Why I think bitcoins are a bad investmen at these high prices.

[Syke]

This means, the market cap for $20 dollar bitcoins to increase to $40 dollars would have a market cap increase of $243 million.

For bitcoins to increase from $1000 to $2000, you would have to increase market cap a whopping $12 billion dollars.
...
Please correct me if I am wrong here, or please let me know if I have a point here.

Stop thinking of "market cap" as the total number of bitcoins times the current price. Bitcoin isn't a stock. Take MtGox for instance. It would only take a purchase of about $20 million to take the price to $2000. That's a far smaller number than $12 billion!

[kkaspar]

I'll take individual responsibility over rules and regulation any day of the week.

You will fail if you try to build group cooperation on inner responsibility, that is based on subjective understandings of moral and ethics. People are different with different understandings of right and wrong. If different views aren't discussed and middle-ground isn't found on how to do things, so everyone are satisfied, then conflicts emerge that slow down progress. That is the meaning of rules - to establish what is best for the group in general and to guide people to follow this path. Breaking the rules mostly means consequences like banishing the rule breaker from the group. So, rules mostly give people a choice 1) If you want to be a part of an group, then you have to follow the rules that are for the good of the group 2) If you want to live by your own rules, then live by yourself without the support of the group.

Now to more practical maters..

If Bitcoin is to flourish in the future, I firmly believe the market will take care of these things.

Bitcoin is already flourishing. You can say that bitcoin is in a critical phase where it can shoot off to heights or fall down to rubble. There is no middle-ground on the current phase. There will be growing trust in this system or there will be none.. Trust is the only thing that gives value to bitcoin.
But, like I said, I can't see that anything is done to take care of the markets

Bitcoin will be traded regardless. There are no protections in this market, the sole responsibility lies with the individual .

Like I said, if bitcoin will continue this path, then it will shrink down to 0,1$ per coin with a small group of true believers. That is the future where no exchanges are needed and people can just trade bitcoins with each other.  
Big things can't be run on just faith that everything will somehow just be ok. Big things need attention and work because too much will be at stake. Without proper markets with rules and regulations, bitcoin will never be big, because it is lacking the main thing that the majority needs - security

I personally wanted for bitcoin to get big. I know that bitcoin can never be an everyday currency, because of it's simplistic macroeconomic properties. I was just hoping that bitcoin will survive long enough to give it's throne away to a better cryptocurrency with more complex properties that modern economics need. But now I see the downfall that unregulated markets cause and I can see that it will cause problems that will make the evolutionary step in finance much longer then it should have been.. and this is sad..

[Peter R]

I'll take individual responsibility over rules and regulation any day of the week.

You will fail if you try to build group cooperation on inner responsibility, that is based on subjective understandings of moral and ethics. People are different with different understandings of right and wrong. If different views aren't discussed and middle-ground isn't found on how to do things, so everyone are satisfied, then conflicts emerge that slow down progress. That is the meaning of rules - to establish what is best for the group in general and to guide people to follow this path. Breaking the rules mostly means consequences like banishing the rule breaker from the group. So, rules mostly give people a choice 1) If you want to be a part of an group, then you have to follow the rules that are for the good of the group 2) If you want to live by your own rules, then live by yourself without the support of the group.

Isn't this what we already have, kkaspar?  For example, YOU could choose to form a group (say a bitcoin exchange) and implement the rules and regulations that you see as important (perhaps independent audits).  Anyone that invests or trades with your group would have to follow your rules or you can kick them out.  If other individuals like what your group has done (e.g., the exchange audits) then they will want to work with your group and play by your rules.  If not, then, like you said, they can live by their own rules without the support of your group. 

So I don't understand what you are proposing.  You mentioned something in one of your posts about the core developers forcing the exchanges to behave a certain way, but I didn't understand what that would look like or how that could be accomplished. 

[nastybit]

Edward50, you say that $20 > $40 is a better investment than $1k > $2k only because we are well over $40, it's a psychological limit you have.

