Anyone have fundamentals to support a higher value on BTC?

[hgmichna]

It is difficult to get at any reliable data, but when you guess how much of the media coverage is based on increasing bitcoin use and how much merely on increasing bitcoin price, the picture is not encouraging.

Take the Cyprus myth, for example. It implies that the Cypriots are buying bitcoin. Even a bitcoin ATM was reported to already be there or, in other messages, going to be there very soon.

Nothing of this is true. The Cypriots could not get at their money, so they could not buy bitcoins. Even if they could, they would not buy bitcoins; they would buy gold. No bitcoin ATM will be there any time soon.

Spaniards are allegedly buying bitcoins. This was said because some kid wrote in his blog that he saw more bitcoin-related apps being downloaded on iPhones in Spain. There was and is no evidence that the Spaniards actually bought significant amounts in bitcoin. It is all only the wildest speculation.

Namecheap.com, wordpress.com, Reddit now accept bitcoins, but the latter two only for some add-on service. But who is going to pay with bitcoins there? Very few. I did pay one bitcoin to namecheap.com just for fun, because I'm one of their customers. But it needlessly complicates my bookkeeping, so I will perhaps not do it again. The estimate is that very few bitcoins are actually moved into any of these services.

Some time over a year ago the actually running bitcoin services, mainly Silk Road and some others, were running fine with a bitcoin value of $3. If their transactions doubled or tripled, they would justify $6 or $9 per bitcoin. If you add some more optimism, you may even get into double digits. But I find it very hard to justify a bitcoin price above $20 at this time. And the current bubble will damage bitcoin's reputation once more. Take your pick.

The sad truth is that the media report on bitcoin because its price rises. People read this and buy bitcoin because its price rises, so it rises more. Then the media report more, and more people buy bitcoins because they want to get rich quick. This is how bubbles are made.

Yesterday the buying frenzy got absolutely crazy with the bitcoin price rising 20% in three hours. People bought bitcoins for up to $148 each. How insane is that? Did real-world bitcoin use suddenly rise by 20% in those few hours? And still many bitcoin holders have not sold. It seems to me that an incredibly large fraction of the bitcoin-holding community is hare-brained.

The up-side is that a hare-brained speculator soon loses his capital. The market automatically rids itself of stupidity. The problem arose only because new, completely inexperienced "speculators" streamed into the bitcoin market. Many of them are now, or will be soon, out of it again, but I expect the next, similar bubble again in two or three years. Too bad that it is impossible to predict at which price a bubble will burst.

[Kazu]

Just because a commodity is not being actively traded for products or services does not make it a bubble, nor does it mean it will never be traded as such. People will pay fiat for btc, and theoretically btc should hold its value better than fiat die to limited suppy in the long term. Just that alone is enough to not only justify its current price, but to indicate that further price jumps are pending.

[lebing]

https://bitcointalk.org/index.php?topic=143973.0

[hgmichna]

Just because a commodity is not being actively traded for products or services does not make it a bubble, nor does it mean it will never be traded as such. People will pay fiat for btc, and theoretically btc should hold its value better than fiat die to limited suppy in the long term. Just that alone is enough to not only justify its current price, but to indicate that further price jumps are pending.

In a very theoretical sense you are right, but a commodity that nobody really needs can fall to a price of zero at any time, if anything starts a sell-off panic.

If you have some basic need, however, the price cannot fall below the required value. In the case of bitcoin, if some people need some bitcoins for actual real-world trades, the total market valuation cannot fall below the total value of those needed bitcoins.

By the way, it is interesting to note that Satoshi may have been a genius also because he set a very limited maximum speed for bitcoin transactions, so there can be no "inflation" due to increasing speed of transactions.

