I'm a Central Bank trying to keep Bitcoin from being adopted

[mindtomatter]

Originally posted at Reddit

Playing Devil's Advocate here....

Let's play a game:  I'll be the Central Bank with say, 10 billion USD to devote to the "problem" of bitcoin.  You try to think of why my plan won't succeed.    

• I win when I can cause situations that scare users away from using Bitcoins.  
• I lose when non-technical users successfully and satisfactorily use any currency that's not controlled by a central bank.

So I'm assuming everyone understands why central banks will never like Bitcoin.

It's a construct completely outside their control, and since they get their power from issuing and being the central clearing house for paper currencies the mere existence of an alternative that doesn't have those problems is very dangerous, because it's obviously a better deal for its users in the medium-long term.

You can't manipulate a currency unless you have a lot of it at your disposal. With dollars, that's easy - Just create some new currency.
But with Bitcoin, you can't do that - So what do you do as a central bank with the ability to create as much paper money as you want.....
You buy a bunch of bitcoins, and the price doesn't matter. Actually, it's BETTER for you if your buying causes the price to go up, the more the better.

The total market cap for Bitcoin just hit 1 billion, so if the Fed wanted to buy 10% at current market rates best case scenario it would be 100 million, which is pocket change for the entities we're talking about. The demand spike creates a price spike which pulls media attention which brings new buyers which feeds higher prices which feeds more media attention, the cycle becomes self perpetuating after a while. That's where we are now.

Because Bitcoin's fundamentals (stable supply, distributed decision making, borderless operation) don't really leave room to argue they're worse than Dollars, the only argument that can reasonably made against them is that they're unstable and therefore unsafe for the average person to use.

So the way you do that is help the price go way up by buying in quantity over a reasonable period of time without regard to the price, then once you've cornered a reasonable proportion of the market (say 5-10%) you dump them all at once, smash the price, and incur massive losses for the new users who bought in during the climb through higher prices.
Then (after the market exhausts itself at the bottom) you DO NOT buy any of your coins back, since the dollar amount is trivial it's better to leave the impression that demand in the market has completely left town.

This also means you can use the same trick of accumulating -> causes bubble -> encourages newbies to get in -> sell large stake -> pop bubble -> cause newbie panic -> advise currency is unsafe -> wait for fundamentals to become important again -> repeat

What do you think, why wouldn't this be easy for any major central bank to do?

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[BTCLuke]

You're assuming there is no significant amount of diehard hoarders, and more importantly, that there is no real economy here that needs these coins for trade.

Both are false, although I wouldn't expect the fed to know this.

You are also assuming there is ONE central bank, when there are many, and many countries in the world full of bitcoin holders.

Bernanke can try all of this himself, for instance, but without the coordination of the EU, IMF, China's central bank, and others, he isn't fighting the full bitcoin market; just the US market.

Too many assumptions, and too many strong bitcoin advocates. I think it would fail.

However, now that we've passed a Billion $ market cap I fully expect some bad press to be manufactured and thrown our way. Things like terrorists attacks funded fully in bitcoin and the like... If they pump out enough of that bullsh!t then the sheeple of the world will form a strong resistance and we'll be far more segregated as a race.

They are experts at propaganda. Just look at any presidential election. Once we've taken a big enough bite out of their economy, this is the big gun that they will use on us.

[Spaceman_Spiff]

Originally posted at Reddit

Playing Devil's Advocate here....

Let's play a game:  I'll be the Central Bank with say, 10 billion USD to devote to the "problem" of bitcoin.  You try to think of why my plan won't succeed.    

• I win when I can cause situations that scare users away from using Bitcoins. 
• I lose when non-technical users successfully and satisfactorily use any currency that's not controlled by a central bank.

So I'm assuming everyone understands why central banks will never like Bitcoin.

It's a construct completely outside their control, and since they get their power from issuing and being the central clearing house for paper currencies the mere existence of an alternative that doesn't have those problems is very dangerous, because it's obviously a better deal for its users in the medium-long term.

You can't manipulate a currency unless you have a lot of it at your disposal. With dollars, that's easy - Just create some new currency.
But with Bitcoin, you can't do that - So what do you do as a central bank with the ability to create as much paper money as you want.....
You buy a bunch of bitcoins, and the price doesn't matter. Actually, it's BETTER for you if your buying causes the price to go up, the more the better.

