This rally is a pirate bubble

[dust]

The increase in price is not due to an increase in the exchange of goods and services for bitcoins or favorable news, the two traditional causes for rallies.

Everyone is buying BTC to get in on pirate's scheme, pirate passthroughs, and other pirate like "lending" schemes.

Obviously earning 3300% a year on BTC is more attractive than 0-10%/year with USD.

The entire bitcoin economy is shifting towards lending and various financial instruments.

If pirate were to default, would the price crash?  There would certainly be less incentive to buy BTC.  Of course, pirate might have all of the coins by then... so there might not be many sellers.

[goxed]

Oh so you mean, it's an end to itself. This could get dirty when the bitcoin generation rate halves.

[notme]

If you're right, his interest rates will fall until he only has as much BTC as he needs.  If he's generous (and selective), he may just limit deposits and new accounts.

[paulie_w]

this rally is not a pirate bubble
this rally is a pirate bubble
this rally is maybe a pirate bubble

[BrightAnarchist]

The entire bitcoin economy is shifting towards lending and various financial instruments.

True, but isn't this a healthy sign? I mean, even in the gold-backed-money days, didn't most people keep their money in a bank which lent it out to earn interest?

The great thing about bitcoin, though, is that unlike fiat money, you're aren't forced to lend it or suffer loss of purchasing power. Due to its deflationary nature, with BTC you can take the risk of lending, or you can just hold it directly with essentially zero risk. Everybody wins

[anu]

Everyone is buying BTC to get in on pirate's scheme, pirate passthroughs, and other pirate like "lending" schemes.

If pirate is selling them again, as many assume, those bitcoins are already back in the market.

[Rockefoten]

That may well be, but anyway, this rally doesn't sees to have hit the PPTs on the exchange. Prices there don't look especially high at the moment.
But if you're right, could be people are looking to deposit directly instead of through the pass-throughs of course.

[jothan]

this rally is not a pirate bubble
this rally is a pirate bubble
this rally is maybe a pirate bubble

Schrödinger's bubble ?

[paulie_w]

impressive :-)

[dopamine]

nahhh just a over due correction, How many bought again higher than 10 when you sold below 9.50, supply and demand, we are in a bull market, wish I can enjoy this run but most of my bitcoins is trapped with bitcoinica

[thebaron]

I wonder if pirate is the US government trying to buy up as many BTC as possible. They can afford to pay out 7% with their fiat.

[herzmeister]

there are still new people "investing" in pirate? i had the impression that the "market" is already saturated, and some believe that his "default" is imminent.

[dopamine]

I wonder if pirate is the US government trying to buy up as many BTC as possible. They can afford to pay out 7% with their fiat.

+1

there are some strong hands holding onto BTC and the reward for mining has not even cut in half

[Spekulatius]

I wonder if pirate is the US government trying to buy up as many BTC as possible. They can afford to pay out 7% with their fiat.

Let me be the first to have the honor to welcome you to the halls of this forum, kind Sir!

[ElectricMucus]

I wonder if pirate is the US government trying to buy up as many BTC as possible. They can afford to pay out 7% with their fiat.

+1

there are some strong hands holding onto BTC and the reward for mining has not even cut in half

hahahaohwow.jpg

[bitcoinBull]

there are still new people "investing" in pirate? i had the impression that the "market" is already saturated, and some believe that his "default" is imminent.

Well, some people were withdrawing (eg MageD) and everybody was nervous about his vegas meet-up. Since it seems to have taken place, its likely there will be a wave of new investors. But that doesn't mean default is no longer imminent, indeed it could very well be. It just depends on the market (both the PPT market and the bitcoin market) and pirate's exit strategy.

The increase in price is not due to an increase in the exchange of goods and services for bitcoins or favorable news, the two traditional causes for rallies.

Everyone is buying BTC to get in on pirate's scheme, pirate passthroughs, and other pirate like "lending" schemes.

Obviously earning 3300% a year on BTC is more attractive than 0-10%/year with USD.

The entire bitcoin economy is shifting towards lending and various financial instruments.

If pirate were to default, would the price crash?  There would certainly be less incentive to buy BTC.  Of course, pirate might have all of the coins by then... so there might not be many sellers.

There is an unhealthy amount of lending schemes going on right now, but I think you might be overestimating the proportion of new buyers they are attracting.

I see evidence for a variety of new investors: the reuters article mentioning the ip addresses of wall street firms visiting mtgox at the beginning of the year, silk road forum post count supposedly 50% of the bitcointalk post count, butterfly labs mining investments, coinLab investment by Ycombinator.

The fact that price has held up so well against the utter vaporization of bitcoinica shows that the bitcoin is market is more resilient and decentralized than I had anticipated (unfortunately for myself, 20% of my funds were in a long position on bitcoinica). So I don't think that a crash of pirate's scheme would affect the market. And actualy from that, one can infer the converse that the success of his scheme is not what's currently driving the price increase. I may be way underestimating the size of his scheme, but I think its fair to say that bitcoinica had a far greater market penetration than pirate does. Of course, MtGox remains the greatest centralized point of risk to the bitcoin price.

[bitcoinBull]

One more thing, my new best guess for when pirate defaults is when we see a correction in the bitcoin price. Not mini-corrections in the uptrend, but a deeper correction followed by a trend reversal. This would be analogous to all the Wall Street ponzis which collapsed in 2008 when the stock prices reverses. Fear gripped the market, depositors wanted to withdraw from funds, and those withdraws exposed the ponzis.

That would be the latest estimate for when he defaults (most certainly before oct 2013), but of course it could be any time.

[sunnankar]

there are some strong hands holding onto BTC and the reward for mining has not even cut in half

Wonder how many people read my 9 June 2012 post before all this got started.

[Raoul Duke]

there are some strong hands holding onto BTC and the reward for mining has not even cut in half

Wonder how many people read my 9 June 2012 post before all this got started.

Stop spamming your post everywhere.

[Vandroiy]

One more thing, my new best guess for when pirate defaults is when we see a correction in the bitcoin price. Not mini-corrections in the uptrend, but a deeper correction followed by a trend reversal. This would be analogous to all the Wall Street ponzis which collapsed in 2008 when the stock prices reverses. Fear gripped the market, depositors wanted to withdraw from funds, and those withdraws exposed the ponzis.

That would be the latest estimate for when he defaults (most certainly before oct 2013), but of course it could be any time.

This is a very interesting thought. I did not know of that 2008 chain reaction, but it makes sense! The type of herd behavior is the same, so the withdrawals might correlate very well with trend-following sales.

Thanks for sharing this.