[Wuji]

A lot of Cyprioits did get there money out before the media even knew about the problem.

http://peoplestrustaustralia.blogspot.com/2013/04/list-released-with-132-names-who-pulled.html

Also Spain turned to Bitcoin as well following Cyprus's lead.

http://www.newstatesman.com/economics/2013/03/spain-turns-bitcoin-prompting-incoherent-discussion-today

Also the banks reopened and the public was able to withdraw money after it was announced they were not going to do the 6.75% on all accounts.

http://www.huffingtonpost.co.uk/2013/03/28/cyprus-bailout-banks-reopen_n_2970564.html

The guy behind BitcoinATM did say the first would go to Cyrpus.  However, I have yet to see a working prototype, not to mention answers to how to deal with world government regulations, exchange fees, and many other issues like local legislation.  This seems like a lot of groundwork that has not been laid.
http://www.businessinsider.com/cyprus-bitcoin-atm-guy-responds-2013-4
http://www.businessinsider.com/cyprus-bitcoin-atm-guy-responds-2013-4

I agree Bitcoin is either a prototype of or the currency of the Internet and the future.  The problem is normal people have spyware on the PCs and if they tried to use BTC would probably get robbed and discouraged and more bad press.  For those of us tech nerds who can secure our coins it is already useful.  Until my dad who taught me computers in the 80s can even figure out how to buy a bitcoin and feel safe I don't see a slow adoption rate outside the tech community.  Even many I know in the community have unanswered concerns I addressed early.  I've been using Magic the Gathering Online Trading card Exchange for long time and they make me nervous.  I always immediately get my USD to BTC or vice versa.  Everytime I use bitinstant I wonder just who is this person I'm sending this cash to, hope I can trust him.

TL/DR - I'm positive long term Bitcoin will become used everywhere.  I not positive we are at that point yet.

[Wuji]

"Just because a commodity is not being actively traded for products or services does not make it a bubble, nor does it mean it will never be traded as such. People will pay fiat for btc, and theoretically btc should hold its value better than fiat die to limited suppy in the long term. Just that alone is enough to not only justify its current price, but to indicate that further price jumps are pending."

- If I search back I bet I can almost find this post word for word when I was telling gold bulls at $1700+ gold was a bubble.  No way man limited currency man it wont EVAH go down, impossible!




If a commodity is going up at a very fast rate (Exponentially higher than the past) based on speculation and/or fear (running from bad Fiat etc) it is not only a bubble the name for it actually is speculation bubble.


Definition of 'Speculative Bubble'
A spike in asset values within a particular industry, commodity, or asset class. A speculative bubble is usually caused by exaggerated expectations of future growth, price appreciation, or other events that could cause an increase in asset values. This drives trading volumes higher, and as more investors rally around the heightened expectation, buyers outnumber sellers, pushing prices beyond what an objective analysis of intrinsic value would suggest.

The bubble is not completed until prices fall back down to normalised levels; this usually involves a period of steep decline in price during which most investors panic and sell out of their investments.

May also be referred to as a "price bubble" or "market bubble".

Source - http://www.investopedia.com/terms/s/speculativebubble.asp

[Wuji]

Those people buying APPL at $700 were pretty confident as well I bet.  Today it is at $428.  They have been around for decades, sell Billions in product, have an enormous amount of followers as if it were a religion.  Man I wish I had been buying up puts at the $700 range.  Tech bubbles are too hard to predict often though and makes options quite risky without some leverage.  Although I am thinking about now buying some S&P puts as I'm smelling a new bubble there.  

[move_zig]

At least with older version of excel, you could go in to table properties and add things like equation and r^2

[Kazu]

Just because a commodity is not being actively traded for products or services does not make it a bubble, nor does it mean it will never be traded as such. People will pay fiat for btc, and theoretically btc should hold its value better than fiat die to limited suppy in the long term. Just that alone is enough to not only justify its current price, but to indicate that further price jumps are pending.

In a very theoretical sense you are right, but a commodity that nobody really needs can fall to a price of zero at any time, if anything starts a sell-off panic.

If you have some basic need, however, the price cannot fall below the required value. In the case of bitcoin, if some people need some bitcoins for actual real-world trades, the total market valuation cannot fall below the total value of those needed bitcoins.

These sell-off panics are by very definition short-term. For the reasons stated in my previous quote Bitcoin is superior to currency even if they don't need to pay people with Bitcoins, as long as either (1) others need to pay people with bitcoins (2) they think in the future either they or others will need to pay people in bitcoins or (3) they merely believe that they will continue to be able to exchange Bitcoins for fiat.

