
Bitcoin rises from $14 to $40 in two months - oleganza
http://bitcoincharts.com/charts/mtgoxUSD#rg60zig6-hourztgSzm1g10zm2g25
======
tokenadult
What is the price of tulip bulbs in the Netherlands these days? What have been
the ups and downs in that commodity over the years?

~~~
oleganza
I've posted that on HN because Bitcoin is not just some commodity, but a
useful technology that allows you to do many interesting things besides
payments. See [http://blog.oleganza.com/post/42262765318/direct-use-
value-o...](http://blog.oleganza.com/post/42262765318/direct-use-value-of-
bitcoin)

~~~
jellicle
If I recall correctly, tulip bulbs are a useful technology that allow you to
create beautiful flower gardens.

------
tsmarsh
If it ever becomes successful, we will marvel that individuals could ever
afford a bitcoin. 21 million is a tiny number for a currency when compared to
$40 trillion in global currency ($6000 per person).

~$1.25 billion spend on Cyber Monday ~$8 billion are traded for oil every day
~$150 billion NYSE daily

If bitcoin became the trusted currency for any of these activities what would
it be worth?

If bitcoin became the global currency we all get 0.003 each, making the upper
limit on a bitcoin around $1->2m depending on inflation.

Of course wars will be fought before bitcoin becomes a global currency. I'm
also not sure that people really want an inflation proof currency. But it is
fun to speculate.

~~~
sergiosgc
This is the fundamental characteristic of bitcoin that puzzles me. Most
currencies are inflationary, which in low doses is a good thing: it
disincentivizes keeping the money under the mattress, maintaining a healthy
flow of currency. Bitcoin is by design deflationary: it's value increases over
time.

Deflation is destructive to the economy, so if bitcoin is deflationary by
design, it can't ever be a primary currency, and thus it's expansion in usage
is constrained from the get go.

Now, if you assume the market is smart, then there must be some other motive,
other than usage, for appreciation. I suspect an artificial bubble.

~~~
snake_plissken
"This is the fundamental characteristic of bitcoin that puzzles me. Most
currencies are inflationary, which in low doses is a good thing: it
disincentivizes keeping the money under the mattress, maintaining a healthy
flow of currency. Bitcoin is by design deflationary: it's value increases over
time."

Thank you for this. I constantly try to explain this to bitcoin fanatics and
they don't get it.

~~~
Hermel
No one is disputing that Bitcoin is deflationary.

What's less clear is how damaging that actually is. If you are looking for a
way to preserve value, then being deflationary might even be beneficial. There
are plenty of things that are deflationary (i.e. limited in supply), such as
gold, stocks of a growing company, or real estate in Manhatten. Does that make
these things worthless?

------
cs702
All else being equal, the more people who use Bitcoin (whether as a store of
value or medium of exchange), the greater the demand for it -- and therefore
the higher its price, because the supply is fixed asymptotically at 21 million
bitcoins.

In the long run, Bitcoin's price will be positively correlated with
adoption.[1]

\--

[1] My thoughts on this haven't changed over the past two years:
[http://cs702.wordpress.com/2011/05/29/on-the-potential-
adopt...](http://cs702.wordpress.com/2011/05/29/on-the-potential-adoption-and-
price-appreciation-of-bitcoin-in-the-long-run/)

~~~
omellet
People will want to have it as an asset, not as a usable currency.
Appreciating currencies are disastrous for any economy stuck with them, which
is why we're no longer on the gold standard.

~~~
adventured
The gold standard worked in the US for about 170 years, which is part of why
the US became the wealthiest nation in history: it had an extraordinarily
trusted currency (green back = good as gold). Gold was worth $19 to $35 for
100+ years, and it worked, America had no problem growing dramatically.

The US economy also had no problem growing fast during the 1990s, when the US
Dollar was strong and had appreciated extremely strongly against gold over a
20 year period ($600 in 1980, to $270 in 2001).

China also dramatically counters this notion. The Yuan has appreciated
significantly (for a currency) over the last decade, while they've
simultaneously gotten far wealthier.

The disaster has been what has happened to our money since 1971 (specifically
the 1970s and since 2001). The real cost of goods has gone parabolic.

1964, 5 silver quarters (90% silver, 10% copper) for a $1.25 minimum wage, now
worth $25.90 ($5.18 each). That's pure destruction via inflation.

And that's not even getting into how the Fed + Congress funds insanity like
endless war because there is no gold standard restricting their spending
habits.

