How is the current market state NOT a bubble?

[zby]

People are speculating about the future value of Bitcoin - this does not mean we are in a bubble.  If the future non-bubbled value of Bitcoin is bigger then what it is sold for today - then there will be no rapid fall down of the price - there will be no bubble burst.   Of course we cannot tell what will be this non-bubble value of Bitcoin and also if we are not yet in a bubble we will be eventually, because this is how crowd psychology works.  It happened with all new useful technology and even Gutenberg overinvested in his printing business.  But it's really impossible to tell if we are already there.  For example PayPal was valued to $1.5 billion - and Bitcoin can probably be an even better money transfer system, if we divide that by the near-future number of bitcoins - this would mean more then $100 per bitcoin.  But this is only for the money-transfer part of the system, what with the 'value store' part?

[1713862252]

1713862252

[1713862252]

1713862252

[1713862252]

1713862252

[altoid]

if we all agreed "it's a bubble," still no one would know what that means because we haven't defined a speculative bubble.  All of the definitions I looked up referred to markets trading above "intrinsic value," but there is no such thing.  Exchange rates in speculative markets (like bitcoin) are determined by what market participants are willing to buy and sell at, which is determined by our feelings of optimism or pessimism.  Everyone thinking bitcoins will appreciate leads them to buy, which pushes up the price, which leads more people to agree, and so on until everyone is in a state of optimistic euphoria about the market, but by that time, everyone who will buy already has and the price has no where to go but down and the whole process starts over but in the opposite direction until everyone is pessimistic about bitcoins.  That's when you buy

[dafishman]

I believe that the current rise in price is extremely bad for bitcoin as a whole. I don't view it as a bubble at all. I see it as a wall.

The problem is that almost the entire BTC economy is based on BTC vs. USD (or other current currency).

Who cares how much a bitcoin is worth if sites are simply adjusting the price of their goods for sale in BTC to the current value of the dollar.  It doesn't ever have to stop going up. It simply means that today a gallon of milk is .5BTC and tomorrow it could be .25. so if you go to buy .5BTC today it is 4USD if you go buy the BTC tomorrow it could be 8USD but the value of the milk hasn't changed. (Admittedly, I am not the best at putting my thoughts into sentences.)

The reason it is bad is that the seller of actual products, the ones who will help balance this whole thing out, that take the biggest risk right now because they have to pay for their product in USD... As the value of BTC increases, so does their risk in accepting it. For example, Biddingpond.com, how do I set a reserve price in BTC today for a product I want to sell. Today it may be fair. Tomorrow it could look ludicrous. Even worse, how do I bid on anything until the last minute? I know people snipe auctions anyway, but why list something for a week then. It would be crazy to bid until the last minute.

I am no economics guru. Just posted this to see if I am missing something here or if my thinking is correct. Please educate me if I am wrong.

Dafishman

[dacoinminster]

I believe that the current rise in price is extremely bad for bitcoin as a whole. I don't view it as a bubble at all. I see it as a wall.

The problem is that almost the entire BTC economy is based on BTC vs. USD (or other current currency).

Who cares how much a bitcoin is worth if sites are simply adjusting the price of their goods for sale in BTC to the current value of the dollar.  It doesn't ever have to stop going up. It simply means that today a gallon of milk is .5BTC and tomorrow it could be .25. so if you go to buy .5BTC today it is 4USD if you go buy the BTC tomorrow it could be 8USD but the value of the milk hasn't changed. (Admittedly, I am not the best at putting my thoughts into sentences.)

The reason it is bad is that the seller of actual products, the ones who will help balance this whole thing out, that take the biggest risk right now because they have to pay for their product in USD... As the value of BTC increases, so does their risk in accepting it. For example, Biddingpond.com, how do I set a reserve price in BTC today for a product I want to sell. Today it may be fair. Tomorrow it could look ludicrous. Even worse, how do I bid on anything until the last minute? I know people snipe auctions anyway, but why list something for a week then. It would be crazy to bid until the last minute.

