Do you think Bitcoin is a safe store of value?

[Dustin T]

 

2. To make the total amount of BTC 21M and not infinity the number of coins being created needs to be reduced. Therefore block subsidy (the number of BTC created in every block) is halved every 4 years. The first halving (from 50BTC to 25 BTC) is almost a year ago.

 

 

Miners create real value as they provide the security of the entire system. If you give me more computational power than the entire network I can do all sorts of nasty things such as rewriting history and spending my Bitcoins more than once. As I wrote above the block subsidy is halved every 4 years until it will reach zero at some point. The block subsidy however isn't the only thing miners get they also get the transaction fees of all the transactions they put in a block (this is expected to rise in time, see: https://blockchain.info/charts/transaction-fees?timespan=all&showDataPoints=false&daysAverageString=7&show_header=true&scale=0&address=). Fees are voluntary but miners can refuse to put a transaction in a block if they so choose. There is a convention for this (based on age of coins and size of a transaction in KB) that is currently followed by almost all miners.

 

If the currency and it's transactions need great computing power to survive, and at some point they are no longer going to issue fresh bitcoins, I'm curious what the plan is once the last bitcoin has been issued but they still need resources to track the transactions and fight off attempts to hack the system?

 

As they become more valuable the issuers have incentives to issue more, I wonder if there is anything that would stop them? Bad publicity and loss of faith is certainly a strong one, but if demand is great that won't matter.

 

For bitcoins to grow in value more and more people must be convinced they do have value. I think they are much more likely to produce a speculative bubble. Traditional money has the backing of Governments that have strong reasons to keep the currency stable, along with legions of people willing to trade them for real value. Gold is a rare tangible substance that has a long history of maintaining it's value through every disruption known to man. Bitcoins has neither of these and cannot in my mind be the "perfect currency".

[wachtwoord]

 

2. To make the total amount of BTC 21M and not infinity the number of coins being created needs to be reduced. Therefore block subsidy (the number of BTC created in every block) is halved every 4 years. The first halving (from 50BTC to 25 BTC) is almost a year ago.

 

 

Miners create real value as they provide the security of the entire system. If you give me more computational power than the entire network I can do all sorts of nasty things such as rewriting history and spending my Bitcoins more than once. As I wrote above the block subsidy is halved every 4 years until it will reach zero at some point. The block subsidy however isn't the only thing miners get they also get the transaction fees of all the transactions they put in a block (this is expected to rise in time, see: https://blockchain.info/charts/transaction-fees?timespan=all&showDataPoints=false&daysAverageString=7&show_header=true&scale=0&address=). Fees are voluntary but miners can refuse to put a transaction in a block if they so choose. There is a convention for this (based on age of coins and size of a transaction in KB) that is currently followed by almost all miners.

 

If the currency and it's transactions need great computing power to survive, and at some point they are no longer going to issue fresh bitcoins, I'm curious what the plan is once the last bitcoin has been issued but they still need resources to track the transactions and fight off attempts to hack the system?

 

As they become more valuable the issuers have incentives to issue more, I wonder if there is anything that would stop them? Bad publicity and loss of faith is certainly a strong one, but if demand is great that won't matter.

 

For bitcoins to grow in value more and more people must be convinced they do have value. I think they are much more likely to produce a speculative bubble. Traditional money has the backing of Governments that have strong reasons to keep the currency stable, along with legions of people willing to trade them for real value. Gold is a rare tangible substance that has a long history of maintaining it's value through every disruption known to man. Bitcoins has neither of these and cannot in my mind be the "perfect currency".

 

There aren't any issuers. The process is decentralized. Everyone controls issuing and no-one wants to deviate from the original plan because this will undermine the entire currency.

 

When the block subsidies are gone the rewards will be restricted to fees paid for the transactions. This is growing and the idea is this will completely replace the block subsidy while being a strong enough incentive for the network to be secured.

[Dustin T]

 

2. To make the total amount of BTC 21M and not infinity the number of coins being created needs to be reduced. Therefore block subsidy (the number of BTC created in every block) is halved every 4 years. The first halving (from 50BTC to 25 BTC) is almost a year ago.