~~~
jbooth
_China also dramatically counters this notion. The Yuan has appreciated
significantly (for a currency) over the last decade, while they've
simultaneously gotten far wealthier._

Real world calling. China pegs the Yuan at 6.22 Y / $1. It's appreciated by
something like 3 cents over the last decade.

How do they do this? They _continually buy dollars with Yuan_. Increase the
supply of Yuan, decrease the supply of dollars. They can't stop, or the Yuan
appreciates, devaluing the dollars they already hold and, more importantly,
hurting their exports.

This is why you're seeing the federal government borrow money for 0.1%
interest, and why there's been almost-zero inflation despite deficts and
quantitative easing.

~~~
adventured
Yes, real world calling.

The Yuan is not pegged to the dollar. The dollar peg was lifted in 2005.

What you mean is, it has appreciated by 15% over just the last 5 years. That's
a significant value increase.

There has been dramatic inflation. Which is why a normal price for oil,
despite plenty of supply, is now $85 to $90. Also why gold is now $1500 as
normal. And also why grocery prices are at all time highs. And why housing
prices, even in the supposedly destroyed markets, are up 50% to 100% over 15
years - drastic by any historical norm, particularly so in an economy with 14%
real unemployment.

The Federal Government is borrowing at near zero because the global reserve
currency is temporarily the US Dollar, and the Fed is buying about 85% to 90%
of all new US Government debt because nobody else wants to touch it as they
know the disaster that is coming. If you think borrowing rates for the US
Govt. are going to stay this cheap for the next two decades, I'll take you up
on that bet.

~~~
jbooth
The RMB was 'depegged' as a press release but is only allowed to float in a
narrow range of 0.3%. (<http://en.wikipedia.org/wiki/Renminbi#Managed_float>).
Most of the increase in value from 2005 was a command decision from the CCP,
not a result of market float.

At any rate, 15% over 5 years is less than 3% inflation. That's low inflation.

I don't think borrowing rates will stay this cheap over the next 2 decades
because eventually the private sector will catch up to all the public jobs
we've been shedding under socialist obama and GDP growth will resume, creating
inflationary pressure again. But for now, and while we're either losing or
barely holding even on employment over the next year or so, the interest rates
will stay low. The second they touch 3% or 5% (normal inflation range), the
fed can start jacking up their interest rate to compensate.

In short: It's ok, our currency is not going to collapse.

~~~
adventured
I agree the USD is not going to collapse. It's going to continue to devalue at
an accelerating pace, as it becomes increasingly less of a global reserve
standard.

Interest rates on US debt will climb from here forward.

The Fed will increase its rate of debt monetization as the US economy flails,
likely from $85 billion per month up above $125 billion per month in the
coming year.

The Fed will also never be able to actually unwind its portfolio, as Bernanke
has begun admitting.

The dollar will have a severe crisis of confidence over the next decade, but
it won't collapse.

~~~
jbooth
Of course interest rates will climb -- what else are they going to do from
0.1%?

People have been making your predictions since January 2009. When's it going
to start?

My prediction is specifically that inflation won't start until growth starts,
at which point it's really much less dire than the picture you're painting.

------
simondlr
My speculations of the current growth:

1) Halving of supply. Block rewards halved end of 2012. 2) SatoshiDice
continues to become more popular. 3) Big names supporting it: Reddit, Mega,
Namecheap. 4) Along with the above that would bring about a general rise in
prices, is the speculators that will try to game it.

My bet is there will be a correction again soon.

------
bfwi
I sold at $22 thinking the bubble was going to burst soon. Damnit.

There's an understanding that a few big players have a lot of the total amount
of bitcoins in circulation. This price must be extremely tempting for them to
sell at. That could cause a crash like last time. I would be careful of buying
at the current price.

~~~
nwh
There's also a lot of early bitcoin that has been lost entirely, which
probably skews the market a little bit.

~~~
andypants
I feel like I should go on my old laptop and dig up my ~0.5 bitcoins.

