
Bitcoin Reaches All Time High Market Capitalization - mrb
https://bitcointalk.org/index.php?topic=141465.0
======
JumpCrisscross
I investigated launching a Bitcoin exchange traded product (ETP) about a year
ago. One of the issues was the market cap of BTC - an ETP would not be
profitable with under $25 million under management. That is still 10% of the
market cap.

More pressing is float, i.e. volume being traded or sitting on the sidelines
able to be traded. The concern is that BTC is like the diamond or Facebook
private stock markets - a tiny float, bid up by a few zealots, unable to
sustain a broader liquidation event without a significantly impairing its
price.

BTC is still of tremendous interest, e.g. practically uncorrelated with the
U.S. money markets, though that will get eroded as it plugs into the financial
system. But the complexity of the BTC microstructure is holding back the
development of deeper, more sophisticated markets.

~~~
dfc
I like the idea of bitcoins but I do not understand what the purpose of a btc
ETP would be? It seems that an ETP would have all the risk associated with
buying BTC but none of the benefits. I'm a finance noob so this is not
criticism, I'm curious.

~~~
JumpCrisscross
It offers _liquid_ BTC exposure on a _trusted_ platform.

There are more investors and market makers with deeper pockets on stock than
Bitcoin exchanges. They prefer trading there because of there is a lower
chance of one's balance vaporising at JPMorgan than at Mt Gox.

~~~
SilasX
I can't directly reply to this:

<http://news.ycombinator.com/item?id=5175163>

so I'll say it here -- yes, an exchange-traded derivative of bitcoin would
certainly benefit from higher liquidity. But why would its liquidity there
necessarily be any different (or quicker to get your money in/out for
amateurs) from the existing BTC exchanges? The interest in the BTC ETF depends
on demand to trade in BTC in general, already captured on exchange sites.

Or is there some reason market makers would find it attractive to provide the
liquidity?

~~~
JumpCrisscross
Gold was traded in spot commodity markets long before GLD came along, yet
there is demand for GLD apart from gold. Similarly, demand for Bitcoin on BTC
exchanges is constrained by (1) trust issues regarding the exchanges, (2) the
energy it takes to connect to those exchanges, and (3) fund mandates limiting
their assets to listed securities.

(1) Counterparty risk. The probability of the U.S. equities clearing system
collapsing is infintesimal compared to the odds of (a) a dick at Mt Gox
running away with the money, (b) a dick hacking Mt Gox and running away with
the money, or (c) any number of technical or personnel problems that could
limit the ability of a customer to withdraw their funds in a timely manner.
This is still my #1 concern regarding setting up a Bitcoin market making
operation.

(2) Barriers to entry. Everyone in finance is already plugged into the majour
stock exchanges. Connecting to a new exchange involves investments of time and
technology.

(3) Mandates. Many funds are required to trade only listed products).

A Bitcoin ETP would require active hedging in the Bitcoin spot markets. Thus,
think of the ETP as a liquidity gate. I do not believe the BTC markets are
ready for the flood gates yet.

------
eof
I have been following bitcoin since they were less than a penny each, and got
my first coins at about .20 each. I have written articles (really the only
thing I have ever written that has been widely read) about bitcoin, and I want
to see it succeed, both because it will change my financial situation and
because I believe central bank issued currency that flows through the hands of
banks is a mechanism for control over people.

All that being said, I think we are in the middle of the next big bitcoin
surge, and I don't want to see "bitcoin reaches all time high xxxx" posts
everyday.

~~~
mrb
I made the HN submission; and you know what? I agree with you. On a second
thought I would have rather not posted it. I much prefer a slow and steady
increase of value, instead of another Bitcoin valuation bubble made even more
rapid by publicizing it all the time.

------
tytyty
I'm quite ecstatic about this. I invested in bitcoin early on when it was
around $1-3 a coin. I try to buy goods with it at legitimate places like
bitcoinstore when it's up, and buy more when it's down. I just, you know,
actually believe it's a great alternative and want to see it succeed.

I do have concerns about it scaling to handle massive amounts of transactions,
and what will happen with transaction fees and mining rigs as the mining
reward is reduced, but it's step in the right direction for currencies.

~~~
betterunix
"I do have concerns about it scaling to handle massive amounts of
transactions,"

Relevant:

<https://dl.acm.org/citation.cfm?id=1754992>

Of course, Bitcoin does not really have offline transactions, so this may not
be all that relevant (though lacking offline transactions is a pretty serious
limitation).

~~~
jerfelix
Correct me if I am wrong, but the prevailing thought when that article was
written (1992) was that digital currency would resemble more of a transferred
digital coin, with signatures representing each transaction. So if I had coin
#12345, and I transferred it to you, I would digitally sign it to you giving
your private key the spend capability.

With those architectures, a central authority would be required to prevent the
double-spend. And with those architectures, the coins grow with each spend.

The difference with Bitcoin (which I think is totally misnamed) is that it's
not a coin architecture, it's a ledger architecture. So no matter how many
times the amount 1BTC is transferred, each transfer _could be_ just the same
length - the sender's address, the recipient's address, and an appropriate
signature. Even 50 years from now and ten thousand transfers of that "coin"
later, the "coin" doesn't get larger.

The ledger gets larger, but the coin does not (since really there's no such
thing as a "bit COIN" - really what you have is a series of account numbers in
the giant shared ledger.)

~~~
betterunix
"With those architectures, a central authority would be required to prevent
the double-spend"

Not necessarily; another approach, which is common in protocols that allow
offline transactions, is to force cheaters (i.e. people who double spend their
tokens) to reveal their identity. It helps to think of the nonce in DSA: if
that nonce is used for one signature, the secret key remains secret, but if
the nonce is reused in another signature then the two signatures can be used
to compute the secret key. Similarly, in a digital cash system, if the same
token is used in two different transactions, then the two resulting tokens can
be used to compute the identity of the person who spent that token in the two
transactions (and hopefully, whoever computes this will warn everyone else
about it).