I am no economics guru. Just posted this to see if I am missing something here or if my thinking is correct. Please educate me if I am wrong.

Dafishman

You are quite right. All transactions should be denominated in USD, and the proper number of BTC should be sent when it is time to pay.

Bitcoin price fluctuations are NOT ideal for everyday transactions. That's why I suggested we need to create contracts that allow for the "StableCoin" via bitcoin derivative contracts. Read about it here.

[dissipate]

I believe that the current rise in price is extremely bad for bitcoin as a whole. I don't view it as a bubble at all. I see it as a wall.

The problem is that almost the entire BTC economy is based on BTC vs. USD (or other current currency).

Who cares how much a bitcoin is worth if sites are simply adjusting the price of their goods for sale in BTC to the current value of the dollar.  It doesn't ever have to stop going up. It simply means that today a gallon of milk is .5BTC and tomorrow it could be .25. so if you go to buy .5BTC today it is 4USD if you go buy the BTC tomorrow it could be 8USD but the value of the milk hasn't changed. (Admittedly, I am not the best at putting my thoughts into sentences.)

The reason it is bad is that the seller of actual products, the ones who will help balance this whole thing out, that take the biggest risk right now because they have to pay for their product in USD... As the value of BTC increases, so does their risk in accepting it. For example, Biddingpond.com, how do I set a reserve price in BTC today for a product I want to sell. Today it may be fair. Tomorrow it could look ludicrous. Even worse, how do I bid on anything until the last minute? I know people snipe auctions anyway, but why list something for a week then. It would be crazy to bid until the last minute.

I am no economics guru. Just posted this to see if I am missing something here or if my thinking is correct. Please educate me if I am wrong.

Dafishman

Your critique would apply to any free floating virtual currency and does not apply to only Bitcoin. You want Bitcoin to be 'stable' in price before it has caught on to the extent to make that happen, but Bitcoin cannot be stable in price leading up to the point when it will be stable in price. At a minimum it would have to gain in price tremendously to become stable. Chicken and egg problem.

[dafishman]

Really wasn't meant as a critique. Just posing a scenario I had playing out in my mind. I am trying to come to grips with the recent price spike.

I don't understand economics all that well and find it very interesting to discuss. Just trying to learn something.

[marcus_of_augustus]

Bitcoin is behaving not like a stock, but somewhat more like a bond. In fact, it is behaving exactly like a newly introduced form of cash (which it supposedly can be used as).

In a word, it is monetising.

This means that the premium the market is placing upon its value, above its production costs (mining costs), has become a function of how the market can use that commodity (bitcoin) to perform the usual functions of money. Medium of exchange, store of value, etc.

It cannot be a bubble until it pops. If bitcoin remains good as money after the initial monetisation phase there is no reason to suppose that it will no longer perform the functions of money and lose that premium that is giving its seemingly unbelievable gains in value.

You need to understand the dynamics of monetisation before you understand the dynamics of the market for bitcoin.

There are very few case studies for this occurrence in the monetary history. It is an entirely new form of free-market private (i.e. non government) money being introduced through an ingenius invention. We are in uncharted territory.

Monetisation.

[bitcool]

Good money tends to be hoarded, not spent. This will be a good test of Gresham's law. http://bitcointalk.org/index.php?topic=3450.0

Periodically, usually after bouts of hyperinflation, people are kicked, dragged and forced to use good money, before they are seduced by easy money one more time.

[Tanu10]

what metrics one would use to detect a bitcoin dubbls,  I have no idea. And the final stabilized price is anybody ,guess.

[djpitagora]

what metrics one would use to detect a bitcoin dubbls,  I have no idea. And the final stabilized price is anybody ,guess.

holly mother of necros! The topic is from 2011.