 

 

Miners create real value as they provide the security of the entire system. If you give me more computational power than the entire network I can do all sorts of nasty things such as rewriting history and spending my Bitcoins more than once. As I wrote above the block subsidy is halved every 4 years until it will reach zero at some point. The block subsidy however isn't the only thing miners get they also get the transaction fees of all the transactions they put in a block (this is expected to rise in time, see: https://blockchain.info/charts/transaction-fees?timespan=all&showDataPoints=false&daysAverageString=7&show_header=true&scale=0&address=). Fees are voluntary but miners can refuse to put a transaction in a block if they so choose. There is a convention for this (based on age of coins and size of a transaction in KB) that is currently followed by almost all miners.

 

If the currency and it's transactions need great computing power to survive, and at some point they are no longer going to issue fresh bitcoins, I'm curious what the plan is once the last bitcoin has been issued but they still need resources to track the transactions and fight off attempts to hack the system?

 

As they become more valuable the issuers have incentives to issue more, I wonder if there is anything that would stop them? Bad publicity and loss of faith is certainly a strong one, but if demand is great that won't matter.

 

For bitcoins to grow in value more and more people must be convinced they do have value. I think they are much more likely to produce a speculative bubble. Traditional money has the backing of Governments that have strong reasons to keep the currency stable, along with legions of people willing to trade them for real value. Gold is a rare tangible substance that has a long history of maintaining it's value through every disruption known to man. Bitcoins has neither of these and cannot in my mind be the "perfect currency".

 

There aren't any issuers. The process is decentralized. Everyone controls issuing and no-one wants to deviate from the original plan because this will undermine the entire currency.

 

When the block subsidies are gone the rewards will be restricted to fees paid for the transactions. This is growing and the idea is this will completely replace the block subsidy while being a strong enough incentive for the network to be secured.

 

I have to admit that it seems like their are some bright people behind this and that they have a well thought out plan, I think the currency without government or tangible backing remains subject to the whims of the people. They are too fickle for me, it won't surprise me if it continues to grow and make people rich or if it crashes. This isn't something I'd personally consider as an investment as I can't predict it's future with any degree of certainty. It will however be fun to watch.

[woltac]

How many tulips can i buy with a bitcoin?

[Liberty]

Tyler Cowen has a theory that Bitcoin's high prices are in good part a result of capital controls in China (and probably other countries):

 

Right now, you can think of the value of Bitcoin being set in the same way that the value of an export license might be set through bids.  If/when China fully liberalizes capital flows, the value of Bitcoin likely will fall.  A lot.  To the extent the shadow market value of the yuan rises, and approaches the level of the current quasi-peg, the value of Bitcoin will fall, by how much is not clear.  Or maybe getting money out through Hong Kong (or Shanghai) will become easier and again the value of Bitcoin would fall.  If Beijing shuts down BTC China, the main broker, which by the way accounts for about 1/3 of all Bitcoin transactions in the world, the value of Bitcoin very likely will fall.  A lot.  You will recall that the Chinese government shut down the virtual currency QQ in 2009; admittedly stopping Bitcoin could prove harder but still they could thwart or limit it.

 

If you are long Bitcoin for any appreciable amount of time, it seems you are betting that the Chinese economy will do poorly and capital controls will remain.  Then more people will be increasingly desperate to get more money out of the country.  Or you may be betting that the Chinese use of Bitcoin to launder money will increase due to the mere spread of the idea, through social contagion.  According to this source, the value of Bitcoin is up by a factor of 66 this year in China.

 

http://marginalrevolution.com/marginalrevolution/2013/11/china-and-the-soaring-price-of-bitcoin.html

[Mark Jr.]

It is not possible to fully grasp the ramifications of bitcoin until one reads The Onion's

 

U.S. Economy Grinds To Halt As Nation Realizes Money Just A Symbolic, Mutually Shared Illusion

http://www.theonion.com/articles/us-economy-grinds-to-halt-as-nation-realizes-money,2912/

 

...realizes the truth behind what makes it so funny, and goes on to realize that the truth behind it is more fully applicable to the US Dollar than it is to bitcoin.

 

At that point, you will realize that crypto currencies are a true game-changer and that the price action of bitcoin is but a mere side-show.

 

Money evolves over time, who can deny that? And it usually evolved along lines of expediency and in a counter-trend to government policy (which is always in one direction: inflate and debase). Today the official national currencies are again being systematically destroyed by their governments, and  this is happening across all currencies simultaneously. Given the needs of a global, interconnected, highly abstract economy facing these circumstances, crypto-currencies were pretty well inevitable.