[...] You mentioned something in one of your posts about the core developers forcing the exchanges to behave a certain way, but I didn't understand what that would look like or how that could be accomplished. 

core developers can't force anybody to do anything really. Consensus drives Bitcoin

[Peter R]

Edward50, you say that $20 > $40 is a better investment than $1k > $2k only because we are well over $40, it's a psychological limit you have.

[...] You mentioned something in one of your posts about the core developers forcing the exchanges to behave a certain way, but I didn't understand what that would look like or how that could be accomplished. 

core developers can't force anybody to do anything really. Consensus drives Bitcoin

Yes, that's my understanding too, nastybit, and is why I said that "I didn't understand what that would look like or how that could be accomplished."   

But kkaspar feels we need more regulation at the exchanges and I think he had some idea on how that could be achieved.  I was hoping that he would address my last post, as I believe the voluntary free-market system we already have is perfectly sufficient. 

[BitchicksHusband]

Buy High, Sell Low, is what some people did.

Who bought coins at $1000+

LOL!

Lost about 1/2 its value.

Just wait for them to go back to $0.01 - $5.00 again.

Soon when all governments and banks disallow any exchange websites, and you can't get your paper money out of it, then value will be $0.00 and you lose 100% of your money.

You need to change your name to either:

UnHappyBitCoinUser

or

HappyBitCoinNonUser

[kkaspar]

Isn't this what we already have, kkaspar?  For example, YOU could choose to form a group (say a bitcoin exchange) and implement the rules and regulations that you see as important (perhaps independent audits).  Anyone that invests or trades with your group would have to follow your rules or you can kick them out.  If other individuals like what your group has done (e.g., the exchange audits) then they will want to work with your group and play by your rules.  If not, then, like you said, they can live by their own rules without the support of your group. 

So I don't understand what you are proposing.  You mentioned something in one of your posts about the core developers forcing the exchanges to behave a certain way, but I didn't understand what that would look like or how that could be accomplished. 

Peter R, I think that you have a very good idea, but sadly I see that I am a little too late for that. To take on an project like that, so that it would generally change the bitcoin exchange scene, would take time and effort that I can't afford. There is the time issue, where a new exchange not only has to be built, but needs a proper run in to gain the confidence of traders. When I see that bitcoin has probably 1 or 2 years to live, then that project would be on a very tight schedule. If you have about 2mil.$ to spare on a very risky venture, where there is a possibility of no return, then I'm in and we can start tomorrow.

First thing I would like from the core developers and the community leaders is that the subject should be talked about. People with expertise and experience should start thinking of different options how to improve the integrity of markets. The threat that unregulated markets present to the future of bitcoin is real, and it should be taken as real. Maybe bitcoin can be classified as an product or an brand, then there are always legal ways to set the terms of it's usage. Maybe a public rating system should be made to grade the exchanges in depth... these are just some ideas that popped into my mind. All I am asking is that people who are interested in the growth of bitcoin, would do the same and start throwing ideas around. The market integrity crises will be a big one, but all problems can be solved. The community should start early on thinking of an solution for this crises that will come sooner then most think. If all hell breaks lose, then there is no time to fix anything and confidence fades quickly. Bitcoin only needs a couple of weeks of waves of bitcoin exchange scandals, and the value will be back to single digits and it probably won't rise again.. And this will come in waves and with rapid speed. If one exchange is using dirty tricks in the market, then be sure that the others do the same. Only the level of dirtiness will varie. Soon greed will take hold and one exchange will leak the material that is needed to hurt the integrity of an competing exchange. This will be answered by a counter-attack that will leak shady doings and will probably spice them up a little with some made up stuff. When people are already unsure about bitcoin because of the previous scandal, then the next one will hit even harder. If the exchanges are corrupt, then greed will make them destroy themselves like this.

[fluidjax]

This means, the market cap for $20 dollar bitcoins to increase to $40 dollars would have a market cap increase of $243 million.

