Wall Observer BTC/USD - Bitcoin price movement tracking & discussion

[gibbtek]

@KeyserSoze,

I have promised to keep my negative views to myself in this forum, but you insist asking for them...

.... spinning around only a fraction of the money that you all put in.  Sorry, folks.

oh no. not the ponzi thing again.  

...

600watt Agreed.
Sorry JorgeStolfi but this one way off. Bitcoin or what ever crypto takes off is not ponzi (ok excluding the pre-mined obvious scams which disappear in a flash). Crypto currency is just another amazing technology that will change many things. Like any other tech, people will find ways to use if for good or bad. But one thing is for sure, its changing the balance of power in the world. The biggest haters are the bankers, hmm I wonder why? Its like Yoda said "Fear leads to hate..." they are scared the population is no longer dependent on their crappy system any more

Crypto offers the opportunity at least to have a chance at changing things for the better - to people who would never get it because they were not born into wealth. Now we've got a bunch of youth who previously would never see the kind of wealth they have access to now, let's hope they can change a few things for the better.

Open source and decentralisation is the way forward. Any system built on those principals has got my vote whether it makes me personally rich or someone else, reason being that the idea of openness and freedom is closer to love (surely the basis of any system that promotes true well-being) then the hate filled closed source bureaucratic bull shit system we have now.

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[Le Happy Merchant]

It is not dishonest if people know it is a zero-sum game with uncertain odds, before they join.

No that is wrong, the test for dishonesty is not dependant on the recipients understanding, it is dependant on the perpetrators intent. (or an objective test - by the 'man in the street')

The Ponzi case has a very specific legal meaning, blurring this meaning,  invalidates the comparison.

Sorry, but the way in which you relate through syntax the semantic meaning 'Bitcoin is honest', is not to say 'bitcoin is not dishonest' because then you haven't said ANYTHING, you just told us what it ISN'T.

[Erdogan]

@KeyserSoze,

I have promised to keep my negative views to myself in this forum, but you insist asking for them...

Is what I wrote on twitter and put on my homepage any different from what I already wrote here?

(You missed my last tweet, "One day bitcoins will be worth their weight in gold".)

Even if bitcoin ultmately succeeds (which I wish it will, but doubt it) and bitcoins becomes extremely valuable (which I very much doubt they will), bitcoin trading is ultimately a zero-sum game.  Any profit that one makes from it is someone else's loss.  In order for @Goat (or someone else) to buy his Lamborghini, @windjc (or someone else) must lose his house.

I believe that adults have the right to gamble their money and property any way they want.  They even have the right to play at this crazy roulette-by-phone where the casinos may not have money to pay off, and the dealers are know to be liars, cheaters, and thieves.

So I have no objections to bitcoin trade and speculation --- as long as the people who come into the game are aware that it is a form of gambling, and that their expected profit is slightly negative (because of fees and other losses). 

However, this particular game will be profitable for its current players only if the price goes up; and that is not likely to happen if the "market" consists of the same guys trading the same bitcoins and the same dollars back and forth among themselves.  In order for the price to go up, and the old players to make substantial profits, new players must come in and bring new money.

So, in that aspect bitcoin trading is indeed a classical Ponzi schema: the money invested by new members is used to pay the large profits of the early joiners -- if these are smart enough cash out while the price is higher than what they paid for their coins.  The net effect of the game is to shift money from the late entrant' pockets to those of the early entrants.

And that is when the game stops being OK.  That is because in order to lure new players, some of the bitcoin "evangelists" are resorting to plain lies, painting bitcoin as a "good investment", an hedge against "rampaging inflation", etc.  They keep showing that false arithmetic of total e-commerce divided by 21 million.  Some still claim that bitcoin payments are untraceable and un-seizeable. (You may have seen my tweets a couple of weeks ago where I argue with someone who claimed just that.)  And the bitcoin salesmen conveniently forget to mention the growing legal barriers, the dozens of exchange failures that ate millions from their clients, and the many other things that would turn sensible people, even uneducated ones, away from the bitcoin game.