 

Yes, new crypto-currencies can emerge (there already are hundreds of them and most of them are dying on the vine - the most comical one I've come across is zimcoin, which actually claims to be pegged to the Zimbabwe dollar at the rate of $10 trillion $Z to one zimcoin)

 

The important thing about this is it puts currency itself back where it should be: subject to market forces. Thus, if one currency elects to destroy itself via mismanagement or dilution (a.k.a inflation), the market participants can and will move out of it. This is as it should be.

 

Fiat currencies like all national currencies are currently engaged in a worldwide game of dirty pool. We're in a global currency war, there is open talk of ZIRP becoming NIRP, governments and central banks are basically screwing everyone in an effort to keep an unsustainable paradigm going.

 

Nearly every single criticism I've seen leveled against bitcoin is more accurately applied against the US dollar, or the Canadian dollar, or the Euro or the Yen. You want to talk about "meaningless numbers in a computer somewhere?" look no further than those currencies. You want to talk Ponzi? Look at QE, Abenomics and other "wealth effect" gimmicks that enrich those closest to the politically connected and screw everybody outside the beltway.

 

That "the government will eventually shut bitcoin down" is also easy to deflect: they can't. Shutting down bitcoin would be about the same as banning prime numbers. Sure they may go after exchange providers, maybe they drive it completely underground, but then they just create it as a black and grey market. Further, to make a real go of "shutting down bitcoin" it will require a push into global totalitarianism that makes today's situation (with it's global surveillance and the suspension of most civil rights) look tame.

 

The reason for all this is because pretty well every global government, and their complicit central banks, especially in the US, especially in the UK, especially in Canada, especially in Europe, everywhere, with their desperate economic rigging and central planning, with their pervasive global surveillance on their own subjects, with one illegal war, police action, "peace keeping", bail-in, bail-out and nationalization after another have lost all legitimacy to rule.

 

So the emergence of something like bitcoin, necessity being the mother of invention, was just one big F.U from the free market to the system that it's been holding its head underwater for decades. It had to come out somewhere, here it is.

 

Crypto-currencies are inelastic forms of exchange, which put them in the same league as gold or silver, and no, they will never replace them, rather they have emerged as a perfect compliment to them. Totally portable, frictionless and largely immune to capital controls, crypto-currencies have become the official lubricant of the free market (I mean the real free market, the one where price discovery actually takes place between buyers and sellers, not dictated by central planners).

 

This isn't a curiosity, this isn't tulipmania, and no, I'm not recommending you run out and buy bitcoin (it'll probably crash down to about $100 or $200 any time now, maybe lower) - but I would recommend setting up a bitcoin wallet somewhere, getting an exchange account and obtaining the ability to move funds in and out of it as needed so you are comfortable doing so.

 

If you own a business, start accepting bitcoin. I've been accepting it since spring of this year, so that's how I've accumulated all of mine. Sure, it's nice to be nominally "up" on the exchange rate, but that isn't why I'm doing it. I've sold a bit of it just to familiarize myself with the ins-and-outs of converting to cash, and I have a debit card which I can load up with bitcoin and withdraw dollars from any standard ATM.

 

End rant.

 

 

[Guest hellsten]

http://www.mebanefaber.com/2013/11/26/bitcoin-vs-south-seas-stock/

 

http://www.mebanefaber.com/wp-content/uploads/2013/11/chart1.png

[SharperDingaan]

We would suggest to you that Bitcoin has been in existence for a very long time; between nations we just call them SDR's, with individual nations we call it QE. Central bankers make them, not individuals; and those bankers issue  bank notes for everyday transactional use - to minimize the fraud inherent with the use of money.

 

No cash? no transaction - so you have to go to a bank; the distribution network for money. In the drug world each bank would be a drug family, & each bank branch would be the pusher on your street corner. Just as each drug family defends its turf, so do central bankers; & just as drug families live in a hierarchy, so do central bankers. It's a great system, works on both sides of the law, & your 'innovation' either gets assumed by the families - or you sleep with the fishes.

 

So my Bitcoin? If it gets assumed, it might actually be worth something; but if not .......

Do you feel lucky  :P

 

SD

 

 

[VersaillesinNY]

Some Fool Threw Away a Hard Drive with £4.6 Million of Bitcoin On It - Adam Clark Estes -

 

Ever accidentally lose a pound coin? Then you count what’s in your war chest, realise it’s a quid short, and kick yourself for being careless? Well, a British IT worker knows what that feels like—except times 4.6 million.