Point take though...people have been calling bitcoin a bubble for 7 years

[kingdom2710]

Actually the current market is buble because the increase, decrease not according to the rules and is difficult to guess

[Shimmiry]

For two weeks and no major reasons other than speculation, the price has gone from 2$/BTC to over 8$/BTC ....I've been on the forums for a long enough time to say that people talk more about getting rigs for mining, selling the currency for USD (equivalent), on pure speculation of the price. The actual commerce behind it isn't backing the price. I don't want Bitcoin to fail (I don't think it will in the long run) but bubbles hurt when they pop & market crashes are bad.

I don't believe 2$ to 8$ within two weeks is a healthy jump with so little to back it up. People are making such a killing in exchange rates at that point, the Bitcoin becomes the commodity itself to sell for an insane exchange rate.

As per the definition of bubbles if it is hurt or someone or something touch it or just some sort of period of time, it will burst. But as we all know, as we enumerated what bitcoin have succeeded as this very moment, it is not probably a bubble. If it is just a bubble it iwas burst long time ago therefore bitcoin is not a bubble.

[TimesVeronica]

This is my personal opinion that bubbles are just beginning. The last stable price is predicted by anyone. News sites are starting to talk about it and that just makes demand rise. I'm eagerly watching to see how many people start participating in the BTC as a means of payment.

[stayeduptolate]

For two weeks and no major reasons other than speculation, the price has gone from 2$/BTC to over 8$/BTC ....I've been on the forums for a long enough time to say that people talk more about getting rigs for mining, selling the currency for USD (equivalent), on pure speculation of the price. The actual commerce behind it isn't backing the price. I don't want Bitcoin to fail (I don't think it will in the long run) but bubbles hurt when they pop & market crashes are bad.

I don't believe 2$ to 8$ within two weeks is a healthy jump with so little to back it up. People are making such a killing in exchange rates at that point, the Bitcoin becomes the commodity itself to sell for an insane exchange rate.

As we all know that bitcoin is a volatile crypto currency and apart from its volatile nature, foremost, it is an kind of investment and this is very common in every kind of investment that its valuation goes ups and downs and that is why people always says that all the investment are subject to market risk and the same is applicable for bitcoin also that its valuation flactuates and on that basis if you are calling bitcoin a bubble them obviously this will not be justified ever.

[Winifredinme825]

I find it pretty crazy how fast it is growing! I will not complain though, even if my lottery players are less, the prize continues to increase. That's what it needs IMHO the most.

[thangthoa]

bitcoin too much volatility. Maybe someday it will collapse that we can not even imagine it.

[James Fleming]

 I will not argue if there is in fact a bubble or not, as it is demonstrated that predicting the value of cryptocurrencies is extremely difficult and subjective. However when I think about a bubble in a given market, my perception is…
 Everyone knows this market and how good it is!
I have 4 or 5 friend that got rich by it, I must invest at all cost having no idea what investing is
We are all going to be rich by next year
I see some of these already happening, but not on a massive scale! At least for now…
 Take into account that people are investing although every financial “expert” is calling it a bubble. This means that the market is not oblivious to this possibility, it just strongly disagrees that the road is coming to an end.
So, in my opinion there is still a pleasant journey ahead for us to explore! Just imagine if ETF’s (everyone is burying their money in these) start trading crypto, it will be a wild ride!

[Cody Blare]

1.Taking a short position is the way to benefit from a bubble, BUT:
2.Markets can stay stupid way longer than you can remain liquid.
In other words: you can make money out of this if (a) you approximately know when this bubble will burst, or (b) you got very, very deep pockets.

Good luck

[Margaretlove]

The value of a bitcoin is determined by the confidence that people have in the currency, so the only way for the value to collapse is a sudden loss of confidence. People are speculating about the future value of Bitcoin - this does not mean we are in a bubble. Of course we can not know what the value is not Bitcoin's bubble and also if we are not in the bubble, in the end, because this is how the crowd mentality works. But it really can not say if we have. But this is only for the money transfer part of the system, what with the 'storage value' section?

[jannatakter]

Actually the current market is buble because the increase not to the rules and is difficult to guess.bitcoin too much volatility.