Things getting interesting once we past $100

[sgbett]

so, this "central bank pump and dump scenario" that is being proposed:

will the dump kill every single last participant's interest?

if it doesn't will they try it again?

if they try it again you think it will work the second time? ... the third?

I think when you think about those questions it becomes clear, that the issue is not how does one stop this from happening, but "so what if it does".

The biggest hole in this scheme, is that this whole plan seems to be aimed at destroying bitcoin's legitimacy as a means of increasing relative wealth, by creating unpredictable boom/bust scenarios. Whilst BTC is to each, for his own, I was under the impression that this was not the primary 'goal' of bitcoin.

It's use as a means of value transfer remain largely unaffected. In particular there is little counterparty risk at this time to merchants using bitpay. The volatility does not seem to have hindered its use on silk road.

As 'money' it is performing reasonably well. As a store of value not so much. (There was a time when it didnt just go up )

The point is it can't be killed by discrediting only one of its functions. Those that need it for what it does, well why would they stop using it because somebody was messing around with the exchange rate. BTC works whether it is worth $1m a coin, or $1 coin.

Now, if the central bank destroys any value as a speculative investment, then the exchange rate may drop, but it will only ever go as low as its utility value. This floor is some function of the amount of wealth that needs to be exchanged, and the number of 'circulating' coins.

Of course at that point it doesn't matter how good of a job was done destroying BTC as an investment. They will be so cheap that people are bound to gamble. It may be that billions were lost last time around, but im sure that millions were made. Human psychology is such that there are always going to be people that want to take a shot at that.

[bb113]

so, this "central bank pump and dump scenario" that is being proposed:

will the dump kill every single last participant's interest?

if it doesn't will they try it again?

if they try it again you think it will work the second time? ... the third?

I think when you think about those questions it becomes clear, that the issue is not how does one stop this from happening, but "so what if it does".

The biggest hole in this scheme, is that this whole plan seems to be aimed at destroying bitcoin's legitimacy as a means of increasing relative wealth, by creating unpredictable boom/bust scenarios. Whilst BTC is to each, for his own, I was under the impression that this was not the primary 'goal' of bitcoin.

It's use as a means of value transfer remain largely unaffected. In particular there is little counterparty risk at this time to merchants using bitpay. The volatility does not seem to have hindered its use on silk road.

As 'money' it is performing reasonably well. As a store of value not so much. (There was a time when it didnt just go up )

The point is it can't be killed by discrediting only one of its functions. Those that need it for what it does, well why would they stop using it because somebody was messing around with the exchange rate. BTC works whether it is worth $1m a coin, or $1 coin.

Now, if the central bank destroys any value as a speculative investment, then the exchange rate may drop, but it will only ever go as low as its utility value. This floor is some function of the amount of wealth that needs to be exchanged, and the number of 'circulating' coins.

Of course at that point it doesn't matter how good of a job was done destroying BTC as an investment. They will be so cheap that people are bound to gamble. It may be that billions were lost last time around, but im sure that millions were made. Human psychology is such that there are always going to be people that want to take a shot at that.

There is also the "enthusiast" aspect. I suspect there are at least tens of thousands of people around the world who will keep the project alive regardless of the price. Only a better cryptocurrency will stop it.

[mindtomatter]

so, this "central bank pump and dump scenario" that is being proposed:

will the dump kill every single last participant's interest?

if it doesn't will they try it again?

if they try it again you think it will work the second time? ... the third?

I think when you think about those questions it becomes clear, that the issue is not how does one stop this from happening, but "so what if it does".

The biggest hole in this scheme, is that this whole plan seems to be aimed at destroying bitcoin's legitimacy as a means of increasing relative wealth, by creating unpredictable boom/bust scenarios. Whilst BTC is to each, for his own, I was under the impression that this was not the primary 'goal' of bitcoin.

It's use as a means of value transfer remain largely unaffected. In particular there is little counterparty risk at this time to merchants using bitpay. The volatility does not seem to have hindered its use on silk road.

As 'money' it is performing reasonably well. As a store of value not so much. (There was a time when it didnt just go up )

The point is it can't be killed by discrediting only one of its functions. Those that need it for what it does, well why would they stop using it because somebody was messing around with the exchange rate. BTC works whether it is worth $1m a coin, or $1 coin.

Now, if the central bank destroys any value as a speculative investment, then the exchange rate may drop, but it will only ever go as low as its utility value. This floor is some function of the amount of wealth that needs to be exchanged, and the number of 'circulating' coins.

