Do you think Bitcoin is a safe store of value?

[Valuebo]

Plummeting lately. Should have looked in that shorting, although it probably wouldn't be too late.

 

Btw, isn't one of the problems with bitcoin that it is deflationary by nature? Currency deflation lowers consumption with that currency as people start to simply hoard it instead of spending it. It thus defeats the very reason of it's existence, being a medium of exchange. Are other crypto currencies set up the same way with limited supply?

 

If you're serious: I have done paid consultancy on the Bitcoin forums explaining thing such as this and helping the client in creating a secure wallet-setup.

 

Thanks. Selling shovels I see :) Are you doing pretty well with this?

 

 

Not especially. I've done it once and the guy approached me (because I'm an long time member of the Bitcoin forums and 'seemed intelligent'). It kind of fun and easy to do as all I'm basically doing is explaining my own setup (which is secure), why it works and talking him through setting it up in the same way (he's also asking general Bitcoin questions to understand it better). The guy is very satisfied :)

 

I find it crazy that we are wasting useful GPU resources around the world to mine Bitcoins instead of applying to more useful purposes...but people go where there are some short term gains to be made, I understand that.

 

Absolutely agree. It's sort of sickening to be honest. The combined computing power of bitcoin is more than 256 times that of the largest 500 supercomputers combined.

 

It's things like this that remind me why we don't have flying cars. We'd rather foam at the mouth when an iPad is released with 128GB than actually make anything useful.

 

I'm going to be blunt, that's absolute bullshit. It's not wasteful it's for securing the network. What do you think the sum of financial institutions complete with ATMs cost? What do you think the computer networks of VISA and AMEX costs? What do you think the entire network of WU costs? Let me tell you Bitcoin's approach is not only cheaper it's also real security instead of the false security the other institutions offer (a bank can transfer funds from your account without your consent).

 

The computing power needs to go up a bit further to make it completely financially unviable to attack it even for superpowers (USA/China). Not tha i's possible to profitable attack it today, but at a huge loss it's still feasible.

 

The computer networks of AMEX, VISA, ATMs, ... protect a much bigger and economically far more important system than what bitcoin is offering and likely ever will. So I don't see how that comparison is reasonable?

[JBird]

http://www.theguardian.com/technology/2013/dec/18/bitcoin-plummets-china-payment-processors-digital-cryptocurrency

[DoddDisciple]

In regards to wachtwoord, maybe what I said is bullshit. I'm not an expert by any means in either bitcoin or payment processors. It just seems to me that much of the technological capacity is spent on the blockchain which is rapidly growing and to me, is redundant.

 

Why does someone need to have the entire history of bitcoin transactions in a file? I know they've talked about separating the blockchain and end users, but then we have a situation where there only a few large miners who can then be easily regulated and controlled. Additionally, the miners have to solve cryptographic puzzles, not just look at the pure data. How much of the technological resources are spent on the puzzle solving part and the actual data storage and processing?

 

I really don't understand the appeal at all of these cryptocurrencies. You have to have the fiat currency of where you live. I know I couldn't find a way to spend bitcoin in my local area for anything. If someone doesn't trust a particular country or currency, they can just convert to a basket of fiat currencies they store on their own if they are paranoid or they can go on Interactive Brokers and for $2-$3 a trade get into 18 different currencies. You have two stage authentication with the USB thumbstick and then, if the money's stolen, you can get it back. There won't be a case of throwing away a hard drive with $6M-$7M in bitcoins.

 

That being said, I'd be really interested in seeing where this bubble goes. I'd like to buy a basket of all crypto coins, but unlike going into IB and making a few clicks, the functionality isn't there to hold all this in a secure web wallet or to easily build this as an offline paper wallet.

[yadayada]

its not really wastefull. Bitcoin could potentially add value, ad its not that much energy. Think of all the people who leave their pc on at night! that must be just as much energy. Or all the people who leave their phone on when they could turn it off.

 

ALso computers make different kind of calculations. That require different kind of chipsets. those ASIC chips are many times better at making just this bitcoin network calculation, and arent necessairily better at other calculations.

