bubble imminent

[genjix]

Yesterday night there was 1.1 BTC per $. This morning it was 0.9 BTC per $ briefly.

- Small core community.
- Not many services. People mainly using bitcoin as an investment vehicle.
- Sharp increases in value.
+ Linux users tend to be idealists and not invest in something because of money necessarily.
+ Lots of outside interest recently.

I conclude a large chance of a bubble soon happening.

[jimbobway]

I disagee.  Up, up, and away!

[S3052]

not sure if the arguments support the call for a bubble.

As with stocks, you can't buy anything with them and still people buy them when prices increase.

The technical picture is very bullish, supported by the underlying volume. Currently, the probability for further rising prices is in my opinion higher.

[Cryptoman]

A bubble is imminent or the bursting of the current bubble is imminent?  I think a lot of people have good faith in Bitcoin, and there are a lot of new users (buyers) pouring into the system.  I had some sell orders in around USD 1, but I withdrew them.  I don't even like the idea of holding dirty, government money any more. 

[bitdragon]

What is a bubble ? something that pops and dramatically loses value?
I'm not going to be selling my coins cheap(er) in the near future and wonder who will?
I prefer having bitcoins than my swiss francs (and bank) personally and way more than any stock, option, derivative. And even more vs Euro and Dollar.
Nobody knows in the end but I personally feel we are far from a bubble and there is more and more, some will say small and meaningless, but there is still more and more businesses accepting bitcoins. The changes in mkt value is positive as a sign more and more people are entering into bitcoins.
Plus it serves as an incentive as coins you accept now at market value can be worth more in a few months time vs less purchasing power when accepting fiat money.
A bubble in fiat money and their next quantitative easing operation is much more likely in my humble opinion.

[ptd]

There are fundamental supply and demand reasons to expect bitcoins to continue to deflate. We are, like any currency with no inherent value, vunerable to runs due to lack of confidence. The reasons that people believe that bitcoins will continue to deflate are not solely based on past deflatation, but on the inherent cryptographic and economic basis of bitcoin. This means that we won't pop like a bubble. A bubble is when many people believe that the asset is overvalued, but want to ride the wave until it falls. Those types of invester we flee at the first sign of trouble.

[ShadowOfHarbringer]

not sure if the arguments support the call for a bubble.

As with stocks, you can't buy anything with them and still people buy them when prices increase.

The technical picture is very bullish, supported by the underlying volume. Currently, the probability for further rising prices is in my opinion higher.

I agree.

As long there is no technical weakness of the protocol and there is no reason to lose confidence in the network from the technical side, Bitcoin is most likely to rise forever (of course with spikes and falls).

Only the speed of the deflation can vary, and there can be small or medium bubbles which would be caused by overspeculation, but in the long term Bitcoin should always rise - as the number of goods, services & currencies offered for it will rise.

The only thing that can really harm bitcoin is some heavy mathematics or a bug, which would break the cryptography used.

[ribuck]

The only thing that can really harm bitcoin is some heavy mathematics or a bug, which would break the cryptography used.

I think the sociological risks are dominant, and under-recognised.

Suppose there is a virus that deletes the wallets of 1% of the Bitcoin users. I think that would give Bitcoin a bad enough reputation that it would not be adopted by the general public, only by tech-savvy early adopters like us.

The "word of mouth" would be "Oh, I don't use Bitcoin. I've heard about how your wallet can just disappear."

[Stefan Thomas]

There are fundamental supply and demand reasons to expect bitcoins to continue to deflate. We are, like any currency with no inherent value, vunerable to runs due to lack of confidence. The reasons that people believe that bitcoins will continue to deflate are not solely based on past deflatation, but on the inherent cryptographic and economic basis of bitcoin. This means that we won't pop like a bubble. A bubble is when many people believe that the asset is overvalued, but want to ride the wave until it falls. Those types of invester we flee at the first sign of trouble.

Those remarks are eerily reminiscent of Alan Greenspan saying that the housing market is not a bubble, but may "experience a slow, gradual decline". If an asset price is largely speculative, there is no such thing as a slow decline. Once it loses 10-20% speculators freak out until the price reaches a more realistic price.

Bitcoin will either find widespread adoption, or it'll remain an obscure toy for contrarians. I own 5600 Bitcoins. In the former case I expect they will be worth more than USD 1 mio, simply because to accomodate such use, the Bitcoin economy would have to expand more than 200-fold. Conversely, they may not, in which the Bitcoins would be worth a few cents, certain below what they are trading for now. (Certainly everything in between is also possible. )

It's calculated risk. It's certainly possible that the price will drop sharply on some bad news, maybe from 1$ down to 0.1$, maybe from 10$ down to 1$. In any event, I'm holding them partly as a long-term investment and partly because for those things that you can buy with Bitcoins, they are actually really convenient.

[jav]

The only thing that can really harm bitcoin is some heavy mathematics or a bug, which would break the cryptography used.

Or maybe a superior successor to Bitcoin. The field of crypto-currencies is still young and little has been tried. If a new system would appear that combines all the advantages of Bitcoin while fixing some of it's disadvantages (doesn't scale to well, takes a long time to verify transactions) in some smart way, it might replace Bitcoin fairly quickly. Those who switch last to the new system will be left with Bitcoins that nobody wants anymore.

However: Maybe the creators of such a successor system might make it recognize current Bitcoin wealth. The genesis block of the new system could include a snapshot of the latest Bitcoin block. That might actually be a good way to jump-start such a system among current Bitcoin users.

[ShadowOfHarbringer]

The only thing that can really harm bitcoin is some heavy mathematics or a bug, which would break the cryptography used.

