
Thoughts on Bitcoin - patrickod
http://blog.samaltman.com/thoughts-on-bitcoin
======
ezl
I normally love SA's writing, but this opinion piece is really narrow minded
and I think misses the point.

cs702 had a fantastic comment a few days ago in another thread [1]:

    
    
        Bitcoin befuddles experts who analyze it from a narrow perspective,
        because  it is not just a new medium of exchange or a new store of
        value: it is also a new kind of point-of-sale payment system (one
        that doesn't require payment processors), a new kind of global
        financial transfer system (one that doesn't require financial
        institutions), a new kind of time-stamping certification system
        (one that doesn't require notaries or county clerks), a new kind of
        contract-enforcing mechanism (one that doesn't require lawyers), etc.
    
        With rising global adoption, many new kinds of applications are likely
        to be created to take advantage of the Bitcoin network, the design of
        which even specifies a built-in script for defining and executing new
        types of transactions involving any arbitrary number of parties.
    
        In short, Bitcoin is a technology platform -- one that is benefiting
        from network effects.
    
        It may fail as "money" (in a narrow sense) and still succeed as a
        global platform.
    

Even from SA's narrow perspective, it's not clear why "legitimate
transactions" is a requirement for success. As long as there is a large enough
community of people who want to use it to transfer value for any reason, it'll
continue to sustain itself.

The one takeaway he offers in closing is spot on though: " _Just as it’d be
stupid to convert all your dollars to bitcoin, it’d be stupid to not pay
attention._ "

[1]
[https://news.ycombinator.com/item?id=6810839](https://news.ycombinator.com/item?id=6810839)

~~~
jval
Sorry, I think the legitimate transactions idea is actually one of the
stronger parts of this piece.

> As long as there is a large enough community of people who want to use it to
> transfer value for any reason, it'll continue to sustain itself.

That's precisely the problem.

A community of speculators will only remain stable or increase in number where
the price of the asset continues to grow. In the case of Bitcoin, the price
can only grow if legitimate transactions increase, or if more people
speculate. With every increase in price the number of people willing to
speculate decreases, to the point where you run out of greater fools to sell
the asset onto, causing a crash.

That means that an increase in legitimate transactions is really the only way
to sustainably grow the value of the network, because it is the only method
resistant to falls in price.

------
michael_nielsen
The following graph shows the estimated volume of transactions:

[https://blockchain.info/charts/estimated-transaction-
volume?...](https://blockchain.info/charts/estimated-transaction-
volume?showDataPoints=false&show_header=true&daysAverageString=7&timespan=all&scale=1&address=)

You see immediately from the graph that the growth in number of transactions
is relatively slow, considering all the media attention, and certainly far,
far slower than the increase in the exchange rate.

Note that this graph is not the same as the number of "legitimate
transactions" mentioned in the OP. But it's at least consistent with the point
of view suggested in the post.

~~~
dustyleary
The graph is log10-scale, so it's difficult to see a 50% or 100% increase in
volume.

It's definitely not a 5x or 10x increase though.

~~~
michael_nielsen
You can remove the log scale:

[https://blockchain.info/charts/estimated-transaction-
volume?...](https://blockchain.info/charts/estimated-transaction-
volume?showDataPoints=false&show_header=true&daysAverageString=7&timespan=all&scale=0&address=)

I used the log scale to make the point that transaction volume is relatively
slow-moving on a log scale. That is certainly not the case for the exchange
rate!:

[https://blockchain.info/charts/market-
price?showDataPoints=f...](https://blockchain.info/charts/market-
price?showDataPoints=false&timespan=all&show_header=true&daysAverageString=7&scale=1&address=)

Incidentally, the volume graph has a notable spike in December 2011. I've
Googled and asked around a bit, but don't have a good understanding of what
caused the spike.

~~~
smilliken
Since this is just volume measured by number of bitcoins exchanged, wouldn't
it be more accurate to scale it by the exchange rate of your primary currency
(ie. the product of the two graphs)? That seems like it would more closely
represent the value being exchanged.