The total market cap for Bitcoin just hit 1 billion, so if the Fed wanted to buy 10% at current market rates best case scenario it would be 100 million, which is pocket change for the entities we're talking about. The demand spike creates a price spike which pulls media attention which brings new buyers which feeds higher prices which feeds more media attention, the cycle becomes self perpetuating after a while. That's where we are now.

Because Bitcoin's fundamentals (stable supply, distributed decision making, borderless operation) don't really leave room to argue they're worse than Dollars, the only argument that can reasonably made against them is that they're unstable and therefore unsafe for the average person to use.

So the way you do that is help the price go way up by buying in quantity over a reasonable period of time without regard to the price, then once you've cornered a reasonable proportion of the market (say 5-10%) you dump them all at once, smash the price, and incur massive losses for the new users who bought in during the climb through higher prices.
Then (after the market exhausts itself at the bottom) you DO NOT buy any of your coins back, since the dollar amount is trivial it's better to leave the impression that demand in the market has completely left town.

This also means you can use the same trick of accumulating -> causes bubble -> encourages newbies to get in -> sell large stake -> pop bubble -> cause newbie panic -> advise currency is unsafe -> wait for fundamentals to become important again -> repeat

What do you think, why wouldn't this be easy for any major central bank to do?

We had a bubble already.  Tell me, how is that working out?  (look at nr of transactions, nr of wallets being used etc.)

[Rodyland]

1. Build an ASIC mining farm with at least 2x current hash power.  Make it quite obvious that one entity controls at least 2/3 the hashing power
2. Mine like a motherf&*$er (throw in the occasional double-spend, just for kicks)
3. Watch difficulty go through the roof
4. Dump your mined btc, causing minor price crash
5. Stop hashing, added difficulty will cause blocks to go through every, say, half hour, instead of 10 minutes, choking the network with uncleared transactions
6. When difficulty readjusts low, goto 1:


A few iterations of this are likely to kill bitcoin, I think.

[cbeast]

Make sure you keep your plan a secret because there is more than one central bank, and they probably have more money than you to spend. Do you think they will waste their money helping you to destroy Bitcoin, or do you think they will buy your cheap bitcoins and put you out of business?

[Sage]

Make sure you keep your plan a secret because there is more than one central bank, and they probably have more money than you to spend. Do you think they will waste their money helping you to destroy Bitcoin, or do you think they will buy your cheap bitcoins and put you out of business?

Central banks have always worked together against the slave class.  Watch the Forex markets if you don't believe so.

It would be naive to think they won't try to kill Bitcoin.

So far though 3 good opportunities to cause a crash have resulted in a rapid rebound.  Demonstrating some pretty good resiliency.

The momentum is only increasing.   The cost of doing something like this is going up exponentially.   

I suspect there are enough in the community to see it for what it is and buy, buy, buy.

It's the new naive user that will be hurt.

[cbeast]

Make sure you keep your plan a secret because there is more than one central bank, and they probably have more money than you to spend. Do you think they will waste their money helping you to destroy Bitcoin, or do you think they will buy your cheap bitcoins and put you out of business?

Central banks have always worked together against the slave class.  Watch the Forex markets if you don't believe so.

Bankers only care about making money for themselves. In fact, it looks like the BRIC nations may move in where the EURO is failing.

[benjamindees]

1) Buy off / co-opt development team and major miners.  (check)

2) Establish network control via frequent, forced client upgrades and network splits.  (check)

3) Use shills to co-opt and distort Bitcoin political message away from freedom and opposition to bail-outs and towards democracy and paying taxes to support cronyist banks.  (check)

4) Support large-scale criminal enterprises to secure a supply of Bitcoins to short (ponzi schemes, thefts, fraud, etc).  (check)

5) Setup Bitcoin services designed to eliminate anonymity.  (check)

6) Identify major holders.  (check?)

7) Control ASIC manufacturers.  (in progress)

8 ) Targeted shut-downs, bank account raids, random door-kickings of major participants that fail to go along. (coming soon)

9) THE PUMP -- pump up the price by preventing selling, artificially limiting supply, and by buying en masse.

10) THE DUMP -- crash the price by coordinated technical attacks, sabotage, targeting merchants, loosening of restrictions on selling, and by dumping BTC.

