
Bitcoin hits $17K as bubble fears mount - tooba
http://www.bbc.co.uk/news/business-42275564
======
qubex
Macro-economist here.

I can’t wait for this bubble to burst so some non-noxious (inflationistic,
fractional-reserve-banking enabling) second- or third-generation
cryptocurrency to supplant it and harness the blockchain in a less naive
manner.

• Something I wrote about the macroeconomic flaws of bitcoin (posted
previously, zero comments):
[https://medium.com/@jamesjunghanns/my-0-00000173120-btc-a-
pr...](https://medium.com/@jamesjunghanns/my-0-00000173120-btc-a-practicing-
orthodox-macroeconomists-unsolicited-views-on-
bitcoin-543da352fc49?source=linkShare-229012a5fba0-1512731487)

• An analysis of the rising amplitude and quickening frequency of oscillations
in valuation, leading to a projection of peak value and crash time:
[https://mynabla.com/2017/11/30/bubble-trouble-exploring-
an-l...](https://mynabla.com/2017/11/30/bubble-trouble-exploring-an-lppl-
model-for-bitcoin/)

• A financially dignified and macroeconomically sophisticated proposed
cryptocurrency (not affiliated):
[http://www.getbasecoin.com/](http://www.getbasecoin.com/)

~~~
tomjen3
>inflationistic, fractional-reserve-banking enabling

The entire point of bitcoin is lack of trust in the financial system and a
trust in math. With bitcoin nobody can take it, nobody can dictate what your
company is allowed to sell, by holding your access to the financial network
hostage; nobody can force you to pay for their schemes by coin clipping or
inflation and nobody can hide counter-party risk in fractional reserve-
banking. Your money is either there or outright stolen, not messed with by
Wall Street cronies.

Bitcoin exists because the current system is untrustworthy. what you are
proposing is making Bitcoin less trustworthy.

~~~
qubex
You as many other technologists write knowingly of currencies and economies
and how they should/could function as if of mechanics flying submarines. Your
assumptions are all wrong.

~~~
tomjen3
My assumptions are that I can save money by not using them, that one should
not take on a debt burden that one cannot pay back and that pumping billions
of phantom money into the world will result in bubbles.

Look I know, the average economist disagree with me. But the ideas (other than
no inflation, which is more a moral thing than a thing of economics) are not
mine - they belong to Hayek and to some degree Milton Friedman. Friedman got a
nobel prize in economics; Hayek was the opponent of Keynes, and despite a bit
less than a century after the disagreement we haven't gotten rid of cyclic
boom and bust.

I believe economies are significantly simpler than economists believe - and
macro economists have an atrocious record of predicting the future.

~~~
qubex
Fair enough, we can agree to disagree about first principles. It just leaves
me a bit nonplussed, as if I came to you and started to preach to you about
how a computer processor contains sentient elves. I could probably make some
workable predictions from that statement, but by overestimating the inherent
autonomy of a deterministic processor I'd also make some statements you would
hold to be ludicrous. To each his own domain, I cannot really attack your
assumptions, just what you derive from them; of your principles and beliefs I
can only provide commentary, and on the topic I shall be as succinct as I can.

To wit, the “phantom money” you mention seems to allude to allude to a
contrast to non-phantom money, supposedly some kind of “real stuff” that meets
your intuition of being a unilateral asset.

National debt for a country that can issue bonds denominated in currency it
itself controls is not at all comparable to the debt accrued by the private
household or firm. Through varying levels of inflation, that debt-load becomes
more manageable over time, a process I am sure you are aware of and conversant
with. Insofar as it is a debt repayable mostly to the citizens and
institutions of the nation itself, denominated in a currency that the
sovereign government controls, it is hardly ever going to be unplayable. Nor
will there be wholesale plunder of savings through hyper-inflation or other
means... it's usually a measured process.

And the debt provides a place for savers to safely park their excess
liquidity. If they did not have the national debt to fund, they would go on
the hunt for other, riskier assets to use as interest-bearing vehicles, and
they'd bid down the price of risky financial assets and achieve lower expected
returns as a result.

Macroeconomics is surprisingly adept at unravelling how capital flows flux
through a body politic. We tend to explain retroactively. Now people are
putting themselves out there making fairly crisp, and as-yet un-falsified
predictions of a crash on the way... we'll see if I was right or wrong to be
convinced by their argument.