 

And because of the network effect I wouldnt hold a basket of bitcoins. it needs a giant moat, and that is being known and having processing power to protect it. None of the other currencies have that. And if the concept of cryptocurrencies completly fails to the point where bitcoins become worthless, I doubt another one will have the potential to become big anytime soon. It would pretty much prove the concept isnt safe. And all those currencies dont really differ in quality anyway. they got it pretty much right at the first try.

 

That said I sold all of mine. The number of transactions per day stayed pretty much the same since the beginning of this year. People arent really using it to pay for stuff. I am no longer bullish on this whole thing, and it just doesnt make sense to me anymore. I also cant make sense of the valuation, and at close at 1k$ it seemed pretty damn overvalued.

[DoddDisciple]

I haven't read good things about the ASIC producers. Mainly they produce shoddy products prone to overheating. I've read that Butterfly Labs has management that engaged in prior financial misdeeds and uses the machines to mine first and only sell them after the difficulty has risen where that model isn't as viable.

 

The question is at what stage are we in on the bubble. Unlike say the dot com bubble, I don't see main street investing in this yet. I think having a little of every coin is the optimal way of doing it. Dogecoin came out of nowhere and is a joke product, yet it's in the top 20 by market cap. I don't know how accurate it was, but it was briefly $400 a coin on coinmarketcap. Maybe just a data error though.

[LC]

 

Btw, isn't one of the problems with bitcoin that it is deflationary by nature? Currency deflation lowers consumption with that currency as people start to simply hoard it instead of spending it. It thus defeats the very reason of it's existence, being a medium of exchange. Are other crypto currencies set up the same way with limited supply?

This is my gripe with bitcoin's value in the long-term. There is value in having an inflationary monetary system where the levels of inflation can somewhat be controlled. Yes there are abuses...of course. But IMHO those potential abuses are (1) less harmful than the problems of not having those levers to pull in times of need, and (2) less harmful than the deflationary nature of how bitcoin is currently set up (with a fixed amount). Even gold isn't a totally fixed supply.

[wachtwoord]

 

Btw, isn't one of the problems with bitcoin that it is deflationary by nature? Currency deflation lowers consumption with that currency as people start to simply hoard it instead of spending it. It thus defeats the very reason of it's existence, being a medium of exchange. Are other crypto currencies set up the same way with limited supply?

This is my gripe with bitcoin's value in the long-term. There is value in having an inflationary monetary system where the levels of inflation can somewhat be controlled. Yes there are abuses...of course. But IMHO those potential abuses are (1) less harmful than the problems of not having those levers to pull in times of need, and (2) less harmful than the deflationary nature of how bitcoin is currently set up (with a fixed amount). Even gold isn't a totally fixed supply.

 

This is the popular (Keynesian) viewpoint.

 

I'm a contrarian and think the Keynesian view of economy is utterly and completely wrong. The centralist (regulated) approach will always be inferior to the distributed (free market) approach for matters as complex as the global economy. Most of the world does not agree with me so take your pick :)

[LC]

How do you view bitcoin, given your economic stance? In the long term, what function does it provide?

 

Secondly, let's assume a deflation/inflation neutral argument. What other advantage does bitcoin offer?

 

I see the only real lasting impact being the ease of transfer. Essentially just putting pressure on banks/payment processors/etc to further reduce transaction fees.

 

I see no real improvements in terms of currency usage nor "store of value"....i.e. if the US changed to bitcoin today, nothing in my daily life would improve.

[JBird]

Just to echo LC, is there anything Bitcoin can do as a currency that dollars cannot do?

[DoddDisciple]

Here's something else I don't really understand. People compare bitcoin to gold, saying they are practically indistinguishable. Gold's been banned in the past. Bitcoin might. Store of value and all that.

 

But isn't the value of gold, particularly to goldbugs and collapse of civilization types, lost if it's just held as a paper asset? The fluctuations in the value of gold therefore are purely speculative, since they're not trading in the actual situation where they have value: hand to hand transactions.

