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Author Topic: Why aren't I filthy rich yet? It's been like two months.  (Read 10859 times)
Piper67
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June 20, 2012, 12:13:39 PM
 #21

Heh, reading just the title, I was sure this was a humorous posting making fun of the speculation forum.

It seems op was serious Smiley

Ha, yeah I was serious (mostly). The problem is I go back and forth. Bitcoin really DOES seem like it has the potential to be revolutionary and MASSIVELY successful. And I sometimes think I'm a genius for understanding its implications earlier than most.  But then I remember that I'm not that smart. And I haven't exactly won over the friends and family I've tried to convert. ("Dude, you've got to drop the bitcoin sh*t. Seriously, I don't care.") And then I wonder if I'm not just a moron who spent several grand on "Mario money" (my wife's preferred term) that will soon be worthless.   I guess we'll find out.  Smiley

The problem is that Bitcoin, as a concept, requires a greater than average understanding of:

- Economics
- Networks
- Coding
- Cryptography
- Social science
- Market forces
- ... and I'm probably missing a few.

That is the reason most people don't get it. Most people have a somewhat basic understanding of one, two or maybe three of these, but not all.

Think about what needed to be understood for the concept of email to take hold. Not now, with the ability to open a gmail account and send an email within seconds, but back when NO ONE had a computer sitting on their desk. There was computing (how to get a computer to work, how to give it DOS commands, how to set up a modem through the phone line, how to get an email across those lines, etc)... people used to prefer to pick up the phone, or send a letter through the mail. And now they don't. It isn't that their understanding of these items has magically grown, it's just that those who did understand them well made them user friendly to the point that the average Joe doesn't need to figure it out, much like he doesn't need to understand electrons in order to throw a light switch.

That's happening with Bitcoin too. Take a look at Bitinstant, Bit-Pay and a host of others... it's coming, my friend. "Real's gonna change" :-)
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realnowhereman
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June 20, 2012, 01:00:14 PM
 #22

1) Why aren't I filthy rich yet?
Sadly, because the money lies in continually attempting to overestimate the stupidity of the general public, whereas Bitcoin underestimates it.

Profound.  Seriously.

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June 20, 2012, 01:10:25 PM
 #23

Ha, yeah I was serious (mostly). The problem is I go back and forth. Bitcoin really DOES seem like it has the potential to be revolutionary and MASSIVELY successful. And I sometimes think I'm a genius for understanding its implications earlier than most.  But then I remember that I'm not that smart. And I haven't exactly won over the friends and family I've tried to convert. ("Dude, you've got to drop the bitcoin sh*t. Seriously, I don't care.") And then I wonder if I'm not just a moron who spent several grand on "Mario money" (my wife's preferred term) that will soon be worthless.   I guess we'll find out.  Smiley

Well, me and a lot of people are betting some serious money that you are correct.

It takes a certain understanding of cryptography, computer science & economics to realize the full potential of Bitcoin ... most people are not there yet. In fact, most people will never be there, but enough "Powers That Be" and decision makers will be converted sooner or later. Give it some time.

I've been with Bitcoin for about 15 months now, and I haven't seen anything to change that initial "Wow, it's awesome" sensation I got when I first learned about it. It's just getting better and better.

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June 20, 2012, 01:10:46 PM
 #24

and after all the debate... we are still poor  Cry

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June 20, 2012, 01:13:22 PM
 #25

And yet, (using all of the previous assumptions) if bitcoins were valued ONLY 1/1000th as much as "monetary" gold, they'd be worth a total of $2 billion, i.e. roughly $95 / BTC. If they were valued AS MUCH as monetary gold, they'd be worth $95,000 a piece. Of course, since bitcoins are at least 10 times BETTER than gold, they should really be worth no less than $950,000 each. And yet, I can't help but notice that I still live with my parents and drive an '89 Geo Metro. That raises a few questions:

1) Why aren't I filthy rich yet?

Ask the average person on the street if they think gold is valuable (could be almost any country).  I bet you get a pretty much 100% strike rate.  Now ask them if bitcoins are also valuable?  If you get more than 1 in 100 people actually knowing what a bitcoin is and why someone should want one, I'll give you a cookie.

Just because something is rare and/or of limited quantity doesn't mean it should skyrocket in value.  But you already know that.

