
Bitcoin Gets Close to $5,000 - omarchowdhury
https://www.bloomberg.com/news/articles/2017-09-01/bitcoin-makes-assault-on-5-000-in-record-breaking-rally-chart?cmpid=socialflow-facebook-business&utm_content=business&utm_campaign=socialflow-organic&utm_source=facebook&utm_medium=social
======
aresant
The graph in the article (1), showing a much steeper slope than other bubbles
is fascinating for a couple of reasons:

1) The total SCALE of the bubble is much much smaller than say the tech bubble
- the 280 stocks representative of the tech bubble fell almost $1.7 TRILLION
in 52 weeks (2) vs the total crypto market cap @ the moment of ~180 billion.

2) The total scale of the Crypto bubble has MORE potential than stocks - why?
The opportunity for casual global participation and almost complete lack of
regulation / sophistication.

If the single use case for Crypto is nothing more than the world's greatest
tulip mania / pyramid scheme it has the potential to be a multi trillion
dollar asset class / wealth transfer.

(1)
[https://pbs.twimg.com/media/DIaa9KcVoAAcs3m.jpg:large](https://pbs.twimg.com/media/DIaa9KcVoAAcs3m.jpg:large)

(2)
[http://cnnfn.cnn.com/2000/11/09/technology/overview/](http://cnnfn.cnn.com/2000/11/09/technology/overview/)

~~~
mrb
Bitcoin has indeed appreciated more than any other investment in human
history. In 7.5 years it went from $0.003 to $4900: a growth 1,600,000×.
Imagine investing ten bucks and a few years later it is worth $16 million!

For comparison: the founders seed round of Uber grew their investment 65,000×,
tulip prices increased by at most 5,000× during tulip mania, some "best
performing stocks" over the last century are reported as growing 1,000×.

~~~
omarchowdhury
It's contemplating these returns and seeing the price still going up that
leads people to continue jumping in to buy at any price level. Is there an
upper limit to this?

~~~
whytaka
According to some reports, the entirety of the world's current wealth is
measured to be north of $240 trillion dollars. [1]

There will only be 21 million bitcoins ever.

Let's say we were to measure all of our wealth in bitcoins, and let's say we
already have all the bitcoins ever to exist available now. Then each bitcoin
could be the equivalent of what $11,428,571.43 is to us today.

[1] [https://publications.credit-
suisse.com/tasks/render/file/?fi...](https://publications.credit-
suisse.com/tasks/render/file/?fileID=BCDB1364-A105-0560-1332EC9100FF5C83)

------
drizzzler
It's funny how thick HNers are about Bitcoin. I believe it's evidence of the
sort of passive conservatism of the tech community. Bitcoin is some utopian
shit, the decentralized technology dream that has a ton of traction, yet many
of you just can't seem to get behind it. Is it because YC is an ultra
capitalistic investment fund and Bitcoin is just too anarchist for its
fanboys?

For all the people out there saying, "I cant find a use case", my question to
you is, have you ever used it?!

If you have, did you notice that there wasn't a middleman taking a cut when
you sent the money? I mean, do you have any fucking idea how much money
businesses pay to the credit card companies?

Get on board guys.

~~~
cheez
Except anyone can figure out where my money comes from and where it goes. No
thanks!

~~~
omarchowdhury
Okay. So I'm anyone. How am I going to know what your addresses are? Starting
from where I am right now all the way over here. You did say anyone.

~~~
cyphunk
the first time you ever pay anyone for anything the probability that this
person can determine your entire net worth is much much higher than if you
were to use any other means of value exchange (Cash, credit, check, etc).

~~~
omarchowdhury
You're argument rests on the assumption that people are putting their entire,
or close to entire net worth into BTC.

~~~
cyphunk
I'm playing on the fantasy that Bitcoin or similar could ever be a predominant
means of value exchange or storage. It's a fantasy many hold.

------
xutopia
I see so many people dissing the technology and rehashing old arguments.