 

Like physical gold, bitcoin can be stolen and is untraceable. With these big thefts at exchanges, don't they convert to altcoins and back to fresh wallets since otherwise you can see that the coins are marked in the bitchain? Are people actually able to benefit from their large thefts are are they undertaken by "for the lulz" types who just do it to see if they can do it?

 

Look at this: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/1920s-germany-hyper-inflation-and-stocks/. During 1920s hyperinflation in Germany, the shares of the publicly traded stocks actually kept pace with inflation. I haven't investigated, but if the same or similar occurred during the fallout of WWII, that would make a pretty strong argument that stocks and business ownership are superior to either bitcoin, gold, or anything similar at the very function these "stores of value" are supposed to be good at.

 

[wachtwoord]

It can provide a number of functions. The most important being store of value (if you read the Voorhees' articles I linked to you can read why I regard Bitcoin as superior to gold), currency (means of exchange) and remittance.

 

The main advantage above fiat currency is that it cannot be inflated away. Next to that it's really important that you are able to control your own money. With fiat the only way to control your own money is by using cash. If you want to do it electronically you need a bank account and for that you need to lend your money to a third party entity we know as banks. Banks can do all sorts of nasty things such charging high fees, being slow, blocking transactions and in the worst of cases: lose your money. With Bitcoin you control your own funds which makes it cheaper, faster and most importantly constantly in your own control.

 

I'm not sure what will happen when the society breaks down and I doubt anyone does. If I would regard that a realistic possibility I would relocate and stockpile on many other things such as guns, ammunition, long lasting food and water, matches, toilet paper etc.

[yadayada]

I haven't read good things about the ASIC producers. Mainly they produce shoddy products prone to overheating. I've read that Butterfly Labs has management that engaged in prior financial misdeeds and uses the machines to mine first and only sell them after the difficulty has risen where that model isn't as viable.

 

The question is at what stage are we in on the bubble. Unlike say the dot com bubble, I don't see main street investing in this yet. I think having a little of every coin is the optimal way of doing it. Dogecoin came out of nowhere and is a joke product, yet it's in the top 20 by market cap. I don't know how accurate it was, but it was briefly $400 a coin on coinmarketcap. Maybe just a data error though.

yeah but it is all based on hype. Im already having doubts about bitcoin. And the price is probably 90% hype. Transactions per day didnt go up from januari this year to now. But for example litecoin had a 700 million$ market cap, and had basicly zero practical use. And was actually a worse product and less secure then bitcoin. At least bitcoin could have some potential fundamental value. There are coins that have a 100 million$ market cap that I havent even heard about lol. If you look at reddit bitcoin then you see how insane this hype is. You get downvoted into oblivion if you say something remotely negative.

Look at this: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/1920s-germany-hyper-inflation-and-stocks/. During 1920s hyperinflation in Germany, the shares of the publicly traded stocks actually kept pace with inflation. I haven't investigated, but if the same or similar occurred during the fallout of WWII, that would make a pretty strong argument that stocks and business ownership are superior to either bitcoin, gold, or anything similar at the very function these "stores of value" are supposed to be good at.

100% agree, something that gold bugs always miss. As gold it is useless. Either you buy stocks , or civilization collapses and your better off buying bullets and canned food.

[DoddDisciple]

If inflation is the problem, why not own stocks? I'd say German stocks keeping place with hyperinflation is a pretty good sign that investing in them is what you want to do with cash you don't need at the moment. Banks and card processors can screw you over, but at least I can issue a chargeback or sue in the worst case scenario and potentially recover some value.

 

Anyway, I'm interesting in putting some money in and holding until it gets too crazy. Course, based on coinmarketcap, I should have done this yesterday since prices are up across the board. Would you recommend coinbase for fiat to BTC and then Crypsty for holding a little of each cryptocoin? I know digital wallets are not good, but I don't want to setup 50 paper wallets.