Edit:

Looks like they have this graph as well:
[https://blockchain.info/charts/estimated-transaction-
volume-...](https://blockchain.info/charts/estimated-transaction-volume-
usd?showDataPoints=false&show_header=true&daysAverageString=1&timespan=&scale=1&address=)
(log scale).

This seems to support the conclusion that transaction volume (in USD) is
growing significantly, although the trend is confounded by large price
movements.

------
modeless
If a receiver of bitcoins sells them for dollars right away, that isn't
necessarily money laundering or tax avoidance. I don't know if you've tried to
transfer money overseas lately, but banks tend to make it difficult and
expensive. An international wire transfer is not a trivial thing to set up; in
many cases it still involves _faxes_.

If bitcoin succeeds only as a payment network, where users convert from and to
dollars at both ends, it can still provide a very valuable and legal service.

~~~
sjtgraham
International transfers are not intrinsically difficult or expensive, the real
cost is in pennies. The reason why cross border payments are priced like they
are is due to the lack of incentive, either economic or regulatory. BTC is a
massive economic incentive for banks to charge more in line with the their
true costs. Even if BTC fails as a currency itself, its greatest success might
be catalysing innovation on prices and products at the incumbents.

~~~
rsingel
Well, there's a lot of paperwork and time involved. Most U.S. banks raised
their international wire fees to ~$60 at the end of October to comply with
more regulations.

~~~
CamperBob2
Or discontinued support for outgoing international wires altogether, as my
Chase account did.

That freaked me out, but unfortunately it didn't freak me out enough to make
me buy a bunch of Bitcoins.

------
tpeng
The way I value bitcoin is to take the fully diluted market cap (21 million *
$850 ~= $18 billion) and apply a money velocity which I assumed to be similar
to US M2 velocity of 1.6 ($18 billion * 1.6 ~= $28.5 billion). Since global
ecommerce transactions are about $1 trillion / yr this implies that bitcoin
should penetrate 2.85% of ecommerce. Big assumption here is that bitcoin does
not work for real-world transactions as the confirmation time is > 15 min.
This may be oversimplified because a lot of real-world transactions don't need
to be real time. I'm also excluding time value effects which you can insert
back in if you like.

From the data I have seen, the bitcoin real economy could be orders of
magnitude smaller than that implied by the current price, although there is no
way to know precisely how large it is. This is including "illegal"
transactions (I'm not sure why sam is discounting drug transactions, unless he
means to imply that these will be shutdown. It does make sense to exclude
gambling transactions as they are extremely high velocity).

Note that sam's point about merchants immediately converting BTC back to USD
serves to increase the money velocity (perhaps by >10x). This would mean that
BTC is pricing in a real economy even larger than $28.5 billion. Based on
current BTC-denominated real transactions, fair value of BTC is at most only a
few dollars.

~~~
im3w1l
I think much of BTC's valuation come from expectations that money velocity and
market penetration will increase.

EDIT: Sorry I meant to say the velocity will decrease.

~~~
tpeng
A higher money velocity => lower BTC/USD, but yes, the current price implies a
huge future growth of the bitcoin economy. This is what sam is saying and I
agree. I happen to think that we will not see that growth/adoption, but that
is a different question.

~~~
im3w1l
Oops, yeah, I meant the other way around.

~~~
tpeng
There's no obvious reason why BTC velocity should go lower than USD velocity.
If anything, its electronic nature and potential for fast settlement times
should indicate a much higher velocity than USD M2.

~~~
im3w1l
>Note that sam's point about merchants immediately converting BTC back to USD
serves to increase the money velocity (perhaps by >10x).

If this changed, it could at least get closer to the velocity of usd.

