
Why The Value of Bitcoin is Skyrocketing - mayop100
https://bitcorati.com/2013/11/13/10-reasons-why-the-value-of-bitcoin-is-skyrocketing/
======
aresant
At this point virtually everybody I know in the tech space is buying at least
one coin to "hedge" against bitcoin achieving "gold 2.0" status.

What are the chances that as this message echoes out to virtually any urban-
dwelling or internet connected human on the planet we may all, as a human
race, wind up accidentally embracing a unified digital currency while in
pursuit of what amounts to a lottery ticket?

~~~
chc
The important question on the other side: What are the chances that we all, as
a human race, wind up accidentally embracing a digital tulip?

~~~
oleganza
Only if Bitcoin fails at its promise and can't be fixed. E.g. some crypto
breakthrough makes all security worth nothing.

Only if P=NP, in other words.

~~~
pcrh
Bitcoin is no longer the only cryptocurrency, so it has to hold value against
gold, diamonds (both of which are _completely_ anonymous), all fiat
currencies, as well as alternate methods of payment.

It is highly unlikely that it will be adopted as a currency for major business
transactions (too unstable and unknown), and is completely traceable, so will
not be adopted by major elements in the black market. In the end, if bitcoin
specifically (as opposed to some alternate cryptocurrency) remains in use for
a long period, it is likely to be for relatively small transactions in niche
markets. Does that warrant it's current valuation? I have no idea.

~~~
dwaltrip
Diamonds and gold make for quite shitty currencies

Gold is extremely laborious to move, and not divisible enough for most usage.
Diamonds are not fungible or very divisible. Both are very susceptible to
physical theft.

Network effects for money are very strong, and bitcoin has a huge first mover
advantage. Any competing digital currency will require quite the innovation or
distinguishing factor to gain any traction. It is becoming more 'known' and
trusted with each month that passes. Pre-bitcoin-era financial groups are
slowly yet increasingly giving it more legitimacy (Mainly VCs, a few funds,
the occasional bank, and research groups -- also Second Market and the
Winklevoss ETF are two big things to watch right now).

The main counterpoint currently is that bitcoin use is quite error-prone and
hard to digest, but this seems more like a temporary roadblock to me. Y'all
remember geocities and AOL right? Bitcoin will become much easier and more
secure to use in the coming years. Software is relatively easy to improve,
compared to gold, fiat, and the like.

There are some potential solutions to traceability, but it is uncertain how
that will play out (I can't even pretend to fully understand the regulatory
environments and international politics that will affect this). The one thing
I can guarantee -- the way we use and conceptualize money is going to change
drastically in the next several decades, and I think bitcoin will have a huge
influence on this.

~~~
XorNot
Bitcoins are very susceptible theft, as evidenced by the fact that someone
heists a whole bunch of them from a website every other week.

You can't play off a good which is hard to move as "susceptible to theft" when
you can log in and copy a data file and have succeeded in stealing a whole
bunch of money.

~~~
dwaltrip
I admitted using bitcoins currently is hard and expensive errors are easy to
make. But this is a software issue. Old "good enough" security habits won't
fly, as a lot money is on now on the line (old security issues usually didn't
cause too much harm for most users). New practices/implementations will have
to be developed, but I don't see why that won't happen.

Even nowadays with a few simple steps you can make your bitcoin stash VERY
VERY secure. Install a fresh copy of linux on a USB, disconnect all networking
capabilities, boot to the USB, create a new wallet/address (brain or paper)
using established methodology, turn off computer, remove USB, presto, you have
a un-hackable bitcoin address. You could even create a multi-sig stash that
requires a digital signature from multiple people (2-of-3, 3-of-5, etc).
Obviously, this is cumbersome and non-trival for the average joe. But with a
small amount of imagination it is easy to see how everyday solutions could be
developed.

~~~
XorNot
Which part of those steps feels "simple" to you, compared to the various
protections my credit card company and bank offer me?

You also haven't covered anything about backups, which means if you lose that
USB or it dies, then _poof_ all that money becomes unrecoverable permanently.

You can't even access that money now without booting an entire new OS on the
computer, which means good luck spending it, not to mention, for a digital
currency you might want network connectivity as well.