 

James Howells did a really smart thing back in 2009 and started mining Bitcoin before anybody had ever heard of it. He managed to stockpile 7,500 of the magic cryptocurrency before his girlfriend made him stop. (Evidently, she thought it “was getting too noisy.”) Based on today’s exchange rate of about £613 per Bitcoin, that stash is worth about £4.6 million.

Then, earlier this year, Howells did a really stupid thing and threw away the hard drive that contained the key he needed to access the small fortune he’d saved up. Actually, he did two stupid things. First, he spilled lemonade on his mining machine and sold it for scrap, which is why he took the hard drive out in the first place. Then he threw it in the bin. His £4.6 million now rests under about four feet of mud and trash at the local landfill.

 

For all intents and purposes, the money is gone. Howells can’t afford to spend the money it would take to mobilise a team to dig through the landfill, and, even if he did, he probably wouldn’t find the hard drive anyway. “I’m at the point where it’s either laugh about it or cry about it,” Howells told The Guardian. “Why aren’t I out there with a shovel now? I think I’m just resigned to never being able to find it.” Consider it a buried sacrifice to the cryptocurrency gods. [Guardian]

 

http://www.gizmodo.co.uk/2013/11/%E2%80%8Bsome-fool-threw-away-a-hard-drive-with-4-6-million-of-bitcoin-on-it/

[JBird]

It's hard to value. Based on the amount of gold that is known to be in curculation, the price of 1 BTC would be >$300k if it completely replaced gold and did nothing else. The potential is even higher as the use of Bitcoin will unlock value that gold doesn't. For one Gold is hardly used as a currency. On the other hand Bitcoin is currently used by only a small portion of the population and therefore this is speculation on future usage.

 

I feel there still is a very wide margin of safety.

 

Why does bitcoin belong in the same conversation as gold? Why is there a large margin of safety at current prices?

[wisdom]

It would not be a bad idea to start COBF coins. Based on this experience everyone on this board could be a millionaire many times over given enough time.

 

Why waste our time doing anything prodcutive?

[wachtwoord]

It's hard to value. Based on the amount of gold that is known to be in curculation, the price of 1 BTC would be >$300k if it completely replaced gold and did nothing else. The potential is even higher as the use of Bitcoin will unlock value that gold doesn't. For one Gold is hardly used as a currency. On the other hand Bitcoin is currently used by only a small portion of the population and therefore this is speculation on future usage.

 

I feel there still is a very wide margin of safety.

 

Why does bitcoin belong in the same conversation as gold? Why is there a large margin of safety at current prices?

 

It does belong in the same conversation as gold, it's just better than gold and still much much cheaper. This brings us to the margin of safety: 300k >> 1k.

 

@hellsten: You could have made the exact same graph for any of the two previous super-exponential growth spurts followed by crashes (the two blimps in your chart). It will probably repeat the pattern and crash at some point. Long term I think we're going way, way higher.

 

@SD: QE is the exact opposite of Bitcoin. Because of QE, the USD inflates more and Bitcoin (as valued in USD) becomes more valuable.

[Green King]

It's hard to value. Based on the amount of gold that is known to be in curculation, the price of 1 BTC would be >$300k if it completely replaced gold and did nothing else. The potential is even higher as the use of Bitcoin will unlock value that gold doesn't. For one Gold is hardly used as a currency. On the other hand Bitcoin is currently used by only a small portion of the population and therefore this is speculation on future usage.

 

I feel there still is a very wide margin of safety.

 

Why does bitcoin belong in the same conversation as gold? Why is there a large margin of safety at current prices?

 

It does belong in the same conversation as gold, it's just better than gold and still much much cheaper. This brings us to the margin of safety: 300k >> 1k.

 

@hellsten: You could have made the exact same graph for any of the two previous super-exponential growth spurts followed by crashes (the two blimps in your chart). It will probably repeat the pattern and crash at some point. Long term I think we're going way, way higher.

 

@SD: QE is the exact opposite of Bitcoin. Because of QE, the USD inflates more and Bitcoin (as valued in USD) becomes more valuable.

 

Be careful these are situations were people lose the most money. When they have full conviction of the situation at hand and can see the future as an inevitability. This is when farmers lose the farm and hang themselves. Make sure your research and work is right !!! Wise you the best if you are right you'll make a lot of money or bit coins. If wrong there is a high chance of losing the principle investment and the option of compounding it at market return level from index funds overtime which will in 20 to 30 years be a lot of money.

