

for all practical purposes Bitcoin is innovative but certainly not unique.

How does uniqueness determine chances of success? I'd think that the LESS unique something is, the more likely it is to succeed...
Given that bitcoin is hands down the most popular crypto currency, I'd say it has a good chance of success based on INERTIA.

The other things you need to take into account are CONTEXT and TIMING. The worlds' middle class just got royally screwed by
financial elites - billions in financial wealth evaporated and billions more went into offshore hedge fund accounts.

Anyone with half a brain is looking to exit the fraudulent system the MOTU have created... enter bitcoin...

[oakpacific]

I would also like to add that an inherent risk of using centralized digital currency is the possibility of insolvency/bankruptcy of the issuer.

[steamboat]

+1 to this thread. Thank you for starting it. I believe one of the largest obstacles to major bitcoin adoption is helping the rest of the world "get it". There are so many people on this forum alone spreading disinformation and lies it's astounding; and the majority of us (myself included) do not yet fully understand bitcoin enough to rebuttal. The more we focus on why and how bitcoin is the answer, the more we learn ourselves and the more we pass that knowledge on to others.

[KTE]

The wheels are already in motion. A few big adopters are already in (most recently Reddit, Mega) making sure the word will spread, and there are plenty of forward looking entrepreneurs having a go at bitcoin (only a matter of time before online poker with bitcoin hits big, and other harder to foresee big hits). It's just a matter of time now, and it's completely out of the hands of us single individuals.

The hard work has already been done. Time to reap the rewards and enjoy the ride. All you need is patience.

[adamstgBit]

+1 to this thread. Thank you for starting it. I believe one of the largest obstacles to major bitcoin adoption is helping the rest of the world "get it". There are so many people on this forum alone spreading disinformation and lies it's astounding; and the majority of us (myself included) do not yet fully understand bitcoin enough to rebuttal. The more we focus on why and how bitcoin is the answer, the more we learn ourselves and the more we pass that knowledge on to others.

people "get it" but they don't Believe it, last Sat Night i was playing poker, ( i was pretty drunk ... and high   ) anyway at one point someone asked "what is bitcoin?" and i told her, we talked about... Government! ...  Fake Dollars! ... Real Bitcoins! i had blurted out so much info so fast one of them lol'd at me and said " you going to sign us a song now" so i got up and starting signing "Mr. BITCOIN Bring me money, give me a chance out of this economy!" LMAO!

gr8 publicity right?

sure, but they will never buy in, because they don't believe and they never will.... they like their bank notes, they like their bank accounts. to them this is money, and just cuz some kid can cough out tons of "BS" about "Dollars" and thinks "bitcoin" is better, wont change their mind. nothing will!

Honestly I believe it scares them, they don't really understand it, they hear me say thing like " everyone fights over a VERY LIMITED SUPPLY, and that's what gives it value!"
and as they start to understand it scares them! they don't want to hear about why the dollars we all use are really just FAKE money, it scares them.

[KTE]

.. and as they start to understand it scares them! they don't want to hear about why the dollars we all use are really just FAKE money, it scares them.

As it should. This is hell of a scary thing going on with bitcoin. It does take guts to take in all the information, take bitcoin to the logical conclusions and accept that there's a lot to be afraid of. Two other options is to deny its viability or to be blind to the dark side and be a blue-eyed ideologic as most here.

I might not think it's all roses, but there's no point denying the potential of BTC and would be stupid not to hop along for the ride.

[DoomDumas]

I would be very very surprised if BTC/USD ratio gets under 20$ ever !