
Bitcoin is back: Price quietly jumps 80% - mathattack
http://www.cnbc.com/id/101728070
======
nlh
I have to say, after the big piece appeared about price manipulation / fraud /
whatever on MtGox, I have zero confidence that this is a genuine rise.

Caveat: I'm not an "active Bitcoiner", just a casual observer. And I can tell
you that my view is now irreparably tainted.

The "normals" I interact with continue to not use Bitcoin for anything. It's
even stopped coming up in casual conversation (likely because the tide of
consumer news stories has slowed). From my perspective, the Bitcoin economy
continues to be powered by people who have either mined or bought BTC and are
just exploring new ways to spend their windfall (Overstock! 50 Cent's new
Album! Dish Networks!)

There is still no incentive to get paid in BTC, no incentive to use BTC, and
no incentive to hold BTC (as the recent spike shows, it's still incredibly
volatile).

For now, I'm holding on my belief that the Blockchain is the real story here
-- and we haven't yet discovered the killer app (which I _don't_ think is
BTC).

~~~
jhart3333
>> There is still no incentive to get paid in BTC

How about no chargebacks? That seems to be a pretty big issue for anyone doing
business on the internet.

~~~
sequoia
Chargebacks, while inconvenient for vendors, provide utility to consumers,
especially online when there can be a long delay between paying and getting to
receive/examine the product.

~~~
FatalLogic
Chargebacks do provide utility to consumers, but they also provide utility to
scammers and fraudsters, who use chargebacks to steal more than $10 billion a
year in the US alone. The cost of this, and fraud prevention and dispute
resolution, is ultimately passed back to the consumer as higher prices.

From the most negative point of view, the chargeback mechanism could be seen
as a sleight of hand marketing trick that was necessary to get consumers to
accept new payment methods, by hiding the real costs.

------
ISL
Some people have been expecting a ~May-June rise for months [1]. If you look
at a log plot, and believe that the future has something to do with the past,
this conclusion has some legs. News articles like this will tend to drive the
hype again, repeating the cycle, perhaps with smaller amplitude.

If enough people believe it to be true, it will happen, at least temporarily.

[1] [http://www.cryptocoinsnews.com/news/bitcoin-
price-2014/2013/...](http://www.cryptocoinsnews.com/news/bitcoin-
price-2014/2013/12/30)

~~~
mathattack
This is interesting because:

1 - Many efficient market theorists say there is no information is past price
movement.

2 - There's a well known January effect in the stock market that's
acknowledged by those who believe in #1.

I look forward to following this. And yes - log plots are the best way to look
for these patterns.

~~~
panarky
The efficient markets hypothesis has a hard time explaining behavior in real
markets.

In theory, traders search for asset prices that are higher or lower than fair
value and profit by arbitraging back to fair value.

But in real markets, rising prices encourage more buying, which drives prices
even further from fair value. Falling prices encourage more selling, pushing
prices lower still.

Markets don't price to what traders think is fair value. They price to what
traders think other traders will think the price will be.[1]

    
    
      We have reached the third degree where we devote our intelligences to
      anticipating what average opinion expects the average opinion to be.
    

The very existence of persistent booms and busts debunks much of efficient
markets theory, and consequently the illusion that free markets can regulate
themselves.

[1]
[http://en.wikipedia.org/wiki/Keynesian_beauty_contest](http://en.wikipedia.org/wiki/Keynesian_beauty_contest)

~~~
notahacker
The very existence of _Bitcoin_ debunks much of efficient markets theory, at
least when markets are thin and difficult to safely short.

~~~
panarky
> markets are thin and difficult to safely short

I would be happy to lend you Bitcoin you can sell short (if you post
sufficient collateral, of course).

How much do you want?

~~~
hft_throwaway
How many do you have? What is "sufficient" collateral?

If someone has the cash, is able to withstand volatility, and the rates are
low enough this trade is a no-brainer. BTCs have no intrinsic value and are
propped up by speculators. Aside from speculative interest, they only have
value in so much as they can be exchanged uniquely online, but they are just
as useful for doing that at $0.0001/BTC as they are at $1000/BTC. Long-term I
would not be surprised to see them go to 0 or some nominal amount.

ETA: Odds are nobody will loan you enough at a low enough rate to make this
trade worth putting on. It's like how you can short leveraged long and short
ETFs and make money due to volatility decay, but nobody will lend them cheap
enough for it to be worthwhile.

~~~
panarky
People said shorting Bitcoin was a no-brainer when the exchange rate was $2.
When the exchange rate rocketed to $10, many serious, smart people just knew
it was a speculative bubble.

Rinse and repeat for each leg up ... $32, $90, $240, $1100. Same arguments
every time.

Given historical volatility, I'd say fair collateral for a short sale would be
300% of the current exchange rate in USD, EUR, CHF or gold, with a margin
interest rate of 6% per month.