[DoddDisciple]

I'm not really sure what to make of the BTC phenomena. I was somewhat aware of them a few years back but never bothered buying any. Just $100 would have made me a BTC millionaire by now :P

 

Going forward, I'm considering putting $1k or more in a basket of the 30-40 crypto currencies that are out right now, equal weighted.

[Guest hellsten]

At least I'm learning about bubbles while reading about Bitcoins. For example, Mr. Shiller's checklist for bubbles:

The solution: a checklist like psychologists use to determine if someone is suffering from, say, depression. So here is Mr. Shiller’s checklist.

…

- Sharp increases in the price of an asset like real estate or dot-com shares

- Great public excitement about said increases

- An accompanying media frenzy

- Stories of people earning a lot of money, causing envy among people who aren’t

- Growing interest in the asset class among the general public

- “New era” theories to justify unprecedented price increases

- A decline in lending standards

 

- Sharp increases in the price of an asset like real estate or dot-com shares

 

Yes, look at the Bitcoin graph.

 

- Great public excitement about said increases

 

Check

 

- An accompanying media frenzy

 

Check

 

- Stories of people earning a lot of money, causing envy among people who aren’t

 

Check

 

- Growing interest in the asset class among the general public

 

Check

 

- “New era” theories to justify unprecedented price increases

 

Yes. Even on "smart" communities like HackerNews, many posters defend Bitcoins with silly arguments like "Bitcoins is a new currency, so old rules don't apply to it. We can't yet understand how Bitcoins will revolutionize money, so it must be valuable.":

https://news.ycombinator.com/item?id=6827077

 

This comment is the best answer we have at the moment to "Do you think Bitcoin is a safe store of value?":

 

Yes, but the volatility nobody is debating is that it was below $1 in 2011 before it shot up above $33 and then came down to $2 at the bottom again. A similar development could be observed earlier 2013 where it started the year around $10, then shot up to $266 and came down again to $80.

 

- A decline in lending standards

 

No?

[wachtwoord]

We're not going to agree here, that's not the reason I bumped the topic. I bumped it to give everyone here that missed it half a year ago another chance at looking into this and forming their own opinion.

 

You know my opinion. Good luck to everyone :)

[Guest hellsten]

We're not going to agree here, that's not the reason I bumped the topic. I bumped it to give everyone here that missed it half a year ago another chance at looking into this and forming their own opinion.

 

You know my opinion. Good luck to everyone :)

 

Yes. Good luck. I don't think Bitcoins are a safe store of value. Too volatile. I have no idea where Bitcoins are going long-term. It could be the next big thing, but I'm going to be conservative and stay on the sidelines.

[Mephistopheles]

I have a friend who's a bit of a fool. He claims bitcoin is in a bubble, yet still is bullish. He said the bubble will grow larger and won't pop for another year. He's also been getting extremely defensive whenever I bring up the risks or reasons why bitcoin may not be a good investment. He's planning on opening a wallet and investing soon. He has little to no knowledge and experience in investing, and he he thinks he's the smartest guy in the world because he became bullish on bitcoins when it was $600 a few weeks ago, and it has doubled since.

 

Based on this experience, it sure feels like a bubble.

[Guest ajc]

The Hole In Bitcoin

 

"Over the past few weeks, our more observant readers may have noticed increasing media coverage of Bitcoin, the decentralised cryptocurrency designed (or should we say, "coined") by a clever developer known pseudonymously as Satoshi Nakamoto (anagram solutions welcome).

We've yet to find an article which combines a grounding in the technology and economic analysis that a layperson can grasp, so this is our attempt to explain what all the fuss is about, and why you are probably looking at one big, energy-consuming bubble..."

 

http://webb-site.com/articles/bitcoinhole.asp

[NeverLoseMoney]

Here are some random observations from my end.

 

1. The success of Bitcoin should not be measured by looking at a graph of the price. If I wanted to answer the question whether this currency has a chance of succeeding, I would make a list of a few hundred of the largest e-commerce sites and check which ones accept Bitcoins. That seems like the best way to measure progress.

 

2. Can associations with dubious merchants cause major problems? For example: I read that the Pirate Bay accepts Bitcoin. Can this fact be used by authorities somehow to seize funds somewhere or in some other way that would disturb transactions on marketplaces?