I wonder just how many bitcoins have been permanently lost already.

~~~
nwh
Early in the blockchain there are thousands of addresses with a single 50BTC
block reward in them. Presumably people downloaded the client, mined a block
and got bored. At that time you could only mine using Bitcoin-QT, which reuses
the same addresses for each block reward. Most, if not all coins mined in this
way are lost forever.

------
darkmethod
I'm trying to get perspective on the size of the bitcoin economy.

As far as I can tell, there are 10.86m Bitcoins in existence at the current
market rate $40.05. [1] That means there are almost $430m in "circulation".

According to the federal reserve 1.17trillion USD currency is in circulation.
[2]

USD: $1,170,000,000.00

BTC: $0,000,430,000.00

0.0367%

Not a perfect comparison, I realize that. It is more of a rough estimate.

[1] <http://www.bitcoincharts.com>

[2] <http://www.federalreserve.gov/faqs/currency_12773.htm>

------
Irregardless
So when can we expect it to be $2 again this time? June? Maybe July? I think
the last 90% drop only took about three months[1], so I'm gonna put my money
on late June for this one. And by _"put my money on"_ I really just mean
_"post this comment so I can quote it in June"_.

[1] [http://www.guardian.co.uk/technology/2011/oct/18/bitcoin-
val...](http://www.guardian.co.uk/technology/2011/oct/18/bitcoin-value-crash-
cryptocurrency)

~~~
sltkr
In other words: you are not willing to put your money on anything; you just
want to post baseless predictions so you can gloat later on the off-chance
that you're right.

If you actually believed the Bitcoin market will crash in June, you would be
buying futures or put options right now.

------
fabiandesimone
I've been following it since it was at $7 saying, this won't go up from $10.
Then a bit more...a bit more. Now is in $40 and I'm kicking my head against
the wall.

Surely this time, it won't go up again, right? ;)

~~~
bti
Same here. I've been following it but have always talked myself out of
throwing money into it. Guess I'll just make money the old fashion way.
Curious what this guy [1] is thinking right now.

[1]
[http://www.reddit.com/r/Bitcoin/comments/18f3pd/i_have_my_en...](http://www.reddit.com/r/Bitcoin/comments/18f3pd/i_have_my_entire_retirement_and_savings_invested/)

------
ankeshk
Other noteworthy charts:

Number of bitcoin transactions go from 40,000 to 57,000 per day in 2 months.
And from 6,000 to 57,000 in 1 year:
<http://blockchain.info/charts/n-transactions>

The trade vs transaction volume remains relatively stable:
<http://blockchain.info/charts/tx-trade-ratio> (Lower the number = fewer
people hoarding.)

------
Hermel
By the end of the year, it will either be at 400 or back to 4. Interesting
bet.

------
dagge
And it went from $35 to $40 in the last 24 hours.

------
FreshCode
I don't know enough about economics to judge, but is this growth sustainable
and how high can it go?

~~~
Zigurd
In theory it can go 2-4 orders of magnitude higher. The value of all bitcoin
now is about the value of a dozen tons of gold, or about 1% of the gold
backing SPDR. Bitcoin is still minor-league, but it's knocking on the door of
being significant. It will be interesting to see if any major governments
freak out about bitcoin, or if any governments embrace it for, say, selling
oil.

~~~
eterm
It's just a commodity, why would Governments freak out about a commodity?

Whether or not bitcoins are currently in a commodity bubble or not is
speculation, but bitcoins are no more a currency than Iron, Gold or Tulips
are.

In theory commodities can go to very high heights indeed.

~~~
ihsw
"There are people on many sides who want Bitcoin to fail, and who will do
anything to stop it from growing. The banks hate it, because it will
disintermediate and replace their business. The Statists dont like it because
it will defund their socialist dreams. The gold bugs loathe it because it is
not gold. Keynesian journalists bristle at the fact that the money supply in
Bitcoin is limited, and dream of seeing it destroyed."

Very interesting read[1] nonetheless.

[1]
[http://it.slashdot.org/comments.pl?sid=2875465&cid=40120...](http://it.slashdot.org/comments.pl?sid=2875465&cid=40120145)

------
tirant
I expect a correction soon, as It happened last year. I wouldnt invest now any
dollar.

~~~
lucb1e
I would expect the same, but I'm not in any way an economist so I'll wait and
see. I also think that after the correction the price will rise again anyway.