 

After I sell out, maybe I hold onto at least 0.1 BTC per https://bitcointalk.org/index.php?topic=345228.0. Don't know how accurate it is, and I don't see how BTC is supposed to "free the world's poor" when it already has created a new 1% of hoarders, but let's see :)

[wachtwoord]

After I sell out, maybe I hold onto at least 0.1 BTC per https://bitcointalk.org/index.php?topic=345228.0. Don't know how accurate it is, and I don't see how BTC is supposed to "free the world's poor" when it already has created a new 1% of hoarders, but let's see :)

 

Because it takes power away from central banks and governments.

[DoddDisciple]

Because it takes power away from central banks and governments.

 

How? The government has, what, 1.6 billion rounds of ammo? Are they really going to let a new 1% exist that got there by putting $100 in these a few years ago? Power is much more complex than just how paper wealthy someone is.

 

You get downvoted into oblivion if you say something remotely negative.

100% agree, something that gold bugs always miss. As gold it is useless. Either you buy stocks , or civilization collapses and your better off buying bullets and canned food.

 

Right, just look at the cult-like status of these things. People are even arguing Dogecoin has value outside of a joke meme.

 

 

 

 

[wachtwoord]

Because it takes power away from central banks and governments.

 

How? The government has, what, 1.6 billion rounds of ammo? Are they really going to let a new 1% exist that got there by putting $100 in these a few years ago? Power is much more complex than just how paper wealthy someone is.

 

 

Didn't Margaret Thatcher once say that if she could choose absolute political power or the power of being able to issue currency she's choose the latter because that's more powerful? Full (or nigh full) adoption of Bitcoin will take that power away from governments.

[yadayada]

After I sell out, maybe I hold onto at least 0.1 BTC per https://bitcointalk.org/index.php?topic=345228.0. Don't know how accurate it is, and I don't see how BTC is supposed to "free the world's poor" when it already has created a new 1% of hoarders, but let's see :)

 

Because it takes power away from central banks and governments.

yeah but the banks can so easily kill this right now. it still needs healthy liquidity between fiat currency and bitcoin. Once they ban exchanges and turn the media machine on it, bitcoin doesnt have much of a chance, besides being used on the silk road or speculators. It is already a big pain in the ass to use bitcoin. Look at China, they banned it and the price collapsed. Unless some p2p exchange comes up that makes it easy to find buyers without a centralized system then bitcoin is pretty much doomed. And even that has serious issues because of trust problems. How do you build a system that lets you know with a v high certainty the other party wont rip you off?

 

People compare this to bittorent, but that is a bad comparison. The weak link here is that you actually need to exchange fiat for bitcoins, and untill that is decentrazlied then bitcoin can be easily killled by governments if they want to. They dont even have to ban bitcoin. They can just make it a major pain in the ass to use it, and make it v unattractive as a currency. Just look at the daily amount off transfers. Pretty much confirms that most people dont use it as a currency. Zero growth this year.

 

Imo bitcoin fanatics need to lose the ideological fantasies and get practical, 90% of the potential users dont care about that ideological crap. Untill maybe we see 15% inflation per year.

[DoddDisciple]

The government still controls the physical space. How do you exercise power with bitcoin then?

 

I understand and agree with your perspective of how much power currency controllers have. On the conspiracy side, a lot of people may have been offed who wanted to upset the balance of power. I don't know what's true or not, but maybe the reality is between what we know and what people claim happened.

 

I'm still investigating putting a little in each coin on Crypsty and holding for a year or so or until things go haywire on the upside, assuming that they all may go to zero.

 

 

[DoddDisciple]

The weak link here is that you actually need to exchange fiat for bitcoins, and untill that is decentrazlied then bitcoin can be easily killled by governments if they want to.

 

Imo bitcoin fanatics need to lose the ideological fantasies and get practical, 90% of the potential users dont care about that ideological crap. Untill maybe we see 15% inflation per year.

 

Right. I can't easily put even $1k into this. I have to open an account on Coinbase using my information (there's the privacy angle gone), wait 4 days and they know my bank account to convert the money into BTC. Who knows what will happen over those 4 days. Maybe it's USD/BTC $1000 or USD/BTC $500. To get any of these other things, I have to then open an account on Crypsty and TRUST that they aren't like all the other sites. Additionally, they also have my information, so again, privacy gone further.