Or maybe a superior successor to Bitcoin. The field of crypto-currencies is still young and little has been tried. If a new system would appear that combines all the advantages of Bitcoin while fixing some of it's disadvantages (doesn't scale to well, takes a long time to verify transactions) in some smart way, it might replace Bitcoin fairly quickly. Those who switch last to the new system will be left with Bitcoins that nobody wants anymore.

However: Maybe the creators of such a successor system might make it recognize current Bitcoin wealth. The genesis block of the new system could include a snapshot of the latest Bitcoin block. That might actually be a good way to jump-start such a system among current Bitcoin users.

Good, idea. It's like buying out the resistance. Without such 'bribe' contender to the throne might simply not survive.

The new network would have to be totally technologically superior to the current one.

That could work, providing another Satoshi-like (japanese ?) genius happens to come along and make a new revolution on top of the current revolution.
Otherwise, IMHO unlikely.

[just a man]

not sure if the arguments support the call for a bubble.

As with stocks, you can't buy anything with them and still people buy them when prices increase.

The technical picture is very bullish, supported by the underlying volume. Currently, the probability for further rising prices is in my opinion higher.

I agree.

As long there is no technical weakness of the protocol and there is no reason to lose confidence in the network from the technical side, Bitcoin is most likely to rise forever (of course with spikes and falls).

Only the speed of the deflation can vary, and there can be small or medium bubbles which would be caused by overspeculation, but in the long term Bitcoin should always rise - as the number of goods, services & currencies offered for it will rise.

The only thing that can really harm bitcoin is some heavy mathematics or a bug, which would break the cryptography used.

Which is why I always wondered, Why? Why did they put all the eggs in one basket? Why sha256(sha256(data+nonce))? Why not sha256(GOST(Whirpool(WhateverElse(data+nonce))))?

Whoever, makes a fork using approach like sha256(GOST(Whirpool(WhateverElse(data+nonce)))) will likely get my support.

Excuse my ignorance, but could it be because of processing power or to avoid lagging the network? And is it not possible to add these additional hash functions?

[LZ]

I just think that we do not really need that functions.
And we do not need any fork. Why should we split?lol
Nothing will help if someone can easy break SHA-256.
It is senselessly to use a set of locks on an one door.

[ribuck]

I own 5600 Bitcoins. In the former case I expect they will be worth more than USD 1 mio, simply because to accomodate such use, the Bitcoin economy would have to expand more than 200-fold.

I don't think the purchasing power of Bitcoin will increase that much (although I'd love it if you turn out to be right).

As Bitcoin becomes popular, more and more people will use "convenience" accounts that are nominally tied to bitcoin but not fully backed.

A "coffee card" for Starbucks, for example, might be denominated in bitcoin, but Starbucks might not hold enough bitcoins to enable them to buy back all the cards (just as they don't hold enough coffee beans in stock at one time to fulfil all the coffee cards).

Many people will buy things with bitcoin-based credit cards. Again, the denomination will be bitcoin but there won't be 100% backing.

Even it bitcoin completely replaces dollars, I think it's erroneous to assume that 21 million coins must have a purchasing power equal to the value of the entire economy.

[ShadowOfHarbringer]

As Bitcoin becomes popular, more and more people will use "convenience" accounts that are nominally tied to bitcoin but not fully backed.

A "coffee card" for Starbucks, for example, might be denominated in bitcoin, but Starbucks might not hold enough bitcoins to enable them to buy back all the cards (just as they don't hold enough coffee beans in stock at one time to fulfil all the coffee cards).

And here we go again, seems that history will score a loop.
80 years ago we had similiar situation. First, everything was backed, and then value was robbed by government from american people (when they took the gold away after great depression).
Will the same happen with bitcoin after/if it replaces gold ? Will it be replaced by fiat currency, of which government says it's backed ?
I don't think so. Unless they shut down the internet completely to seize control.

Many people will buy things with bitcoin-based credit cards. Again, the denomination will be bitcoin but there won't be 100% backing.

Lucky us. Contrary to gold, using Bitcoin one can convert his home into digital Fort Knox and store as much value as he wants in it practically without the possibility of thievery ... So i don't see any need to store some bitcoin-based currency. I choose to store the real deal.
That would not have been possible before the internet era.

This is truly the century of wonders.

[ribuck]

I'm not saying it's good that there will be non-backed bitcoin-denominated transactions. I just think that it's inevitable.

I hope that "actual bitcoin" will always be perceived as superior to "denominated in bitcoin".

[genjix]

mtgox has low volume- everybody buying up

[marcus_of_augustus]

The quantity of bitcoins  put into circulation in the second year was the same as in the first year, this is relative money supply growth of 100%.
The third year it will 'only' be 50% 33% money supply growth. The fourth 33% 25%. Suffice to say, in the start-up years inflation will be necessarily rampant.

It is amazing they are increasing in value in the face of such an onslaught of increase in money supply, relatively speaking. That or they are just not circulating (hoarding).

edit: bad numbers.

[ShadowOfHarbringer]

The quantity of bitcoins  put into circulation in the second year was the same as in the first year, this is relative money supply growth of 100%.
The third year it will 'only' be 33% money supply growth. The fourth 25%. Suffice to say, in the start-up years inflation will be necessarily rampant.
It is amazing they are increasing in value in the face of such an onslaught of increase in money supply

If money supply grew 100%, and number of currencies/goods/services offered for it grew 500%, then increase in value is really nothing unexpected.

As there is no 100% reliable way to calculate how much stuff is offered for Bitcoin at any time, then the growth could have been 1000% or even 10000%.

[genjix]

I disagee.  Up, up, and away!

yeah, totally...