If no imminent financial Armageddon, Bitcoin fair value below $50?

[bootlace]

This is the logic I used to reach that conclusion, please state which part is incorrect if you disagree:

1)   Bitcoin’s main technological and paradigm breakthrough – and the main source of its value is as a fluid currency that allows quick, anonymous, and nearly free transactions anywhere in the world.
2)   Currently Bitcoin is not being used as a currency – you would be crazy to spend it when its rising so much in value and when you could much more wisely sell it at a huge premium on a local bitcoin marketplace and buy the product in USD instead.
3)   Bitcoin is rising because people expect it to be a major currency of the future and that there will be huge flows from fiat money into bitcoin as financial crisis panic in Europe spreads.
4)   Bitcoin will keep rising as long as this assumption gains ground.
5)   If this assumption fails, and Europe is ‘saved’ (or can is kicked down the road) as it has countless times, new money will stop to come in, speculators will cash out feeling the party is over and price will drop.
6)   How low will it drop? Based on its intrinsic value as a currency that it had built over the past couple of years with perhaps an added premium thanks to the extra coverage it got over the past few weeks and new ‘believers’ added to the mix.
7)   Therefore, the true value of a Bitcoin, if financial armageddon doesn’t unfold before our very eyes, should be the value that it had before this whole Cyprus thing + some additional worth based on drawing more loyal users.

The main assumption here is that a lot of the new investors over the past 2 weeks are speculators hoping to make a nice profit, instead of people who swear by Bitcoin as a practical currency. BY the way I’m one to hope that there is some kind of financial Armageddon so don’t shoot me for hypothesizing an alternate scenario.

[agath]

2)   Currently Bitcoin is not being used as a currency – you would be crazy to spend it when its rising so much in value and when you could much more wisely sell it at a huge premium on a local bitcoin marketplace and buy the product in USD instead.

What's the difference of buying in BTC directly and exchange them, then buy with USD? In both cases you will end up with the same amount of bitcoins.

It's crazy to spend it until you already have an alternative currency, but when you run out of it, you have to spend your bitcoins.

[MonadTran]

if financial armageddon doesn’t unfold before our very eyes

Isn't it unfolding right now? It's already noticeable to untrained eye, but you do need to squint, and tilt your head in a certain way, in order to see it

[bootlace]

if financial armageddon doesn’t unfold before our very eyes

Isn't it unfolding right now? It's already noticeable to untrained eye, but you do need to squint, and tilt your head in a certain way, in order to see it

It would seem that way, I bought tons of gold a year ago thinking we were on the verge, but those bastards in charge always seem to manage to delay the problem or make everything seem ok and the general population just buy it up -> just look at US stock prices :S

[notme]

if financial armageddon doesn’t unfold before our very eyes

Isn't it unfolding right now? It's already noticeable to untrained eye, but you do need to squint, and tilt your head in a certain way, in order to see it

It would seem that way, I bought tons of gold a year ago thinking we were on the verge, but those bastards in charge always seem to manage to delay the problem or make everything seem ok and the general population just buy it up -> just look at US stock prices :S

US stocks are up because investment banks are getting 0 interest loans and have a promise to be rescued if they fuck up.

Soon enough they will need rescued again.

[ineededausername]

ok bootlace, go ahead and sell, we don't care!

[chiropteran]

Since you think the fair value is below $50, I'm willing to make an amazing deal with you:  I will buy all of your bitcoins for $50 each. 

[bonker]

if financial armageddon doesn’t unfold before our very eyes

Isn't it unfolding right now? It's already noticeable to untrained eye, but you do need to squint, and tilt your head in a certain way, in order to see it

You're right. The thing with Armageddon is that people don't appreciate that it happens very slowly.

Now Cyprus is over there will be calm, stocks continue to rise and Bitcoin will fall back. Then in six months or so the next crisis will arise, and people will panic and it will all settle down again.