One feature of Ponzi schemes is that most people who join feel the urge to become salesmen and convince others to join too.  You do not see long-term stock investors doing that; that's because those people know that other smart investors will look at what the company does, and will not be impressed by sales hype.

It was the opening of the Chinese market that lifted the bitcoin price from the low tens to 1200, and it is the Chinese who are holding it at the present levels.  But that market is no longer growing. So, where will the necessary new suckers come from?

I have seen people here and elsewhere saying that the only hope left now is Latin America.  Well, I cannot sit and watch fellow countrymen being conned, can I?

Several times I felt the urge to end my posts here with a friendly "I wish you all get filthy rich".  But I cannot honestly say that: if some of you do, others necessarily will become filthy poor.  I thought of writing "may you all get back most of what you invested", which is the fairest outcome one could wish for in a zero-sum game.  But I cannot honestly even wish you that, because many people have already walked out of this game with millions of profits or stolen money --- so you all are, like those guys in my parable above, spinning around only a fraction of the money that you all put in.  Sorry, folks.

So you didn't notice that bitcoin is money? Or do you not understand how money works?

[JorgeStolfi]

I do not want to bring more discord here.  You all know my views and arguments, if you don't agree with them I do not know what to add.

But let me clarify a couple of misunderstandings:

* Investment in stocks is not a zero-sum game.  A long-term stock investment is a loan to the company, who hopefully uses that money to create new real wealth (goods or services) that is worth more than the money invested in it.  Part of that extra wealth is returned to the long-term investor as dividends, part is returned through the increase in stock price related to increase in the assets of the company (e.g. new factories built with money from profits that was not distributed as dividends).  Thus investing in stocks can make people richer without making anyone poorer.

* Money that is invested into bitcoins is not being given to the "company" -- that is, the bitcoin network -- for it to build the infrastructure and paying the costs of doing its service (which is the "new wealth" that the bitcoin project is meant to create). Most of it goes into the pockets of other traders, some into the pockets of exchange operators.  The "company" does not pay dividends to bitcoin investors, and these do not own a single chip from that "company".  So, investing into bitcoins is not at all like investing in Google or Apple stock.

* By simply moving a fixed amount of money and bitcoins around, bitcoin trading cannot make everybody rich, not even in the average sense.  That is something that a college education may help understand: in basic physics you learn that you cannot create mass, charge, or energy by smartly moving those things around.

[oda.krell]

I do not want to bring more discord here.  You all know my views and arguments, if you don't agree with them I do not know what to add.

But let me clarify a couple of misunderstandings:

* Investment in stocks is not a zero-sum game.  A long-term stock investment is a loan to the company, who hopefully uses that money to create new real wealth (goods or services) that is worth more than the money invested in it.  Part of that extra wealth is returned to the long-term investor as dividends, part is returned through the increase in stock price related to increase in the assets of the company (e.g. new factories built with money from profits that was not distributed as dividends).  Thus investing in stocks can make people richer without making anyone poorer.

* Money that is invested into bitcoins is not being given to the "company" -- that is, the bitcoin network -- for it to build the infrastructure and paying the costs of doing its service (which is the "new wealth" that the bitcoin project is meant to create). Most of it goes into the pockets of other traders, some into the pockets of exchange operators.  The "company" does not pay dividends to bitcoin investors, and these do not own a single chip from that "company".  So, investing into bitcoins is not at all like investing in Google or Apple stock.

* By simply moving a fixed amount of money and bitcoins around, bitcoin trading cannot make everybody rich, not even in the average sense.  That is something that a college education may help understand: in basic physics you learn that you cannot create mass, charge, or energy by smartly moving those things around.

That's funny, so we agree on point 1.

But you draw a different conclusion then.  True, the money we invest (be it for a year, or a day)  isn't used by any company directly to create anything, but it provides liquidity. Which is, hm, kind of a prerequisite for any functional currency, wouldn't you agree?