------
headmelted
Bitcoin is a massive ponzi-scheme and it _will_ crash imminently. Or, you
know, it isn't and it won't.

It's really interesting to me to follow on the side-lines of crypto as the
price it's exchanging at moves up. In the last week I've had non-techies
mention how they were buying Bitcoin (ostensibly to make fast, easy money).

What intrigues me most is that amid the hysteria, a lot of posters on reddit
and elsewhere seem to be of the belief that _everyone_ can get rich on Bitcoin
- and that if everyone buys in the price won't crash. Moreso, most of the
people I'm seeing discuss it don't seem to have any knowledge of similar
financial events from the past (e.g. the dotcom bubble, tulip mania).

I'm not going to begrudge anyone that's made money from Bitcoin, nor am I
going to judge anyone else for putting money in at this stage (anecdotally,
the chatter I'm hearing in work from non-techies points to an ample supply of
greater fools), but I think it should raise alarm bells that financial
literacy is so low in the general populace that in most cases people are
making these decisions with so little information to hand of what they're
buying (I think it's fair to believe at this point that most of the buyers at
this level aren't familiar with what the blockchain is as a concept - they
just see rising valuations).

~~~
opportune
What we're seeing isn't the utility of Bitcoin going up, we're seeing what
happens when supply meets demand. The total number of Bitcoins that can ever
be mined is fixed, but I think the real reason the price is going up is that
the current rate of mining can't sustain the rate at which people want to get
into crypto. But what change in utility is driving the increase in demand?
Right now Bitcoin isn't good at (and no amount of revisionism will change
this) it's original purpose of being _currency_ , which is literally Bitcoin's
only utility other than the fact that there are a limited number of them. So
it's actually less useful now than in the past... meaning the increase in
demand is in _spite_ of that change, leading me to believe it's all due to
more people wanting crypto.

I feel the same way as you, I think a lot of people who don't know anything
about crypto are making rash decisions and it's setting off alarm bells in my
head too. I don't even know why people are buying Bitcoin over most alts
because to me Bitcoin has so much less utility compared to what BCH, ETH,
Monero. Not that Bitcoin is worthless, it's just that it seems like people are
only buying it because it has the name "Bitcoin". _That_ 's why I think it's
going to crash.

~~~
headmelted
I think most of this can be explained by thinking of Bitcoin not as digital
dollars, but as digital gold (a perpetually limited, deflationary value store
that is immune to central-bank meddling).

A lot of us in tech are _really_ excited about crypto, but the economic
realities mean it's very likely that for any particular token to be treated
seriously as a currency it would need central bank support - which is anathema
to Bitcoin's stated purpose.

~~~
opportune
Yes, I am aware of that. I'm not confusing crypto with Bitcoin, actually I'm
bullish about crypto in general.

I'm saying that Bitcoin the currency is like pewter or lead compared to BCH or
ETHC. That's why it's not gold. It's like a version of gold that's heavier and
more useless than some other perpetually limited, deflationary value store.

In fact I think I'm going to start calling Bitcoin "digital lead" because it's
so hard to move it around.

~~~
headmelted
Digital lead. I like it.

We ICO on Monday!

------
egze
Same story every time. At 1$ it was a bubble, at 30$ it was a bubble, at 100$,
at 1000$, etc. I wonder what needs to happen for the "bubble" people to say -
alright, this is not a bubble anymore, I was wrong. Or it will always be a
bubble for them?

~~~
tutfbhuf
i guess if the value stabilize and people use it as a real currency, then
people will stop saying bubble, but now even Steam has stopped accepting BTC

~~~
headmelted
Bitcoin isn't a currency, it's a commodity (akin to digital gold). It can't be
naturally deflationary and used to facilitate day-to-day trade because, by
design (and with all else being equal), you're better holding on to the
bitcoin than spending it.

Fiat currencies are the opposite - inflation encourages spending because the
money slowly trends towards being worthless if you don't spend or invest.

------
arekkas
It seems like the bitcoin craze also attracts significant traction for
underwhelming journalism.

~~~
opportune
Bitcoin journalism sucks because if a journalist knew enough about Bitcoin to
write well about it, they'd be qualified for a better job than being a
journalist writing about Bitcoin.

------
neals
All these threads and articles are the same, there's no new information just a
new price.

I like to follow a long with the Cryptocurrency, I've got a couple million in
Bitcoin right now, and I'm hoping for a big 'crash' to weed out the Wallstreet
types and focus again ons some good old-fashioned development.

It's hard to experiment when there's billions riding on it and I feel that
we're not done experimenting yet.

Anybody else remember the good old 2011 days of a small community and
enthousiasts? I miss those days.