"with those architectures, the coins grow with each spend."

Chaum's result applies to _any_ secure offline electronic transactions,
regardless of the internal workings of the transaction. The argument is
basically this: to maintain the security of the transactions, the amount of
information being transferred per transaction must increase in the number of
offline transactions that involved a particular "unit" or its "derived" units
(e.g. if the system supports splitting the currency, as Bitcoin does). It does
not make a difference whether or not the system has a central authority; all
that matters is that the system allows some value to be _securely_ transferred
in an offline/peer-to-peer fashion i.e. that a transaction do not require any
communication with any parties not involved in the transaction itself.

"The difference with Bitcoin (which I think is totally misnamed) is that it's
not a coin architecture, it's a ledger architecture"

I read this as saying basically this: there are no offline transactions in
Bitcoin; every transaction involves communicating with other nodes in the
Bitcoin network. Which is well-aligned with Chaum's result, because Chaum's
result boils down to a trade-off: either you support offline transactions and
incur a scalability penalty (which a central authority can fix by trading
"old" tokens for "new" tokens), or you only allow online transactions (or
something in the middle, like "receipts," which Chaum discussed). I would call
the lack of offline transactions a major technical shortcoming of Bitcoin that
severely limits its utility, but I suppose not everyone agrees with that
statement.

------
stch2
I have a question about bitcoin -- let's assume that it actually starts
becoming popular. What stops any country that's adopting it from simply
forking their own version? Specifically, why is everyone investing in _this_
particular instance of bitcoin?

~~~
betterunix
Why would any country want to adopt Bitcoin? What incentive does any country
have to do such a thing?

A country would be more likely to introduce a Chaum-style digital cash system,
where the government would act as an issuing authority for digital cash
tokens.

~~~
adrianbg
They might adopt it if it's more stable than their currency, like how Ecuador
uses the US dollar.

~~~
betterunix
Perhaps, but it would have to be adopted side-by-side with a currency that can
be used (securely) for offline transactions. Why do that, when you could just
adopt one currency that can be used both offline and online (especially since
you can deploy a digital cash protocol for any currency, and thus you only
really need one that is useful for offline payments)?

------
nym
If you want to find out how to buy bitcoins (it's hard to mine them now),
there are a set of online guides at:

<http://howdoyoubuybitcoins.com/>

tl;dr use coinbase (just like paypal / 1%) or bitme (chase deposits / 0.75%)

~~~
MacsHeadroom
coinbase.com is actually a Ycombinator start-up!

So if you have problems with them, you know just were to bitch about it. I
kid. I kid.

Joking aside, I've only had great experiences with the folks over at Coinbase.

------
k2enemy
The fact that people talk about the "market capitalization" of bitcoins
suggests that they treat it as a speculative investment and not a currency.
Maybe it is unavoidable in the adoption phase of its life (supply relatively
fixed and demand fluctuating), but the price swings relative to other
established currencies detract from its usefulness as a currency.

------
synctext
Bubble Warning

That is the more fitting word, instead of 'all time high market cap'. See our
before-it-was-famous academic debunking of Bitcoin:
<http://www.pds.ewi.tudelft.nl/~victor/bitcoin.html>

Highlights: \- scalability to Visa/Mastercast number-of-transactions is
architecturally not possible currently \- as many have said: it's not
anonymous \- security has numerous widely discussed issues

~~~
gst
Your last paragraph on the link says it all: "BitTorrent is technologically
complicated, infrastructure-wise inefficient, much less usable than a regular
Web download, etc. But it got popular anyway, mostly because of unreasonable
greed and paranoia of incumbent oligopolistic players."

After reading this (I started with reading the conclusion) I'm glad that I
didn't waste my time with the remainder of the article. This doesn't seem to
be an objective article, but just subjective ranting.

------
gbhn
So how would one short bitcoin?

~~~
AndrewDucker
With a contract to supply it at a future date, paid immediately.

~~~
betterunix
So what would you do if the counterparty failed to deliver on that contract?

~~~
SilasX
Castration? I don't know, whatever they do on "plain vanilla"
exchanges/brokerages that allow shorting.

Although there were recent scandals about people shorting shares that didn't
exist, and when they would have reaped a profit, they were told there was no
record of the shares, "but we can reverse the transaction if you like".

------
steeve
Am I the only one here who feels like they're missing out on something with
Bitcoin?

~~~
csdreamer7
I still feel the majority of the money that is being put into bitcoin is
speculative(as opposed to having hard data). I think if you buy bitcoins now
you lose money at the end of the bull's run. That could easily change if
Amazon or Steam start accepting them and the money from actual uses drowns out
the speculators (and therefore any growth in the value of the coin has real
use backing instead of easily spooked speculators).

~~~
jerguismi
Amazon or steam hardly matters if the international drug/gun trade adopts
them. However that might also mean regulatory problems.

------
damian2000
History of bitcoin:

\- slow start

\- exponential rise

\- exponential fall

\- exponential rise

\- ??

~~~
MacsHeadroom
More like:

\- constant exponential climb

[http://bitcoincharts.com/charts/mtgoxUSD#igWeeklyza1gEMAzm1g...](http://bitcoincharts.com/charts/mtgoxUSD#igWeeklyza1gEMAzm1g10zm2g25zi1gVolzl)
(note the Log scale)

That minor "fall" in 2011 was an over-hyped blip. Minor boom and bust cycles
are normal.

~~~
arethuza
I would agree that the underlying trend looks exponential - but that "blip"
takes up about a quarter of that chart (about 7 months or so).