~~~
dwaltrip
Creating backups is not that hard. Print out extra copies, give one to your
sister/best friend/lawyer/whoever you trust. Or store the seed phrase (or
memory jog that only you will understand) in many places. Upload encrypted
versions to dropbox/gmail/etc. Put a copy in your locked safe. There are many
options.

There are several tools that allow you to create a transaction offline (using
similar steps to what I listed above, which only take 10-20 minutes) and then
you can broadcast the raw transaction text to the network using something like
[http://blockchain.info/pushtx](http://blockchain.info/pushtx). Again, this
only necessary for super secure storage of long term savings/investments/etc.

Lastly, one could easily keep small, day-to-day amounts on their smartphone,
which can spent and transferred quite conveniently (average joe level
convenient). Then top up this spending wallet every so often using your
offline wallet (10 minute time commitment every week or two).

The options/methods for doing all of this will only get easier. We are in the
pre-alpha stages of digital currency software right now. Think web in the
early 90s.

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andr3w321
Forget these 10 reasons. The real 10 reasons are

1\. The price keeps skyrocketing, so people hoard or buy 2\. The price keeps
skyrocketing, so people hoard or buy 3\. The price keeps skyrocketing, so
people hoard or buy 4\. The price keeps skyrocketing, so people hoard or buy

etc... it all works out until it doesn't... it's long overdue for a major
correction

~~~
teddyh
Does not “correction” imply that there is a “correct” price for Bitcoin? Since
it has absolutely no inherent value, what would this be? Zero? Or does its
value derive from its utility as a medium of exchange (and associated transfer
mechanism)? In that case, should its value be derived from the size of the
global economy? (As done here: [http://falkvinge.net/2013/03/06/the-target-
value-for-bitcoin...](http://falkvinge.net/2013/03/06/the-target-value-for-
bitcoin-is-not-some-50-or-100-it-is-100000-to-1000000/))

~~~
XorNot
It's zero.

Perfectly substitutable currencies have an exchange rate of either zero or
infinity. If there's no reason to hold one over the other, you've no reason to
ever give up your holdings of one or the other...until there's a slight
imbalance, at which point 1 is clearly superior and you've a huge incentive to
abandon ship as fast as possible.

In practical terms, government money is backed by the necessity of
extinguishing tax obligations and debts within it's jurisdiction, so it's
_not_ perfectly substitutable. Bitcoin has no such benefit - there's never a
reason to hold it because everything provided by it can be provided by other
currencies. Of course, the fact exchanging out requires selling to a greater
fool provides some stability, but therin lies the nature of a bubble - once
people want out, there's absolutely nothing that's going to convince anyone
else they should want in.

Of course if you _hold_ Bitcoin, for any reason, you need to aggressively
argue against this problem - and indeed all problems with Bitcoins, at least
until you no longer hold Bitcoin.

~~~
oscilloscope
How can a currency have an exchange rate of infinity?

~~~
XorNot
Infinity isn't a number to start with, it's an expression of a limit. i.e. if
you _need_ something, then how much you'll pay for it is effectively
unlimited. The idea is, that how the price changes is basically only limited
by how quickly your various agents can buy it.

You see the problem with this when artificial agents get into bidding wars -
because they react so quickly, they end up creating massive price volatility
because when it's worth buying _its worth buying_ and when it should be sold
they can't dump it quick enough.

In practice every thing has some type of limits - i.e. even computers operate
over limited time intervals, and any individual actor has limited resources so
eventually something exhausts itself (i.e. everyone might have dumped Currency
1 for Currency 2, but even if no one holds any any more, they'd still be
trying to sell it off if they did - ergo, we never reached a finite "price"
for it.

------
vijayboyapati
I still think Moldbug has by far the explanation of the increasing moneyness
and price of bitcoin: [http://unqualified-
reservations.blogspot.com/2013/04/bitcoin...](http://unqualified-
reservations.blogspot.com/2013/04/bitcoin-is-money-bitcoin-is-bubble.html)

So when people say bitcoin is "bubble" they are essentially correct - although
the condescension is usually misplaced. All money is a bubble in the sense
that its reservation demand is far higher than its use value warrants. This is
true for the dollar, and it's also true for gold, which also has a large
element of "moneyness".