BTC below $50? short/medium term ... Yes I reckon so.
BTC to hit $1000 long term.. yes

[notme]

if financial armageddon doesn’t unfold before our very eyes

Isn't it unfolding right now? It's already noticeable to untrained eye, but you do need to squint, and tilt your head in a certain way, in order to see it

You're right. The thing with Armageddon is that people don't appreciate that it happens very slowly.

Now Cyprus is over there will be calm, stocks continue to rise and Bitcoin will fall back. Then in six months or so the next crisis will arise, and people will panic and it will all settle down again.

BTC below $50? short/medium term ... Yes I reckon so.
BTC to hit $1000 long term.. yes

If today is any indication, stocks haven't reversed the current downtrend just yet.

[Peter Lambert]

This is the logic I used to reach that conclusion, please state which part is incorrect if you disagree: My additions in bold:

1)   Bitcoin’s main technological and paradigm breakthrough – and the main source of its value is as a fluid currency that allows fairly quick, partially anonymous, and nearly free transactions anywhere in the world with access to the internet.
2)   Currently Bitcoin is not being used as a currency – you would be crazy to spend it when its rising so much in value and when you could much more wisely sell it at a huge premium on a local bitcoin marketplace and buy the product in USD instead. Unless you think this might be a bubble, so you might as well spend them now while they are worth extra. Or if you just bought the btc so you could use them as money right now.
3)   Bitcoin is rising because people expect it to be a major currency of be worth more in the future and that there will be huge flows from fiat money into bitcoin as financial crisis panic in Europe spreads.
4)   Bitcoin will keep rising as long as this assumption gains ground or other reasons arise for using bitcoins.
5)   If this assumption fails, and Europe is ‘saved’ (or can is kicked down the road) as it has countless times, new money will stop to come in, speculators will cash out feeling the party is over and price will drop. Unless people really are cashing out of the failing bank system and have no plan to return no matter how much the Banksters try to say they have changed their ways.
6)   How low will it drop? Based on its intrinsic value as a currency that it had built over the past couple of years with perhaps an added premium thanks to the extra coverage it got over the past few weeks and new ‘believers’ added to the mix. Huh? I don't think this is a complete thought?
7)   Therefore, the true value of a Bitcoin, if financial armageddon doesn’t unfold before our very eyes, should be the value that it had before this whole Cyprus thing + some additional worth based on drawing more loyal users.

The main assumption here is that a lot of the new investors over the past 2 weeks are speculators hoping to make a nice profit, instead of people who swear by Bitcoin as a practical currency. BY the way I’m one to hope that there is some kind of financial Armageddon so don’t shoot me for hypothesizing an alternate scenario.

I think your assumption has some merit, that much of the rise is induced by speculators. But Some of the rise has been because of people who really beleive in bitcoin putting more money into it. You could say the price rises (or drops) quickly based mostly on speculation and equilibrates slowly based on what people are saving in bitcoin and how much it is used for transactions. Whether the price drops depends on whether the users of bitcoin are able to offset the amount taken out by the speculators. If they do not, and the price starts falling, we could see the price overshoot downward and users of bitcoins will get a discount again (like anybody who boutght below 5 USD).

[matt608]

Even if the financial Armageddon is post-poned or avoided somehow for 50 years, Bitcoin (or alternate successful cryptocurrency) will become seen as 'the ethical currency', rather ironic given it's origins; but there is more to the to the financial crisis than just finance. The problem is with governments controlled by banks having power to send nations to war and to oppress their own people with oppressive laws such as the warn on drugs, which have tragic and unnecessary costs.  Bitcoin has the power to help with many of these huge problems.

Bitcoin takes power away from the banks and long term I actually propose it actually takes money away from drug cartels by resulting in their eventual legalization, regulation and taxation.  It shifts the balance of power in a favourable direction, therefore it will succeed.

[hgmichna]

If bitcoin survives for another good number of years and does not get overtaken by something like a hypothetical bitcoin2, its prospects are, indeed, bright.