[ChartBuddy]

Explanation

[schizoid]

* Money that is invested into bitcoins is not being given to the "company" -- that is, the bitcoin network -- for it to build the infrastructure and paying the costs of doing its service (which is the "new wealth" that the bitcoin project is meant to create).

Of course it is. Where do you think the money to pay these people is coming from?

Most of it goes into the pockets of other traders, some into the pockets of exchange operators. 

The same is true for stocks. Your money only goes to the company if you buy the IPO.

The "company" does not pay dividends to bitcoin investors

But it does the equivalent of buybacks. In order for "customers" to use the service, they must buy bitcoins from investors.

[michaelGedi]

so, what happens if the price levels out and the unit of exchange is used for the exchange of goods and services? who has lost? I'm geniunely curious.

The negativity surrounding bitcoin is only relevant if it declines in price. What happens if it sits still, for example

[Teppino]

First a greeting to Jorge from Venezia  

Then a question: actually moving money around has a high cost and friction due to fees applied by banks and entities like paypal and so. How do you explain this in relation to the basic physic you named?
Could it be that we already have been made poor (thus engaged in a worldwide ponzi scheme driven by inflation) and bitcoin, being technologically superior, is giving us back a part of what has been taken (if not stolen)?

p.s. apologies for the bad grammar!

[JorgeStolfi]

* Money that is invested into bitcoins is not being given to the "company" -- that is, the bitcoin network -- for it to build the infrastructure and paying the costs of doing its service (which is the "new wealth" that the bitcoin project is meant to create).

Of course it is. Where do you think the money to pay these people is coming from?

As a rough guess, people who invested in bitcoin must have already poured around a billion dollars into the market, even discounting what they took out. How much of that went to the miners?

Most of it goes into the pockets of other traders, some into the pockets of exchange operators. 

The same is true for stocks. Your money only goes to the company if you buy the IPO.

Yes, but when a long-term investor sells his stock to another, he is simply transferring the credit of the loan (and any future dividend and appreciations) to him.  So it is as if the initial loan was made by both of them, and they split the profits and risks in a particular way.   

You may be thinking of day traders, who try to make money on price fluctuations that much above the real wealth produced by the company during the time that they hold the stocks.

The "company" does not pay dividends to bitcoin investors

But it does the equivalent of buybacks. In order for "customers" to use the service, they must buy bitcoins from investors.

A company buys back its stock when it wants to reduce the pressure to give out dividends.

Customers buying bitcoins just to make payments are not "buybacks by the network".  They are like day traders who are forced to buy some stock but do not expect to make profit.  Again, they are just the ultimate new investors that bring their wealth (money or goods) into the system, which is used to pay the profits of earlier entrants; and who will get that wealth back only by selling their bitcoins to someone else who will have to put the same amount of wealth in.  Do I need to I tell you how they would fit into my "parable"?

[seldon]

Has this been posted here yet? http://www.tigerdirect.com/ now gives 20$ off on orders above 100$, when paying in btc!

Nice marketing incentive, or are they speculating on rising btc prices?

[raid_n]

I do not want to bring more discord here.  You all know my views and arguments, if you don't agree with them I do not know what to add.

But let me clarify a couple of misunderstandings:

* Investment in stocks is not a zero-sum game.  A long-term stock investment is a loan to the company, who hopefully uses that money to create new real wealth (goods or services) that is worth more than the money invested in it.  Part of that extra wealth is returned to the long-term investor as dividends, part is returned through the increase in stock price related to increase in the assets of the company (e.g. new factories built with money from profits that was not distributed as dividends).  Thus investing in stocks can make people richer without making anyone poorer.