 

What I'm interested in is what happens when Wall Street and the Winklevii ETF goes like. There's already been some cash flowing into BTC on SecondMarket. If this goes into full-on frenzy mode, I see Dogecoin 10k :P

[wachtwoord]

yeah but the banks can so easily kill this right now. it still needs healthy liquidity between fiat currency and bitcoin. Once they ban exchanges and turn the media machine on it, bitcoin doesnt have much of a chance, besides being used on the silk road or speculators.

 

Haha, that's what most people think and in reality it will prove to be completely opposite. The more the existing system fights Bitcoin, the stronger it will get. If you fight it by limiting the functionality of your own money (fiat) your only crippling fiat even more giving Bitcoin a larger benefit.

 

The ban on gold by the US also killed gold right? Oh wait, it didn't :)

 

Disclaimer: Note that the above is my opinion. I don't think it's likely I'm wrong, but stranger things have happened ;)

[yadayada]

nobody is using gold to pay for stuff. But they wont ban bitcoin directly, they just make it a pain in the ass to use. How will it get stronger the more they fight it? You forget that emotions dont last, and in the end it needs to be practical. Right now it is not practical. How will this change? What problem will bitcoin solve? that whole 'no more government control' angle doesnt count. Since they control exchanges, they control bitcoin basicly. What if they make it even a bigger pain in the ass to get money on exchanges? They can use excuses like moneylaundering to make this even harder. They basicly control bitcoins lifeline.

 

If it is twice as easy to use a credit card and pay like 2%, people will just do that. Or they use paypal or something. And honestly do you use bitcoin now? I still find it a pain in the ass to use. Let alone random people who dont really care much about what it could represent (ie: most people).

 

So basicly to survive bitcoin needs to work with decentralized exchanges. But then how do you know who to trust? If you crack that problem then yeah, governemnts cannot fight it.

 

Also gold's value comes from the fact that people have been using it for ages. Literally. Just like they cannot ban alcohol, but they can ban weed. If it has been around for very long it will have value. You could argue that the value of other rare metals should be through the roof as well. But only gold is really overvalued compared to its practical use. Bitcoin doesnt have this advantage.

[DoddDisciple]

Why are we talking about Bitcoin? Dogecoin is up 400% today :D

[Guest 50centdollars]

Do people remember the late 90's? People tried online currencies but it failed miserbaly.

 

http://www.cnet.com/1990-11136_1-6278387-1.html

 

#4 on the list

[DoddDisciple]

Do people remember the late 90's? People tried online currencies but it failed miserbaly.

 

http://www.cnet.com/1990-11136_1-6278387-1.html

 

#4 on the list

 

I love it. Actually, a Flooz sounds better than some of this stuff. I could actually at least get a book from B&N with some Flooz. There was also eGold around the same time, right?

 

I don't know what this sudden interest in bitcoins and similar cyptocurrencies mean in terms of where we are on the bubble cycle. I have long felt that social media companies have been bought and traded at insane valuations. But can it be a bubble when the public at large can't partake? Bitcoin seems to be an extension of whatever's been happening in social media to me at least.

[rkbabang]

Do people remember the late 90's? People tried online currencies but it failed miserbaly.

 

http://www.cnet.com/1990-11136_1-6278387-1.html

 

#4 on the list

 

I love it. Actually, a Flooz sounds better than some of this stuff. I could actually at least get a book from B&N with some Flooz. There was also eGold around the same time, right?

 

I don't know what this sudden interest in bitcoins and similar cyptocurrencies mean in terms of where we are on the bubble cycle. I have long felt that social media companies have been bought and traded at insane valuations. But can it be a bubble when the public at large can't partake? Bitcoin seems to be an extension of whatever's been happening in social media to me at least.

 

I used to have a little online business selling bumper stickers back then (rkbabang.com).  I accepted e-gold, GoldMoney, and of course paypal.  I actually lost some money when the feds shutdown e-gold.  One of the allures of bitcoin is that the feds can't shut it down.