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wtracy
_" The Silk Road shutdown resulted in brief, but shallow sell off and
subsequent rebounded within a few days. This event showed the world and
governments that illegal activities were a very small fraction of the
transactions taking place on the bitcoin network."_

I would say it showed that _Silk Road_ was a small fraction of all BC
transactions, but that still doesn't speak to the total amount of illegal
activity going on BC.

That said, it does imply to me that either: (1) The total percentage of BC
transactions being used for illegal transactions really is low (as the article
implies), or: (2) The remaining entities using BC for illegal purposes are
confident that what happened to the Silk Road won't happen to them.

~~~
gcb0
No matter how small it was, it was probably the largest money-bitcoin-money
faction.

Lots of people mine and trade coins. But only the few thousands (hundreds?)
Silkroad users were actively pumping money constantly into the system, giving
a much needed reality check of how much people will pay for a made up currency
with established made up money.

------
javert
Investment-wise, the prognosis is still the same as it ever was: BTC will
either become a huge thing worth a lot, or it will be worth near zero.

The only difference is the % of total BTC you can buy given your availabe
assets.

For some people that % is now close to nil, whereas before it wasn't, so
they've missed their opportunity.

For others, the % is still significant. Those people should probably still get
into BTC if they agree with the premise of this comment.

~~~
dualogy
> Investment-wise, the prognosis is still the same as it ever was: BTC will
> either become a huge thing worth a lot, or it will be worth near zero

Almost but not quite: it must surely go to zero at _some_ point, because
chances are extremely high that we haven't accidentally hit the holy grail of
digital cryptocurrencies and no better thing could ever be possibly come along
for all eternity. Before that happens, it will most likely become a bigger
thing than now. So I think most folks are just wondering two things: before we
reach zero, how much bigger will it become (multitudes? exponentially bigger?
orders of magnitude? or just another $3.50 higher?) and over what timeframe.

And even the most educated guess at those two questions is as good as any
other, truly.

~~~
javert
> Almost but not quite: it must surely go to zero at some point, because
> chances are extremely high that we haven't accidentally hit the holy grail
> of digital cryptocurrencies and no better thing could ever be possibly come
> along for all eternity.

Bitcoin mathematically approximates Byzantine concensus with arbitrary
parcitipants. This is the fundamental insight over the fundamental hurdle that
made all prior attempts at cryptocurrencies (for decades) non-starters.

What is the space of cryptocurrencies that exploit the Byzantine insight, but
are somehow better than Bitcoin? I would suspect that it is very small, or
nil.

So unlike you, I don't think there is a high chance of something better coming
along. I think there is a low but significant chance.

A slight digression:

I _do_ think that bitcoin may end up being the "gold" used to resolve balances
between crypto-banks that have their own currencies. The advantage of such a
system is confirmation in almost no time, and not having to pay a transaction
fee to get your transaction into a block (which could be large as contention
for block space rises).

But other cryptocurrencies backed by bitcoin will have to be redeemable for
bitcoin, always. If you sever the link, they become worthless.

Now if they increase the block size limit to keep transaction fees low, there
may never be any need for other cryptocurrencies backed by bitcoin.

------
yason
Anything that goes up fast will come down fast. That simple is that. The
sooner you sell your speculative investment the more likely you'll get your
money back (at the expense of other people). I sold some leftover coins of
mine after 2x in price and that's still phenomenal gains from just some random
coins I saved for any next purchase.

The value of BTC will slowly rise but naively extrapolating from the last year
or so only I'd say the realistic value is still below $100. I'm pretty
confident that roughly $50 is a rather stable floor for the years coming.

~~~
dwaltrip
Do you have any logical/economic basis for this speculation you have so
confidently pronounced?

------
mmariani
tl;dr JS_loader == BAD_UX

I can't comment on the post because I'm on a train with spotty 3G coverage.
Which begs the question. WTF is going on with this trend of JS loaders? If
your site takes too much time to load, stop nagging users and just take the
time to properly optimize the site.