However, at the moment this rather extreme price bubble is about to severely damage its fair reputation.

Currently it is not the Cypriots or the Spaniards who buy bitcoin. It is only a growing bunch of newbie speculators and their mothers. The only reason why they buy bitcoin is because the price is rising. And the price is only rising because these people are buying bitcoin. This is how bubbles are made.

There has been no significant increase in real-world use of bitcoins. A few more companies are now accepting bitcoins, but very few customers actually pay in bitcoin. Therefore the price will sink back to pre-bubble levels within about half a year after this bubble bursts, which it may do within weeks.

As usual it is impossible to make any precise estimate about how high a bubble will go, because a single person can prick it by selling a lot of bitcoins and thus inciting a sell-off panic. If nobody does, such a bubble can grow to strange heights. But even then this one cannot grow to $1,000. As the Germans say, trees do not grow into heaven.

It is a bit difficult to say what the pre-bubble value is, because this one began before the previous one of 2011 was fully deflated. I am sure though that the bitcoin price will fall to some $20 level and quite possibly into the single digits. $50 is way out of reason. Let's talk again in half a year's time.

[Mike Christ]

If bitcoin survives for another good number of years and does not get overtaken by something like a hypothetical bitcoin2, its prospects are, indeed, bright.

However, at the moment this rather extreme price bubble is about to severely damage its fair reputation.

Currently it is not the Cypriots or the Spaniards who buy bitcoin. It is only a growing bunch of newbie speculators and their mothers. The only reason why they buy bitcoin is because the price is rising. And the price is only rising because these people are buying bitcoin. This is how bubbles are made.

There has been no significant increase in real-world use of bitcoins. A few more companies are now accepting bitcoins, but very few customers actually pay in bitcoin. Therefore the price will sink back to pre-bubble levels within about half a year after this bubble bursts, which it may do within weeks.

As usual it is impossible to make any precise estimate about how high a bubble will go, because a single person can prick it by selling a lot of bitcoins and thus inciting a sell-off panic. If nobody does, such a bubble can grow to strange heights. But even then this one cannot grow to $1,000. As the Germans say, trees do not grow into heaven.

It is a bit difficult to say what the pre-bubble value is, because this one began before the previous one of 2011 was fully deflated. I am sure though that the bitcoin price will fall to some $20 level and quite possibly into the single digits. $50 is way out of reason. Let's talk again in half a year's time.

Thanks for this, I finally understand why everyone keeps talking about bubbles

[XXthetimeisnowXX]

honestly i think that the base value will be around 250. it will go up to maybe 600 tops but then a slide. it seams crazy now but just look at the past. bubble at eight dollars? time will tell but expect this to be the new apple but double or triple

[nobbynobbynoob]

This could be a bubble; bears could be right. But the "single digits" bears are just being ridiculous, barring the discovery of a fatal flaw in Bitcoin's design/protocol itself. I, for one, will buy like the clappers at $10 per 'coin, so there will never be single digits.

[jwzguy]

If bitcoin survives for another good number of years and does not get overtaken by something like a hypothetical bitcoin2, its prospects are, indeed, bright.

However, at the moment this rather extreme price bubble is about to severely damage its fair reputation.

Currently it is not the Cypriots or the Spaniards who buy bitcoin. It is only a growing bunch of newbie speculators and their mothers. The only reason why they buy bitcoin is because the price is rising. And the price is only rising because these people are buying bitcoin. This is how bubbles are made.

There has been no significant increase in real-world use of bitcoins. A few more companies are now accepting bitcoins, but very few customers actually pay in bitcoin. Therefore the price will sink back to pre-bubble levels within about half a year after this bubble bursts, which it may do within weeks.

As usual it is impossible to make any precise estimate about how high a bubble will go, because a single person can prick it by selling a lot of bitcoins and thus inciting a sell-off panic. If nobody does, such a bubble can grow to strange heights. But even then this one cannot grow to $1,000. As the Germans say, trees do not grow into heaven.

