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Author Topic: Unbiased article on the Crash and Future of Bitcoin  (Read 2349 times)
aussie_striker
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April 12, 2013, 03:15:39 PM
 #1

GBBG Fund Managers Market Opinion

Posted: Friday, April 12th, 2013
Category: GBBG Fund

There is a good reason why investors such as Warren Buffett become multi billionaires while 999,999 out of 1 million people do not. The reason, most people are too fickle. When markets move down suddenly, the average person panics. They begin to fret over the losses, although only real when acted upon, and they act in self-destructive ways. As markets move up, investors such as Mr. Buffett relax, smile, and wait. When markets begin to turn downward, those like Mr. Buffett begin to smile as happiness fills their soul. Why? Because their favorite investments are on sale! They can buy what they want at a discount.

Such is the case in the past few days with Bitcoin. The fund managers at GBBG are smiling happily today as their favorite investment vehicle goes on sale. While the panicky, fickle masses jump on the ‘sell now’ bandwagon, GBBG fund managers are quietly building their portfolio. Like Warren Buffett, they don’t care so much what the market is doing ‘TODAY’ as much as what the market will do over the next 5 or 10 years.

GBBG fund insiders predict the current mini-pop to settle around $60 or $70 (USD) per BTC and then stabilize. Then, the fun begins again. They estimate the next ‘bubble’ will rise to around $400 or $500 (USD) per BTC before the next mini-pop. This is a natural occurrence that is expected at regular intervals over the next few years.

Bitcoin is a very new, untested protocol. Over the next few years, people will dabble with it with distrust. Merchants will slowly begin to accept it, but with hesitation. The price will rise and fall as the global marketplace learns how to tether this new currency into normal financial function. There will be panics in the marketplace. There will be bubbles. This is fully expected. Yet, over time, the trend should be upward if populations continue to adopt bitcoin as an acceptable form of payment.

Over the past few months, GBBG has introduced over 150,000 people to Bitcoin. We feel it is our responsibility to shed light on our Bitcoin belief system. We constantly monitor the various news releases and their various takes on the protocol. And, we constantly field questions from our membership.
Bitcoin Hacks

So often the media misrepresents the truth about hacking. Nearly 100% of the time, when a news release discusses a recent ‘hack’ on a product or service, they are entirely incorrect. When it comes to bitcoin, this is fully the case. Bitcoin has NEVER been hacked. Many articles have surfaced recently alarming the general public with reports of bitcoin hacks. While these articles do a good job of causing panic and short-sighted sell-offs, enabling our managers to purchase BTC at a massive discount, they are malicious lies.

Bitcoin is a protocol, like email is a protocol. It is not a company, a service, or an organization. In the four year history of Bitcoin, the protocol has functioned near flawlessly. With only a very few exceptions, such as the recent branch in the blockchain, the protocol has delivered above and beyond expectation. As a protocol, Bitcoin has never been ‘hacked’. Therefore, the fear mongering and misrepresentation of the general media is unwarranted.

The real truth is that certain individuals, through their own security flaws, have allowed their Bitcoin Wallets and the servers that manage them to be hijacked. Every single instance of ‘Bitcoin hacking’ that has been reported by the media is actually a hijacking. There is a major difference between the two. Hacking a system is the complex process of decrypting the passwords or other security measures in place to protect the system. Hijacking is the more simple process of fooling someone into handing over passwords and other details necessary to gain access to a system.

We have yet to see a true, definitive case of hacking within the Bitcoin protocol. However, because people are people, we have seen many cases of hijacking. The media chooses to report these hijacks as ‘hacks’ and uses this as a reason to distrust Bitcoin. In our opinion, they should also apply this philosophy to email. Since so many individuals have allowed their email accounts to be hijacked over the years, the entire world should discard and distrust email altogether. Their assertion that Bitcoin cannot be trusted or ‘valuable’ over time, because individuals have allowed their wallets to be hijacked is the exact same as the assertion that email cannot be trusted or ‘valuable’ over time because individuals have allowed their accounts to be hijacked. Both are extremely stupid assertions.

Bitcoin is a protocol. Email is a protocol. TCP/IP is a protocol. And, as with the early days of Email and TCP/IP, the Bitcoin protocol will have its ‘maturing’ and ‘vetting’ process. We urge our members to read carefully when idiots in the media report ‘bitcoin hacking’. A stupid fool who says Bitcoin has been hacked is just as ignorant as one asserting that Email has been hacked. If an individual does not take the proper security measures and they allow another individual to hijack their wallet, that is NOT hacking. And the fools reporting such in the media should be ignored.
Market Volatility

Bitcoin is a brand new protocol. There are far fewer merchants accepting the payment system as there are speculators participating in the ‘bubble’ effect. Because of this fact, we expect the Bitcoin market valuation to be highly volatile for at least 12 to 18 months. While the ‘basis’ for bitcoin valuation relies primarily on market speculation, no person can predict or measure what a bitcoin is really ‘worth’. Therefore, people will cautiously invest and hoard their coins (driving prices up) and then dump their holdings in short-sighted panic attacks (driving prices down). This cycle will continue as the protocol matures.