------
vijayboyapati
Sam sees the flaw in his own argument - when he mentions gold and the
possibility of its use a store of value. But he doesn't understand the full
significance of his own comment. Moldbug has by far the most compelling (imo)
theory on the origin of money and why bitcoin (and gold) float far above their
use value. These two posts cover it very well:

[http://unqualified-reservations.blogspot.com/2011/04/on-
mone...](http://unqualified-reservations.blogspot.com/2011/04/on-monetary-
restandardization.html)

[http://unqualified-
reservations.blogspot.com/2013/04/bitcoin...](http://unqualified-
reservations.blogspot.com/2013/04/bitcoin-is-money-bitcoin-is-bubble.html)

I highly recommend them to anyone trying to understand the economics of
bitcoin

~~~
calinet6
Really fascinating articles, thank you.

------
sjtgraham
I think this is spot on.

All sorts of people I rarely speak with have been coming out of the woodwork
to ask about Bitcoin. These people are invariably regular folks that have
heard about this thing that has been appreciating at an unbelievable clip.
This is extremely alarming for me.

~~~
fat0wl
Same. I've tried to warn them about this whole mess (even if the value is
appreciating I think it's at best a risky investment and at worst partaking in
an immoral scheme).

This article reiterates 2 of my favorites points --

1\. the lack of real-world transactions, coupled with

2\. the fact that these transactions are usually done via 3rd party processor
or immediate conversion back to USD. If vendors had faith in it as an actually
currency, they wouldn't feel the need to do so. This is not true adoption,
this is simply an attempt at expanding one's market by accepting a tradable
item.

Glad to see some more sobering articles emerging as I've been wondering why no
one has coherently written these things. Most of the negative BTC articles on
HN are poorly written and used as a straw man.

~~~
ahmadss
Re: #2 - Vendors need to pay rent, suppliers, and employees - all of whom
presumably don't accept BTC. So that's probably why you see Coinbase, BitPay,
and others that default to converting BTC to fiat the moment of transaction.

~~~
fat0wl
i see what you're saying but if they have profit margins they could opt to
keep some BTC. i think the issue at this point is that if one decides to hold
onto BTC they are put more in the position of an "investor" rather than a
bank-account owner.

business owners can't all be expected to drink the kool-aid, so they don't
really seem to be assisting Bitcoin adoption outside of making it a choice in
their payment processor

------
aristidb
After all the insane articles that claim things like "Bitcoin is a ponzi
scheme" or "Bitcoin is anonymous", it is quite nice to read a well-informed
and sane article.

------
asciimo
The metric of "legitimate transactions" is interesting, but I don't see an
easy way of tracking it. [http://coinmap.org/](http://coinmap.org/) tracks
brick-and-mortar retailers that accept bitcoin. Maybe there should be an opt-
in registry, like a global Bitcoin YellowPages?

------
CamperBob2
_A currency without the major use case being legitimate transactions is going
to fail._

Couldn't he have said the same thing about a protocol like BitTorrent?

~~~
jmilloy
He means legitimate as in "I gave you bitcoins for a concrete purpose" rather
than "recognized as legal by a government." People are using BitTorrent for an
actual purpose, so it's different.

------
doki_pen
I don't know why it is required that it is used in legitimate purchases. No
one questions the value of gold, yet not many people use it to make purchases.
I suspect bitcoins value will follow the same pattern as gold, once it is
stable. When the world is full of uncertainty, it's value will rise. When
things are steady, it's value will fall.

~~~
biot

      > No one questions the value of gold, yet not many people
      > use it to make purchases.
    

Gold is purchased and used to make art, jewelry, electronics, medical devices,
and so on in addition to being hoarded as an investment / currency reserve.
Those products have real tangible value. Very few people are interested in
buying bitcoin just to use the bitcoin address as artwork, for example. Tulip
bulbs had more actual value. At its peak, one tulip bulb cost around €25,000
and WAS being used for legitimate purchases: milk, cheese, cows, wine, etc.
Even after the price of tulip bulbs crashed, you could still at least plant
them and grow flowers. If bitcoin reaches that price and crashes to next to
nothing, what could you use your bitcoin for?

~~~
DennisP
Although this is true, gold's total value is much higher than could be
supported by those uses alone.

------
scotty79
We've already seen few bubbles on bitcoin. Investing overshadows usage of
bitcoin as a currency. Everybody knows that.

One title I haven't seen: "X no longer accepts bitcoin."

------
andrewhillman
"The fact that the few merchants willing to accept bitcoin generally convert
to dollars right away suggest an underlying lack of faith in bitcoin—or at
least a problem with the volatility."

Its not a lack of faith l, it's lack off trade acceptance. If merchants accept
bitcoin they need to convert back to dollars because that's what their
business calls for. In other words, if they could pay their bills with
bitcoin, then bitcoins would flow back and forth without an issue, removing
your suggestion that this is about lack of faith.

