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Author Topic: Bitcoins vast overvaluation  (Read 4827 times)
sublime5447
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September 19, 2013, 03:29:16 AM
 #1

http://falkvinge.net/2013/09/13/bitcoins-vast-overvaluation-seems-to-be-caused-by-usually-illegal-price-fixing/

If you dont know we are still heading down.
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Corelianer
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September 19, 2013, 06:58:38 AM
 #2

Who cares? We are all happy if the price goes up, no?
sublime5447
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September 19, 2013, 05:37:01 PM
 #3

No.
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September 19, 2013, 05:56:39 PM
 #4


From this link he seems to be an idiot who has no idea what he is talking about. Is there any reason you have to believe anything he says?

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September 20, 2013, 02:20:59 AM
 #5


From this link he seems to be an idiot who has no idea what he is talking about. Is there any reason you have to believe anything he says?

http://en.wikipedia.org/wiki/Rickard_Falkvinge

He's decently intelligent in his areas of expertise, but he knows shit about markets.

https://www.bitcoin.org/bitcoin.pdf
While no idea is perfect, some ideas are useful.
sublime5447
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September 20, 2013, 02:41:27 AM
 #6

The point to me is something he just glosses over and that is that there is not an underlying market supporting the bitcoin price. Basically the whole bitcoin market is speculators with no real demand for coins other than drugs and gamblers and they dont need enough coins to justify the price. I dont really care about the other aspects of the artical.

It is like the housing market and the feds bond buying, The real market is not there for homes so they have to create artificial scarcity and use fed bond buying to prop up the price.  

Reality will set in at some point, but i guess the saying goes the market can stay irrational longer than you can stay solvent.
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September 20, 2013, 02:48:57 AM
 #7

I dont hold coins I make money whether the market goes up or down.
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September 20, 2013, 02:56:02 AM
 #8

of course Aunt Jemima.  Grin
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September 20, 2013, 02:56:14 AM
 #9

I agree with Falkvinge in general, but I think even he is overvaluing bitcoins and underestimating the extent of manipulation.

 Cheesy Cheesy Cheesy Cheesy
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September 20, 2013, 03:05:03 AM
 #10

The point to me is something he just glosses over and that is that there is not an underlying market supporting the bitcoin price. Basically the whole bitcoin market is speculators with no real demand for coins other than drugs and gamblers and they dont need enough coins to justify the price. I dont really care about the other aspects of the artical.

It is like the housing market and the feds bond buying, The real market is not there for homes so they have to create artificial scarcity and use fed bond buying to prop up the price.  

Reality will set in at some point, but i guess the saying goes the market can stay irrational longer than you can stay solvent.

You say "reality will set in at some point."  Well, what point will that be exactly?

You think bitcoin miners who have owned bitcoins for years and seen the price go from <$1 to <$265 are going to "wake up" and sell their coins and walk away?

Or perhaps the growing ecosystem fueled by tens of millions of Venture Capital dollars being invested in bitcoin based companies will suddenly just dry up and vanish in the wind?

Or how about the continual increase of global bitcoin transactions in "legal" sectors fueled by companies like Bitpay?

Or is it just the idea that a world ever more influenced, created and led by technology will never give birth to a true technology based currency that will find its way into the global economy in some permanent way?

But, instead you compare a 4 year old Bitcoin market to a 100+ year old bond market and a 200+ year old real estate market?

Do you ever consider that Bitcoin's current "inflated" price might just be the soil it needs to grow an underlying market, by igniting the press, global interest and potential monetary gain to inspire the very investment any currency needs to become a conscious, and ultimately, useful part of society?

I won't argue that Bitcoin's are currently heavily valued in speculation. Or that the US dollar is dying soon (or in our grandchildren's lifetimes). However, as long as the price of Bitcoin is enticing enough for you to be trading it for "fat stacks," it's also attractive enough to be creating an economic infrastructure and ecosystem for true economic utility.


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September 20, 2013, 03:11:04 AM
 #11

The best part

"As of this writing, one bitcoin is trading for 142 US Dollars. Readers of this blog will remember that I estimated the endgame value of one bitcoin, if the currency succeeds, to be between 100,000 and 1,000,000 US Dollars. That estimation still holds."

But it's "vastly overvalued"   Roll Eyes
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September 20, 2013, 03:27:29 AM
 #12

I think he's making a whole lot of assumptions here that you just can't make.

First of all, let's not forget that there is a large degree of automation in bitcoin trading since, you know, there's an awful lot of programmers around. You can also look back and see all trading robots that have been posted to the forums alone where people literally download and let it run so you have a large population of users who don't know what they're doing just letting the bot do its thing. Since this is the same exact bot over many different accounts, they will all notice the same things and make the same decisions.