For bitcoins to increase from $1000 to $2000, you would have to increase market cap a whopping $12 billion dollars.
...
Please correct me if I am wrong here, or please let me know if I have a point here.

Stop thinking of "market cap" as the total number of bitcoins times the current price. Bitcoin isn't a stock. Take MtGox for instance. It would only take a purchase of about $20 million to take the price to $2000. That's a far smaller number than $12 billion!

Thats the same as a Stock, No market is ever deep enough to allow the liquidation of a stock to the value of the market cap.
Bitcoin is not a stock, but it has similarities in the way it behaves and the way it can be analysed.

[Syke]

No market is ever deep enough to allow the liquidation of a stock to the value of the market cap.

No, public companies are purchased all the time, typically for a price not much more than their market cap.

For example, Dell was public for 25 years, before it was bought out just a couple months ago. http://en.wikipedia.org/wiki/Dell#2013_buyout

Bitcoin cannot be liquidated by a leveraged buyout. Bitcoin is not a stock.

[fluidjax]

No market is ever deep enough to allow the liquidation of a stock to the value of the market cap.

No, public companies are purchased all the time, typically for a price not much more than their market cap.

For example, Dell was public for 25 years, before it was bought out just a couple months ago. http://en.wikipedia.org/wiki/Dell#2013_buyout

Bitcoin cannot be liquidated by a leveraged buyout. Bitcoin is not a stock.

What has that got to do with what I said. I'm talking about market depth. The size of all the bids in a market is not relevant when calculating the market cap, and the market cap of any stock can't be obtained by simply selling into the market...its never deep enough.  All the bids willl never add up to the market cap.
In any event a buy-out doesn't cost the market cap, it would only cost just over 50% at most.

[Romyen]

This claim that bitcoin is too expensive is based upon flawed logic. BTC is an arbitrary unit. If you think 1BTC is expensive then buy microBTC instead. They are a million times cheaper.


 

[Syke]

What has that got to do with what I said. I'm talking about market depth. The size of all the bids in a market is not relevant when calculating the market cap, and the market cap of any stock can't be obtained by simply selling into the market...its never deep enough.  All the bids willl never add up to the market cap.
In any event a buy-out doesn't cost the market cap, it would only cost just over 50% at most.

My point is stock companies can be bought. All shares may not be present on an exchange, but they are available for purchase. Therefore, calculating their market cap (# of shares * price) makes sense.

Calculating bitcoin's market cap as "# of shares * price" is inaccurate because it is literally impossible to buy all of bitcoin. So many of the mined bitcoins simply are not available for purchase, at any price. They may as well not exist. Don't use them to calculate a "market cap". All we can really work with is market depth. By looking at market depth, we can see that it would not take a very large investment to make bitcoin's price skyrocket to the moon.

[fluidjax]

What has that got to do with what I said. I'm talking about market depth. The size of all the bids in a market is not relevant when calculating the market cap, and the market cap of any stock can't be obtained by simply selling into the market...its never deep enough.  All the bids willl never add up to the market cap.
In any event a buy-out doesn't cost the market cap, it would only cost just over 50% at most.

My point is stock companies can be bought. All shares may not be present on an exchange, but they are available for purchase. Therefore, calculating their market cap (# of shares * price) makes sense.

Calculating bitcoin's market cap as "# of shares * price" is inaccurate because it is literally impossible to buy all of bitcoin. So many of the mined bitcoins simply are not available for purchase, at any price. They may as well not exist. Don't use them to calculate a "market cap". All we can really work with is market depth. By looking at market depth, we can see that it would not take a very large investment to make bitcoin's price skyrocket to the moon.

OK, I understand your point, and now agree, market cap is inaccurate.
Of course depth is even more useless, its easy manipulated and huge sells or buys will only result in massive oscilations around a new less extreme price.
There seems to be very few metrics we can apply to bitcoin that give meaningful information.
I guess market cap gives nice media headlines.