Of course at that point it doesn't matter how good of a job was done destroying BTC as an investment. They will be so cheap that people are bound to gamble. It may be that billions were lost last time around, but im sure that millions were made. Human psychology is such that there are always going to be people that want to take a shot at that.

What you see as a hole, I see as the whole purpose!  We both agree that there are people who you will not be able to chase away from bitcoin, and we agree that you can't destroy it through outward forces (like making it illegal) without causing a Napster/eMule cascade.   

So what is left?   

You can't make it go away, and you can't argue with its superior features, but you can scare people who don't understand either of those advantages away from it by causing them to lose money.

The new people who don't know anything are exactly the people who the central bank has the ability and means to impact, once they come to appreciate Bitcoin for its many and varied advantages they can no longer be scared out with this.

It is a means to limit the overall pool of users, if they successfully pull this trick with more than 80% of a population over any number of repetitions they can probably stave off the loss of functional reserve status.  Technically legal tender laws would still apply, so people setting prices only in bitcoin with floating dollar amounts would be in violation.  But once we're there the battle is over, Dollar is functionally replaced with Bitcoin as the reserve.

And for the central bank, that is game over - I lose all the majority of my power to impact and implement monetary policy since continued issuance of currency no longer has an implied buyer no matter the amount.

Does that help?

[MatTheCat]

Now, if the central bank destroys any value as a speculative investment, then the exchange rate may drop, but it will only ever go as low as its utility value. This floor is some function of the amount of wealth that needs to be exchanged, and the number of 'circulating' coins.

Of course at that point it doesn't matter how good of a job was done destroying BTC as an investment. They will be so cheap that people are bound to gamble. It may be that billions were lost last time around, but im sure that millions were made. Human psychology is such that there are always going to be people that want to take a shot at that.

See, this thing that 'the exchange rate may drop', is key. For example. If I were a business accepting payment in Bitcoin today for example. At some point, I may have received a $1500 order, paid for in Bitcoin, so ~ 10 Btc. Now however, that I need to turn my Bitcoin into money, that 10 Btc is only worth $1150. My profit on the order was only $250, so I am working to be down $100! This is a fkn crazy way to conduct business, and simply not viable. If I am prepared to put up with this kind of risk in the running of the business which provides my daily bread, I may as well just sell up, go down the casino, and put everything on red!

With sort of volatility we are seeing in Bitcoin, it is strangling real world transactions on the way up, but will destroy the real Bitcoin economy on the down. Yes, there will always be people looking to buy back in, and the market places that rely upon its use will also seek to rearrange themselves after the dust settles, but as mindtomatter describes, in this manner, Bitcoin can be held in its place as a fringe asset, popular with high risk tolerant speculators, and online drug customers. It will bring a few people exceedingly large profits, but leave the majority with a disgusting taste in their mouths.

[Rodyland]

See, this thing that 'the exchange rate may drop', is key. For example. If I were a business accepting payment in Bitcoin today for example. At some point, I may have received a $1500 order, paid for in Bitcoin, so ~ 10 Btc. Now however, that I need to turn my Bitcoin into money, that 10 Btc is only worth $1150. My profit on the order was only $250, so I am working to be down $100! This is a fkn crazy way to conduct business, and simply not viable. If I am prepared to put up with this kind of risk in the running of the business which provides my daily bread, I may as well just sell up, go down the casino, and put everything on red!

If you're a merchant accepting bitcoin and are concerned about exchange rate volatility then it's no different from being a merchant accepting any other foreign currency.  There are already providers out there that will handle this for you and "lock in" your prices.  If the cost of doing so is less than the cost of handling credit cards or cash, then it's a win for the merchant.

And if you're a merchant accepting bitcoin and discover that one of your suppliers also accepts bitcoin, all of a sudden you don't need to convert all your bitcoin to fiat, providing a further saving.

And that's where it gets interesting, because the more people that accept bitcoin, the more people will be willing to use bitcoin.  We all know how network effects work, and if it takes off then pretty soon anyone not accepting bitcoin will be the one that has to deal with the fiat/bitcoin conversion. 

As for volatility, I think it's not unreasonable to presume that once transaction-usage volume (ie people buying and selling stuff with bitcoin) dwarfs speculative volume then the exchange rates will become less volatile, making retail BTC prices a feasible option.  And once prices are set in bitcoin, it won't be the bitcoin price that is volatile, it will be the fiat price which is volatile.

We have a long way to go though.

[Rampion]

Coins are now in weak hands that rushed in for the gold fever

But each dip, each flash crash, each big crash is a buying opportunity. And the coins will slowly move to stronger hands.

[mgio]

To get back to the original topic of this message...

I have the same issue you do, and here is what I learned.