~~~
celticninja
i think you are right, past corrections have been cause dby someone dumping
between 100k and 200k btc, i dont think there are many early players left with
that amount of BTC that they would dump any time soon.Even if they did this
would not move the market as much as it would have in the past, perhaps
dropping the price by $10-$15 on a day like today, which would not take long
to correct upwards again. It is not likely to start a panic driven sell off
instead people will buy in at the lower price cuaing it to gain again.

~~~
craftkiller
the big sellers on the silk roads will have that kind of volume to dump if
they've been hoarding it.

~~~
celticninja
perhaps but most, if not all, will be selling it almost immediately as they
need to re-stock, these people use BTC to facilitate their dealing it is not
an investment for them. Plus moving the market takes approx 100,000 BTC, that
is about $5m, no vendor is going to be selling drugs if they have that much in
BTC.

------
saosebastiao
Bitcoin threads are always the most interesting, due to the extremity of the
positions conveyed. Why cant people see this as it is? A cryptocurrency that
is illiquid due to volume, and subject to the ups and downs of hype.

------
vijayboyapati
[http://unqualified-reservations.blogspot.dk/2011/04/on-
monet...](http://unqualified-reservations.blogspot.dk/2011/04/on-monetary-
restandardization.html)

Finally, we examine a new contender - the mysterious and awesome Bitcoin.

I'll be frank with you, dear reader. When I came up with the MoMT, my first
thought was: how can I, Mencius Moldbug, make some damned money from this? As
system software is my first love, it was not that hard to think of an answer.
In some ways Bitcoin is actually much better designed than my design, which
was not distributed. The use of Lamport hash chaining is particularly elegant.
I did not wind up building my design, however, because I sensed a problem.
Bitcoin has the same problem, but worse.

But the basic economic design is the same: an artificial currency of limited
supply. What is the currency backed by? Nothing but speculation and hot air.
Note that this (contrary to its exponents' claims) violates Mises' classical
"regression theorem." MoMT has no problem with an unbacked monetary candidate,
because the required epsilon can be provided simply by the probability that
the monetary system is adopted.

If Bitcoin becomes the new global monetary system, one bitcoin purchased today
(for 90 cents, last time I checked) will make you a very wealthy individual.
You are essentially buying Manhattan for a quarter. There are only 21 million
bitcoins (including those not yet minted). (In my design, this was a far more
elegant 2^64, with quantities in exponential notation. Just sayin'.) Mapped to
$100 trillion of global money, to pull a random number out of the air, you
become a millionaire. Wow!

So even if the probability of Bitcoin succeeding is epsilon, a million to one,
it's still worthwhile for anyone to buy at least a few bitcoins now. The
currency thus derives an initial value from this probability, and boots itself
into existence from pure worthlessness - becoming a viable repository of
savings. If a very strange, dangerous and unstable one.

I think the probability of Bitcoin succeeding is very low. I would not put it
at a million to one, though, so I recommend that you go out and buy a few
bitcoins if you have the technical chops. My financial advice is to not buy
more than ten, which should be F-U money if Bitcoin wins. Or, of course, you
can invest in those alpaca socks.

Here is the problem with Bitcoin: the tank, I think, will pop. This is not due
to any technical fault in Bitcoin's algorithms or economics. It is due to a
political fault in our society, which is that we're governed by dumb people.

Because we're governed by dumb people, here is what I think will happen with
Bitcoin. Stage 1: Bitcoin does not exist. Stage 2: Bitcoin exists, but is
worthless. Stage 3: Bitcoin exists, and is used by strange and desperate
weirdos and geeks. Stage 4: Bitcoin is used by Slashdot readers, perhaps
slightly less desperate. (You are here.) Stage 5: Bitcoin is used by
criminals. Stage 6: All Bitcoin exchanges are shut down by USG. Stage 7:
Bitcoin exists, but is worthless. Stage 8: Bitcoin does not exist.

At least on the surface, Bitcoin exchanges violate the critical know-your-
customer rule which USG enforces on all money-transfer businesses. As a money-
transfer business, you are essentially an agent of the government - a spy. To
a regulator, Bitcoin seems like a way to transfer arbitrary quantities of
money anonymously. This is a nonstarter, and the regulator knows exactly whose
necks he has to squeeze - the spies who are not doing their jobs.

He cannot shut down Bitcoin itself. He can trivially shut down Bitcoin-dollar
exchanges, or even Bitcoin-gold exchanges. Probably seizing all their dollars,
etc. He probably can't seize their bitcoins, but it doesn't really matter.

