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Author Topic: 2013-03-18 newstatesman.com - When the speculators flee, what will be left of Bi  (Read 1120 times)
Akka
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March 18, 2013, 01:39:29 PM
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When the speculators flee, what will be left of Bitcoin?

Last week's post pointing out bubbly appearance of Bitcoin's market capitalisation sparked some kickback. That was to be expected; in any bubble, people who are currently exposed to the possibility of a crash are unlikely to take the news well. Bitcoin has even more die-hard defenders than most bubbles, though, because of the mixture of political and cultural factors which cause a lot of people to invest such hope in it....


The natural price of Bitcoin is far, far lower than where it stands right now, probably around the same level it was last summer, after its first catastrophic crash and before its second. The real question for the currency isn't whether it can survive being an investment for speculators – it can't – but whether it can survive as a currency when valued at 10 per cent of what it is currently.

The problem it faces is that the distributed computing which lets Bitcoin work is expensive. It takes energy, and time, and frequently also specialised hardware. The reward for doing so – "mining", in the parlance – is a randomly allocated share of the new coins produced through inflation. As time goes on, the currency will produce less and less extra coins this way, but for now, the bigger fear is if the natural price for Bitcoin can go low enough that it no longer becomes efficient to run these mining rigs.

There are still ways of getting around that – the technology allows for the payment of what is essentially a processing fee on top of each transaction – but it may be the case that Bitcoin's use as a currency is currently being subsidised by its bubble-tastic value. Hopefully the two are separate enough that even after the crash, Bitcoin can continue to function as an alternative way to send money over the internet. But the more Bitcoin fans boost the bubble, the bigger the shock's going to be when it pops.

http://www.newstatesman.com/economics/2013/03/when-speculators-flee-what-will-be-left-bitcoin

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Akka
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March 18, 2013, 01:41:07 PM
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I have the feeling that guy is just pi*** off for some reason. He made another Bitcoin Bubble article only 4 Days ago: https://bitcointalk.org/index.php?topic=153514.0

Probably has bought in in the 2011 Bubble, sold at a loss and is now realized this was a mistake.

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kiba
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March 18, 2013, 02:42:57 PM
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Unconvincing. Plus, what about wordpress and reddit and mega and lot of other good news?

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March 18, 2013, 03:22:40 PM
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Fail article
Nancarrow
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March 18, 2013, 03:41:20 PM
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Most of what's in that quoted section is reasonable enough. But the key points are just nuts.

The natural price of Bitcoin is far, far lower than where it stands right now, probably around the same level it was last summer, after its first catastrophic crash and before its second.

How has the author determined 'the natural price' of Bitcoin? I *do* think it's actually reasonable to define a 'natural price'... take an estimated fiat value of all the goods and services traded in Bitcoin over the past month, or year or whatever, divide by the number of bitcoins circulated in that timeframe. But such a price is a theoretical construct, probably impossible to actually get an accurate value for.

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the bigger fear is if the natural price for Bitcoin can go low enough that it no longer becomes efficient to run these mining rigs.

The author has forgotten about the inbuilt difficulty change that keeps the mining network roughly in equilibrium. Price drops too low -> most miners drop out -> difficulty goes down -> mining becomes more profitable -> miners come back. Not to mention that with ASICs coming up, electricity costs, which became the bane of GPU miners, will become relatively unimportant for a while (year or so, maybe) until we come full circle again with a mining network made entirely of ASICs.

Quote
But the more Bitcoin fans boost the bubble, the bigger the shock's going to be when it pops.

True enough, ASSUMING that we have a bubble in the first place. As other posters have mentioned there's a much bigger bitcoin economy than there was two years ago.

If I've said anything amusing and/or informative and you're feeling generous:
1GNJq39NYtf7cn2QFZZuP5vmC1mTs63rEW
alexanderanon
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March 19, 2013, 02:29:35 AM
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When the speculators flee, what will be left of Bitcoin?

Last week's post pointing out bubbly appearance of Bitcoin's market capitalisation sparked some kickback. That was to be expected; in any bubble, people who are currently exposed to the possibility of a crash are unlikely to take the news well. Bitcoin has even more die-hard defenders than most bubbles, though, because of the mixture of political and cultural factors which cause a lot of people to invest such hope in it....


http://www.newstatesman.com/economics/2013/03/when-speculators-flee-what-will-be-left-bitcoin

Logik
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March 19, 2013, 02:47:26 AM
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The reward for doing so – "mining", in the parlance – is a randomly allocated share of the new coins produced through inflation.


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