Our opinion is the day-to-day reactionary market is not the place to keep one’s eye. We feel the more determinant ‘valuation’ mechanism is the VC activity, entrepreneurial developments, and slow adoption of the protocol by real-world merchants. Very few established venture capitalists take blind risk. Most of them have informed reasoning when they make a move. This is why our belief in bitcoin is strong. There are established VC firms moving into bitcoin-based ventures. These people do not act on gut feeling or ‘whims’.

Volatility should stabilize over the next few years and normalize into a steady, yet slowly increasing, valuation. Why? Because mainstream merchants will be foolish to ignore this payment system, and as such will begin to adopt it. It makes financial sense, although only after volatility begins to stabilize and currency conversion is more practical. Why would any merchant want to give up 5% or 10% of their revenue to banks and payment processors when they can accomplish the exact same tasks for under 1%?

As major processors, such as BitPay begin to prove the value of this payment system to mainstream merchants, others will adopt more rapidly. The aspect of volatility and convertibility will be addressed by systems such as BitPay, which allow merchants to immediately (daily) convert their sales into real (cash) deposits in their banking accounts. Our belief is that the protocol is only just now beginning to see professional, experienced development. Until now, the majority of systems serving the bitcoin economy have been amateur. As the professionals enter the arena, the protocol will mature. Along with this, the marketplace. Along with this, volatility will stabilize and price-valuation will normalize.
Summary

Bitcoin is an excellent, yet infant protocol. There will be ups and downs. There will be moments of fanatical valuation increases. There will be moments of panicked sell-offs. The wise participants are those who capitalize on the long-term upward movement and resist the day-to-day pressures. When bitcoins are on sale, grab some!

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Bitcoin mining is now a specialized and very risky industry, just like gold mining. Amateur miners are unlikely to make much money, and may even lose money. Bitcoin is much more than just mining, though!
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April 12, 2013, 03:26:15 PM
 #2

I feel the same way, a lot of people are very short-term minded when it comes to this. "It didnt make me a millionaire overnight!" Well, this isn't a lottery and it is a crappy analogy for what Bitcoin really is. This mini-pop was the first instance of true stress testing, and we found the weaknesses in the system to improve upon until the next wave. There is also an important distiction that the cause of the crash was literally Bitcoins own popularity as people scrambed to trade and get MTGOX accounts, and the trade engine crashed, sending the stock trader wannabes scrambling. The rest of us know this is just the beginning, over the long term those who stay invested will reap the real benefits later on, and also keep the system alive. Bitcoins only true failure comes when we stop using it.

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April 12, 2013, 03:27:27 PM
 #3

GBBG Fund Managers Market Opinion

Posted: Friday, April 12th, 2013
Category: GBBG Fund
...
Bitcoin is a very new, untested protocol.
...
Bitcoin is an excellent, yet infant protocol.
Yes - but the problem is not bitcoin. It's the free market and the infancy of the exchanges. Ordinary people are usually not exposed to free markets and rightly so, as the progression of the bubble shows. We had our "bitcoin" moment recently, and it caused a sudden crash, but recovered more easily. This time the crash is more severe, likely due to a significant disturbance of the forces governing selling and buying pressure. The market has no idea right now what the fair price of a bitcoin is.

The ASICMINER Project https://bitcointalk.org/index.php?topic=99497.0
"The way you solve things is by making it politically profitable for the wrong people to do the right thing.", Milton Friedman
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April 12, 2013, 06:02:05 PM
 #4

"Unbiased", LOL. This is clearly an article biased in favor of Bitcoin. Not that that's necessarily a bad thing.
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April 12, 2013, 06:12:52 PM
 #5

Well, it's true. Every panic/frenzy bandwagon has just hurt the panickers and frenzied.

My attempt at adding to the bitcoin-using marketplace: https://bitcointalk.org/index.php?topic=171843.0
Like online video games? Check it out! I'm selling at a big discount
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April 12, 2013, 06:45:59 PM
 #6

GBBG fund insiders predict

Uuuuu, they are insiders!  We all better listen.


Bitcoin has NEVER been hacked.

This is not true at all.   At one point there were 184 billion bitcoins in existence.

https://en.bitcoin.it/wiki/Common_Vulnerabilities_and_Exposures#CVE-2010-5139
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April 12, 2013, 07:59:39 PM
 #7

Unbiased article!?

GTFO here!

The very first sentence clearly revealed it was a 'keep calm and carry on' number from a Bitcoin ramper. Not a lot unlike the sort of crap that the precious metal retailers were putting out when their markets hit a big correction.

Kraken Account, Robbed/Emptied. Kraken say "Fuck you, its your loss": https://bitcointalk.org/index.php?topic=1559553.msg15656643#msg15656643

Bitfinex victims. DO NOT TOUCH THE BFX TOKEN! Start moving it around, or trading it, and you will be construed as having accepted it as an alternative means of payment to your USD, BTC, etc.
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April 12, 2013, 11:32:00 PM
 #8

Also with regard to Warren Buffett and the blatantly fraudulent suggestion that "if you were smart like him you would by now".  If you were smart like Warren Buffett you would buy companies that make actual products that actual people actually buy, and which produce an actual revenue stream.  Like Clorox bleach and Smucker's Jam, and you would do massive RESEARCH to see that they are well managed, and you wouldn't 'smile' when their value rises because you were not speculating on reselling at a profit, your holding for the longer term for the revenue stream.  About the only thing they got right was Buffett buys things that are cheap, but this is more often because the company has been historically undervalued in his opinion, not because of a sudden dip in price.