~~~
pinarsezer
> The fact that the few merchants willing to accept bitcoin generally convert
> to dollars right away suggest an underlying lack of faith in bitcoin—or at
> least a problem with the volatility.

Few merchants accept gold either. Yet gold reserves in the world amount to US
$8.2 trillion in value.

Edit: removed part on volatility

~~~
crististm
Given the choice I think they will not have a problem in picking gold instead
of bitcoins. Gold has some history behind it, and compared to bitcoins is more
liquid and less volatile.

(volatile for about 3000 years - do you mean available?)

~~~
fragsworth
> Gold has some history behind it

"It has history behind it" really seems like a fallacy to me. Many things had
histories and were replaced, or changed dramatically, due to new technologies.
Horses, swords, aluminum, newspapers...

I see Bitcoin being a very realistic threat to the high price of gold.

------
jey
Why distinguish between legal and illegal transactions? I guess the assumption
is that value grounded in illegal transactions is inherently volatile due to
the risk of it getting shut down?

~~~
jforman
Because the value illegal actors find in Bitcoin isn't in its role as a
currency, but rather in its role as an anonymous method to globally transfer
wealth.

Even if millions of people use Bitcoin for that use case, it doesn't mean
Bitcoin will ever have staying power for the "reserve currency" use case.

~~~
thaumasiotes
The term for "a method to transfer wealth" is "currency". (And in fact,
"currency" is used metaphorically to indicate methods of transferring anything
at all.)

~~~
jforman
There's a large difference between a currency being used for anonymity and a
currency being used for stability and trust (hence the use of "reserve" vs.
"anonymous" in my post — I omitted "reserve" in the first sentence).

~~~
jey
Hm? Currencies are primarily used as a means to store and exchange value. The
other things are secondary features that you may use to do things like pick
between two currencies.

~~~
jforman
Y'all are getting hung up on insisting that Bitcoin is a currency, which
nobody is arguing. There are important differences in the use cases that make
a currency valuable to society, though. And Bitcoin is a far cry from
demonstrating its value beyond the anonymous use case (or speculator use
case). It is not stable or trustworthy yet, and will not be used as a reserve
currency until making huge gains in both areas.

------
jonny_eh
Even if it just becomes the primary mechanism for moving money around, that's
a multi-billion dollar industry. Think Western Union, ACH, Paypal, etc. To me,
that seems like a safe(ish) bet.

Being able to buy bubble gum, well, we'll see :)

~~~
analog31
Will it be cheaper than PayPal? A believer in Murphy's Law might speculate
that the package of services needed to make Bitcoin reliable enough for
regular consumer use, will also involve a level of fees comparable to PayPal.

------
emin-gun-sirer
The post assumes that Bitcoins will fail if they are not suitable as a store
of value. It overlooks the fact that a currency can succeed as a medium of
exchange, even if it is not suitable as a store of value.

~~~
gnaritas
Being a good store of value is in fact a detriment to being a good medium of
exchange. A currency should not be a good store of value, it should be a
predictable store of value that inflates very slowly so as to discourage
hoarding and encourage spending. PPC looks like a better currency than BTC for
this very reason.

~~~
termain
Is PPC PrimeCoin, PeerCoin or something else?

~~~
gnaritas
PeerCoin.

------
allochthon
From the article:

 _low transaction costs for worldwide commerce would still be great._

I'm late to the whole bitcoin phenomenon, but here is what I really like about
crypto-currencies. My US credit union (not even a commercial bank) charges me
40 dollars for an international wire transfer to Canada, and the bank on the
other end will charge me 15 dollars. If this were done in bitcoin or a similar
currency? Nothing, as far as I can tell, if you do it through the right
exchange. And that's how it should be.

I suspect that banks don't even know to be worried at this point.