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bsaul
Just like with every bubble, some people will wait and wait again to invest
in... Only once all their friends will have gain some money speculating, once
the main media will say it's an easy way to make money, when they'll have the
feeling that eveybody else is making money, only then will they invest in...
And loose everything the next day, after the bubble collapse.

So, if you're planning on speculating with bitcoins, do it _right now_ , or
never do it... The chances are it's already too late btw, since people are
already mentionning exponential growth.

~~~
ashray
Case in point: I hold quite a few bitcoins. I am waiting to sell them. The
deciding moment will be when my mom mentions bitcoins to me the first time.
That will be the trigger ;)

~~~
betterunix
"I just heard about some kind of tech scam where everyone lost their money.
Bitslab or something like that. Have you heard of this?"

------
yen223
To Bitcoin owners out there: out of curiosity, what kind of stuff do you buy
using Bitcoin?

~~~
lennel
given the crazy rise in prices I doubt anybody is spending any, apart from
people who maybe want to, uhm, clean some money.

~~~
darkFunction
That's not really true, a lot of us more sensible people want to 'cash out' a
little slowly as the price goes up, and what better way to cash out than
actually spending the bitcoin on an actual product and supporting the economy?
I'd be willing to bet that as people suddenly find themselves with tens or
hundreds of bitcoins, and that they can buy a pizza for 0.05 BTC, they are
quite open to the idea of receiving what is essentially free pizza. Sure, that
pizza could be worth five pizzas tomorrow but you still have a decent chunk in
bitcoins and if the whole thing plummets to earth then at least you got
something delicious.

~~~
XorNot
Hilariously this post highlights like, every reason why trading goods for BTC
is a sucker's deal for the retailer.

~~~
user24
How? The retailer gets exactly what they would if they had just asked for
local currency, except maybe a little extra business.

~~~
XorNot
My point was rather meta, but it was the choice of language. "Pizza
effectively for free" \- lots of things about Bitcoin seem to involve people
hoping they get something effectively for free.

In the case of the price volatility for hoarding bitcoin while it rises, it
underscores the deflationary nature of the currency - no economic value has
been contributed by someone holding the BTC, but they've gotten richer
regardless. Sitting around doing nothing with the BTC did not produce any
economically valuable activity - it wasn't invested or used to finance
starting that pizza place, for instance.

------
wilhelm
How many of these transactions are tulip-style speculation, and how many are
real use of bitcoins as a currency for exchanging labour and goods?

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rhizome
Huh, nothing about the approach of a big buyer's holiday and the end of the
tax period?

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peteretep
Your idiotic mobile theme renders this as a gigantic, unscrollable "0%"

~~~
tantalor
And breaks scrolling.

~~~
moe
And screws with scrolling in desktop browsers too.

Seriously, why do people do this? Instant close tab...

~~~
gcb0
Fad. Most show hn sites have zoom disabled. As does most look-how-cool-and-
web-2.0-this-designer-website-is start ups.

~~~
Fr0styMatt
Freaking zoom disable is the most pointless thing ever put in a mobile
browser, ever.

~~~
gcb0
Why browsers still respect that, even on custom ROMs is beyond me.

My CM7 browser can bypass this. but my cm10 can't.

------
genericacct
If goes btc keeps going up like this for 10 years 1 BTC will be worth more
than all dollars in the world today. I think i'll keep hoarding 3 euro coins
instead, at least you can make bullets out of them.

~~~
dwaltrip
Some investments go up really fast for a while, and then go up more slowly
after that. Do you have good arguments for why bitcoin couldn't do this?

~~~
genericacct
Nothing goes up forever.

As for investments.. those usually have (or promise to have) a thing called
yield. If i put my money in the bank, they give me an interest. BTC doesn't.
If my bank goes bankrupt, my deposit is insured. If my BTC wallet is stolen...

And this is before we even start talking about regulatory risk. Again: BTC is
a fantastic technical endeavour, but to call it an "investment" is quite a
long shot. Call it a bet.

------
thomhall
What a headache. Just to buy a cup of coffee I need to boot up Linux on a USB
disk, input a 500 digit hash, call my brother for the rest of the hash, and my
cousin in Sweden for the rest of it, make the transfer an wait for 15 minutes
for it to transact, then I get my coffee. Yea. I'd feather have GOLD, SILVER
AND COPPER coins. Even digital representations maintained by a bank.