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June 20, 2012, 01:15:27 PM
 #26

and after all the debate... we are still poor  Cry

If you know what a bitcoin is, can generate one, and know what to do with it, you're by definition richer than 80, probably 90% of all humanity.

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Roger_Murdock
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June 20, 2012, 01:38:18 PM
 #27

Piper67: yeah, you're echoing a lot of the thoughts I've had. I'm a pretty educated guy (or so I thought), but I didn't REALLY understand money, or banking, or the Federal Reserve until Bitcoin piqued my interest enough to do some reading (not that I'm an expert now or anything).  But while I understand that I'm in a tiny minority of people who "get it," I'm not sure that fully explains the market's (in my view) extremely depressed valuation of bitcoin.  Because part of getting economics is getting market efficiency. It's like the old joke about the economist who won't pick a twenty-dollar bill off the sidewalk. ("If it were a real bill, someone else would have already picked it up.") Well, I feel like I'm staring at what could be a million-dollar bill. And it seems hard to believe that it hasn't already been picked up. Not EVERYONE needs to understand Bitcoin for its value to shoot up. It seems like even a handful of serious financial players could drive the price way up very quickly given how tiny the current market cap is. Take the $13,600 / BTC estimate that was previously offered. In some ways, it really was a conservative estimate of bitcoin's potential. Assume that it only had a 1 percent chance of happening in the near future (and a 99% chance of failing completely). That alone would get us a market price closer to $100.  So where are the big (or even medium) players? Is there some other factor that I'm missing that's keeping the "smart money" away? What is perceived as the biggest obstacle to radical success on the kind of scale I'm envisioning? That the technology won't scale? That a crippling security vulnerability will be discovered in the basic protocol that can't be fixed? A successful government crackdown? The emergence of a hugely- superior cryptocurrency alternative? Some other threat?
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June 20, 2012, 01:48:45 PM
 #28

Roger: +1 ... I posted your comment to a few social networks.

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June 20, 2012, 01:51:04 PM
 #29

story...

Like somebody already said:

"Bitcoin is now like the Internet before the web browser."

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June 20, 2012, 02:02:46 PM
 #30

Another "Super Bull" checking in... I believe those radical numbers. It's just a matter of time for information to propagate and infrastructure to develop.

Someone at HSBC says 2-3 years for virtual currency to be "mainstream". I'm betting on more like 5.

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Piper67
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June 20, 2012, 02:04:03 PM
 #31

One of the things keeping the smart money away is that most of the smart money isn't so much smart as cautious. And the smart money is owned by people, who do not at this point understand all the implications of Bitcoin. Give them time.

I like your 13,000/BTC calculation, though. Always said I would start spending bitcoin (as in spending them and not replacing them) when they reached around 8,000/BTC. But I think 13,000/BTC is more reasonable.
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June 20, 2012, 02:04:31 PM
 #32

Roger: Right now any significant amount of money invested would overwhelm the market and cause a boom-bust cycle. I think there are at least several wealthy individuals on the sidelines of the BTC market, buying a little bit now and then. Remember that when Buffett invested in IBM he did it without telling anyone and over the course of 6+ months. Because the real value of BTC is measured by the number of people willing to accept it, if you invest a lot too early you actually hamper your rate of return, because the higher you push the value the less likely you are to find buyers for that value. I'm guessing those adding money into the system are keenly aware of all of these factors and are trying to match their investment to the growth of the BTC market. Right now it's not even interesting to people with > $1 billion net worth, but I'd imagine several multi millionaires are watching, and that once it crosses something like 500 mil market cap and > 2 mil free float there will start to be some real money flowing in.

-bgc

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June 20, 2012, 02:31:21 PM
 #33

If you look at the Bitcoin charts from an Elliott Wave point of view for clues then we could see a fair bit of upside relatively soon.

If the initial spike up to the low $30 region was a Wave 1 impulse wave (which the pattern fits), with the classic 90%+ crash back down from a parabolic rise in a corrective form being Wave 2 then Wave 3 up should be next. Third waves are usually the strongest in the Wave 1 advance, Wave 2 correction, Wave 3 advance, Wave 4 correction, Wave 5 advance pattern.

IF this were to pan out, then you'd expect Wave 3 to be much larger than the $30 ground covered by Wave 1 so I'd be expecting Wave 3 to push up towards the $100 mark.

The next indication that this may be happening would be for a break above the previous all time high. Some way off, I know but if things start snowballing, who knows.

