
As Big Investors Emerge, Bitcoin Gets Ready for its Close-Up - uptown
http://dealbook.nytimes.com/2013/04/11/as-big-investors-emerge-bitcoin-gets-ready-for-its-close-up/
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zeteo
Poor Winklevoss twins keep taking the wrong decision at the wrong time...

"This social network idea looks great, let's tell Mark Zuckerberg about it!"

"Bitcoin has been rising so fast, we should sink a few million dollars into
it!"

~~~
tlrobinson
It sounds like they started buying long before this latest hype cycle:

"The 31-year-old identical twins have amassed _since last summer_ what appears
to be one of the single largest portfolios of the online currency that has
caused such a stir in financial and technology circles."

Though I do wonder about the timing of them going public with this fact.
Perhaps they're trying to dampen the crash.

~~~
gojomo
I'd bet they started talking to the reporter near the $266 peak -- "look how
savvy we are!" -- and publication came after the last 24-36 hour crash.

~~~
guard-of-terra
I'd bet you didn't read TFA: _But the 6-foot-5 Winklevii were unfazed by the
latest tumult. Indeed, the brothers said they used the low prices to buy more_

~~~
gojomo
That the reporter got their comment about the latest plunge provides no
evidence either way about when they first talked to the reporter about their
Bitcoin holdings. For a story like this, it's almost certain that the
interviewing began more than 48 hours ago.

(I'd bet you'd benefit from thinking more deeply before playing 'gotcha' with
non-dispositive article excerpts.)

~~~
guard-of-terra
\- They started to buy last summer. \- They bought cheap after prices
collapsed.

This makes it look as if they were smart. As in, "not doing stupid things out
of panic or euphoria".

~~~
illuminate
"This makes it look as if they were smart"

Seriously. If this was the case, they wouldn't have publicized their
"investments" only when it became trendy. I hope they lose a butt-ton on BTC.

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tsotha
You'd be crazy to put serious money into bitcoins. Not because it's
fundamentally flawed as a currency (I don't have the expertise to know if
that's true or not), but because if bitcoins ever become more than a sideshow
governments around the world will make their use illegal ( _de facto_ if not
_de jure_ ). People left holding the currency will be out of luck.

Controlling a currency is a politically easy route to tax everybody who uses
it, and governments will not give up that privilege even if it means intrusive
new controls on internet traffic.

~~~
ivix
Control of a currency has little to do with taxation.

Eurozone countries manage to tax income just fine even though they do not have
"control" over their currencies.

~~~
rollo_tommasi
They have control of the nodes and vectors through which the money flows,
which is I think what the parent meant by control over "currency".

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tvladeck
> “We have elected to put our money and faith in a mathematical framework that
> is free of politics and human error,” Tyler Winklevoss said.

Well, I don't even know what to say about that. Bitcoin is pretty awesome tech
but I don't think anything can take care of human error...

~~~
brown9-2
It seems like humans are doomed to continually rediscover that the weakest
part of markets is always the other humans.

~~~
anon808
well said. folks tend to forget that there's no entity such as a 'market' that
you can deal with, there are only people, just like you with strengths and
weaknesses, nothing more.

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citricsquid
Maybe this guy will get his wish if the Winklevoss twins lose everything:
[http://www.reddit.com/r/Bitcoin/comments/1c525e/ive_lost_mor...](http://www.reddit.com/r/Bitcoin/comments/1c525e/ive_lost_more_money_in_the_past_24_hours_than_ive/)
[http://www.reddit.com/r/Bitcoin/comments/1c5m6w/class_action...](http://www.reddit.com/r/Bitcoin/comments/1c5m6w/class_action_against_mtgox/)

~~~
rayiner
That second reddit thread is amazing.

OP: "Do we have any legal ground to stand on here? Lots of people have had
their lives torn apart by this.

I remember NASDAQ had to compensate people after the debacle that was the
Facebook IPO. Why is this any different?

I would appreciate your thoughts. Thanks."

Top response: "Well, considering bitcoin isn't regulated by the SEC - no you
have no legal ground to stand on."

Further down: "So you want your unregulated currency to be.... regulated?"

OP in response: "There is a difference between financial regulations and
corporate liability/consumer protection laws.

It's not about financial regulations."

In Bitcoin, we are currently watching a microcosm of how the traditional
financial system came to be the way it is. It's really a rare opportunity to
see the evolution of complex social systems in real-time.