First of all the IRS is NOT like judicial system. You are not innocent until proven guilty. If the IRS notices unaccounted for deposits in your bank account or spending that is not consistent with your declared salary, the burden of proof is on YOU to show where that money came from. You can not say "I bought those bitcoins for $72 last year and sold them for $73 this year so I only made a dollar a coin on them". You need to have some kind of documentation showing that you did in fact buy them for $72. You need proof to establish you basis or the whole thing could get declared a capital gain.

If you are going to do things the "right" way, you probably want to hold on to your coins for at least a year so you can pay long-term capital gain tax which is much less than the short-term tax.

Now, one thing I looked into was the possibility of simply spending the coins outright without ever converting to dollars. If bitcoins could be considered a foreign currency, this would be totally legit and you would owe no taxes on the appreciated value. Think about if you exchange dollars for euros and then went on vacation in Europe. You wouldn't owe any capital gains tax if your euros happen to appreciate before you spent them. As long as you don't convert them back to dollars, you are ok. The problem is that bitcoin isn't a foreign currency because it is not back by any government. Therefore you can't treat it as such. You could try anyways as the IRS hasn't really said how to deal with bitcoins but if they found out, they probably will say "You can't do that, pay us the taxes." and you'd have to pay anyways. You might not get hit with an interest or penalty though in which case you'd be in the same place as if you just paid the taxes up front. Also note that you would likely have to file an FBAR form if you are going to consider bitcoins a foreign currency if you have any large amount of them. The FinCEN announcement doesn't say anything about taxes unfortunately and while it uses the term "virtual currency", I don't think the IRS has ever used that term before. And they definitely don't call it a "foreign currency".

Finally, if you wish to take the tax evasion route, well than that is simply. Use localbitcoin and sell your coins directly. And convert some to gold. You probably won't get caught. But you would be in big trouble if you did, and it isn't the ethical solution no matter how you try to justify it.

[justusranvier]

and it isn't the ethical solution no matter how you try to justify it.

I know what you mean. There is no ethical way to avoid recognizing that taxation is immoral, no matter how they try to justify it.

[mgio]

and it isn't the ethical solution no matter how you try to justify it.

I know what you mean. There is no ethical way to avoid recognizing that taxation is immoral, no matter how they try to justify it.

Well, the question is, do you agree with following the laws or breaking them? This is not about being a libertarian or not. Libertarians still are, for the most part, law-abiding citizens. It's whether you are a good citizen or if you are a leech. Personally, I stay away from leeches, sneaks, thieves, and sneaks. Maybe your system of ethics believes that stealing is ok. I'm not going to argue against that. But I think you would be in the minority in that case. People use the argument that taxation is immoral, or "i didn't vote for these taxes" to justify tax evasion. It is a just a cop out excuse to get out of doing something you don't want to do. But philosophically, you are going to have a hard time arguing that doing so is ethical.

[bb113]

and it isn't the ethical solution no matter how you try to justify it.

I know what you mean. There is no ethical way to avoid recognizing that taxation is immoral, no matter how they try to justify it.

Well, the question is, do you agree with following the laws or breaking them? This is not about being a libertarian or not. Libertarians still are, for the most part, law-abiding citizens. It's whether you are a good citizen or if you are a leech. Personally, I stay away from leeches, sneaks, thieves, and sneaks. Maybe your system of ethics believes that stealing is ok. I'm not going to argue against that. But I think you would be in the minority in that case. People use the argument that taxation is immoral, or "i didn't vote for these taxes" to justify tax evasion. It is a just a cop out excuse to get out of doing something you don't want to do. But philosophically, you are going to have a hard time arguing that doing so is ethical.

No one even knows what the laws are... You need to wait until someone goes to court, and even after pay someone hundreds or thousands to tell you what it means for your circumstances. Its a crappy system. I would want to follow the laws if I could know what they are.

[justusranvier]

But philosophically, you are going to have a hard time arguing that doing so is ethical.

Quite the opposite, in fact, but I see no reason to continue because either you are using words you do not understand, or else you do understand and are using that knowledge to spread disinformation.

[BitcoinTate]

i sit here looking at the price go up and up...also thinking how stupid i was to sell my modest 150 coins @ 45... for some it's not a lot of money, but damn.. right now i`m down to ~45 coins if i were to buy, would doesn't make any sens anymore

I would buy those 45.. could make you a millionaire one day.

[myrkul]

But philosophically, you are going to have a hard time arguing that doing so is ethical.

eth·i·cal 

Adjective

    Morally correct.

Resisting theft is always morally correct.