 

3. It seems to me that the more legitimate merchants accept Bitcoins and the more Bitcoin becomes a viable alternative for traditional currencies in online transactions, the stronger the incentive for governments to make life hard for Bitcoin exchanges, merchants and users. The stronger Bitcoin becomes the weaker the "moat" of traditional currencies becomes. I think the US, Europe, China, etc. will all feel the same way about this.

 

4. I don't think Bitcoin is unstoppable. You can make life very hard for all those involved. Study how the US dealt with the online poker sites and payment processors for years and years. It took a while, but it has been pretty effective in the end. I know Bitcoin is something entirely different, but some of the tactics used there can be used again.

 

5. Besides governments, there are probably a lot of large corporations that want Bitcoin to fail (credit card issuers, PayPal/Ebay?). The more successful Bitcoin becomes the more lobbyists will fight it. Their donations to politicians buy influence and policy.

 

6. I've been looking at the map on http://fiatleak.com/ and a lot of demand seems to come from China. I don't know what this means and whether the Chinese use Bitcoins for actual transactions or they're just using it to speculate or as a tool to get money out of China. Looking at the explosion in the price of Bitcoins and many of the alternative cryptocurrencies, coupled with the large Chinese demand, it does look like a speculative bubble to me. I don't know if Bitcoin will succeed or not, but I like the idea. Having said that, I think it would be smart for those who were lucky or insightful enough to mine Bitcoins early on to take this opportunity to cash in at least some of their chips and buy some more shares in their favorite company.

 

7. Bitcoin has the best chance of succeeding. If it fails and becomes essentially worthless it would be very hard for another cryptocurrency to succeed. So many people will get burned and the media will be all over it. The faith of users in a currency is vital. If Bitcoin fails, who is going to trust any alternative? So, if I wanted to speculate on a cryptocurrency I would bet on Bitcoin. Diversifying into a basket of cryptocurrencies seems like a terrible strategy to me.

[yadayada]

I think we are having the wrong discussion here to be honest. I try to be both a bull and a bear. And I see bitcoin as a new technology, not really a new currency yet.

 

Some uses this technology can be disruptive (and why I have my doubts about that)

 

1. in person payments.

Seriously doubt it. I mean it would lower the price for products like 2% at most, and would be higher cost and more hassle vs using cash. There will also be Clinkle soon, which is going to make bitcoin completly irrelevant in this area. So here it will stay a niche thing.

 

2. Online payments.

In europe this seems to be working well already with SEPA, and how many people really are going to bother when they can save only one or two % vs credit cards, or when paypal is still free? You still need to buy bitcoins, or put money on a service that converts them for you. So that would still take one or two days. And who really wants to hold bitcoin with this volatility? And no the volatility could potentially never end, since it really seems like a chicken and egg problem. Bad currency because of the volatility, so no mass adoption for that, and volatility wont go away.

 

3. remittance.

I think this one has potential. Looking at the western union fees, they are like 4-12%. if you send like 50 euros, then it hovers around 10%, and for maybe 300 euros its more like 4%. Bitcoin could potentially make this very cheap. So there is def something to gain here for consumers. But again the problem here is volatility. Google has already set up a service to avoid this. They would essentially convert the currencies using bitcoin and then quickly back to their home currency, and not have the customers be exposed to bitcoin and its volatility. This could work perfectly and cheaply with for example MPesa.

BUT the big problem here is, who is going to buy these bitcoins in Africa and India? People throw around numbers like 'omg that is a 500 billion $ market, imagine if bitcoin captures it!'. But there would be about 500 billion$ worth of buyers in those countries, who would buy bitcoins. Other it would have to be adopted as a second currency in those countries. But who will buy them if you can't use them because of this volatility? Local potatoe farmers? For some reason I don't see this happen quickly. And I see almost no one discuss the problem. The bitcoin bulls are all like 'omg yeah you ass that will take care of itself ldo!'. Would love to hear opinions about this from people who know more about currency markets then me.

 

4. black markets and Silk road specifically

I see huge potential here for bitcoin for the online drug trade. As someone who has u.. I mean heard of people who used this, it really is perfect. You cut out the middle man. There is quality control (quality is really excellent, and trust is no issue if you use a large vendor). You don't have to deal with shady drug dealers. And it is completly shielded from law enforcement by this huge wall of cryptography. DPR is caught, but almost no vendors were caught in the process. This is a pretty large market, and this could become huge. Not sure if it would justify the current bitcon price tho. But bitcoin really fills a need here, and is here to stay.

