rpietila public diary -- Episode II

[RAJSALLIN]

The realization that it is impossible for Bitcoin to become a currency has sunk in. The coin supply curve can not be overcome no matter how many BTC gifts you personally send this Xmas. Even if the market cap reaches $4 trillion, the currency float will only be in the range of $200 billion (at 5% of coins). That is third-world country size, yet spread out globally without the economy-of-scale of proximity.

Right now Bitcoin acts as a store of value more than a medium of exchange and it's not necessary for Bitcoin to ever be a medium of exchange to reach much higher valuations. Gold is a good example which has a very high valuation despite not being used a medium exchange since the gold standard.

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[farfiman]

Right now Bitcoin acts as a store of value more than a medium of exchange and it's not necessary for Bitcoin to ever be a medium of exchange to reach much higher valuations. Gold is a good example which has a very high valuation despite not being used a medium exchange since the gold standard.

Not so sure about that. Store of value is based on trust and "intrinsic" value . Gold is used as store of value but also in industry + it has historical "trust".  Bitcoin as a store of value only doesn't seem possible in the long term.

[rpietila]

the US has a fairly low savings rate compared with the rest of the world. Americans save between 11-12% of GDP per year. If we were to apply this savings rate to Bitcoin, already knowing the future path of the Bitcoin money supply, a problem starts to emerge–were 11.5% of Bitcoins saved per year, by 2021, 95.3% of the entire supply of the currency will have been stashed away as savings rendering commerce effectively impossible. A system of credit can be built on top of the Bitcoin economy (and most likely will be built), but while this can push back the date at which savings account for too large a share of the entire economy, it can only delay the inevitable. At some point, Bitcoins saved will start to approach total Bitcoins in circulation, making commerce effectively impossible.

The above shows absolutely no understanding of self-adjusting mechanisms (like markets).

I appreciate your point concerning the blow-off top which comes in 18-36 months, and that the current structures (continuous harassment by banks, capital gains tax, flybynight exchanges, fear to disclose holdings) do not support the distribution of coins from big stashes to small. Therefore both the majority will be trapped with no opportunity to buy coins (statistical majority - each individual can buy as much as he wants), and the minority will have a difficulty in diversifying/unloading.

If for example I smell the top when USD/BTC is $194,538 and want to sell a paltry BTC3,582.64 for $696,900,000, there are many kind of hassles. I would not regard it as realistic for any large holder to sell near the top unless they are willing to take the risk and employ leverage in conjunction with actual selling of bitcoins.

[AnonyMint]

the US has a fairly low savings rate compared with the rest of the world. Americans save between 11-12% of GDP per year. If we were to apply this savings rate to Bitcoin, already knowing the future path of the Bitcoin money supply, a problem starts to emerge–were 11.5% of Bitcoins saved per year, by 2021, 95.3% of the entire supply of the currency will have been stashed away as savings rendering commerce effectively impossible. A system of credit can be built on top of the Bitcoin economy (and most likely will be built), but while this can push back the date at which savings account for too large a share of the entire economy, it can only delay the inevitable. At some point, Bitcoins saved will start to approach total Bitcoins in circulation, making commerce effectively impossible.

The above shows absolutely no understanding of self-adjusting mechanisms (like markets).

Yes of course eventually savers need to invest outside of Bitcoin-the-asset so the coins must circulate.

But the key point which you may be missing is that the coins don't necessary have to circulate to the masses. In fact, they only circulate to the masses if Bitcoin is the currency used by the masses.

It is a chicken-and-egg problem. That is why the above quote does indeed show a very astute understanding.

You see if I invest my BTC in a business, I can't pay my employees in BTC unless BTC is already being used by them.

This is why widespread distribution is critical.

Risto you are not going to fix this without my altcoin. You will just have to accept that I am going to be richer than you

(this is inside joke because he knows and I know we are both more concerned about the right outcome than our personal wealth)

I appreciate your point concerning the blow-off top which comes in 18-36 months, and that the current structures (continuous harassment by banks, capital gains tax, flybynight exchanges, fear to disclose holdings) do not support the distribution of coins from big stashes to small. Therefore both the majority will be trapped with no opportunity to buy coins (statistical majority - each individual can buy as much as he wants), and the minority will have a difficulty in diversifying/unloading.