What I'm trying to get at here is that just that third condition is enough to justify bitcoin's high price. Sure, MtGox going down suddenly (as it did yesterday, but honestly, who believed that it wouldn't come back?) can cause scares and since Bitcoin is so reliant on this third condition and has not yet diversified its value between all three Bitcoin's price will be affected, these scares will by definition become short-term as long as the exchangers DO come back.

So while Bitcoin won't reach its full potential or have a very stable price until condition (1) is satisfied, the lack of condition (1) being satisfied does not necessarily make Bitcoin some form of a bubble.

[RodeoX]

What about the value of the work already done? It would take millions of dollars worth of electricity to remake the blockchain and vast numbers of computers to crunch the numbers again. What is that worth?

[phlogistonq]

Who says the current fundamentals have to support the current price?
I think it is obvious that the current price is based on the expectation that bitcoin will have a higher market cap and is going to be used extensively for payments -in the future-.
That is not at all the same as a bubble. It would be a bubble if those expectations never materialize and the price remains high.

If you wait for mass adoption to actually happen first, you are not going to profit. The profit comes from having the foresight that bitcoin is going to be great. The profit is the reward you get for having that insight and actually betting on it becoming true.

What we are currently seeing is just a lot more people getting that insight and betting their money on it. At some point, most people will have some bitcoins, however much they feel comfortable with , just like everyone now has an internet connection or a mobile phone, and then the price will level off. Probably we will see a few oscilations as the price stabilizes, as we see now on a smaller scale after every jump. Then, we are all set for large scale use. Everyone has some, the price is more or less stable, and the current objections currently often raised (hoarding, unstability, etc) have vanished .

[dg2010]

What about the value of the work already done? It would take millions of dollars worth of electricity to remake the blockchain and vast numbers of computers to crunch the numbers again. What is that worth?

I think you misunderstand how Bitcoin works.

There is really no value to the blockchain, it is a fundamental part of Bitcoin but it has no value on it's own.

If you set up Bitcoin2 tomorrow you would start with a fresh blockchain.

[Wuji]

If you wait for mass adoption to actually happen first, you are not going to profit. The profit comes from having the foresight that bitcoin is going to be great. The profit is the reward you get for having that insight and actually betting on it becoming true.

The points I made are why I don't see it likely mass adoption will happen due to the risks I outlined in previous posts.  I think a much more open virtual currency will come along not created by Satoshi (whoever that is), not with mysterious early coins that are hibernating, and owned by a large reputable company with years of history in the financial world (yes I realize many financial companies are evil but widely trusted).  A company that will guarantee it wont raise the number of coins with insurance.  

Mt. Gox has a long way to go before I fully trust them, for starters why are they not on CloudFlare???  The very real possibility of a more legitimate replacement is a concern for me.  BTC would get traded over and the price would plummet.  If you weren't watching and in the initial rush, that could be some huge losses for you.  I'm not trying to spread any FUD only addressing my own real world concerns on my current investment.  

If there is one thing I have learned in 40 years it is to question everything and never put blind faith in anything.  If there are mysteries and unanswered questions I tend to remain a sceptic but I still have 80% (after a 1000+% increase) of my BTC so I'm a leveraged risk taker as well.  In other words in many ways your preaching to the choir I'm just not a big a zealot as a lot of people.

[RodeoX]

What about the value of the work already done? It would take millions of dollars worth of electricity to remake the blockchain and vast numbers of computers to crunch the numbers again. What is that worth?

I think you misunderstand how Bitcoin works.

There is really no value to the blockchain, it is a fundamental part of Bitcoin but it has no value on it's own.

If you set up Bitcoin2 tomorrow you would start with a fresh blockchain.

Oh I am well aware of how it works. I am just saying that all the infrastructure and the proof of work in the blockchain must have some value. I have no real idea how to monetize it however.

[dg2010]

Oh I am well aware of how it works. I am just saying that all the infrastructure and the proof of work in the blockchain must have some value. I have no real idea how to monetize it however.

Sorry but the two are mutually exclusive. You either understand how Bitcoin works and therefore understand that the blockchain and all of the historical compute power that has gone into it is worth nothing.

Or you don't fully understand how Bitcoin works and therefore you believe that it must have value.