[Oldminer]

Maybe something is wrong with my logic, but to me buying bitcoins at $700 or $1000 is simply a very bad investment that I simply will not do. I just do not feel the returns are there for the risk you take of the price falling back down and also the risk of the market cap having to increase exponentially more!

Please correct me if I am wrong here, or please let me know if I have a point here.

To use your logic, I could just as easily say its easier making $20 profit by investing $1000 than it is by making $20 by investing $20 since my $20 needs to give me 100% return in profit while my $1000 only needs to increase in value by 5% (and this is regardless as to whether my $1000 buys me 1 or 1000 BTC). Sure I am risking more but the potential profit on my investment is 20 x higher.

[terman45x]

Now think about this. I doubt that there are that many new buyers in the bitcoin market than there were at the beginning of this year when bitcoins were $13 dollars. When bitcoins were $13 dollars a rise form $13 dollars to $23 dollars would have been huge! But in actuality a bitcoin price rise from $700 to $710 seems small now, but it takes the same market cap increase as it did in January. Yet you would think a $700 to $710 increase is nothing now.

Something just does not add up to me with how the prices are and how high they have grown over such a short period of time.

So you see the market cap doesnt make much sence for Bitcoin, yet you still use it to reason all your arguments

[Romyen]

What has that got to do with what I said. I'm talking about market depth. The size of all the bids in a market is not relevant when calculating the market cap, and the market cap of any stock can't be obtained by simply selling into the market...its never deep enough.  All the bids willl never add up to the market cap.
In any event a buy-out doesn't cost the market cap, it would only cost just over 50% at most.

My point is stock companies can be bought. All shares may not be present on an exchange, but they are available for purchase. Therefore, calculating their market cap (# of shares * price) makes sense.

Calculating bitcoin's market cap as "# of shares * price" is inaccurate because it is literally impossible to buy all of bitcoin. So many of the mined bitcoins simply are not available for purchase, at any price. They may as well not exist. Don't use them to calculate a "market cap". All we can really work with is market depth. By looking at market depth, we can see that it would not take a very large investment to make bitcoin's price skyrocket to the moon.

OK, I understand your point, and now agree, market cap is inaccurate.
Of course depth is even more useless, its easy manipulated and huge sells or buys will only result in massive oscilations around a new less extreme price.
There seems to be very few metrics we can apply to bitcoin that give meaningful information.
I guess market cap gives nice media headlines.

More meaningful metrics can be estimated very simply from the information provided on coinmarketcap.com. I think this information comes from Vircurex, and might not be very comprehensive, as it does not include all exchanges. If I'm wrong please correct me. I think actual sales are a more meaningful measure of market depth than are bids and asks. For example, at the time of this writing, 45,749,635 USD worth of bitcoins were sold in a 24 hour period. The bitcoin price at this instant is 727 USD. I'll use this instantaneous number as a price estimate estimate since I don't know the 24 hour price history. Dividing you get 62,929 XBT sold. Dividing by the total number of bitcoins minted you get 0.52% of bitcoins exchanging hands in a 24 hour period. Now compare that to ripple, ranked number 2 on coinmarketcap, you get 0.0051% of ripple exchanging hands in a 24 hour period. This is 100 times less, and shows how ripple, being premined, has a high market cap due to artificial scarcity. This confirms that market cap is a worthless metric.

More meaninful metrics can be derived by histogramming the age of coins and recording sale price over time. It's much harder for a developer of a scam coin to game those numbers. New metrics will eventually emerge for cryptocurrencies, which differ from those of fiat or physical commodities.

[Romyen]

To amend my post above, I think the total trade volume must come from reading the blockchain, since it appears to be too high for one exchange. If I'm wrong about that, please correct me. It's possible to game these numbers and make them appear high by transferring coins to a different wallet without changing ownership. The using the trade volume within the exchange itself, from which the price was derived, would be more meaningful.