If you can sell the majority long calls as they are rushing in at the blowoff top, then the minority can exit selling puts.

If for example I smell the top when USD/BTC is $194.538 and want to sell a paltry BTC3,582.64 for $696,900,000, there are many kind of hassles.

My take on that is more conspiratorial. I think you would need permission from the "controllers" who will put up the options markets. In other words, I think you will need to sell your soul to the elite. Thats another reason why I've been concerned about what you are doing here. But maybe I am batshit crazy on this one.

I would not regard it as realistic for any large holder to sell near the top unless they are willing to take the risk and employ leverage in conjunction with actual selling of bitcoins.

Agreed.

I am hoping you can trade your BTC for an altcoin that has the correct long-term properties.

Hey at least I spiced your diary for this week  

[rpietila]

And now for something simple buying and selling advice:

We are already 50% over the monthly-average exponential trendline, so a retracement is possible any time.

wow, you bearish?

 

The definition of trendline is that (about) half of the time price is over the trend, and half of the time it is under the trend.

It is therefore smart to buy when price is below trendline, and sell if it goes too high above it.

I do not easily recommend selling for trading purposes, because buy&hold works better.

But if you have been in it for a long time and want to sell periodically, we have just entered the period where it makes sense to sell.

ADD:
[Re: trading based on trendline] With this methodology it is easy, because the datapoints are monthly weighted averages and new points are added only once per month. December target based on Jan2009-Oct2013 is $404.

I do not suggest anyone to buy above $700 this year, it is likely a bubble and you can likely buy cheaper next year if you just wait. Furthermore, I have pounded the table extremely hard from about $195 (the only time I pounded so hard before was February), and everyone wanting to enter in based on my advice should have done it by now.

But do not speculate - unless you intend to permanently start lowering the number of your bitcoins, do not sell.

[rpietila]

Excellent synthesis on the actual mechanisms of control.

I've long held the opinion that the most important thing about todays system of schooling is not the content of the curriculum, but the structure of the whole activity in schools. Sort of like Marshall McLuhans "the Media is the Message" - it doesn't matter what is ON TV, what matters is that TV, as a medium influences thought and action in a certain way, regardless of what content is shown.

So what do our schools teach us? The first thing they teach you is that you are not the sovereign master of your time. They teach you that all your life, there will be predetermined periods of time, during which you have to be at a certain location, doing specific things. After that you will generously get some "free time".

Next thing you learn is that there is exactly one correct answer for everything and don't bother trying to come up with it yourself, we already have, so just memorize it.

And do NOT question authority. Mistakes are wrong, be afraid of mistakes, you will be punished for them.

All in all these places stifle creative thinking and personal development, reinforce conformity and submissiveness to authority. In other words they achieve their goal splendidly. What goal? George Carlin pointed it out years ago: the point of schools is to create obedient workers. Just smart enough to run the machines and do the paperwork and just dumb enough to passively accept all the rigged bullshit of this system.

Well put!

IMHO the issue with the current system is across the board our "thought leaders" (i.e. those in positions to advise and create/influence policy) are universally those who bought into the conformity of thinking you described so well. Just look at the path one HAS to go through to become a FED chairman. It requires going to a top economics program, accepting the concensus line of thinking as fact, and becoming highly regarded in that field by publishing papers that most other experts agree with.

By definition, those who go outside the norm are not seen positively and do not advance in the field. Engineering/science fields are at least grounded in a physcial world, it is possible to later prove who is right, but economics & public policy have no such feedback mechanism and as a result can go down false paths for generations. Worse is these fields are coruptable due to their proximity to money/power politics.

[Rampion]

But do not speculate - unless you intend to permanently start lowering the number of your bitcoins, do not sell.

