
Bitcoin Tops $50USD on MtGox - kenthorvath
https://mtgox.com
======
frisco
Don't listen to the "it's out of control" or "is very due for a crash because
it's rising so quickly" stuff. It comes down to a very simple test: do you
think that there are significant reasons Bitcoin would or would not gain
acceptance as a mainstream currency?

A few reasons I can think of why it would:

* The current banking system is inherently insecure. If you have an account number and a routing number (written on the bottom of every check), you can pull money. Bitcoin is potentially much more secure.

* It's way too difficult to send money today, especially internationally, and fraud is a huge issue. We shouldn't need something like PayPal. Bitcoin solves this.

* If you don't have faith in banks or central governments, Bitcoin doesn't require trust in any third party to function. You aren't dependent on any bank.

A few reasons it might not:

* It requires too much technical knowledge to use and is unapproachable for mainstream users.

* It's too tied up with illicit interests and won't break out of that image, leading it to an untimely demise in culture. A fax machine is no use if no one else has one.

* There are lurking fatal flaws in the underlying technology. Maybe a blockchain fork is much more possible than currently assumed, or there's found to be an error in the cryptographic scheme.

* Mining power ends up concentrated in the hands of few when ASICs are in full swing and transaction fees aren't enough to keep individuals at it, giving power over the blockchain to a few (potentially malicious) actors. There's no guarantee transaction fees will actually pick up the incentive slack.

If you think that Bitcoin will ultimately be widely adopted, buy now. $50 /
btc is very cheap in that world. If you think Bitcoin will fail, then any
price is too much. Any mumbling that "it's doubled in a month and therefore is
set up to come back down to earth" is just hand waving.

~~~
citricsquid
> The current banking system is inherently insecure. If you have an account
> number and a routing number (written on the bottom of every check), you can
> pull money. Bitcoin is potentially much more secure.

If the company you store your wallet with is hacked you lose everything, if
your laptop is stolen or your dropbox account is hacked... it's as safe as
keeping cash in your apartment. If your bank fucks up your money is (almost
always) insured.

[http://arstechnica.com/tech-policy/2012/09/hacker-
steals-250...](http://arstechnica.com/tech-policy/2012/09/hacker-
steals-250k-in-bitcoins-from-online-exchange-bitfloor/)
[http://arstechnica.com/business/2012/03/bitcoins-
worth-22800...](http://arstechnica.com/business/2012/03/bitcoins-
worth-228000-stolen-from-customers-of-hacked-webhost/)
[http://arstechnica.com/tech-policy/2011/06/bitcoin-price-
plu...](http://arstechnica.com/tech-policy/2011/06/bitcoin-price-plummets-on-
compromised-exchange/)

> It's way too difficult to send money today, especially internationally, and
> fraud is a huge issue. We shouldn't need something like PayPal. Bitcoin
> solves this.

Fraud is a huge issue that Bitcoin does not solve. Send your money over
bitcoin and it's gone, _forever_. Paypal etc. offer protections, they're not
bulletproof but they're better than nothing.

~~~
mrb
_"If the company you store your wallet with is hacked you lose everything"_

Which is why it is not recommended to store Bitcoin wallets with third
parties. Store it and secure it yourself.

 _"if your laptop is stolen or your dropbox account is hacked... it's as safe
as keeping cash in your apartment."_

Which is why it is recommended to encrypt your wallet, so that if your laptop
is stolen, the attacker has no access to it.

 _"If your bank fucks up your money is (almost always) insured."_

Eventually, if the Bitcoin economy continues to grow, an insurance market will
develop itself.

 _"Fraud is a huge issue that Bitcoin does not solve"_

Actually it does solve the biggest fraud issue of today: fraud during
purchases. Merchants receiving bitcoins are guaranteed that transactions are
irreversible and cannot be charged back.