You shouldn't consider Bitcoin as a currency but as a better form of Gold.
Like gold it has a limited amount available: ~180k tons of gold and eventually
21 million bitcoins. Like gold it is a good store of value (especially as more
people are dropping their gold to purchase BTC). Unlike Gold you can send it
to someone else online and that means it can also be used like a currency
(even thought it is _not_ its strength).

~~~
an_account
Many people buy gold for “post apocalypse” scenarios. How well is the bitcoin
network going to work in the post apocalypse?

~~~
mixedCase
In a true, real post apocalyptic world, you can't eat gold, you can't have sex
with it, it will not cure your sickness nor will it feed your vices;
therefore, it has little to no value.

~~~
omarchowdhury
But someone might exchange that gold with you for food, for sex, for medicine,
and for what feeds your vices, as they have for millennia.

~~~
mixedCase
Once a semblance of civilization establishes again? Then yes, it's likely.
During times of true hardship where the general population is at risk of dying
of starvation, disease or being murdered by a once upstanding citizen, and
there's no way to readily exchange that gold for needed supplies? No. You
would consider yourself lucky to be able to exchange a bar of solid gold for a
few cans of food.

~~~
omarchowdhury
True, it would by necessity be a barter economy.

~~~
programmarchy
Or similarly, an informal debt economy. If I give Bob a pair of boots, he'll
be more obliged to give me one of his pigs when I tell him how nice and fat
they look a month later. Informal debt economies really only work within
tribal communities where social pressure has more leverage, but it does solve
the double coincidence of wants problem.

------
johnwheeler
It's 100% bubble.

It could go up to $6,000, $50,000, or even $1M. It's not localized like
tulips, and it's connected to the internet, so the universe of people
available to fuel the speculation is enormous. That the Chinese are highly
speculative is what's mainly driving the current price.

It has no intrinsic value. It's like gold in that it's not a productive asset.
It doesn't yield anything like stocks or bonds. The only thing a bitcoin
holder can hope for is that someone will buy their coins in the future at a
higher price.

The interesting part is watching human nature unfold. People who hold bitcoin
mistakenly believing they're investors because the price action is reinforcing
that belief. They're 100% speculators by definition. It's OK to speculate.
It's neither illegal or immoral, but you should know when you're speculating
and when you're investing.

You can't make this stuff up. Look at the people coming out of the woodwork:
The Winklevoss Twins, Dan Bilzerian, professional wrestlers, and such. All the
community leaders are either fighting with each other or in jail.

~~~
cyphunk
the china essentialist argument was debunked once CN regulators forced CN
exchanges to institute a know-your-customer policy. Result, the bots they used
to fluff their order books had to go. You can see this difference from that
day onward very clearly in exchange trade volume comparison:
[https://data.bitcoinity.org/markets/volume/2y?c=e&t=b](https://data.bitcoinity.org/markets/volume/2y?c=e&t=b)

actaul trade from china is similar or smaller to that in the EU at the moment

~~~
johnwheeler
They're not trading. They're holding and creating the price support. The only
people who are trading right now are John Q. Public and a few whales who
manipulate the market with shill bids.

------
rampage101
People have been saying since it was valued at $1 that it was overvalued, or
nobody should pay $1 for a virtual coin. Same people are still arguing the
same thing 5 years later...

~~~
MBCook
Doesn't make them wrong.

I find the idea of crypto currency, especially bitcoin, very interesting. I
just have a very hard time seeing how it's actually useful. It can't handle
very many transactions per minute. And the thing that supposed to make it so
great is that no one controls it. But if bitcoin becomes really important then
people will want to control a lot of the mining power. Pretty soon you end up
with a group of miners (or even a single miner) having enough power to
influence things leaving you pretty close to someone being in charge of the
thing.

It's such a fascinating idea. But in less there was someway to limit mining so
people couldn't throw additional power at it I'm not sure it's useful.

As an example, you could use a block chain to enforce a ledger between a
couple of different companies but you'd have to have some sort of contract it
said everyone was only allowed to use one of device X for mining. That way
everyone would be equal and you could easily check it because the blocks
should be minded roughly evenly.

But when miners can buy additional mining capacity, and they get rewarded for
doing that with more money, how does this not end up with a winner takes all
situation?