~~~
berkes
> Anybody else remember the good old 2011 days of a small community and
> enthousiasts?

I do. It was fun. There was a real sense of community. Where you'd ask advice
on IRC on some mining setup, and people would gladly help you tune some
settings on your build-in GPU. When, after a full day of mining, I was like
"meh, this'll make at most one BTC per day, no way that I'm going to let my
computer blast the whole night just for one Bitcoin. Where you knew nicknames
and trusted people (and their advice, software, scripts based on "knowing them
from IRC")

One thing I've noticed when moving more into the Eth community (I'm developing
solidity stuff now) is that Eth is both a friendlier, more helpful community,
and feels like a more closed set.

Btc feels all about in-fighting these days. No matter what reddit you visit,
there is fighting, not heated debates, but actual, real hate. Eth feels more
as a whole group. We -vs- them kinda thing. As opposed to the Bitcoin us-vs-
us.

------
nucatus
I guess it is fair to assume that the bitcoin has become a extra-money sponge
that absorbs the extra money floating in the market right now. When there will
be less and less "free or cheap money floating" people want to get their money
back from the investments they made and this is the exact point where the
burst occurs. It would be no problem if the decrease is happening at the same
speed as the one of the initial increase, but due to human emotion, the
decrease is happening orders of magnitude faster than the increase. At that
point, the money will magically disappear.

It's a natural process that balances the value of the money available in the
market.

One interesting point to note here is that the value of the entire bitcoin
monetary mass is about 0.25 trillion dollars. That's something like 1% of the
whole US national debt.

------
jasode
A recent September 2017 blog[1] estimated electricity mining costs to be
~$19k. (I don't know if bitcoin community has adjusted the hashing difficulty
since September 2017 to maintain the 10-minute block rate.)

Are there realistic scenarios where the _sustained_ value of bitcoin exceeds
the mining costs?

What was the mining cost of 1 BTC in May 2010 when the famous request for 2
pizzas[2] for 10000 bitcoins was made?

[1] [https://grisha.org/blog/2017/09/28/electricity-cost-
of-1-bit...](https://grisha.org/blog/2017/09/28/electricity-cost-
of-1-bitcoin/)

[2]
[https://bitcointalk.org/index.php?topic=137.0](https://bitcointalk.org/index.php?topic=137.0)

~~~
spdionis
The difficulty of mining adjusts every 2 weeks so that data is certainly
outdated.

------
leaf_mc
Who cares? In the grand scheme of things, does it really matter that this
bubble pops?

I know there are some people out there who'll have invested everything they
have in BTC, which will suck for them. However, I'd wager for most people it's
still just a fun way to make some spare cash, given that it's actually really
difficult to use cryptos on much IRL.

We've got a bit more work to do before cryptos start being useful mainstream
money, rather than just a volatile investment opportunity. The underlying
ideas in blockchain are brilliant, genius even. Journalists should focus more
on the interesting potential of this technology, and less on how much 1BTC
costs today.

~~~
cheschire
They're fueling the speculation because they are probably invested as well.

And now that options contracts are taking off for bitcoin, the folks with put
contracts are banking on a crash.

~~~
brucen
Do you mean futures? Where are options being offered?

------
albertgoeswoof
The market price is pointless to look at, it's driven by people/groups with no
understanding or interest in the technology, who are just looking for easy
money.

Bitcoin, Ethereum, Monero and others are absolutely incredible pieces of tech.
E.g. the EVM is essentially a new paradigm in computing which has never been
seen before.

To draw a parallel in history, would you rather have been an investor in Apple
when the iPod was launched, or on the engineering team that built the iPod
itself?

We can spend all our time discussing the price and gambling on the perception
of value OR we can actually get our heads down and build something completely
new and cutting edge. I know what I prefer to do.

------
asenna
For those unaware of the recent news (briefly mentioned in this article) which
is driving the prices crazy the past couple of weeks, it's because the two
biggest derivate exchanges form Chicago are launching Bitcoin Futures soon.
CBOE launching this Sunday on Dec 10th 6pm EST. CME launching on the 18th [1].

10th would be a very interesting day for traders. I am no expert at all but
from what I can tell, this will make it easier for big institutions to short
the Bitcoin (all transactions happening off the blockchain though). There are
specualtions that prices are going up just before the launch and might take a
dive with the shorting after. BUT if there's anything that've learned trading
BTC on the side: anything can happen, it's got a mind of its own :)

Either way, I think this is good news for the long run as it legitimizes BTC
(There are rumors of Nasdaq and other exchanges globally getting in soon as
well next year). If you thought 2017 was fun, wait till you see what 2018 has
in store for cryptos.

[1] - [https://www.cnbc.com/2017/12/04/cboe-announces-it-will-
launc...](https://www.cnbc.com/2017/12/04/cboe-announces-it-will-launch-
bitcoin-futures-on-dec-10.html)