It is a bit difficult to say what the pre-bubble value is, because this one began before the previous one of 2011 was fully deflated. I am sure though that the bitcoin price will fall to some $20 level and quite possibly into the single digits. $50 is way out of reason. Let's talk again in half a year's time.

There are plenty of people besides the Cypriots and Spaniards (who ARE buying Bitcoin, as we have heard in first hand accounts) who want to use Bitcoin as a store of value to protect them against theft through confiscation and hyper-inflation. Increased demand for this utility of Bitcoin has and will continue to increase the price.

As for the rest of the statement, I'm not going to hold your hand through the last year's worth of developments and stories. But you must have been living under a rock if you think "real-world use" of Bitcoin hasn't significantly increased. That is just plain ludicrous.

[hgmichna]

There are plenty of people besides the Cypriots and Spaniards (who ARE buying Bitcoin, as we have heard in first hand accounts) who want to use Bitcoin as a store of value to protect them against theft through confiscation and hyper-inflation. Increased demand for this utility of Bitcoin has and will continue to increase the price.

What do you think these people will do when they see the bitcoin price drop like a rock through their buying price? Look at the 2011 bubble.

As for the rest of the statement, I'm not going to hold your hand through the last year's worth of developments and stories. But you must have been living under a rock if you think "real-world use" of Bitcoin hasn't significantly increased. That is just plain ludicrous.

Where do you see any evidence for that? I could just barely believe a doubling of real-world use, but please tell me who buys which goods or services for bitcoin? namecheap.com or wordpress.com? Reddit Gold? Have you ever heard of anybody paying a bitcoin there?

I am actually a namecheap.com customer. I just filled up my account there from my credit card. That was before they started accepting bitcoin. Then I actually paid Ƀ1 to them, just to try it out. But I doubt that even I will do that again, because it needlessly complicates my bookkeeping.

[w00t]

The thing is - PayPal became a real nightmare as well as processing the credit cards. If you had a chance to run an online business you would know what I'm talking about.

If some folks use some ridiculous payment methods as paysafecard or webmoney then Bitcoin in comparison is true heaven. Wire transfer is always the alternative but it's so goddamn slow and very expensive.

In the end all roads lead to Bitcoin.

[matt608]

There are plenty of people besides the Cypriots and Spaniards (who ARE buying Bitcoin, as we have heard in first hand accounts) who want to use Bitcoin as a store of value to protect them against theft through confiscation and hyper-inflation. Increased demand for this utility of Bitcoin has and will continue to increase the price.

What do you think these people will do when they see the bitcoin price drop like a rock through their buying price? Look at the 2011 bubble.

As for the rest of the statement, I'm not going to hold your hand through the last year's worth of developments and stories. But you must have been living under a rock if you think "real-world use" of Bitcoin hasn't significantly increased. That is just plain ludicrous.

Where do you see any evidence for that? I could just barely believe a doubling of real-world use, but please tell me who buys which goods or services for bitcoin? namecheap.com or wordpress.com? Reddit Gold? Have you ever heard of anybody paying a bitcoin there?

I am actually a namecheap.com customer. I just filled up my account there from my credit card. That was before they started accepting bitcoin. Then I actually paid Ƀ1 to them, just to try it out. But I doubt that even I will do that again, because it needlessly complicates my bookkeeping.

Say if this is all true and there is a huge excess bubble of speculation on top of the trade for goods/services, the bubble can get massively bigger, it can keep growing for years, most of the world still doesn't know about bitcoin.

[hgmichna]

Say if this is all true and there is a huge excess bubble of speculation on top of the trade for goods/services, the bubble can get massively bigger, it can keep growing for years, most of the world still doesn't know about bitcoin.

The rise is currently roughly exponential. Therefore it is easy to estimate for how long this can still go on.

All historic price bubbles I have seen have a pointed peak. This bitcoin bubble will be no different. The only difficulty is that nobody can predict the height of that peak. What we can easily predict is that it will not take several months to burst.