~~~
mathattack
The same argument held on Amazon, as the shorts got crushed on it's rise. :-)

------
NelsonMinar
Perhaps one of the other major exchanges started supporting a massive fraud?
c.f.
[https://news.ycombinator.com/item?id=7796748](https://news.ycombinator.com/item?id=7796748)

------
laichzeit0
For those who have been using Bitcoin for years now it's completely
fascinating that people still doubt a technology like this that's seen _so
many_ ups and downs and yet it just refuses to die. It stubbornly refuses to
fail despite everyone's best wishes that it inevitably should.

~~~
anigbrowl
The 419 scam has been running for over a century, but that doesn't make it a
good model for wealth redistribution.

[http://en.wikipedia.org/wiki/419_scams](http://en.wikipedia.org/wiki/419_scams)

~~~
laichzeit0
I don't think it's meant as a model of wealth redistribution. I personally
just like the fact that Bitcoin allows me to pay for things in a one-time sort
of way. For example, paying for pornography would be brilliant. I don't want
something as edgy as that linked to my physical address or credit card in any
way.

------
joeyspn
Bitcoin is also driven by market sentiment, and the current sentiment is quite
positive after the much needed Gox purge and the latest news (DISH, UK Gov
support, etc)

Btc has recovered before from serious crashes and I'm pretty sure next
Christmas could smash the current ATH... It really feels like last
September/October or March '13.

I wonder what the financial gurus with bitcoin-is-going-to-10-predictions [0]
say about that if finally their predictions fail...

[0] [http://www.businessinsider.com/williams-bitcoin-
meltdown-10-...](http://www.businessinsider.com/williams-bitcoin-
meltdown-10-2013-12)

------
luxpir
Noticed this jump over the last few days, randomly checking the price with
DDG. It's never clear what's behind these things, but I'm sure there will be
some explanation (when the jump has reversed, no doubt).

~~~
selectodude
The daily volume has tripled in the past 15 days. There must be something
behind that.

~~~
mathattack
There are two competing theories...

1 - When there's not a lot of volume, you can't trust price movements because
it doesn't represent a critical mass of opinions.

2 - When there's too much volume, you can't trust price movements because it's
a mania or panic.

I'm not sure if #2 is true in this case. It'll be interesting to watch.

~~~
selectodude
Bitcoin is fascinating. I have zero dollars in it for a reason, though.

~~~
justizin
exactly how I feel about the stock market.

~~~
mathattack
I feel safer buying stock market indices than I do Bitcoin though. It just
feels too much driven by insiders. (Also why I don't trade Gold or Oil)

------
unclebucknasty
I have zero evidence to support this except, perhaps, Occam's Razor and
Bitcoin history, but I believe this to be either fraud or manipulation. In
fact, I believe the majority of Bitcoin's price, whether volatility or
stability, is not the product of natural market forces.

How does an asset with virtually no underlying value remain so remarkably
stable for long periods? Then, how does that same asset suddenly experience
such sharp increases in value and volatility?

There are those with huge holdings who have an interest in stability for the
sake of its adoption as a currency, and its long-term value. They can easily
manipulate the market towards stability. And, as we saw with Mt Gox, unsecured
and unregulated exchanges can also be a vehicle for market manipulation and
outright fraud.

I know that opinion is unpopular with some, especially without hard evidence,
but many also believed the increase before the Mt Gox fiasco was organic.

I am not a Bitcoin hater, and have dabbled myself for a decent return. I just
think its past time to secure it properly and earnestly acknowledge its
vulnerabilities. That vs. pretending that any of this makes sense from a
traditional market perspective.

~~~
icebraining
_How does an asset with virtually no underlying value remain so remarkably
stable for long periods? (...) There are those with huge holdings who have an
interest in stability for the sake of its adoption as a currency, and its
long-term value._