~~~
em3rgent0rdr
> "wait till you see what 2018 has in store for cryptos."

The ability to short might actually bring some stablity to the price (as
shorters will produce sell orders when they think others are mistakenly buying
too much, and will likewise produce buy orders on the falls).

~~~
asenna
I agree. More stability for Bitcoin but a general uptrend as the adoption
increases.

As for the other top cryptos, Bitcoin being legitimized and going mainstream
would translate to way more money moving into the space. I'm quite bullish on
a few good projects like Ethereum, Litecoin, Neo, etc.

------
speedplane
"as bubble fears mount"... seriously? I'm pretty sure bitcoin always felt like
a bubble even when it was trading at less than a dollar.

------
walkingolof
I do not claim to understand the value creating mechanisms of a cryptocurrency
vs. a "traditional" currency.

But without a central trust, the thing that guarantee the value of bitcoin is
the network effect, right ?

In that case the usage may show the characteristics of a MMO or a social
network.

------
tw1010
Keep calling it a bubble and it becomes a bubble. This whole thing is entirely
psychological. How can we be sure journalists aren't somehow shorting bitcoin
on the side while writing these articles? They have a huge influence on the
collective unconsciousness.

~~~
RutZap
It really is entirely psychological. Based on the two main theories of stock
investing: fundamental value and castles-in-the-air speculation, with
Bitcoins, it's hard to gauge its real value as it may be argued that it
doesn't actually have one. Being an asset that does not produce any profit,
it's hard to put a number against it. So therefore the price is driven by
demand and by what the mass wants it to be worth and by what it hopes to be
worth in the future.

Speculators coming in the Bitcoin ecosystem now are willing to spend a lot of
money on it because they know that there will be someone else that is willing
to spend even more money on it. It's all driven by mass psychology, exactly
like many of the previous bubbles in the history of stock markets: tulip bulb
craze, dotcom shares, Japanese land value and so on.

The only thing is... it's very hard to predict the randomness of mass
psychology. Everybody wants to get rich.. and everybody wants the price to go
up and up... but when they start to sell in order to cash in, the price will
drop and if a lot of people do it at the same time, panic will set in and then
it will crash seriously. You may argue that the whole thing behaves a bit like
a ponzi scheme (with the main difference that there is actually something
happening underneath the whole speculation-investing-money aspect, which is,
IMHO, the very elegant blockchain technology)

------
flashman
Is there any data on the average transaction size when converting between BTC
and USD? The price might be $17k per coin, but if people are transacting in
$100 amounts for fractions of coins, that's kind of sustainable whether the
BTC price is $1 or $100,000.

------
659087
Do we really need to hear about Bitcoin's price changing multiple times every
day?

------
holydude
Oh yeah but it sharply dropped right ? 14,927.78 -11.45%

------
hyperpallium
OK, _Now_ it's a bubble.

------
joebergeron
To the moon, boys. To the moon.

~~~
nkkollaw
To infinity... And beyond.

------
chucknelson
This is insane - is there any "expert" speculation out there on when this will
all collapse? Before or after the new year...?

~~~
kungpoo
Rule #1 of cryptocurrencies, trust nobody.

~~~
lukasm
that's rule number 3.

1\. HODL 2\. BUY DIP

~~~
659087
Reddit appears to be leaking.

------
digitalengineer
The modern day equivalent of The Tulip Mania where one specific type of tulip
could be traded for a house?
[https://en.wikipedia.org/wiki/Tulip_mania](https://en.wikipedia.org/wiki/Tulip_mania)

~~~
mitchellberry
Can you grow a bitcoin in your garden?

~~~
dest
Some will say you can mine it…