11) GOTO 8

[cbeast]

1) Buy off / co-opt development team and major miners.  (check)

2) Establish network control via frequent, forced client upgrades and network splits.  (check)

3) Use shills to co-opt and distort Bitcoin political message away from freedom and opposition to bail-outs and towards democracy and paying taxes to support cronyist banks.  (check)

4) Support large-scale criminal enterprises to secure a supply of Bitcoins to short (ponzi schemes, thefts, fraud, etc).  (check)

5) Setup Bitcoin services designed to eliminate anonymity.  (check)

6) Identify major holders.  (check?)

7) Control ASIC manufacturers.  (in progress)

8 ) Targeted shut-downs, bank account raids, random door-kickings of major participants that fail to go along. (coming soon)

9) THE PUMP -- pump up the price by preventing selling, artificially limiting supply, and by buying en masse.

10) THE DUMP -- crash the price by coordinated technical attacks, sabotage, targeting merchants, loosening of restrictions on selling, and by dumping BTC.

11) GOTO 8

1. Bitcoin is open source. Satoshi will return anonymosly. Check
2. Anonymous dev team will use darknet communications to coordinate counter attack because they are smarter than bankers. Check
3. FUD is ignored by anyone with a brain. Check.
4. A good thing. Monetizing Bitcoin makes my stash more valuable. Check.
5. Set up anonymity services on darknet. Check.
6. Change your name. Check
7. Compete with ASIC manufacturers by building bigger fabs. Check.
8. Use TOR. Check
9. Sell to pumpers. Check.
10. Buy from dumpers. Profit.
11. GOTO 8
Better sell all your Bitcoins.

[benjamindees]

Oh, I forgot:

3b) Promote Bitcoin as a 'payment service' or an 'investment' instead of a currency in order to justify regulation and create volatility. (check)

[MikeH]

I don't think they'll bother trying to take down bitcoin as another would just take its place.

They'll probably just buy up a good portion of btc with their unlimited US dollars and manipulate the market.

The central banksters along with the CIA will be among the biggest users for the purpose of money laundering.

[yvv]

So I'm assuming everyone understands why central banks will never like Bitcoin.

No. Why?

[cbeast]

Oh, I forgot:

3b) Promote Bitcoin as a 'payment service' or an 'investment' instead of a currency in order to justify regulation and create volatility. (check)

3b. Vote criminal politicians out that craft unjust laws. Check.

[mindtomatter]

So I'm assuming everyone understands why central banks will never like Bitcoin.

No. Why?

Next time read the next sentence - The short version is "Because central banks don't have to obey the rules of the market, but if the world adopts bitcoin then they DO have to play by the same rules as everyone else.   That might not seem like a big deal to you, but the ability to break or change the rules at will is the only emergency control mechanism they've got.  If Cyprus and the EU had bitcoin as their primary currency, would the EU have been able to freeze all bank accounts and take money out of all accounts? 

No.  They'd have to play by the rules, which means they can't save the failed bank, which means they don't have control.

[mindtomatter]

Make sure you keep your plan a secret because there is more than one central bank, and they probably have more money than you to spend. Do you think they will waste their money helping you to destroy Bitcoin, or do you think they will buy your cheap bitcoins and put you out of business?

Central banks have always worked together against the slave class.  Watch the Forex markets if you don't believe so.

Bankers only care about making money for themselves. In fact, it looks like the BRIC nations may move in where the EURO is failing.

Actually the division you're seeing is because the BRIC nations recognize they're getting the shitty end of the stick.   Look at gold manipulation, that lasted for decades before some central banks turned buyers (knowing what's coming).   It's still happening now, but the cartel is breaking up since CBs actually want gold if we go through a destablizing event in the major reserve currency.   

[mindtomatter]

You're assuming there is no significant amount of diehard hoarders, and more importantly, that there is no real economy here that needs these coins for trade.

Both are false, although I wouldn't expect the fed to know this.

You are also assuming there is ONE central bank, when there are many, and many countries in the world full of bitcoin holders.

Bernanke can try all of this himself, for instance, but without the coordination of the EU, IMF, China's central bank, and others, he isn't fighting the full bitcoin market; just the US market.