[mgio]

But philosophically, you are going to have a hard time arguing that doing so is ethical.

Quite the opposite, in fact, but I see no reason to continue because either you are using words you do not understand, or else you do understand and are using that knowledge to spread disinformation.

Give it a shot. I'm interested to hear what your argument on why no one should pay taxes.

[myrkul]

But philosophically, you are going to have a hard time arguing that doing so is ethical.

Quite the opposite, in fact, but I see no reason to continue because either you are using words you do not understand, or else you do understand and are using that knowledge to spread disinformation.

Give it a shot. I'm interested to hear what your argument on why no one should pay taxes.

I doubt he will. But I'm willing.

I even have a meme:

[mgio]

and it isn't the ethical solution no matter how you try to justify it.

I know what you mean. There is no ethical way to avoid recognizing that taxation is immoral, no matter how they try to justify it.

Well, the question is, do you agree with following the laws or breaking them? This is not about being a libertarian or not. Libertarians still are, for the most part, law-abiding citizens. It's whether you are a good citizen or if you are a leech. Personally, I stay away from leeches, sneaks, thieves, and sneaks. Maybe your system of ethics believes that stealing is ok. I'm not going to argue against that. But I think you would be in the minority in that case. People use the argument that taxation is immoral, or "i didn't vote for these taxes" to justify tax evasion. It is a just a cop out excuse to get out of doing something you don't want to do. But philosophically, you are going to have a hard time arguing that doing so is ethical.

No one even knows what the laws are... You need to wait until someone goes to court, and even after pay someone hundreds or thousands to tell you what it means for your circumstances. Its a crappy system. I would want to follow the laws if I could know what they are.

Yes, that's the problem. But the IRS is going to look more kindly if you attempt to follow some of the rules. They are definitely not going to buy "there aren't any regulations that specifically address bitcoins so I don't feel I have to pay anything." The best way to stay on their good side is to pick a set of rules to follow and try to apply them to bitcoins. At least you won't be deliberately evading taxes in their eyes. You might be wrong and they will correct you, but the penalties won't be as severe.

[myrkul]

No? You don't want to explain how taxation is not theft?

[nobbynobbynoob]

No? You don't want to explain how taxation is not theft?

I'll tell you why taxation is not theft:

Theft is non-violent larceny. The act of taxation involves implicit [threat of] physical force by the government agents (of whatever flavour), so it is not theft in my book, it counts as "robbery with violence" according to the definition in the common law, or indeed the 1968 definition under English law.

[myrkul]

No? You don't want to explain how taxation is not theft?

I'll tell you why taxation is not theft:

Theft is non-violent larceny. The act of taxation involves implicit [threat of] physical force by the government agents (of whatever flavour), so it is not theft in my book, it counts as "robbery with violence" according to the definition in the common law, or indeed the 1968 definition under English law.

Oh, sorry, you're right.

Armed robbery, then.

[sgbett]

Now, if the central bank destroys any value as a speculative investment, then the exchange rate may drop, but it will only ever go as low as its utility value. This floor is some function of the amount of wealth that needs to be exchanged, and the number of 'circulating' coins.

Of course at that point it doesn't matter how good of a job was done destroying BTC as an investment. They will be so cheap that people are bound to gamble. It may be that billions were lost last time around, but im sure that millions were made. Human psychology is such that there are always going to be people that want to take a shot at that.

See, this thing that 'the exchange rate may drop', is key. For example. If I were a business accepting payment in Bitcoin today for example. At some point, I may have received a $1500 order, paid for in Bitcoin, so ~ 10 Btc. Now however, that I need to turn my Bitcoin into money, that 10 Btc is only worth $1150. My profit on the order was only $250, so I am working to be down $100! This is a fkn crazy way to conduct business, and simply not viable. If I am prepared to put up with this kind of risk in the running of the business which provides my daily bread, I may as well just sell up, go down the casino, and put everything on red!

With sort of volatility we are seeing in Bitcoin, it is strangling real world transactions on the way up, but will destroy the real Bitcoin economy on the down. Yes, there will always be people looking to buy back in, and the market places that rely upon its use will also seek to rearrange themselves after the dust settles, but as mindtomatter describes, in this manner, Bitcoin can be held in its place as a fringe asset, popular with high risk tolerant speculators, and online drug customers. It will bring a few people exceedingly large profits, but leave the majority with a disgusting taste in their mouths.

Thats the purpose of using someone like bitpay, you have the option to do instant conversion to fiat at the point the buyer pays, so if you want zero exchange risk, that's the one for you.

The risk remains for the buyer, but I think the buyer (one hopes) is well aware of the risks of holding bitcoin!