* Money that is invested into bitcoins is not being given to the "company" -- that is, the bitcoin network -- for it to build the infrastructure and paying the costs of doing its service (which is the "new wealth" that the bitcoin project is meant to create). Most of it goes into the pockets of other traders, some into the pockets of exchange operators.  The "company" does not pay dividends to bitcoin investors, and these do not own a single chip from that "company".  So, investing into bitcoins is not at all like investing in Google or Apple stock.

* By simply moving a fixed amount of money and bitcoins around, bitcoin trading cannot make everybody rich, not even in the average sense.  That is something that a college education may help understand: in basic physics you learn that you cannot create mass, charge, or energy by smartly moving those things around.

I think that the term zero-sum game is being used unfairly in this context.
If Investing money into company a instead of b , b loses out on that investment so you'd be looking at a zero-sum game under these loose definitions (which of course is not the case).
You need to assume a totally closed system for a zero-sum game argument to make sense.

Bitcoin is not a closed system. It is a means of exchange

[fonzie]

Well Bitcoin would  alsowork  if the price for 1 Bitcoin would only be 1-100$.
What´s the problem? I thought you all love the technic/philosophy and not the actual $ value of Bitcoin.

[shmadz]

First a greeting to Jorge from Venezia  

Then a question: actually moving money around has a high cost and friction due to fees applied by banks and entities like paypal and so. How do you explain this in relation to the basic physic you named?
Could it be that we already have been made poor (thus engaged in a worldwide ponzi scheme driven by inflation) and bitcoin, being technologically superior, is giving us back a part of what has been taken (if not stolen)?

p.s. apologies for the bad grammar!

Good question. Imagine the "money circle" game, except you are handing around those $50 bills in a circle of friends in 10 different countries. Using fiat and paying exorbitant fees this game would obviously not last long.

Next, imagine that there was some magical, mystical way that you could track the money as it floats from friend to friend and that as soon as one person tries to "pocket" the cash all the other participants would know instantly that the money did not go where it should have because they were all auditing everyone else's transactions in real time...

[raid_n]

Well Bitcoin would  alsowork  if the price for 1 Bitcoin would only be 1-100$.
What´s the problem? I thought you all love the technic/philosophy and not the actual $ value of Bitcoin.

Technically bitcoin works however you value it but its utility increases as its value increases because that determines how much
value you can transfer through it. Think of it as the "bandwidth".

[JorgeStolfi]

so, what happens if the price levels out and the unit of exchange is used for the exchange of goods and services? who has lost? I'm geniunely curious.

The negativity surrounding bitcoin is only relevant if it declines in price. What happens if it sits still, for example

OK, in my parable, after the two swindlers leave, those who remain have less than they had invested.  Each invested 50 or 100 dollars, the scoundrels have taken out 150 net.  But the losers think that they have more than they invested, because they own a highly "valuable asset" -- their place in the circle.  Let's say that they believe that their place is now worth 300 dollars.

A new "customer" comes in and wishes to buy a place in the line.  He pays 300 dollars to one of the original investors, who walks out with that money.  That first "customer" then immediately sells his place in the line to a second "customer" and walks out with 300 dollars.

So the "old investor" made a fat profit (invested 100, walked out with 300) and the "first customer" got in and out with no net profit or loss. Where did the profit of the old investor come from?

Why don't people play this circle game in real life, if it makes everybody rich?

[oda.krell]

Well Bitcoin would  alsowork  if the price for 1 Bitcoin would only be 1-100$.
What´s the problem? I thought you all love the technic/philosophy and not the actual $ value of Bitcoin.

Technically bitcoin works however you value it but its utility increases as its value increases because that determines how much
value you can transfer through it. Think of it as the "bandwidth".

This is the correct answer.

Plus, as liquidity increases, and perhaps adding to that some amount of exchange friction between markets (e.g. because of different legal approaches), we would also see volatility decrease gradually.

Which, by the way, is already slowly happening. I know the press is all screaming about "the biggest crash yet in Bitcoinland", but looking at actually more objective measures, like Bollinger Band Width (which essentially tracks normalized standard deviations of averaged price), we can actually see that volatility already *is* trending down slowly.