Long periods? Long-term? When has ever Bitcoin experienced this? Looking at
the graphs, I don't think I can find a single month where Bitcoin remains even
close to stable.

~~~
unclebucknasty
> _Looking at the graphs, I don 't think I can find a single month where
> Bitcoin remains even close to stable._

Sure you can. And, even more so when you define stability relative to the
degree of fluctuation during volatile periods.

------
rdmcfee
This could just be a correlation but the BTC/USD price seems to be inversely
correlated with MtGox news. Trending down when rehabilitation/takeover looks
promising, trending up when Willy report comes out and the momentum of the
takeover bids seems to stall.

------
gst
It will be interesting to see how this will work out in the long-term.
Currently the cost of Bitcoin transaction is already at around $50 which makes
Bitcoin transactions quite expensive. The only reason why this cost doesn't
matter yet is because the inflationary factors (new coins, etc.) are smaller
than the deflationary factors (more adoption, etc.).

I see Bitcoin as something like the 2nd-gen P2P file sharing systems
(Gnutella, etc.) where a radical decentralization approach was taken to
counter weaknesses of the earlier generation (P2P: Napster, Currency: E-Gold).
In the P2P world we figured out that a small amount of centralization provides
benefits and is acceptable (e.g., Bittorrent). I suspect that in the
e-currency world we'll be going a similar route, where successors to Bitcoin
will use Ripple-like concensus systems instead of proof-of-work [2]. This
should not only allow to significantly reduce the cost per transaction, but
might also allow to make the network more secure in practice (as the number of
validators in a concensus approach will be much larger than the number of
mining pools with signficant hashing power in the Bitcoin world).

[1] that's basically the cost of finding a new block divided by the number of
transactions per block - see [https://blockchain.info/en/charts/cost-per-
transaction](https://blockchain.info/en/charts/cost-per-transaction).

[2] Proof-of-stake is a nice theoretical approach but due to the complexity
involved it will probably take some time until a solution is found that also
works well in practice. Proof-of-stake as implemented in Peercoin is basically
outdated, something like Slasher
([http://blog.ethereum.org/2014/01/15/slasher-a-punitive-
proof...](http://blog.ethereum.org/2014/01/15/slasher-a-punitive-proof-of-
stake-algorithm/)) looks more like a viable solution.

EDIT: As there has been some confusion about the $50 transactions costs: I'm
not talking about direct costs for the person who initiated the transaction,
but about externalized costs that are paid by the whole network. See my
responses below.

~~~
ok_craig
The cost of a bitcoin transaction is not $50, it's about $0.06. Often times,
such as for large transactions or moving old coins, you don't need to include
a fee at all.

~~~
gst
The direct cost per transaction (= the mining fees paid by the person who
initiated the transaction) is $0.06. The externalized cost per transaction (=
the block reward divided by the number of transactions) is $50.

~~~
ok_craig
(1) That's not made apparent in the sentence (why leave it for a footnote?),
and (2) you haven't explained why that number is actually meaningful.

Edit: I don't know much about this stuff so please correct me if I'm wrong but
wouldn't the cost of the "externalized price per transaction" be
(price_to_mine-block_reward)/number_of_txs. price_to_mine and block_reward
would approach each other over time.

~~~
gst
The block reward will continue to half in regular intervals during the next
decades, while the price of a Bitcoin can't continue to double in regular
intervals during the next decades (see: limits of exponential growth, etc.).

This leaves us with two options:

1) Instead of being financed by the block reward miners will require higher
mining fees in order to include transactions. With a decreasing block reward
those mining fees will eventually approach the actual cost of a transaction
(currently: $50).

2) There will be less miners so mining a single block will be cheaper. This
will lead to a decreased security of the network and make the network more
vulnerable to attacks.

~~~
dangero
Why don't you factor in the possibility of more transactions per block? The
idea is that as the Bitcoin transaction volume climbs, the need for a block
reward decreases.

Secondly, you're assuming that the mining pool is currently constrained by
what is profitable. From what I have read about large mining operations, they
are significantly into the green on profit margin right now, so there seems to
be room for a decrease in profitability without losing significant portions of
the mining network. Every time the mining difficulty changes this is tested
already so we know that there is at least some wiggle room in the mining
profit margins.

~~~
gst
You mean that the number of transactions grows faster than the mining
capacity? I've covered a similar case in
[https://news.ycombinator.com/item?id=7846564](https://news.ycombinator.com/item?id=7846564)
(it's #2). In general, if you want more transactions you also need a better
security, which leads to increased mining costs.

~~~
dangero
That does not seem like a similar case to me. You specifically say "less
miners" in #2. Plus what do you mean by mining capacity? If you mean actual
GH/s then that's not a meaningful measurement because better hardware in the
future will give higher mining efficiency at the same mining cost.

It just seems like you're oversimplifying a really complex equation with lost
of potential outcomes. Perhaps this short comment style just isn't allowing
you to explain everything. Have you written a blog or anything that details
your thoughts on this?

------
rgbrgb
I'm pretty excited that Apple seems to be loosening their terms around
cryptocurrency apps. Maybe that helps explain the spike? I'm hoping for some
neat p2p ios apps.

------
lnanek2
Kind of weird talking about some conference in Europe no one ever heard of
when Apple just OK'ed virtual currencies...

------
Havoc
So who is fudging things this time round?

------
solomania9
[http://bitcoinmegaphone.com/14XMmrqXiUcpPHySzj4SXSPyxLPiVVgo...](http://bitcoinmegaphone.com/14XMmrqXiUcpPHySzj4SXSPyxLPiVVgoiX/)

~~~
dangero
I'm assuming you made bitcoinmegaphone.com?

This was very confusing for me and it took me about 5 minutes reading the site
before I could understand what I was looking at. There's so much information
on that page that is irrelevant to a person following that link. Perhaps I
could see this being valuable if people used it like pastebin, but why do
people have to pay so much to post something?