Also, I'm glad I didn't agree to pay my mortgage in bit coins when the value
was $11. The 70X increase in price would BITRUPT me! :)

------
thomhall
TOO MANY BIT COIN QUESTIONS:

If they were stolen, who do I call to help me get them back? If I loose the
keys to get into my coins, who will help me get access back to my cash. Does
the UN have a BitPolice squad hunting down bit theft? If I were to declare
bankruptcy would I have to declare my bit coins as a part of my estate? Is
there a BITRUPTSY court?

------
joosters
n.b. the article is about why (in the author's eyes) the price of bitcoin
skyrocket _ed_. It's all very much past-tense, observation not prediction.

------
grey-area
This Bitcoin rise rases some interesting questions for me, even if it rings
alarm bells at the same time.

What is the value of a currency? Is it the inscription 'I promise to pay the
bearer on demand...', which nowadays will not be fulfilled? Is it the power of
the organisation backing it? Perhaps the simplest explanation is best - what
can you buy in other goods you might want with this currency? But that leaves
you open to manipulation as you are entirely dependent on your _perception_ of
what other people think this is worth, which can change in an instant as we
have seen with stock markets or indeed government-backed currencies where
confidence is lost. So a good confidence trick will be worth as much as or
more than a solid currency, until a moment of panic.

If you try to base it on the current value of goods in the world divided by
the currency in circulation (say 11m coins), Bitcoin has a large climb in
value ahead of it _if_ it were to become a world currency, and if no other
currency were in use. What is the USD worth if you price it this way though
with only 3b in circulation and ?

If you say the value of a currency is its ability to buy other goods Bitcoin
is currently worth a lot compared to other currencies and prices in it are
deflating rapidly, but it has crashed before and will again, because the only
measure of value seems to be confidence in its possible future uses, and that
makes it very hard to pin down the value. It would be interesting (but I
suspect impossible) to try to calculate a value for each Bitcoin based on
actual use to buy goods of known value at the present time (as opposed to
speculative trading).

If you base it on its use value as a medium of exchange, I have hesitations
about the utility of Bitcoin, because of its anonymous nature (not tied to
verified IDs), lack of regulation, deflationary policy, and lack of backing,
and thus hesitations about its value. As a result of the free-floating value
and lack of regulation, I suspect Bitcoin prices will behave far more like
stock markets (a random walk) than like a normal currency which is pegged to
others to some extent, and thus will be difficult to establish as a medium of
exchange because of the volatility.

I also find it hard to believe if it is successful that it will not be
supplanted by some other digital currency which has fewer of its limitations
and is more suited to transactions between people who do _not_ value anonymity
above all, and wish to be protected from fraud, and the govs and corps that
would like to track them. All you have to do to set up a competitor is
establish some rules and get people to use it - something which corporations
or governments can easily achieve if their monopoly on the money-supply is
threatened in a meaningful way.

------
D9u
Now I'm kicking myself for not buying into BTC last week!

~~~
jlgaddis
I bought $9,000 worth of BTC at $7 two and a half years ago.

I sold them when it hit $30. :-(

~~~
BinaryBrainz
$38500 aint bad, but it isn't $771000. I wish I would of purchased more than
one when it was around $65 (right after the first pop). Now I'm trying to find
the thumbdrive that contains the bitcoins that I got from the original
fountain.

------
dschiptsov
Bandwagon + Peer effects = a "gold" rush. btw, the current exchange rate -
$600 is making it worthless for everyday payments or small shopping. It is
just a mass hysteria.

~~~
eurleif
>btw, the current exchange rate - $600 is making it worthless for everyday
payments or small shopping.

Huh? Why? You can buy fractions of a bitcoin, you know.

~~~
dschiptsov
Prices like 0.0167 are averse.)

~~~
dwaltrip
_That 'll be 17 millicoins, sir. Would you like a receipt?_

Or whatever hip term the youngsters come up with ;)

------
ezl
the _price_ of bitcoin is skyrocketing.

why? "more buyers than sellers"

------
Kiro
Completely OT but what's up with the scrolling? Why would you do that?