I don't mean to be a dick about it.... I'll happily be proven wrong but I'm quite certain that there is absolutely 0 value to the historical compute power or the blockchain by itself.

[Brushan]

Of course there is value. Thanks to the blockchain and the computing power we have an element which is scarce and impossible to counterfeit. Through human history things that hold these properties have been valued by people and used as currencies and commodities (for example gold and silver). Something bitcoin has that gold hasn't is being able to send it anywhere in the world in seconds.

And people are complaining about bitcoin price being to high but in my opinion the price is fully logical. If we want to see bitcoin succeed as a mainstream currency it HAS to increase it's marketcap. There is simply no way it can be used globally and by alot of businesses with todays marketcap. Since bitcoin inflation is limited of course 1 bitcoin will rise in value. The marketcap will set a fair value for bitcoin but i'm just saying it will never become mainstream if the marketcap doesn't rise massively.

Another thing people tend to forget is that the bigger the marketcap, the more secure is the currency. Which also increases it's value. Just like people are fearing a 51% attack and adding hashes to the network increases security.

So we should just be happy with the price rise and hope for more. Not for the sake of us making money but for the sake of bitcoin succeeding as a currency.

[Luckybit]

Before Fiat currency, money was based on Gold.  I believe that change happened in 1973 and dollars didn't rise at this rate before then.  Gold is a limited resource like BTC.  Why is BTC expected to rise soon to $1000 or $10000 when limit currencies have not behaved that way in the past?  A good article I found today on why these speculation based rises actually will more likely hurt Bitcoin as viable currency than help.  Bitcoin is going from currency to commodity it seems at the moment.  I'll be happier if it goes back to being more of a currency again.

http://blogs.reuters.com/felix-salmon/2013/04/03/why-bitcoins-rise-is-nothing-to-celebrate/

I so totally agree with you here.

Places like bitcoinstore scratch the surface of what the economy really needs.

How can BTC flourish as a currency when it is currently not being used as such? All speculative projects aside, what do we REALLY have to spend BTC on? When I say we, I refer to the public, not us coin-nerds.

I'm talking about important services and everyday tangible goods. These are what we lack at-the-moment. The general public is not spending money on VPN subscriptions and Bitcoin t-shirts.

When 1 Bitcoin is worth enough that it's a years salary $100,000, then it will make sense to spend Bitcoins if you have hundreds. When you work you'll earn a fraction of a Bitcoin, and when you spend you'll spend a fraction. Right now it's not being spent because it's still not in the range where spending Bitcoins makes a lot of sense because getting them is going to become a lot harder in the very near future.

So think of each coin as worth $100,000 in 5 years time. If you have 100 coins then you'll have enough for 100 years of $100,000 income minus whatever taxes of course. If you sell one coin every year you're set for life.

[Luckybit]

It is difficult to get at any reliable data, but when you guess how much of the media coverage is based on increasing bitcoin use and how much merely on increasing bitcoin price, the picture is not encouraging.

Take the Cyprus myth, for example. It implies that the Cypriots are buying bitcoin. Even a bitcoin ATM was reported to already be there or, in other messages, going to be there very soon.

Nothing of this is true. The Cypriots could not get at their money, so they could not buy bitcoins. Even if they could, they would not buy bitcoins; they would buy gold. No bitcoin ATM will be there any time soon.

Spaniards are allegedly buying bitcoins. This was said because some kid wrote in his blog that he saw more bitcoin-related apps being downloaded on iPhones in Spain. There was and is no evidence that the Spaniards actually bought significant amounts in bitcoin. It is all only the wildest speculation.

Namecheap.com, wordpress.com, Reddit now accept bitcoins, but the latter two only for some add-on service. But who is going to pay with bitcoins there? Very few. I did pay one bitcoin to namecheap.com just for fun, because I'm one of their customers. But it needlessly complicates my bookkeeping, so I will perhaps not do it again. The estimate is that very few bitcoins are actually moved into any of these services.

Some time over a year ago the actually running bitcoin services, mainly Silk Road and some others, were running fine with a bitcoin value of $3. If their transactions doubled or tripled, they would justify $6 or $9 per bitcoin. If you add some more optimism, you may even get into double digits. But I find it very hard to justify a bitcoin price above $20 at this time. And the current bubble will damage bitcoin's reputation once more. Take your pick.