Also interesting to note that only a few % of packages were intercepted here in the post office. It seems because of the sheer volume every day, it is impossible to properly check this. Especially if the vendor did a good job on stealth.

 

Regarding bitcoins moat:

Bitcoin's moat is huge untill some bug brings it down. There is a transaction limit currently in place of only 7 transactions per  second. That problem needs to be solved, and all the owners of computer chips providing the bitcoin moat need to agree on the new number. This is called a hard fork I think. And this could potentially  be a big problem. If this is solved then I don't see how other crypto currencies could be a threat to bitcoin. There have been succesfull hard fork's before on other issues...

I mean think about it, bitcoin is built on trust and people knowing about it and the huge number of computing power protecting it. It has roughly the same moat as facebook, maybe even stronger. Unless facebook fks up BIG TIME then they are here to stay. We only really need one currency. Especially if somehow bitcoin becomes widely used, volatility will be solved. Making the moat even bigger. So I really think that is not a significant risk here.

 

Regarding bitcoin being in a bubble:

You cannot say that just because randoms are talking about it, it must be a bubble. Actually the more people talk about it, and use it, the bigger the odds are that the price will stabilize at some point. Every person using it for something in the long run, adds to the fundamental value of bitcoin. You could compare this to facebook in it's early days. Imagine if you were a VC, or you were mark zuckerberg and it exploded into the main stream. Except now the public is exposed to this, and not just the VC's. This isn't some stock with a fixed value, the value of bitcoin is in it's use and in people knowing and trusting it. Allthough as I have said above, I still have doubts bitcoin will make it.

This is also why it is so interesting to follow, since this really looks like a once in a lifetime thing for most regular people.

 

So in conclusion, I think bitcoin really could fill a need to solve innefficiencies. But the remittance market for example could be solved if third world countries get a better banking system. And I am sure there cuold be other ways besides bitcoin to bring costs down here. Those skype guys are doing it in Europe already with Transferwise.

 

I bought some a while ago, and I am really thinking about selling now. And not looking back. If there are any bitcoin bulls here, I would love to here an in dept response why that would be a mistake.

[rkbabang]

I bought some a while ago, and I am really thinking about selling now. And not looking back. If there are any bitcoin bulls here, I would love to here an in dept response why that would be a mistake.

 

I'm not a bitcoin bull, I've been watching bitcoin for years, but I have never owned any.  If I did own some bitcoin right now, I'd probably sell some now and hold onto some to see what happens. 

 

Let's look at the potential, not what is likely, but what is the best possible case.  That would be bitcoin being used for almost all human trade and replacing all other currencies.  Almost every person in the world using bitcoin for every transaction, all businesses using it and reporting in it and paying their employees with it. Stocks trading on all the major exchanges priced in bitcoin, etc....

 

The world GDP is somewhere around $70T-$85T depending on how you calculate it.  So to trade that amount with only 21M bitcoins each bitcoin would have to be worth at least $4M, probably a hell of a lot more.  What will the world GDP be in 10 years?  Even after this happens holding "cash" (i.e. bitcoins) will be a sufficient savings strategy for the average person as there will typically be a yearly deflation over time as the world economy grows.  Of course none of this is the likely outcome.

 

So, my prediction is that in 10 years 1 bitcoin will be worth somewhere between $0  and  $100M.

 

[JRH]

So, my prediction is that in 10 years 1 bitcoin will be worth somewhere between $0  and  $100M.

 

 

Well, let's put some probabilities on it and throw it into the Kelley Criterion! ;)

[CONeal]

When they first came out a couple of years ago they were valued at .05 each.  Now they are valued over $88 each.

 

Kinda looking like a dumbass right now but life goes on. :-)

[tengen]

The Hole In Bitcoin

 

"Over the past few weeks, our more observant readers may have noticed increasing media coverage of Bitcoin, the decentralised cryptocurrency designed (or should we say, "coined") by a clever developer known pseudonymously as Satoshi Nakamoto (anagram solutions welcome).

We've yet to find an article which combines a grounding in the technology and economic analysis that a layperson can grasp, so this is our attempt to explain what all the fuss is about, and why you are probably looking at one big, energy-consuming bubble..."

 

http://webb-site.com/articles/bitcoinhole.asp

 

Thanks for posting this. I guess the title should be "Holes" since there appear to be more than one.