~~~
pbhjpbhj
I just looked at transaction costs on 2 exchanges and they were both at 0.2%
for < $1000. One offered reductions for higher value transactions, the other
was fixed.

Kraken and BTC-E resp.

~~~
allochthon
I might have been a little quick to jump to a conclusion, there. ;) But is
there anything currently stopping someone from opening up an exchange whose
only fees are an initial membership fee?

~~~
pbhjpbhj
Greed?

Or possibly just that an initial-membership-fee model risks not covering costs
long term and so looks like a potentially unstable proposition?

------
leokun
I'm going to buy a bitcoin after the bubble has passed. What do we think the
real price is. Like $10 or $100? What's the projected bottom? I'm hoping for
less than $10, because cheaper is better. The thought that I would never be
able to afford an entire bitcoin has a negative psychological effect, which
may be silly.

What I like about alt-coins is how one can use that for games. Imagine making
a game where a custom alt-coin, a bitcoin-fork coin that has no value outside
of the game, used for transactions. Seems like a cool idea to me anyway.

~~~
skizm
To be honest I think the bottom is going to be around $500. Pretty much
everyone I know who is even the slightest bit interested in bitcoin is waiting
for this crash to happen so they can jump in. Just a guess though.

~~~
thinkalone
Looks like the last time it traded below $500 was November 17th[1] - so
everyone you know who is interested has only become interested in the past two
weeks?

[1]
[http://bitcoincharts.com/charts/bitstampUSD#rg30ztgSzm1g10zm...](http://bitcoincharts.com/charts/bitstampUSD#rg30ztgSzm1g10zm2g25zi1gMomentumzv)

~~~
skizm
Yep, since the spike.

------
codex
Heaven help us if Bitcoin becomes the world reserve currency without some
central authority like the Fed controlling the money supply. Bad things would
happen without counter cyclical fiscal policy.

------
kolev
Just like investments in Bitcoin startups are binary, so are investments in
Bitcoin itself. Put some USD into it and don't worry too much about it. People
waste millions on lottery tickets with much smaller chances of success, so,
I'm tired of all these negative articles, just because Bitcoin dropped 20-30%
and then almost fully recovered in a day. Sell off if you wish - there are
enough people to buy your Bitcoins cheap. And by the way, the tulip craze is
an obvious myth.

------
VintageCool
Question: why isn't gold the international reserve currency?

~~~
parasubvert
Chapters 1 and 2 of Karl Polanyi's The Great Transformation provide one
popular theory as to why it collapsed around World War 1, from a cultural
anthropology perspective.

[http://uncharted.org/frownland/books/Polanyi/POLANYI%20KARL%...](http://uncharted.org/frownland/books/Polanyi/POLANYI%20KARL%20-%20The%20Great%20Transformation%20-%20v.1.0.html)

Liaquat Ahamed's _Lords of Finance: The Bankers Who Broke The World_ provides
another congruent account, from a more detailed historical/economic
perspective, as to why gold was abandoned.

[http://www.amazon.com/Lords-Finance-Bankers-Broke-
World/dp/0...](http://www.amazon.com/Lords-Finance-Bankers-Broke-
World/dp/0143116800)

------
johnrob
Why should anyone feel compelled to follow or invest in bitcoin? The time to
buy bitcoins is when you need them to get something you want (as it should be
for any currency).

~~~
gnaritas
> Why should anyone feel compelled to follow or invest in bitcoin?

To make money speculating of course. :)

------
teawithcarl
Sam - 你忘记了中国的影响。

The price is bitcoin is proportional to the "hot money" flowing out of China.
Doesn't matter if that's an illicit market, it's still the most significant
factor.

Whether or not one believes that hot money is going to stop/slow should
strongly influence your estimate of the price of bitcoin.

That said, it's top heavy at $900-$1100, and reasonable people should be
selling a portion of their holdings.