Too many assumptions, and too many strong bitcoin advocates. I think it would fail.

However, now that we've passed a Billion $ market cap I fully expect some bad press to be manufactured and thrown our way. Things like terrorists attacks funded fully in bitcoin and the like... If they pump out enough of that bullsh!t then the sheeple of the world will form a strong resistance and we'll be far more segregated as a race.

They are experts at propaganda. Just look at any presidential election. Once we've taken a big enough bite out of their economy, this is the big gun that they will use on us.

I'm not assuming any such thing  - I'm assuming that if a central bank had 10 billion USD to play with in hopes of disrupting Bitcoin, you would first have to wildly inflate the price while buying your initial bitcoins to work with.  Because you have more money than the whole market by an order of magnitude, the price people sell at is *irrelevent* and you actually WANT the price to be as high as possible.   To your point, this would be very few sellers to the much larger demand.  Sure, many sellers wouldn't go for it at a 50% premium but we're now up over 1000% gain since january.  How many people do you think would still refuse to sell a single coin at 10,000USD each?    

Again, the higher the price goes, the better for the purposes of manipulation so slim supply is DESIRABLE for the manipulator.  The higher you go, the further you fall (as they say.

As far as "fighting the US market" i don't think you understand how bitcoin functions as a stateless entity.   As VALUE goes into bitcoin, whether from Dollars or gold or euros or whatever, there is more money chasing the same (at a steadily increasing rate) number of bitcoins.  

If someone uses dollars to buy 10% of the available bitcoins, it doesn't matter how you price it - bitcoins are now rarer to other market participants, cash is now more plentiful to other market participants, so bitcoins will cost more regardless of the currency you buy them with.

As far as Central Banks working at cross purposes.... Why?   They're all in the same paper boat, Bitcoin makes their product look terrible - A twinkie to a flourless chocolate cake, both are confections but one's garbage and the other gourmet.   How do you sell the twinkie if the flourless cake costs less and is better for you?  You make the flourless cake look dangerous.

Central banks are all selling their own variant of twinkies, so they all benefit from getting rid of that stupid cake - So long as the only options available to people is twinkies, they know they look just as good as their competition.

Does that not make sense?

[mindtomatter]

Although in theory you have a good point, in reality you see the transactions at gox and the volumes are still pretty low. It's easy to get a few coins (1-500) but getting enough coins to own the market will be proven unfeasible since there are a lot of coins out there in cold storage on top of that, I don't see banks getting into a system they don't understand. Agreed a few million dollars isn't much for banks, but I don't see that happening. At a market cap of 1 billion, bitcoin is not even a drop in the ocean as far as being a threat to banks yet.
"The EU source said withdrawals of seven billion euros were rumoured with fears the cash bleeding could be even more severe." Source: http://bit.ly/11pXN0g and others
That's 7 times the whole market cap of bitcoin and I'm sure less than 1% found refugee in the coin (this is just an assumption)

The whole theory here is that the Central Bank would buy bitcoins over a somewhat long period of time because the ascent needs to look natural - They want the price to go up, but not too fast.  Then once you're done accumulating and helping the price get nice and high you dump everything, don't rebuy them, and let the air out of prices until the market clears the enormous amount of coins with a willing seller but no buyers.   

So I don't really think your volume comments have an impact, right?

[mindtomatter]

I don't think they'll bother trying to take down bitcoin as another would just take its place.

They'll probably just buy up a good portion of btc with their unlimited US dollars and manipulate the market.

The central banksters along with the CIA will be among the biggest users for the purpose of money laundering.

Why would they benefit from the "money laundering" features of bitcoin when they already fund their operations without any oversight using money they don't have to buy?  Seems like that's a system they've had working well for the last 30 years at least, I'm not sure how this helps them and we know the government doesn't like to cut jobs.

And what do you mean by "take down bitcoin"  - I didn't say they would destroy it, just that they'll manipulate it to create instability so they can say it's unsafe for normal people to use.   

Because THAT is how bitcoin wins - when normal people step away from paper currencies and use Bitcoin as their de-facto money.  That's what Central Banks can't allow because then they have no control.

[mindtomatter]

Originally posted at Reddit

Playing Devil's Advocate here....

Let's play a game:  I'll be the Central Bank with say, 10 billion USD to devote to the "problem" of bitcoin.  You try to think of why my plan won't succeed.    