In fact, I used to use this knowledge to predict what the bots would do in a certain situation. When I saw that scenario playing out, I would take advantage of the bot's mindlessness and it was making me some pretty good profit. The bots have gotten pretty sophisticated now, and the market is large enough that the risk to me is too great. I wouldn't put it past a bigger player to be taking the same sort of reactionary trades against a programmed hive mind.
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September 20, 2013, 04:25:04 AM
 #13

Technically it's already a fourth of the price. If you sell it, no matter how little you have, in most parts of the world, you'll be charged about 70% tax in between VAT and income and other tax and commissions from exchangers and wire fees etc. If you hold you make an agreement with other people that hold money that it's valuable, you get to use it for online investments and for putting it in corporations instead of your easily taxable self, and you get to wait around for the time when there are more people on the streets to exchange it with commission and tax free.
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September 20, 2013, 06:13:44 AM
 #14

Technically it's already a fourth of the price. If you sell it, no matter how little you have, in most parts of the world, you'll be charged about 70% tax in between VAT and income and other tax and commissions from exchangers and wire fees etc. If you hold you make an agreement with other people that hold money that it's valuable, you get to use it for online investments and for putting it in corporations instead of your easily taxable self, and you get to wait around for the time when there are more people on the streets to exchange it with commission and tax free.

I totally agree to this. I am also here to make a commitment.
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Digital money you say?


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September 20, 2013, 08:39:20 AM
 #15

So where can I buy bitcoins for $4!? In fact, if anyone wants to sell them to me for A WHOPPING $20 a piece (5X more than the article states) I have $4000 with their name on it. No joke.

Seriously, I don't understand how some people come up with these numbers. If the market says they are worth $140 then I will buy and sell them for that much. How do I know that $140 is a pretty good number? Well to use my case above^, If the price drops to a certain level, then people go nuts and buy them!

Quote
If Silk Road has 22 million USD in annual sales, let’s be very generous to err on the safe side, and divide that by the United States’ money velocity, which is 1.67 on average instead of the 6 estimated above.

This generous estimation gives us a total bitcoin money supply value of 13 million USD.

Oops.

This is like saying 'If the gold market has $X in sales and lets be generous to err on the safe side, and divide that by the US' money velocity, which is 1.67 on average instead of the 6 estimated above. This gives us a generous gold money supply value of (insert low figure here).'

I think the word we are looking for here is 'Oops'   Lips sealed

I don't really care who this guy is anymore, he can't see the forest for the trees.

An items value is not solely based on the USD price it commands or the volume of business it does. It can also be valuable because people see future value or if it has a utility that someone needs. I am sure someone more versed in economics could explain it better than I.


FAP Turbo 2.0, the FOREX trading robot which also trades bitcoin!

I had to link it because I love the name. Seriously, that is the real name.
marcovaldo
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September 20, 2013, 10:09:20 AM
 #16

Quote
its market share of transactional currencies, multiplied by the size of that market (about 75 trillion US dollars).


What?Huh Wtf?
I estimate the market of about a few million usd considering the sales on bitmit, and stuff that like.

Where did he come with this figure?

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randymarsh730
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September 20, 2013, 10:32:09 AM
 #17

For those of you who don't know who Rick Falkvinge is or what he is about....
http://www.youtube.com/watch?v=zsI3-IEWgFg
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September 20, 2013, 11:14:34 AM
 #18

For those of you who don't know who Rick Falkvinge is or what he is about....
http://www.youtube.com/watch?v=zsI3-IEWgFg

Cool guy! Not so good at economics though I guess. I'd still vote for him. I wish there was a pirate party in the US...

FAP Turbo 2.0, the FOREX trading robot which also trades bitcoin!

I had to link it because I love the name. Seriously, that is the real name.
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September 20, 2013, 12:27:56 PM
 #19

Quote
UPDATE 4: FOCUS ON PART TWO
As I was able to document what’s normally illegal trading practices, I tried to quantify their impact on the exchange rate by dividing the price into utility value, speculation value, and price-fixing value. That turned out to be a mistake, horribly imprecise, unnecessary, and irrelevant. Ignore the napkin ballpark calculations below and focus on the documented price-fixing further below instead; that’s the news brought to the table here.

So basically what he is admitting after all the backlash is that the calculation of value that he did is worthless, so just focus on his point that the market is being manipulated.

Manipulated?  Bitcoin market?  Say it ain't so!   Cheesy

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September 20, 2013, 12:44:51 PM
 #20

The point to me is something he just glosses over and that is that there is not an underlying market supporting the bitcoin price. Basically the whole bitcoin market is speculators with no real demand for coins other than drugs and gamblers and they dont need enough coins to justify the price. I dont really care about the other aspects of the artical.

It is like the housing market and the feds bond buying, The real market is not there for homes so they have to create artificial scarcity and use fed bond buying to prop up the price.  

Reality will set in at some point, but i guess the saying goes the market can stay irrational longer than you can stay solvent.

So Bit-pay single handedly attaining 10,000 merchant customers is equivalent to your bolded statement above?

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