What you mean, is not that Bitcoin does not solve fraud, it is that Bitcoin is
hard to "secure". It _is_ a hassle for a user to encrypt his local Bitcoin
wallet with a secure passphrase and to ensure that his computer is not
infected by keyloggers/malware attempting to steal the passphrase.

Fortunately, there are efforts from different groups to develop credit-card
sized tamper-proof hardware Bitcoin wallets (think about typing a pin code on
a small device, which sends a Bitcoin transaction via NFC or via showing a QR
code on an e-paper display).

~~~
khuey
BTC may solve buyer-side fraud, but it creates a giant seller-side fraud
problem.

~~~
xur17
I basically see advantages for the seller (lower fees, fraud protection), but
none for the buyer (seller-side fraud potential, no cash-back).

Therefore, why would I, a buyer use this vs a credit card?

~~~
oleganza
Since transactions are irreversible, buyers need to fill less forms and have
lower prices. Coindl.com sells you stuff with no registration/forms/emails -
it shows a QR code and gives you a download button within two seconds after
you sent a transaction. And buyer does not need to trust his CC details to new
merchants. He only risks the amount to be paid, not the whole bank account.

~~~
neilkumar
But a compromised credit card doesn't mean you risk your whole bank account.
First, at least in the US, there are limits to what you are liable if you are
card is compromised -- report within 48 hours, the limit is $50, report within
60 days, the limit is $500. Second, credit cards have a credit limit -- so,
worst case scenario, you'd be out to whatever your limit is (which is unlikely
to happen as any weird use of your card would probably trigger it for a
security review, which wouldn't allow any transactions until someone talks to
you). Finally, credit cards (unlike debit cards), are not linked to your bank
account.

~~~
oleganza
Compromised credit card adds significant hassle while Bitcoin transaction adds
zero hassle. So CC is worse than Bitcoin for both parties: merchant can lose
money and have to insure against it with paper work and higher prices,
customer has to worry about reputation of a merchant and check his balance
regularly, call the bank quickly etc.

Yes, if the merchant steals from the buyer, the raw BTC transaction is not
reversible. But normally merchant has much more to lose than you if he is not
nice (and merchants show their commitment by investing a lot in marketing and
development) and in rare cases when you transact more money, you can use
escrow and extra paperwork. But that's totally optional and is not needed when
paying for a coffee, a book, or some inexpensive service.

------
obiefernandez
If 500 million people were to embrace Bitcoin to the point where they own on
average $100 worth, then it would represent $50 Billion in value (500 Million
x $100). With only 20 Million Bitcoins in circulation, each Bitcoin would be
worth $2500.

That's discounting other deflationary factors.

I think it would be nuts to put all your savings in Bitcoin, but as a hedge
against fiat currencies and interesting place to put play money: time to buy!

~~~
josephagoss
I Speculate on Bitcoin by holding a few, but be-careful! First if you read the
forums a lot there are a lot of scaling issues happening at the moment (Max
block size) that mean Bitcoin cannot handle a large amount of transactions and
this will put a big dampener on the BTC being worth thousands of dollars.

Second, time to buy is never when the price is sky-rocketing. Bitcoin is not
perfect and we need to see what the devs do over the next year to decide if
Bitcoin will ever be allowed to scale because at the moment Bitcoin cannot
scale up beyond 2-4 times its current usage and adoption.

------
zwtaylor
This recent spike may have a lot of do with this just-issued repot from the
Treasury department.

[http://www.fincen.gov/statutes_regs/guidance/html/FIN-2013-G...](http://www.fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html)

~~~
eric_bullington
This 100%. The U.S. Government just effectively legalized Bitcoins and other
virtual currencies in the document posted above. This is a huge development,
much more important than Bitcoin going over $50.

------
habosa
Is there any exchange where I can short sell bitcoins? Besides the fact that
this will almost definitely be a profitable strategy in the near future, it
would seem that allowing both short and long positions would create market
stability. Most securities exchanges allow both short and long positions.