• I win when I can cause situations that scare users away from using Bitcoins. 
• I lose when non-technical users successfully and satisfactorily use any currency that's not controlled by a central bank.

So I'm assuming everyone understands why central banks will never like Bitcoin.

It's a construct completely outside their control, and since they get their power from issuing and being the central clearing house for paper currencies the mere existence of an alternative that doesn't have those problems is very dangerous, because it's obviously a better deal for its users in the medium-long term.

You can't manipulate a currency unless you have a lot of it at your disposal. With dollars, that's easy - Just create some new currency.
But with Bitcoin, you can't do that - So what do you do as a central bank with the ability to create as much paper money as you want.....
You buy a bunch of bitcoins, and the price doesn't matter. Actually, it's BETTER for you if your buying causes the price to go up, the more the better.

The total market cap for Bitcoin just hit 1 billion, so if the Fed wanted to buy 10% at current market rates best case scenario it would be 100 million, which is pocket change for the entities we're talking about. The demand spike creates a price spike which pulls media attention which brings new buyers which feeds higher prices which feeds more media attention, the cycle becomes self perpetuating after a while. That's where we are now.

Because Bitcoin's fundamentals (stable supply, distributed decision making, borderless operation) don't really leave room to argue they're worse than Dollars, the only argument that can reasonably made against them is that they're unstable and therefore unsafe for the average person to use.

So the way you do that is help the price go way up by buying in quantity over a reasonable period of time without regard to the price, then once you've cornered a reasonable proportion of the market (say 5-10%) you dump them all at once, smash the price, and incur massive losses for the new users who bought in during the climb through higher prices.
Then (after the market exhausts itself at the bottom) you DO NOT buy any of your coins back, since the dollar amount is trivial it's better to leave the impression that demand in the market has completely left town.

This also means you can use the same trick of accumulating -> causes bubble -> encourages newbies to get in -> sell large stake -> pop bubble -> cause newbie panic -> advise currency is unsafe -> wait for fundamentals to become important again -> repeat

What do you think, why wouldn't this be easy for any major central bank to do?

We had a bubble already.  Tell me, how is that working out?  (look at nr of transactions, nr of wallets being used etc.)

It took 6 months+ to recover, scared a lot of players out of the market who have still not returned, and let everybody talk about how "unstable" bitcoin is because it's just a speculative bubble.   

The fact we're now in an even bigger bubble is cause for concern in the short term because as normal people buy into the currency, not wanting to miss out on the next big thing, a crash in price back to even 500%+ what it was in January will mean HUGE losses for anyone buying in at prices over 60/ea.   

Those investors won't hang around once the price is at 30 hoping for a rebound, they'll take the loss and be out of bitcoin thankful they didn't lose more and swearing to not be stupid enough to try a "new currency" again

Which again, is my goal (as the central bank) so I won that round, and it looks like I'll win this round too.  Crash the price, Gut the newbies, destroy the legitimacy of the investment for at least a few months.

[mindtomatter]

1. Build an ASIC mining farm with at least 2x current hash power.  Make it quite obvious that one entity controls at least 2/3 the hashing power
2. Mine like a motherf&*$er (throw in the occasional double-spend, just for kicks)
3. Watch difficulty go through the roof
4. Dump your mined btc, causing minor price crash
5. Stop hashing, added difficulty will cause blocks to go through every, say, half hour, instead of 10 minutes, choking the network with uncleared transactions
6. When difficulty readjusts low, goto 1:


A few iterations of this are likely to kill bitcoin, I think.

I actually think this wouldn't work Once it's obvious an entity controls most of the market and is inducing these fluctuations, non-compromised mining interest groups would increase their own operations to counterbalance.      This is possible because while there is no end to the money that can be thrown by a central bank, there are real technical limitations when it comes to the production and sale of ASICs, all the manufacturers are incredibly back-ordered. 

 That chokepoint means any agency trying to manipulate would have to
a) wait a long time to build enough ASIC power relative to the rest of the market.
b) build their own ASICs (the government is not known for efficiency)
c) Buy an ASIC manufacturer and use all production internally without telling anyone.

I think this is a fringe risk for the foreseeable future, especially as ASIC manufacturers start shipping units and the power becomes more distributed.