~~~
solotronics
why is it useful? you can store and instantly send any arbitrary amount of
money anywhere on the planet and it is the hardest (impossible?) for a
government to steal it from you

~~~
fooker
>instantly

This makes me think you haven't ever transferred bitcoins.

~~~
solotronics
I have many times. Bank transfers can take hours or days but BTC shows up
instantly and is proven permanently immutable after a few blocks (20-40
minutes)

------
theklub
What will stop bitcoin's price from going up? I just keep thinking that other
than new laws or something getting hacked there is no reason for the price to
not just keep creeping up.

~~~
BenoitEssiambre
It can't go up forever because the knowledge of that trend would make more and
more people invest in them.

At some point this would cause people to build stashes of tokens instead of
investing in real businesses with real production capacity.

When this trend would become widespread enough, it would eventually cause
global production capacity to drop. That's right, when enough people do it,
token hoarding displaces investment in businesses and factories and lowers
global production capacity. This means token hoarding causes a future drop in
things available to buy with these very tokens.

Eventually there will be people who want to buy real things with their stock
of tokens. The tokens will be chasing fewer goods which would mean prices for
stuff would rise (tokens would lose value). This could happen suddenly when
people with large stockpiles of tokens notice that value is dropping and that
there are tons of other tokens waiting on the sideline ready to make it drop
even further.

Hoarders might rush to get rid of their stockpile all at the same time before
they're worthless which would cause their fall to worthlessness. This drop
would bring the tokens closer to their natural intrinsic value of zero. The
cycle can then start again, such is aggregate economics.

The 1920s and 1930s suffered from this type of production drop but with gold
tied currencies instead of cryptocoins. It happened to a lesser extent in 2007
when western world central banks failed to keep inflation rates high enough.

It's important for the world's sake to not let deflationary currencies become
too popular. When savings or financial promises are insufficiently tied to
future production or to accumulation of real goods, there will be
disappointment when many people try to exchange them for real stuff. That is
true for crypto currencies as well as government currencies (that is why the
system is designed to make banks invest people's money in real businesses and
minimize the proportion of money that is stockpiled idly).

It's true that crypto currencies are currently not widely held enough to
significantly affect the aggregate economy but speculation already keeps them
volatile and the knowledge that as they get more popular, there will be more
macroeconomic pressures towards volatility keeps the speculation wild and
cryptocoins unstable.

Currencies that are not designed to lose value over time can not be stable.
Intrinsically worthless tokens engineered to have better than market risk
adjusted, liquidity adjusted, real returns compared to real productive
investment will always fluctuate increasingly wildly as they get more popular.

~~~
omarchowdhury
This is the soundest commentary I have encountered regarding the Bitcoin
phenomenon since 2008. Sure, a lot of people will denounce Bitcoin, even
central bankers will assign doom to it, but never assert why. Is your
background in economics? What literature or resource do you recommend I read
to understand more of what you understand? May I contact you?

~~~
BenoitEssiambre
My background is not in economics but the financial crisis of 2008 and its
aftermath kept me interested on the subject long enough to develop a general
understanding of macro.

I would say the economists who most shape my views would be Nick Rowe (
[http://worthwhile.typepad.com/worthwhile_canadian_initi/nick...](http://worthwhile.typepad.com/worthwhile_canadian_initi/nick-
rowe/) ), David Beckworth (
[http://macromarketmusings.blogspot.ca/](http://macromarketmusings.blogspot.ca/)
) and sometimes the more controversial but always entertaining Scott Sumner (
[http://www.themoneyillusion.com/](http://www.themoneyillusion.com/) ) .

A while back, I wanted to do as a side project, a game with a realistic macro
economy but I got stuck at the learning phase and never got around to do the
game (the rabbit hole went deeper than I had imagined). While I was
researching, I put some of my musings about what I was learning in a few posts
here: [http://bessiambre.tumblr.com/](http://bessiambre.tumblr.com/) then
later kind of summarized the views that I had formed in the following medium
post: [https://medium.com/@b.essiambre/the-world-deserves-a-pay-
rai...](https://medium.com/@b.essiambre/the-world-deserves-a-pay-
raise-302f25efd82a)

I'm sure my conclusions are simplistic and over-general compared to those of
real economists.

My email is b.essiambre@gmail.com. Don't hesitate to write if you have
questions.

------
simplify
Is anyone worried about that unsustainable bitcoin energy usage article on HN
a few days ago? Would Litecoin have those same problems?