Excellent advice that I tend to follow from day 1 - I would add that the only purpose of daytrading should be to increase one's stash of coins, making a USD profit is trivial and pointless when dealing with an asset that appreciates so much against the USD as is BTC.

I do trade during a very specific time - bear markets that follow bubble pops, as it happened in 2011 or April, 10th this year. Catching the very top and the very bottom is just a matter of sheer luck, but on the contrary is pretty easy to spot a bubble pop and the subsequent bear market that usually follows. In a bear market the confidence of the weaker hands is seriously hit, and one can do some effective analysis and assume that the price will decline at least for a few months (as it happened from April 10th to October 15th aprox.)

I do think that mid term the bear markets will be shorter and the price decline less steep - in the first bear market in 2011 BTC lost 94% of its value (from $32 to $2), in the second bear market only 75% (from $266 to $50, and the very bottom was visited very quick just after the pop), I believe that unless something disruptive happens bear markets will be less and less relevant in the mid term because every subsequent "pop" will be seen by more and more capital just as an opportunity to buy and not a potentially catastrophic event that could lead the price to 0.

I think its also a good advice to take some profits when you have been in for long and the price has been going parabolic too quick, or has been above the trendline for too long - for example, if you already have a x100 unrealized profit I'd recommend to sell 20% of your coins and thus recoup your fiat investment in full while cashing in a nice profit, I think that helps most people to be more rational and thus to have stronger hands.

My friendly advice to AnonyMint: distopian future or not; world reserve currency or just "the mother of all bubbles"; disruptive community effort or trojan horse, I'd say that you just cannot afford to lose the opportunity of being into BITCOIN. Just throw at BTC the money you can comfortably afford to lose, historically it never let down those that took that choice. Do not be fooled by your greed that will tell you "x10 of a little is still a little", because if BTC realizes its potential the exchange rate will grow by many orders of magnitude - quickly.

[AnonyMint]

I remember my high school Trigonometry teacher who marked me down from a perfect test score because I didn't draw a box around the solutions at the end of each derivation. She was really protesting that I almost never came to class and could so effortlessly ace the tests without being controlled. (I almost never attended class at the university level and achieved a 4.0 GPA)

I really hated sitting in class it was slow, boring, and couldn't go off on the creative tangents that were potentially interesting. I was often staring out the window, dreaming of doing some sports or calculating something in my head.

I went to the principle and demanded my grade be restored to 100%, else I would quit the Track & Field team. I appealed to how the low grade would impact my ability to be accepted into a top university. Since I was the top 800meter and miler for our high school (4:25 on the mile), and since I was liked so much by the principle, I won.

That was my first conscious lesson on two things:

1. I am my own master when I leverage my brain.

2. I win politics by making people dependent on me and be sure the important people like me. Appealing to directly to the majority based on personality and individual judgments (e.g. via speech) is a can-of-worms and inefficient. Appealing to the majority via protocol, algorithm, or strategy is very efficient.

It seems lately I have allowed myself to fail a lot, particularly by involving myself with too many people who can't keep up. Where I succeeded greatly is where I burned my own path at my speed.

But I really like interacting with people of different stripes. Yet it can be frustrating.

Excellent synthesis on the actual mechanisms of control.

I've long held the opinion that the most important thing about todays system of schooling is not the content of the curriculum, but the structure of the whole activity in schools. Sort of like Marshall McLuhans "the Media is the Message" - it doesn't matter what is ON TV, what matters is that TV, as a medium influences thought and action in a certain way, regardless of what content is shown.

So what do our schools teach us? The first thing they teach you is that you are not the sovereign master of your time. They teach you that all your life, there will be predetermined periods of time, during which you have to be at a certain location, doing specific things. After that you will generously get some "free time".

Next thing you learn is that there is exactly one correct answer for everything and don't bother trying to come up with it yourself, we already have, so just memorize it.

And do NOT question authority. Mistakes are wrong, be afraid of mistakes, you will be punished for them.