FRC:  18mAGEto3xZzfKNJPwsDVA5c2Fk5Za3nbs  http://www.freicoin.org  IRC:  Freenode #freicoin
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April 12, 2013, 11:50:10 PM
 #9

Nice article, Bitcoins are made for the future and longterm. Short profits possible but with high risk involved...!

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April 13, 2013, 03:03:55 AM
 #10

GBBG fund insiders predict

Uuuuu, they are insiders!  We all better listen.


Bitcoin has NEVER been hacked.

This is not true at all.   At one point there were 184 billion bitcoins in existence.

https://en.bitcoin.it/wiki/Common_Vulnerabilities_and_Exposures#CVE-2010-5139

Looking at the link you put here, that was not a hack, it was something that went wrong. and was fixed.

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April 13, 2013, 04:29:46 AM
 #11

GBBG fund insiders predict

Uuuuu, they are insiders!  We all better listen.


Bitcoin has NEVER been hacked.

This is not true at all.   At one point there were 184 billion bitcoins in existence.

https://en.bitcoin.it/wiki/Common_Vulnerabilities_and_Exposures#CVE-2010-5139


The Bitcoin protocol itself has never been hacked, because you would need a quantum computer from the future to do it.

Exchanges get hacked however, but that's not the fault of Bitcoin, its the fault of their operators for having insufficient security and redundancy. One of the big ones was burned because someone was stupid enough to be tricked into giving the hacker their admin creds over the phone...

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April 13, 2013, 02:22:20 PM
 #12

Looking at the link you put here, that was not a hack, it was something that went wrong. and was fixed.

It was a hack.


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April 13, 2013, 02:24:48 PM
 #13

GBBG fund insiders predict

Uuuuu, they are insiders!  We all better listen.


Bitcoin has NEVER been hacked.

This is not true at all.   At one point there were 184 billion bitcoins in existence.

https://en.bitcoin.it/wiki/Common_Vulnerabilities_and_Exposures#CVE-2010-5139


The Bitcoin protocol itself has never been hacked, because you would need a quantum computer from the future to do it.

Exchanges get hacked however, but that's not the fault of Bitcoin, its the fault of their operators for having insufficient security and redundancy. One of the big ones was burned because someone was stupid enough to be tricked into giving the hacker their admin creds over the phone...

The link where the hack is documented is like, right there, and yet you still claimed that it was never hacked. Some nerve.


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April 13, 2013, 05:21:38 PM
 #14

The article is well written.  But possibly, assumes too much about the state of the bitcoin economy.

I understand why some people might consider it a great investment opportunity.   And on some levels, it is if you believe it can "store of value".  The problem is the bitcoin economy itself is too small to let us know what that value is.   Speculating, yes, buying the bitcoin lottery ticket yes, but investing NO, at least not until the "bitcoin" economy goes mainstream (ie outside of silk road & mining, and mining equipment purchase)

In addition, with just one exchange handling "80%" of the trades, it's a single point of failure.  And since bitcoin is a electronic/virtual currency, any failure of the exchange, will take down the market, since there is no alternative.

I still believe it has the potential.  That's one of the reasons I still keep an eye on bitcoin & bitcointalk.  I am still waiting for the changes needed to make this an investment opportunity.

There are folks pushing bitcoin's as in investment or getting onto mainstream media to talk about buying pizza or beer with bitcoins, bitcoin ATMs, or Bitcoin to Gold exchanges, etc.  This type of hype just seems like they are trying too hard, which just re-enforces my belief that bitcoin is not yet mainstream enough to be investment grade.  Encouraging more people to buy as a speculation on future value, is just asking for short term price volatility, which is very very very bad when you are trying to stabilize an economy.  And since, there is no central authority to step-in, the price will come down faster than it went up - basically the worst of all possible cases.

I would prefer organic growth, instead of hyped unsustainable growth.  1/2 the reward, has led to organic growth in value, just as it was designed to do.  However, this recent price volatility (possibly tied to cypus, and increased media coverage of bitcoin), just makes me and all sane investors stay away from bitcoin as an investment category.

Summary: Bitcoin mining & payment acceptance/currency exchange are the only legitimate revenue generating opportunities.  If you mine, invest in ASICs and go big to ensure profitability.  The long term viability of all other pure bitcoin businesses is questionable both from a legal and profitability outlook.
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April 13, 2013, 06:03:10 PM
 #15

The article kind of flourishs Bitcoin, not much unbiased. However, nice read.

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April 14, 2013, 04:11:38 AM
 #16

Much needed article among all the circus tent pitching and fear mongering on bloomberg and cnbc last week.

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