(I'll post it, if you request proof :D)

[Teppino]

First a greeting to Jorge from Venezia  

Then a question: actually moving money around has a high cost and friction due to fees applied by banks and entities like paypal and so. How do you explain this in relation to the basic physic you named?
Could it be that we already have been made poor (thus engaged in a worldwide ponzi scheme driven by inflation) and bitcoin, being technologically superior, is giving us back a part of what has been taken (if not stolen)?

p.s. apologies for the bad grammar!

Good question. Imagine the "money circle" game, except you are handing around those $50 bills in a circle of friends in 10 different countries. Using fiat and paying exorbitant fees this game would obviously not last long.

Next, imagine that there was some magical, mystical way that you could track the money as it floats from friend to friend and that as soon as one person tries to "pocket" the cash all the other participants would know instantly that the money did not go where it should have because they were all auditing everyone else's transactions in real time...

Agreed 100%, if  that's the case the wealth influx needed to fuel bitcoin full growth has been already been payed by everyone using the current bank system in all those past years.
Then, whilst it is true that the " bitcoin takeoff" has been quite similiar of a ponzi scheme, once it becomes an official exchanged currency it will find his natural habitat and will get his value from other currencies (aka from the past).

[af_newbie]

so, what happens if the price levels out and the unit of exchange is used for the exchange of goods and services? who has lost? I'm geniunely curious.

The negativity surrounding bitcoin is only relevant if it declines in price. What happens if it sits still, for example

OK, in my parable, after the two swindlers leave, those who remain have less than they had invested.  Each invested 50 or 100 dollars, the scoundrels have taken out 150 net.  But the losers think that they have more than they invested, because they own a highly "valuable asset" -- their place in the circle.  Let's say that they believe that their place is now worth 300 dollars.

A new "customer" comes in and wishes to buy a place in the line.  He pays 300 dollars to one of the original investors, who walks out with that money.  That first "customer" then immediately sells his place in the line to a second "customer" and walks out with 300 dollars.

So the "old investor" made a fat profit (invested 100, walked out with 300) and the "first customer" got in and out with no net profit or loss. Where did the profit of the old investor come from?

Why don't people play this circle game in real life, if it makes everybody rich?

You cannot be serious.  Your logic can be applied to any assets.  Most houses in US/Canada are really worth 40-50K, but they sell for 500-800K.  Is land in the city really worth the money people are willing to pay.
Of course not.  It is a dead land.  You cannot grow any food on it,, cannot drill for oil or dig for some other resources.  The water underneath it is polluted.  So why people pay so much?  Because they want it.
So yes, real-estate (a limited resource) is being bought by a "circle/line" of people.  The last one to own it holds the "bag".

It is always a net zero game.  Someone's profit it someone else loss (realized or unrealized).  Don't get me started on other "financial instruments" like stocks, bonds, mutual funds etc.  Same thing.

[raid_n]

Why don't people play this circle game in real life, if it makes everybody rich?

I'll go as far as agreeing with you that there will be people that won't benefit or only marginally benefit and those that will lose out for not adopting cryptocurrencies.
(note: I am not mentioning bitcoin specifically, lets talk about a new form of exchange that is emerging in a more general sense).
The later adoption happens the less you profit.

A far fetched example:
Every company is jumping onto this new "internet" thingy.
Those going in early are , on average, seeing increases in profit.
Now if Bob's Bakery also makes the jump after just about everyone and their pet has a website and has a page with online ordering it won't have the same impact as if he were the first to do it.

I don't understand why you have to explicitly link bitcoin to its perceived value. [edit] To me it looks like you treat bitcoins as some abstract paper bill with no use at all except for speculation [/edit]
Look at how the technology enables you to securely make transactions without having a central place that runs it all.
This in itself is a valuable new asset (you do know that you can add text to bitcoin transactions that is also stored on the blockchain so you could build all kinds of services around this)