All in all these places stifle creative thinking and personal development, reinforce conformity and submissiveness to authority. In other words they achieve their goal splendidly. What goal? George Carlin pointed it out years ago: the point of schools is to create obedient workers. Just smart enough to run the machines and do the paperwork and just dumb enough to passively accept all the rigged bullshit of this system.

Well put!

IMHO the issue with the current system is across the board our "thought leaders" (i.e. those in positions to advise and create/influence policy) are universally those who bought into the conformity of thinking you described so well. Just look at the path one HAS to go through to become a FED chairman. It requires going to a top economics program, accepting the concensus line of thinking as fact, and becoming highly regarded in that field by publishing papers that most other experts agree with.

By definition, those who go outside the norm are not seen positively and do not advance in the field. Engineering/science fields are at least grounded in a physcial world, it is possible to later prove who is right, but economics & public policy have no such feedback mechanism and as a result can go down false paths for generations. Worse is these fields are coruptable due to their proximity to money/power politics.

[AnonyMint]

But do not speculate - unless you intend to permanently start lowering the number of your bitcoins, do not sell.

I think its also a good advice to take some profits when you have been in for long and the price has been going parabolic too quick, or has been above the trendline for too long - for example, if you already have a x100 unrealized profit I'd recommend to sell 20% of your coins and thus recoup your fiat investment in full while cashing in a nice profit, I think that helps most people to be more rational and thus to have stronger hands.

Mathematically if you don't know how many months it will stay above trend, then you can't know when you sell whether you will be able to buy back in for a lower price.

When to buy has the same problem. There is only one exception I can think of. If you just obtained the money or ability to buy and you notice the price is below trend, then you are lucky and should buy immediately.

The only mathematical reason to sell is when you are ready to exit. And for larger holders, that should be sufficiently long duration before the expected final peak price and market cap saturation.

My friendly advice to AnonyMint: distopian future or not; world reserve currency or just "the mother of all bubbles"; disruptive community effort or trojan horse, I'd say that you just cannot afford to lose the opportunity of being into BITCOIN.

There are some factors that I can afford to lose.

1. Losing all my money because I lose the keys or they are hacked. Considering how busy I am, and health issues, etc.. I have to make choices about where to put my limited time. I lost $75,000 in 2012 because I was out-of-mind I was so near death.

2. Losing a lot of the money because of getting caught in a pincher again where I can't execute a sale for various reasons as I explained above. I am not sitting in a first world country with all status all perfectly in compliance as you all  may be. I have an ex to deal with too, which complicates, etc..

3. The times where I made big money is where I did not spend any time on money, and all my time programming. I believe this will be the case again. I might forsake a 10X gain only before I will turn some code into a $1 billion in 2014. As if I really need that much, I wouldn't even know what to spend it on.

4. What I need most is about $2-3 million and anonymity so I can live my life in peace. I don't need more potential points of failure in my life right now, I have too many issues that can go awry already. K.I.S.S.

5. I have seen in my life I was forced to sell short-term by factors. Selling short-term into a correction is painful.

From your perspective yes, because that is the only opportunity you have. I am special. Sorry to say. This has presented me a huge opportunity just fell into my lap.

Nevertheless if I have not succeeded by Jan 1, I might buy some Bitcoin, perhaps up to $40,000 or so. Especially it might be below the trendline by then or Feb. which would reduce short-term risk of a holding.

Just throw at BTC the money you can comfortably afford to lose, historically it never let down those that took that choice. Do not be fooled by your greed that will tell you "x10 of a little is still a little", because if BTC realizes its potential the exchange rate will grow by many orders of magnitude - quickly.

It is not greed of 10X of a little. Rather the issues above.

Thanks for your concern.

[Rampion]

excellent advice

Excellent advice that I tend to follow

What was the thing that we used to disagree upon? 

$300k by this year + singularity

[Rampion]

excellent advice

Excellent advice that I tend to follow

What was the thing that we used to disagree upon? 

$300k by this year + singularity

Let me guess that rpietila argued against the Bitcoin singularity?

No, he said that we would have definitely seen $300k per BTC by this year (2013), and that denying this was just a "denial of the facts". And he proved it by the kind of maths that show you that the Bitcoin singularity is coming super short term.