The sad truth is that the media report on bitcoin because its price rises. People read this and buy bitcoin because its price rises, so it rises more. Then the media report more, and more people buy bitcoins because they want to get rich quick. This is how bubbles are made.

Yesterday the buying frenzy got absolutely crazy with the bitcoin price rising 20% in three hours. People bought bitcoins for up to $148 each. How insane is that? Did real-world bitcoin use suddenly rise by 20% in those few hours? And still many bitcoin holders have not sold. It seems to me that an incredibly large fraction of the bitcoin-holding community is hare-brained.

The up-side is that a hare-brained speculator soon loses his capital. The market automatically rids itself of stupidity. The problem arose only because new, completely inexperienced "speculators" streamed into the bitcoin market. Many of them are now, or will be soon, out of it again, but I expect the next, similar bubble again in two or three years. Too bad that it is impossible to predict at which price a bubble will burst.

The reason there isn't increased use is because people don't get paid in Bitcoins so how exactly are we supposed to get the Bitcoins to use them if we don't buy them first? Then after we buy them we are broke for a bit so we aren't gonna rush to spend them when it costs thousands to buy them. However the way it works is you buy as many as you can afford, you save for as long as you can, and then when 1 coin is worth about a years salary then you can slowly spend your coins down.

But no one is going to spend Bitcoins unless they earn Bitcoins. So what you should be asking is when can I get a job and be paid in Bitcoins? 

[hgmichna]

Who says the current fundamentals have to support the current price?
I think it is obvious that the current price is based on the expectation that bitcoin will have a higher market cap and is going to be used extensively for payments -in the future-.

No. It is based on the expectation of getting rich quick. People buy bitcoin because the price is rising.

If you wait for mass adoption to actually happen first, you are not going to profit. The profit comes from having the foresight that bitcoin is going to be great. The profit is the reward you get for having that insight and actually betting on it becoming true.

The profit comes from recognizing a price bubble in time and getting out when it is still possible.

What we are currently seeing is just a lot more people getting that insight and betting their money on it. At some point, most people will have some bitcoins, however much they feel comfortable with , just like everyone now has an internet connection or a mobile phone, and then the price will level off.

A "permanently high plateau". We can talk again tomorrow, after you will have seen what the bitcoin price actually does instead.

Probably we will see a few oscilations as the price stabilizes, as we see now on a smaller scale after every jump. Then, we are all set for large scale use. Everyone has some, the price is more or less stable, and the current objections currently often raised (hoarding, unstability, etc) have vanished .

A beautiful dream. They hoped for it because they wished it so much. Reality is rarely so nice.

If bitcoin survives for long enough, this dream might actually come true to some extent. But do not think we are there already. That will take more years and more price bubbles.

[humanitee]

Who says the current fundamentals have to support the current price?
I think it is obvious that the current price is based on the expectation that bitcoin will have a higher market cap and is going to be used extensively for payments -in the future-.

No. It is based on the expectation of getting rich quick. People buy bitcoin because the price is rising.

If you wait for mass adoption to actually happen first, you are not going to profit. The profit comes from having the foresight that bitcoin is going to be great. The profit is the reward you get for having that insight and actually betting on it becoming true.

The profit comes from recognizing a price bubble in time and getting out when it is still possible.

What we are currently seeing is just a lot more people getting that insight and betting their money on it. At some point, most people will have some bitcoins, however much they feel comfortable with , just like everyone now has an internet connection or a mobile phone, and then the price will level off.

A "permanently high plateau". We can talk again tomorrow, after you will have seen what the bitcoin price actually does instead.

Probably we will see a few oscilations as the price stabilizes, as we see now on a smaller scale after every jump. Then, we are all set for large scale use. Everyone has some, the price is more or less stable, and the current objections currently often raised (hoarding, unstability, etc) have vanished .

A beautiful dream. They hoped for it because they wished it so much. Reality is rarely so nice.

If bitcoin survives for long enough, this dream might actually come true to some extent. But do not think we are there already. That will take more years and more price bubbles.

Quoting another bear that cannot see the writing on the wall.
Adding you to my sweet collection.