~~~
ChuckMcM
_"In Bitcoin, we are currently watching a microcosm of how the traditional
financial system came to be the way it is. It's really a rare opportunity to
see the evolution of complex social systems in real-time."_

I fear we are also watching the schooling of a naive minority in the
difference between what is "right" and what is "legal." Way too many people
I've talked to about Bitcoin are so in love with the concept that they haven't
really considered the implications. Yes, someone could, conceptually, break
into Mt. Gox and "steal" all of the Bitcoins there, which some would see as a
multi-million dollar equivalent theft, and the "authorities" would see it as a
'zero' dollar equivalent theft. Unlike regulated currency Bitcoin doesn't have
an enforcement agency. That limits your options when it goes away.

I've been looking, such that I can, at various 'events' (alledged or actual
unapproved transfers of Bitcoin from one wallet to another) and have yet to
find a single one where there was any legal repercussions at all. I'm
interested in finding some so if anyone reading this comes across them I'd
love to read them.

This is really a 'new' thing when it comes to case law as far as I can tell
and somewhat wide open to interpretation.

~~~
rayiner
I mean that's a really astute point and raises interesting questions. If
someone takes your bitcoin, is that theft? What if a bitcoin denominated
contract is breached--did you really suffer economic damages?

~~~
illuminate
It's really fascinating how quickly someone who believes in the ultimate
supremacy of contracts may try to weasel out of their own obligations.

------
jbooth
I don't know how many times this will have to be pointed out before people get
it...

Currencies don't have investors, they have users. Sure, there are currency
traders but the point is to be used.

~~~
tptacek
I'm not sure what point you're trying to make.

As you acknowledge, currencies obviously do have traders, like George Soros.
So it's hard to start a comment with "currencies don't have traders".

One of the problems with Bitcoin, of course, is that it is intensely
speculative; its "users" hoard it, and its transaction volume as a currency is
so extremely thin (blog tip jars and "spa powder") that its "exchange rate"
(more appropriately, it's spot price) is untenably volatile.

~~~
jbooth
The exceptions prove the rules of course.

Currencies do not have (>10% of volume of transactions) investors, they have
(>90% of volume of transactions) users.

Currencies are primarily mediums of exchange and occasionally used as an asset
class. Bitcoin is primarily used as an asset class and very occasionally used
as a medium of exchange.

I don't think you're really disagreeing with me, we're just quibbling on
semantics.

~~~
chollida1
> Currencies do not have (>10% of volume of transactions) investors, they have
> (>90% of volume of transactions) users.

Are you sure about your numbers?

from the fx exchange wikipdeia page:

> As such, it has been referred to as the market closest to the ideal of
> perfect competition, notwithstanding currency intervention by central banks.
> According to the Bank for International Settlements,[3] as of April 2010,
> average daily turnover in global foreign exchange markets is estimated at
> $3.98 trillion, a growth of approximately 20% over the $3.21 trillion daily
> volume as of April 2007. Some firms specializing on foreign exchange market
> had put the average daily turnover in excess of US$4 trillion.[4]

If you are right that less than 10% of fx transactions are traders and there
is 4 trillion in fx trades a day then there must be 36 trillion in non trader
transactions a day.

That seems a bit high to me:) I think if anything you've got your values
transposed:)

~~~
Locke1689
Why does 36 trillion seem high? Sounds about right, especially since some of
the forex trades are for legitimate currency changing, not speculation.

~~~
chollida1
Mostly based on the Wikipedia estimate of 69 trillion as the world wide GDP.
Though as I said, it's also very much a gut feel:)

~~~
Locke1689
You should look a little more into what GDP means. The "money" you see is very
much the tip of the iceberg.

~~~
chollida1
> You should look a little more into what GDP means. The "money" you see is
> very much the tip of the iceberg.

:) I work in finance. I'm well aware of what GDP means. I appreciate you
trying though:)

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deepblueocean
Oh, so _that's_ why the value is crashing... people just wanted to get out
once they saw the Winkelvii getting in.

Well that explains everything. I can go home now.

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rdl
The OpenCoin a16z invested in is presumably Ripple (where the parent company
named itself OpenCoin relatively recently), not the long-standing and more
useful OpenCoin.org (which is an open source electronic cash protocol
library).

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epoxyhockey
I'm completely fascinated with how quickly this bubble inflated and deflated:
about 3 weeks.

If the bottom hadn't already dropped out, I would say that this news article
indicates a good time to hit the sell button.

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carbocation
Wow, this bitcoin / Winkelvoss story is front page news on the New York Times
website: <http://i.imgur.com/rSLLqZz.png>

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7Figures2Commas
The problem the Winklevoss twins have is that they seem to be placing a bet on
what they believe will be a long-term secular trend through an instrument that
is extremely volatile and better suited to speculation, and that will probably
continue to be for the foreseeable future. In doing so, they're taking on a
level of risk that is unnecessary given their investment thesis.

If the Winklevoss twins truly believe that the future of "virtual currencies"
is bright, their investments should be focused almost _exclusively_ on
ecosystem companies, not the currencies themselves.