From what I've noticed so far, Bitcoin seems to map Elliott Wave patterns pretty well, as one would expect, as it's pretty clean in terms of being driven by human emotion as opposed to the very manipulated old world capital markets.
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June 20, 2012, 03:51:06 PM
 #34

My personal opinion is the destruction of other currencies (including the US Dollar) by short-sighted monetary policy will hasten the adoption of bitcoin, if only to move massive amounts in short periods of time. The later stages of using bitcoin will cause the true renaissance of this currency.

And like any other endeavor involving predicting the future, I can be utterly wrong - or more right than I know.

As a corollary, rising valuation by pricing bitcoins in dollars may only be evidence of the dollar's continued debasement via issuance of debt. However, I believe the 'intrinsic value' of bitcoin to be much higher than being priced with fiat.

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June 20, 2012, 04:01:44 PM
 #35

Roger: Right now any significant amount of money invested would overwhelm the market and cause a boom-bust cycle. I think there are at least several wealthy individuals on the sidelines of the BTC market, buying a little bit now and then. Remember that when Buffett invested in IBM he did it without telling anyone and over the course of 6+ months. Because the real value of BTC is measured by the number of people willing to accept it, if you invest a lot too early you actually hamper your rate of return, because the higher you push the value the less likely you are to find buyers for that value. I'm guessing those adding money into the system are keenly aware of all of these factors and are trying to match their investment to the growth of the BTC market. Right now it's not even interesting to people with > $1 billion net worth, but I'd imagine several multi millionaires are watching, and that once it crosses something like 500 mil market cap and > 2 mil free float there will start to be some real money flowing in.

-bgc

This. Good points.

I've had numerous opportunities to discuss Bitcoin with high net worth individuals, and the overwhelming majority are not even aware of its existence, let alone participating. Though they have universally seen the potential and hope the best for Bitcoin after it being explained, the main view is indeed that the system is too young and unstable to be upset with large capital flows.

A primary use for Bitcoin among the wealthy is not as a standalone form of currency, but as a means to safely transfer wealth without having to incur the risk of physically moving it. For instance: sell physical gold to buy bitcoins; relocate; sell bitcoins to re-buy physical gold. In most situations, this is far less expensive than physically transporting it, and it can be done in stages with a few million of EUR or USD at a time.

The one factor that will change this is awareness - spread the knowledge of Bitcoin.
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June 20, 2012, 04:04:38 PM
 #36

My lessons from year 2011:

1. Bitcoin will not lose all of its value unless the underlying network somehow fails.
2. Those who bought in / started mining during the single digits won't be filthy rich any soon.

I think, if the infrastructure doesn't fail, BTC is going to top $100 no matter what, but this may take several years. It just might top $10 000 but this won't happen until the infrastructure has really matured, and will definitely take more than ten years. The network is kinda struggling already.
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June 20, 2012, 04:24:05 PM
 #37

OP, if this post is good for nothing else, it did make me smile a smile of genuine happiness Smiley

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June 20, 2012, 04:37:00 PM
 #38

The recent stable price was actually a period of quite substantial growth.
Bitcoin is currently in a super inflation phase and the price kept up with this inflation. It's very clear to see this growth on a market capitalization chart.

http://blockchain.info/charts/market-cap?timespan=180days&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address=

The value overall of bitcoin increased substantially in the last 4 months - a $5 bitcoin 1 week ago is a healthier sign than a $5 bitcoin 3 months ago.
Bitcoin (the network) is worth more now than at the $7+ January high.

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June 20, 2012, 04:46:19 PM
 #39

I really want Bitcoin to succeed, but I'd say even 1% of the world is very optimistic.

What % of the world's transactions are Paypal or Western Union?  We need to get to those lower numbers first.

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June 20, 2012, 04:48:19 PM
 #40

The recent stable price was actually a period of quite substantial growth.
Bitcoin is currently in a super inflation phase and the price kept up with this inflation. It's very clear to see this growth on a market capitalization chart.

http://blockchain.info/charts/market-cap?timespan=180days&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address=

The value overall of bitcoin increased substantially in the last 4 months - a $5 bitcoin 1 week ago is a healthier sign than a $5 bitcoin 3 months ago.
Bitcoin (the network) is worth more now than at the $7+ January high.



Seems so simple, but I hadn't thought of looking at things from the perspective of market cap; and you're right, it is pretty remarkable.
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