~~~
Permit
Short selling Bitcoins would be an incredibly risky move on your part. There
are no financial regulations in place to prevent market manipulation. You used
to be able to short sell on Bitcoinica and there were some really questionable
margin calls that took place.

~~~
habosa
Can you elaborate? I'm not too familiar with the bitcoin market, just viewing
it from a normal (amateur) financial perspective.

~~~
jfoutz
Read up on the hunt brothers and the silver markets. Essentially, they would
buy up contracts with brokers to buy 1lb of silver on july 1st for $10 (or
whatever the specifics happen to be). Then, in June they bought all the
silver, like some ridiculously huge fraction of all the silver in the world.
When it comes time for that broker to find that pound of silver he owes the
hunt brothers, the hunt brothers get to set the price, because they're the
only ones with silver. So this broker, he has to come up with how ever much
the Hunt brothers demand, he is really over a barrel.

Just one memorable example of market manipulation and unlimited exposure.

------
trg2
Are bitcoins in a position to have a crash as tumultuous as last time, or is
the currency more stable now overall?

~~~
plaguuuuuu
It will probably crash. Obviously it has had greater accessibility and hype
lately. Coupled with profitable mining becoming impossible for most people
riding the boom looks more and more attractive. At some point in the future
the buying volume will taper off due to less new speculators getting into the
game.

If BTC had anything actually underpinning its value we could work out the
ratio of how overvalued it is. Unfortunately it doesn't - even the fact that
real transactions are made with BTC doesn't change anything, as the value is
so elastic that a T-shirt selling for 1 BTC 6 months ago would sell for a
fraction of the BTC now.

If the currency is stable now, what exactly is making it stable? Where does
the equilibrium come from? Isn't it unstable by definition anyway since it's
rising uncontrollably?

~~~
mrb
_"Coupled with profitable mining becoming impossible"_

Well it is incorrect to state that. Obviously, as the exchange rate increases,
mining becomes more and more profitable. In fact, as of today ($50/BTC,
difficulty factor around 4.9M, 25BTC/block) mining has never been so
profitable in over a year(!) since January 2011 ($6/BTC, diff=1.1M,
50BTC/block)!

------
arasmussen
It's literally doubled in a month. This is out of control.

~~~
shredfvz
Facebook's market cap is $63,000,000,000. If the market cap of Bitcoin were
just _10%_ of Facebook, each Bitcoin would be worth about $500. 1% and it's
about $50.

Can a global financial system conceivably give the world just 10% of the value
of Facebook? Because just ten percent ... and one BTC is $500.

Oh, but clearly society demands Farmville, you say? Clearly we don't need a
new financial system ... more than we need to know who Joe Bob hooked up with
this weekend.

As if there's no pain being solved here by Bitcoin. As if there are no
problems with USD or the EUR. As if Cypriots are just pissed off over spilled
milk right now. After all it's only a "haircut".

It's so funny to see how most people on HN are here to make businesses that
scale infinitely. What could possibly, POSSIBLY, scale faster and more widely
than an open source global currency? The price increase in the last month
represents a trickle of people around the globe exchanging fiat for BTC. Just
a trickle. Whereas most people are obviously hesitant to invest. That would
include most people on HN.

The supply of Bitcoin is ridiculously tiny. Only 11,000,000 in total are in
circulation today, let alone available for purchase on the market.

Sellers wanted. I acquired enough BTC to make me happy without being over the
top - and I'm not ever exchanging it back into any other ass backwards asset
class, gold and silver (and USD) included. Early adopters of BTC are from what
I can tell mostly the same way, if crazier than I am.

Bitcoin is valuable because the world desperately needs to escape the current
financial system. Individual sovereignty and financial privacy are the most
scarce resources on the planet, bar none. It's not too late to acquire BTC,
put it in a brainwallet and carry around $10k at all times. Now let's all go
back to flinging monkey poop at consumers over the Internet.