My opinion about that was that it ($300k per USD this year) would have NEVER happened firstly and foremost just because the Bitcoin infrastructure (the exchanges, the blockchain itself) is not ready to support that kind of flash-growth (this seems painfully obvious to me), secondly because other circumstances (among which human psychology) make that kind of parabolic growth unsustainable. IMO what we are seeing is almost the optimum "cruise speed" we can reach.

That said, I have to say that I'm enjoying a lot his latest posts and he looks to me much more reasonable

[AnonyMint]

Risto (et al), I don't know where you finally settled on in your philosophy about precious metals (ya'll know Risto was/is a precious metals dealer), so I wanted to share the math of where my logic ended up. Seems to have silenced the goldbugs in that thread.

Also hope you saw the goods news that China is accelerating free market reforms, so this bodes very well for the future. China will still need to undergo an adjustment (possibly acute and painful along with global contagion), from a debt-laden fixed capital infrastructure and exports economy to a consumer economy that doesn't repress household share of GDP via several mechanism that Pettis outlined. The above linked reforms are the prescription Pettis has pushed for. Implementation must follow though.

[AnonyMint]

I remember my high school Trigonometry teacher who marked me down from a perfect test score because I didn't draw a box around the solutions at the end of each derivation. She was really protesting that I almost never came to class and could so effortlessly ace the tests without being controlled. (I almost never attended class at the university level and achieved a 4.0 GPA)

Or protesting the fact that you were wasting her time because if there's a box around the answer it takes just a second to grade a 100% paper.

Btw, we were supposed to show our work, and not just the final solution. Yes maybe that would accelerate grading of the very rare case of 100% correct. Not a very compelling argument.

But you would be remiss not to notice that I did not enter that contract on my own free will, thus the terms were not mutually agreed. The system is trying to force down my throat how I should set my priorities.

I think that is a very interesting rebuttal because it illuminates the difference between a socialist (big government) and a minanarchist (small government).

In case that link above doesn't make this clear, socialists want to fix Syria but can't even fix Detroit, because they don't understand relative value. So they think every requirement makes sense, because it is all fair.

Because they fundamentally don't understand that potential energy = degrees-of-freedom.

So yeah I guess I am being arrogant again. How else could I rationally respond?

I went to the principle and demanded my grade be restored to 100%, else I would quit the Track & Field team. I appealed to how the low grade would impact my ability to be accepted into a top university. Since I was the top 800meter and miler for our high school (4:25 on the mile), and since I was liked so much by the principle, I won.

Without questioning your awesomely self described awesome intelligence but "principle" is different than "principal".

Does that make you feel better? But this chest thumping doesn't help you because your inability to generate a model sticks out like a blackeye above, or was that just error due to haste?

It seems lately I have allowed myself to fail a lot, particularly by involving myself with too many people who can't keep up. Where I succeeded greatly is where I burned my own path at my speed.

But I really like interacting with people of different stripes. Yet it can be frustrating.

Surely that must be a total torture yoking yourself to plebs of small brain, I commiserate.  Surely the fault is entirely theirs.  

Good point except I can't choose who replies, when I am attempting to talk seriously with the technologically astute.

But 3 serious comments:

1. Recommend you don't blame an elite conspiracy for that which can be explained by simple social/organization stupidity.

9/11 could not have been unorganized, nor performed by a few guys on camels as presented. And anyone who has studied deeply and objectively as those 1000s of architects and engineers did understands it is not what it was presented to be.

Who can deny a master plan to enact the Patriot Act and down the AML, KYC hole we are in now.

2. Learn to see yourself as others do.

I am not a socialist, so I will not bend the important work to be fair to the unimportant nonsense. I know their opinion of me (and it is not all the same).

3. Don't hijack Risto's public diary -- make your own (you have some interesting things to say).

I was responding with a personal story to a discussion that Risto et al started about the mode of control starting with primary education.

What you are really saying is that you want social control/conformance. Typical socialist you are. You are under their mode of control. You are even parroting it.