~~~
TomGullen
Why is it reasonable to sell a portion of their holdings? What does that
actually achieve for the holder?

------
spydum
Can't help but wonder how many tech savy career drug dealers have just decided
to become day traders after watching their btc soar in value.

------
aaron695
The tulip craze is a myth, I'm surprised people still buy into it.

It's stupid that tulips would go that high, and funnily enough it didn't
happen.

~~~
TreyS
Citation?

~~~
gwern
Read the Wikipedia article on Tulipomania, or _Famous First Bubbles_.

OP should too, actually, since his comment that

> The price of tulip bulbs has yet to recover from its 1637 peak.

betrays several fundamental misunderstandings of the tulip market at the time.
Of course the top tulip bulbs depreciated. That is like saying 'a patent has
never recovered its peak value' or 'Windows 3.1 never recovered its March 1992
peak'.

~~~
thaumasiotes
That wikipedia article seems to fully support the idea that tulips did "go
that high"; it also notes that a legal change transformed tulip futures
contracts into tulip option contracts, which enabled the price of tulips to
rise substantially without costing speculators extra. It shows a catalog page
of the time offering one tulip bulb for over ten times the contemporary annual
earnings of a "skilled craftsman". If I assume that a "skilled craftsman" in
the US earns $20 / hour (less than I made as a summer intern at amazon before
graduating college), that puts the price of the bulb at at least $400,000. For
the price listed in that catalog, you could also have bought 25,000 pounds of
cheese.

It also notes that while flowers in general averaged 40% annual price
depreciation at the time, tulips averaged a more impressive 99.999% annual
depreciation.

~~~
aaron695
> Many of the sources telling of the woes of tulip mania, such as the anti-
> speculative pamphlets that were later reported by Beckmann and Mackay, have
> been cited as evidence of the extent of the economic damage. These
> pamphlets, however, were not written by victims of a bubble, but were
> primarily religiously motivated. The upheaval was viewed as a perversion of
> the moral order—proof that "concentration on the earthly, rather than the
> heavenly flower could have dire consequences".[53] Thus, it is possible that
> a relatively minor economic event took on a life of its own as a morality
> tale.

^ From the same wiki page ^ No idea with the picture you reference where it's
from.

The point about economic theory is the market needs to be fluid. It says
nothing about crazy people in a small private market(obvious I guess)

The "Tulip" craze seems to me to just be the normal fundamental dogma that you
get when people don't fully understand systems. People distorting instances
that are not linked to push their views. To me the interesting thing is people
400 years ago also feared financial systems.

~~~
thaumasiotes
Seriously, understand what other people are saying (or make some sort of note
in your comment that it's unrelated to the one you're responding to).

The wiki page says that there was very little financial damage from the tulip
crash. It also says that "There is no dispute that prices for tulip bulb
contracts rose and then fell in 1636–37". I responded to the claim that high
tulip prices were a myth. The wiki page cited does not support that idea to
any degree. And the portion you cite, in particular, also does not support
that idea. It says there was little economic damage from the crash, which I
acknowledged, but barely mentioned, because it was irrelevant to my point.

The picture, as wikimedia notes, is from the tulip book of P. Cos, which you
could read about here:
[http://www.oldtulips.org/index.php?section=broken&content=ea...](http://www.oldtulips.org/index.php?section=broken&content=early_tulip_catalogs)

------
tsaoutourpants
His article is premised on this:

"The estimates I’ve heard from smart people that really follow bitcoin are
that legitimate transactions are up only about 2-3x from a year ago"

That's hardly scientific. I've used Bitcoin for several purchases of
"legitimate" things, and look to continue to do so whenever possible.

~~~
ajiang
Well, not to belabor the point, are you saying that your anecdotal evidence is
better than his anecdotal evidence? Or that we shouldn't take the perspectives
of Sam Altman's experts' opinions too heavily?

------
matthiasb
Have you check Bitcoin sales on Craiglist?