~~~
joezydeco
_The supply of Bitcoin is ridiculously tiny. Only 11,000,000 in total are in
circulation today, let alone available for purchase on the market._

Bitcoins can be divided to 8 decimal places at the moment (it could be
expanded). So instead of 1.1e7 units, isn't it 1.1e15 units?

~~~
wmf
Yes, but the exchange rate is quoted in BTC.

~~~
joezydeco
So? Everyone knows how to do the necessary math.

One Japanese Yen currently costs $0.0104715 USD. The price fluctuates down
into the lower decimals. People deal with this every day.

------
unix-dude
Really interesting stuff. I was expecting a crash or at least "return to
normal" in that period where the price jumped to around $25 (before a mini-
crash to like $16, and then the subsequent takeoff to the 40s).

Personally, I dont think they're worth $50, but heck, thats a horrible reason
for you not to buy them. A more objective reason not to buy now is that there
are people holding thousands of bitcoins. If a few of them (or maybe even one
big player) sells tons of them, it could cause a crash like last time, when
the price fell from $33ish to almost 0.

Interesting times for bitcoin either way.

~~~
mrb
You are incorrect. When the "price fell to zero" in June 2011, it was the
result of bogus trades from a hacker: <http://blog.zorinaq.com/?e=55> No one
had enough bitcoins to crash the price that low for real.

As of today there are so many bids on MtGox alone that selling 100k bitcoins
is barely sufficient to crash the price to the low $30s. Anybody owning that
much is obviously long on bitcoin. It will take a _lot_ more than a "few large
holders" to crash the price to $30 or below. It would take a massive market
panic.

------
cstrat
I originally put about $500 dollars into Bitcoin to play with. Have withdrawn
about $2000 cash and still have about 35 BTC worth left. Would have loved to
get in on this back in the early days...

------
stcredzero
What is the proportion of BTC volume due to speculation vs. due to buying
transactions?

------
ohashi
Time to sell

~~~
BrianEatWorld
It seems funny to assume that. I mean I haven't been tracking the underlying
fundamentals, but the nature of most currencies today is that because they are
managed, they tend to go up and down. If the fundamentals are solid for
Bitcoins, as in there is actually increasing demand (which seems feasible
given all the new services advertising their acceptance) and the supply is
increasing in tune with expectations (which seems feasible given that it can
be forecast with a fair amount of accuracy), this may just as well be the time
to buy as it is to sell.

I guess human psychology could also play a part in thinking this is the time
to sell, but do the fundamentals actually seem questionable to you?

~~~
Helianthus
I don't believe that you actually have any understanding of the supply/demand
economics of booms/busts necessary to be skeptical of parent.

Increasing demand of a finite resource drives the price up. This drives the
demand up even more.

The real value of a Bitcoin is still in USD, of course, so at some point it's
going to cross over a line where the people holding Bitcoins want to get rid
of it.

Decreasing demand of a finite resource drives the price down. This drives the
demand down even more.

The fact that the price is accelerating so quickly indicates a runaway effect.

What, do you _really_ think the real-world USD value of all the Bitcoins in
the world has doubled in two weeks?

~~~
BrianEatWorld
Your analysis holds true if you are treating bitcoins as purely speculative.

You are correct that I don't fully understand supply/demand economics, because
as an Austrian theorist, my concepts relating to booms and busts use dynamic
models and not the statics you are using to prove your point. In a static
situation, increasing demand of a finite resource does drive the price up,
which can drive up demand even more, but thats if you ignore the effect of
substitutes, which for both the exchange and speculative value of bitcoins,
there are several.

Do I really think that it has doubled? No. But I don't think that people
expecting a large crash like before are doing so because they understand the
fundamentals. I think, as in any market, you do have speculators, but I also
think that the legitimate demand for bitcoins as a means for exchange has gone
up since the previous crash providing a more solid basis for the higher price.

~~~
Helianthus
>Do I really think that it has doubled? No.

Then it sounds like the speculative bits are driving, even if there are other
passengers in the car.