[rpietila]

No, he said that we would have definitely seen $300k per BTC by this year (2013), and that denying this was just a "denial of the facts". And he proved it by the kind of maths that show you that the Bitcoin singularity is coming super short term.

My opinion about that was that it ($300k per USD this year) would have NEVER happened firstly and foremost just because the Bitcoin infrastructure (the exchanges, the blockchain itself) is not ready to support that kind of flash-growth (this seems painfully obvious to me), secondly because other circumstances (among which human psychology) make that kind of parabolic growth unsustainable. IMO what we are seeing is almost the optimum "cruise speed" we can reach.

That said, I have to say that I'm enjoying a lot his latest posts and he looks to me much more reasonable

Rampion was correct that $300k did not happen this year. The psychological mechanisms that I outlined are however still there, it just did not trigger yet. I currently consider that 2015-2016 is the time when we cross $300k on our way up. Of course parabolic growth is unsustainable I never said that it would be a smooth ride or that it would not end in a spectacular bubble before finding the stable valuation which takes years.

Maybe my greatest contribution was to actually make the $300k figure mainstream. I remember it was met with suspicion and ridicule back in late April, when I introduced it. Now it seems that everybody is content with the idea.

I disagree on the technology side. It would help tremendously to have Bitcoin ATM's in every corner, and a way for the early adopters to repatriate their gains effortlessly. But the price rise can happen regardless of that, and the ill-functioning infra just steepens the rise, because by restricting the fiat flows it squeezes the exchange rate up quicker than what would happen in perfect market circumstances.

[Zangelbert Bingledack]

Right now Bitcoin acts as a store of value more than a medium of exchange and it's not necessary for Bitcoin to ever be a medium of exchange to reach much higher valuations. Gold is a good example which has a very high valuation despite not being used a medium exchange since the gold standard.

Not so sure about that. Store of value is based on trust and "intrinsic" value . Gold is used as store of value but also in industry + it has historical "trust".  Bitcoin as a store of value only doesn't seem possible in the long term.

Follow this logic a ways: The intrinsic* value is based - at the very bottom - on the nascent present uses as a currency and remittance system, and more so on its future uses in such capacities. That value, largely based on future promise though it may be, provided the initial bedrock for the store-of-value functionality. And since Bitcoin has absolutely revolutionary features when used as a store of value, even a little adoption of Bitcoin as a store of value is a virtuous cycle. People believe in its future for various uses, including store of value but a whole lot more, and so they don't sell much. It becomes more and more an excellent store of value, now outlandishly excellent, preposterously amazing, utterly world-beating in this regard going up 10 million percent in four years. Teleportable, deniable, non-confiscatable if done right, and 10M% gain in four years. It's impossible not to call this the greatest intergalactic homerun of all time in the store-of-value department, so far at least.

http://www.reddit.com/r/Bitcoin/comments/1mb27q/bitcoins_vast_overvaluation_appears_caused_by/cc7i6y8

Bitcoin is simply a universal ledger. You want to secure your place on that universal ledger, because the planet is moving toward adopting this universal ledger idea, as it is vastly superior to any alternative. The only thing that was needed was the initial motivation to use this ledger. Once some people use it, they create the incentive for more to want to use it, and so on. There's no limit until it takes over the earth or gets replaced by something else.

People will back at how we used to trade industrial and decorative metals around to communicate value and laugh at how primitive it was.

"How would you get those metals to your friend on the other side of the world?"

"Well you could fly them there, but that was really hard, or you could trust a chain of companies in different jurisdictions to take your metals and make sure someone over there gave the same amount to your friend, all the intermediaries taking a cut of course. Alternatively, you could use paper certificates printed by governments that promised they wouldn't print too many, but always broke those promises eventually."

"What the heck?! You had the Internet. Why didn't you just have a universal ledger?"

*improper term: use "non-monetary value" or "non-exchange value," because nothing has intrinsic value, technically (valuation is always a subjective judgment)

[rpietila]

3. Don't hijack Risto's public diary -- make your own (you have some interesting things to say).

I was responding with a personal story to a discussion that Risto et al started about the mode of control starting with primary education.