[http://austin.craigslist.org/search/?sort=rel&areaID=15&subA...](http://austin.craigslist.org/search/?sort=rel&areaID=15&subAreaID=&query=bitcoin&catAbb=sss)

~~~
rrich
Funny thing about that are the people selling the shovels. I had no idea BFL
was selling firmware upgrades to increase hash rates on existing ASIC miners.
Simply brilliant.

------
headgasket
Great read! I just posted an essay from way back (2008) on bubbles to hacker
news:
[https://news.ycombinator.com/item?id=6831300](https://news.ycombinator.com/item?id=6831300)

re-reading it gave me some perspective.

Good luck and Cheers!

------
brisance
>Tax is a big deal, of course, but even nations can't always compete with the
popular sentiment tidal forces enabled by the internet.

How has the Internet outrage about NSA spying affected the US government?

------
rebelidealist
A major legitimate use is wiring money internationally at a low cost.

------
collabacode
Relevant Futuram clip:

[http://www.youtube.com/watch?v=KbCk1XNfTs4](http://www.youtube.com/watch?v=KbCk1XNfTs4)

------
richiverse
My biggest issue with bitcoin is that it should be redeemable for something
tangible other than $USD. The first virtual currency that addresses this and
is directly convertible to watts or calories will be the currency to beat.

~~~
logicallee
you just defined 'currency'. basically, your issue with bitcoin is that it
can't be exchanged for goods and services.

this is quite the chicken and egg problem. but basically when people 'believe'
it's a currency, they will accept it as one - thereby justifying that belief
since it will be true due to all the other people accepting it.

dollars are only a worldwide currency because people and institutions think
it's one - and if it were to stop being treated as currency it would stop
being accepted as one. totally tautological - but there's currency for you.

------
RuCrazy
Will it hold?

------
notdrunkatall
I've been watching bitcoin since $30, bought at $80, and sold last night. I
think that Stefan Molyneux (or however you spell it) is right on when he says
that bitcoin is "a revolutionary protocol for information synchronization."
However, it is by no means unique, and as we've seen, anyone can start their
own bitcoin-type cryptocurrency. Apparently, the Canadian government is
working on their own, and I don't think it will be long before other central
banks begin to follow suit by adapting the bitcoin protocol for their own
purposes and presumably solving some of its myriad problems in the process.
And of course, when given the choice between a new-and-improved cryptocurrency
that's guaranteed by a central bank and the old one that's guaranteed by
nothing, Joe Blow is going to pick the former. Bitcoin is an amazing idea and
I do believe that the idea behind it it will revolutionize transactions, but
it won't be alone for long, and once the improved versions begin showing up,
those who've held on to bitcoin because it's an amazing idea (it is) without
realizing that bitcoin itself has only a very thin economic moat are probably
going to have a bad day.

I've been trading and investing stocks for about 7 years now, and I think I've
learned a thing or two in that time, but one of the most important things I've
learned is that if holding onto something is making me uncomfortable, it's
time to sell. Holding my bitcoin was making me uncomfortable as of a couple of
days ago, so I sold. On the other hand, I've also learned that if everyone is
expecting something to do one thing, it usually does the opposite, and it
seems that pretty much everyone agrees that bitcoin is in a bubble. If it does
crash, I'll get back in, but if it doesn't, I won't regret selling. I've been
on the emotional rollercoaster of watching relatively large sums of money
invested in a volatile asset fluctuate wildly, and I'd rather not go through
that again. Just my two cents.

~~~
sillysaurus2
I wanted to buy right when it hit $850 a few days ago. I redeemed my $11k
mutual fund, but the wire transfer took until Friday to go trough. By the time
I was able to buy bitcoins, they were $1111 on coinbase. Bought anyway. Got
9.89BTC.

Just lost $2k of that investment, according to the markets. Though it seems to
be recovering somewhat. Ow.

Anyway, I'm long on bitcoin. Maybe it will crash and I'll lose everything.
Twice it's crashed, then the recovery has eclipsed the previous peak by
several X. So I don't know.

I do know that if banks hasn't been so slow, then I would currently be telling
the story of "I was able to grow $11k into $13k." One problem BTC solves is
moving money around instantly. It doesn't close for Thanksgiving holiday.

Mtgox needs to become wiser as well. There's currently no trade fees, because
they wanted to participate in BTC Black Friday. That kind of thing encourages
people who are holding onto $15k coins to sell all of them if they think the
market will go down. An extra 0.4% on that much money is significant. Mtgox
really shouldn't be so willy nilly.