To save in a currency is to place your trust in that currency. If you put
energy into this great collective battery, you have to be able to get it back
out. If that trust can be convincingly damaged, the currency has no chance. If
people lose money in bitcoins, the currency can never recover. No one will
ever again exchange it for dollars, or even alpaca socks. It will be dead. Its
chances, now and forever, will be zero - not even epsilon.

If Bitcoin was centralized - sacrificing all real coolness - it could deal
with this problem, perhaps, by applying KYC to all dollar transactions. But
Bitcoin is not centralized, so there is no way the development team can
prevent exchanges from operating. These exchanges are obvious targets for
numerous predatory authorities. When they are destroyed, the currency dies.

What is Bitcoin's only chance? Perhaps that Bitcoin is not really anonymous.
In fact, it is anything but. All transactions, though pseudonymous (named by a
random key), are public and can be tracked by anyone, including said
authorities. There is no financial secrecy in Bitcoin - it's a completely
transparent system.

Which means that, if money launderers try to launder money through Bitcoin,
they are actually doing the authorities a massive favor. It is very easy to
track dirty bitcoins. If you know Pablo, a drug dealer, is using Bitcoin
address X, you can download the entire graph of parties that X trades with,
and roll up Pablo's whole network. Instead of shutting down the real-money
exchanges, you can secretly force them to send you their entire customer
database. That way, the terrorists, drug dealers, etc, are not hiding their
transactions at all - they are sharing their most intimate details with the
government. Heck, the DEA probably understands Pablo's finances better than
Pablo's own people. That's what he gets for using Bitcoin.

But, as I said, we are governed by dumb people. Or, worse, committees of smart
people. Therefore, I reiterate my target price on bitcoins: epsilon.
Nonetheless, it probably wouldn't kill you to go buy five or ten - not that
this is financial advice.

~~~
d23
I thought the point of laundering was that yes, you can see where every
individual bitcoin goes, but that when you put it through a "washing" service
it then goes to people who are completely unrelated to whatever Pablo was
doing. And Pablo gets money that was completely unrelated to what he was
doing, probably at another account.

~~~
SilasX
Indeed. The crucial questions are:

a) Can the washing services "mix up" owners' address well enough that you can
plausibly say, "I got money that was in a drug deal? Wow, only six thousand
other people did too!" (I think they can.)

b) If a) is true, will it be plausible to ban washing services? They're pretty
much the definition of money laundering, so the legal case is a lot more
airtight.

------
tocomment
I'm confused how a bitcoin bug fix or protocol fix would get implemented?
Isn't it a distributed system, so everyone mining coins would have to agree at
once?

~~~
redegg
It requires more than 50% of the network to agree.

Those who don't will live in their own little fork.

------
Torn
I wonder how much of this growth is driven by Silk Road - would be interesting
to see some figure analysis if Silk Road makes any available

~~~
jerguismi
<http://arxiv.org/abs/1207.7139>

Based on this analysis, not much. But then again, the estimation methods in
the paper are not very good IMHO.

------
daleknauss
Is it possible to short bitcoins?

------
snake_plissken
the muppets are gonna get burned, again. only a matter of time.

------
fixed_input
damn, I missed out on being a successful arbitrageur

------
maeon3
But how will the Federal Reserve be able to allocate new blocks of bit coins
to give to one of the 12 federal reserve banks so we can fund more trillion
dollar packages of spending borrowed money if all they can do is try to
acquire bitcoins from other people who have them?

In theory, would inflation be impossible with bitcoin provided that the number
of humans who are willing to exchange labour for coins always increase?

~~~
Nursie
You mean how will a central authority with the economic stability of the
country as its central aim be able to help provide that stability?

Yeah, not so much. Which is a shame because that's a feature of the current
monetary systems that I like.

~~~
ahi
I don't think that is currently the central aim of the Federal Reserve, if it
ever was.

~~~
Nursie
Wikipedia's page on the Federal Reserve, particularly the section on 'Purpose'
would seem to disagree with you. But it is only wikipedia and may well be
inaccurate.

~~~
maeon3
Which means, if bitcoins were to 100% replace US Dollar today, the US
Government would have to immediately default on the treasury.

I get the sinking feeling that when Bitcoin takes off for it to make any kind
of fractional dent in society, it's going to be squished like a bug. After
having been linked to WMD's and terrorism.