What you are really saying is that you want social control/conformance. Typical socialist you are. You are under their mode of control. You are even parroting it.

You've lost your individuality and your manhood.

2. The composite of qualities, such as courage, determination, and vigor, often thought to be appropriate to a man.

I fully support the idea of AnonyMint having threads of his own, but it seems to suit him better to dwell in frameworks created by others. I would never have bought Jason's monthly report if there was no forum, and the forum was not dominated by Jason but by AnonyMint. His way of writing is very provocative and would probably not attract enough target audience without this hijacking trait. I can and will make new threads when the old ones get too infested with extreme personalities

EDIT: Personal attacks should be kept at the minimum necessary, OK?

[bitrider]

Bitcoin is simply a universal ledger. You want to secure your place on that universal ledger, because the planet is moving toward adopting this universal ledger idea, as it is vastly superior to any alternative. The only thing that was needed was the initial motivation to use this ledger. Once some people use it, they create the incentive for more to want to use it, and so on. There's no limit until it takes over the earth or gets replaced by something else.

People will back at how we used to trade industrial and decorative metals around to communicate value and laugh at how primitive it was.

"How would you get those metals to your friend on the other side of the world?"

"Well you could fly them there, but that was really hard, or you could trust a chain of companies in different jurisdictions to take your metals and make sure someone over there gave the same amount to your friend, all the intermediaries taking a cut of course. Alternatively, you could use paper certificates printed by governments that promised they wouldn't print too many, but always broke those promises eventually."

"What the heck?! You had the Internet. Why didn't you just have a universal ledger?"

Great post overall. An excellent, concise and flamboyant summary.

[AnonyMint]

Right now Bitcoin acts as a store of value more than a medium of exchange and it's not necessary for Bitcoin to ever be a medium of exchange to reach much higher valuations. Gold is a good example which has a very high valuation despite not being used a medium exchange since the gold standard.

Not so sure about that. Store of value is based on trust and "intrinsic" value . Gold is used as store of value but also in industry + it has historical "trust".  Bitcoin as a store of value only doesn't seem possible in the long term.

Follow this logic a ways: The intrinsic* value is based - at the very bottom - on the nascent present uses as a currency and remittance system, and more so on its future uses in such capacities. That value, largely based on future promise though it may be, provided the initial bedrock for the store-of-value functionality. And since Bitcoin has absolutely revolutionary features when used as a store of value, even a little adoption of Bitcoin as a store of value is a virtuous cycle. People believe in its future for various uses, including store of value but a whole lot more, and so they don't sell much. It becomes more and more an excellent store of value, now outlandishly excellent, preposterously amazing, utterly world-beating in this regard going up 10 million percent in four years. Teleportable, deniable, non-confiscatable if done right, and 10M% gain in four years. It's impossible not to call this the greatest intergalactic homerun of all time in the store-of-value department, so far at least.

http://www.reddit.com/r/Bitcoin/comments/1mb27q/bitcoins_vast_overvaluation_appears_caused_by/cc7i6y8

Bitcoin is simply a universal ledger. You want to secure your place on that universal ledger, because the planet is moving toward adopting this universal ledger idea, as it is vastly superior to any alternative. The only thing that was needed was the initial motivation to use this ledger. Once some people use it, they create the incentive for more to want to use it, and so on. There's no limit until it takes over the earth or gets replaced by something else.

People will back at how we used to trade industrial and decorative metals around to communicate value and laugh at how primitive it was.

"How would you get those metals to your friend on the other side of the world?"

"Well you could fly them there, but that was really hard, or you could trust a chain of companies in different jurisdictions to take your metals and make sure someone over there gave the same amount to your friend, all the intermediaries taking a cut of course. Alternatively, you could use paper certificates printed by governments that promised they wouldn't print too many, but always broke those promises eventually."

"What the heck?! You had the Internet. Why didn't you just have a universal ledger?"