~~~
Udo
_> Though it seems to be recovering somewhat. Ow._

As with most investments, you need to think medium and long term. Barring some
kind of final(!) crash, there isn't anywhere to go for BTC but up. Mainstream
media and ordinary people are just now starting to talk about it. Stay with
your investment, and don't sell before it at least doubled. If it crashes
temporarily, that's fine too: chaos is a ladder.

Within reasonable confidence, I'd say: Whatever you do, do not sell at a loss.
_That 's_ the moment when it _becomes_ a loss. Don't lose your nerve.

Personally, I had a bit over 100 BTC. When it reached $20 the second time, I
sold it because I could use the money and also because I became nervous. While
it wasn't the _biggest_ money mistake of my life, it's certainly a whopper in
retrospect. Don't be like me ;)

~~~
CamperBob2
_While it wasn 't the biggest money mistake of my life, it's certainly a
whopper in retrospect. Don't be like me ;)_

I have a problem classifying random things like this as a mistake. You didn't
have enough information at the time to predict that BTC would exceed $1000,
and you don't have enough information _now_ to predict what it will do,
either.

It's just a game of musical chairs. The only "mistake" is to play. Some
mistakes we pay for, while others ultimately benefit us.

~~~
behold-
IMHO it would be a huge mistake not to invest a few days worth of income in
bitcoins . Most likely you'll loose them, but there's a reasonable chance
you'll get 100x back in a few years. I invested $2500 in the summer of 2012
and just last week cached a small part to buy a Citroen C5 saloon.

~~~
vworldv
100x back in a few years? So the market cap will be >1T, and Satoshi will be
the richest man (?) on earth? Don't think so. Maybe 10x, and the chance of
this is probably not great enough to balance against a crash.

Good call divesting some of your BTC in favor of physical assets.

~~~
behold-
IMHO China, Saudi Arabia, Japan, Abu-Dhabi, etc. can't be happy with US
printing trillions of USD every year. They need a stable currency to keep
their enourmous savings in, but the Fed monetary policy is eroding those
savings. Bitcoins would be a perfect alternative. If governments start buying
them, the total value can easily go > 1T.

Plus are you implying that hackers, like Bill Gates, Larry Page and Satoshi,
can't possibly be (or deserve to be) ultra-rich?

~~~
XorNot
If any of those places were unhappy they would stop buying US treasuries. But
they keep buying them.

There isn't a "can't be happy" feeling to a market - just what people actually
do. At the scales and volumes involved, it is literally impossible for any of
those countries to divest themselves of treasuries suddenly (for one thing,
bonds don't work that way).

Moreover, governments only invest in real things. The productive output of the
US is a real thing because all those places buy tons of US goods and services.
Bitcoins are not real things. Perhaps moreover, why would any one of those
places invest in a currency at a scale which would simply let them purchase
the computing power to take it over permanently?

~~~
iiAAIiajj98
If an individual or group were to purchase the computing power to "take over"
the currency Bitcoin would lose all of its value.

~~~
XorNot
Which perhaps should highlight why nationstates aren't going to buy it?

Because the money levels being talked about are large enough that you could
trivially destroy it. Which means your entire foreign exchange rate is subject
to whether someone wants to screw with the blockchain.

Which means at any junction, some third actor can hold the entire currency
hostage - unless the governments invest in huge amounts of hashing hardware to
protect it. Which is (1) a colossal waste of money and energy and (2) would,
in turn, give them the capability to do the _exact same thing_.

Bitcoin will _never_ be a currency held or traded by governments.