*improper term: use "non-monetary value" or "non-exchange value," because nothing has intrinsic value, technically (valuation is always a subjective judgment)

I am sorry but as eloquently written as that is, I think it is mostly wrong on the facts.

The single most important use of Bitcoin right now is as a ponzi scheme. You can not deny that the vast majority of people holding Bitcoin are doing so because they expect the exponential appreciation in price. And you can not argue that the appreciation is caused by other people buying later who have the same expectation. And the fact that most hold, thus the float is tiny. I read there were only 5,400 bitcoins standing in the way of $500 when we were at $450. That tiny float is critical. If ever the psychology adjusts where a smaller percentage don't want to hold on tight like a miser counting his future greed, then Bitcoin is toast. A ponzi scheme is precisely where the valuation is based on nothing but the ability of the later investors to support the gains of the prior ones. It differs from an investment that has revenue or otherwise can support the payout of the early investors without depending on an expansion of later investors. Bitcoin absolutely can not do that. It is absolutely dependent on the tiny float and the later investors continuing to pour in.

So to contrast this with the exponential runup in price of say Cisco or Microsoft stock into the dot.com bubble, and then collapse to a stable price level hence, what is remaining in Bitcoin after the speculative bubble pops?

So let's review the facts of the other points of your comment in that regard.

1. We can transfer small or large value decentralized. However, we can do nothing with that transfer until we cash out in fiat, because Bitcoin itself is not a currency. Thus this claimed feature advantage really doesn't exist. Maybe for the moment, we can sidestep AML and KYC laws in some jurisdictions with Bitcoin, but FATCA is coming and all banks in the world are subservient to their masters in the USA. This is because the dollar is the reserve currency and thus every other currency and fiat financial system in the world is more influenced by ingress and egress of dollars than any other factor. The US Congressional inquiry starts this Nov. 18. Compliance for Bitcoin will increase, not decrease.

2. We have a universal ledger which destroys our privacy and gives the NSA and other rogue government functionaries the ability to track everything we do everywhere, unlike with fiat cash and bank accounts in foreign jurisdictions we used to have some privacy.

Did I miss anything? The nascent uses of Bitcoin as a currency are occasionally useful, but irrelevant because I can't use them to do anything with large size of store-of-value. And large size of store-of-value is the predominant use of Bitcoin.

It can't change. It is not like all of sudden those who are expecting exponential gains will decide they want to use Bitcoin as a steady savings account. If Bitcoin stops appreciating, then they won't be asking for merchants to add Bitcoin so they can slowly spend their Bitcoins. They will exit and try to find a new investment. And one day we will hear this giant sucking sound and this 21st century tulip mania will be completed.

Obviously the ideas in Bitcoin are revolutionary. But the execution is horrible. That is why I am thinking Satoshi put a good Trojan inside of an evil one. And I am trying to prove it in reality (very soon).

Clear thinking is very important to success. I intend to make it my hallmark.

[AnonyMint]

Let me assume the Bitcoin singularity is some concept that assumes some critical mass will be reached where the remaining portion of the population must rush to obtain Bitcoin.

This can't happen because Bitcoin is not a widespread currency, thus the only significant utility of Bitcoin is a ponzi bubble.

Rather what will happen is that Bitcoin will reach market saturation and the exponential growth will be lost. Then it will collapse to near 0 in an accelerating stampede exodus. I don't think this can happen for a year or more yet. We could see another significant correction and then another runup before seeing the final end. Bitcoin is probably far from market saturation, and it also depends on competition if any because mass-mania psychology (driving the tiny float) is the main factor of Bitcoin's valuation.

Bitcoin is the typical greed emotion overtaking logic phenomenon. If you fall too deep into this Risto, you will end up similar to what happend to Jason Hommel and his fall from $15 million valuation in speculative bubble stocks with tiny floats. I will send you a PM on this. You SHOULD read it.

[cAPSLOCK]

This can't happen because Bitcoin is not a widespread currency, thus the only significant utility of Bitcoin is a ponzi bubble.

Your line of reasoning is only really compelling when you ignore what is happening in china.