~~~
MBCook
Wouldn't that happen to any general crypto currency that got popular?

~~~
nosuchthing
Alternative crypto currency network designs try to reduce the energy cost of
PoW though delegation to a limited set of masternodes, or via "Proof of Stake"
which so far has required a pre-existing supply of coins to exist (and one
should ask who mints the supply...?)

[https://mycrypto.guide/](https://mycrypto.guide/)

~~~
MBCook
That seems more like the kind of system I was thinking of, but you're right
the initial set up and dolling out of the supply brings you back to the kind
of problems bitcoin was trying to avoid.

~~~
omarchowdhury
Unless the supply was initially distributed through PoW, and then the system
switched to PoS. That is the plan for Ethereum.

~~~
nosuchthing
Ethereum launch in review:

\- Investment Prospectus:
[https://www.ethereum.org/pdfs/TermsAndConditionsOfTheEthereu...](https://www.ethereum.org/pdfs/TermsAndConditionsOfTheEthereumGenesisSale.pdf)

\- Premine Part I: Anyone can buy ETH in exchange for BTC for the next 42 days

\- Premine Part II: On top of Premine Part I, +10% of the total ETH allocated
during Premine Part I will be distributed to "early contributors"

\- Premine Part III: On top of Premine Part I and Premine Part II, +10% of the
total ETH allocated during Premine Part I will be distributed to the Ethereum
Foundation

\- The supply of ETH is uncapped and inflationary at a rate of +25% per year

\- The premine is being conducted by "EthSuisse", a Swiss entity which will be
prompty dissolved after the premining period ends. The Ethereum team makes no
guarantee that development of Ethereum will continue after the dissolution of
"EthSuisse"

\- Regardless of how many BTCs are raised during the premine period, ~4000 BTC
is explicitly reserved to pay for "Expenses incurred prior to and related to
Genesis Sale". Translation: they are pocketing the first 4000-5000 BTC

> The Ethereum Platform is being developed primarily by a volunteer
> contributor team - many of whom will be receiving gifts of ETH in
> acknowledgement of their dedication - and will continue to be developed on a
> volunteer basis by some developers as well as under a more formalized
> contracting or employment relationship for other developers. The group of
> developers and other personnel that is now, or will be, employed by, or
> contracted with, Ethereum Switzerland GmbH ("EthSuisse") is termed the
> "Ethereum Team." EthSuisse will be liquidated shortly after creation of
> genesis block, and EthSuisse anticipates (but does not guarantee) that after
> it is dissolved the Ethereum Platform will continue to be developed by
> persons and entities who support Ethereum, including both volunteers and
> developers who are paid by nonprofit entities interested in supporting the
> Ethereum Platform.

via Cyther606 (
[https://news.ycombinator.com/item?id=8072947](https://news.ycombinator.com/item?id=8072947)
)

------
mej10
It is going to be really interesting to see what happens to cryptocurrencies
during the next economic downturn.

If their "market caps" aren't decimated then I will be a true believer.

I say this as someone who has owns some of a few different ones.

------
cabaalis
Would it be correct to say that there is a threshold where the value of a
bitcoin makes it reasonable for retailers/small business/etc to invest in
using them as an actual currency at the register? If that's the case, then it
would make good business sense for someone nefarious to pump up the price as
much as possible to reach that threshold, wait for the use to become common,
then cash out. Effectively manipulating the market into something it didn't
need in the first place.

~~~
matthewmacleod
I don’t see why this would be the case. The utility in currency is not value,
but stability; there’s little incentive to use Bitcoin if the value is not
stable.

~~~
solotronics
yeah who would ever want something that appreciated in value /s

~~~
matthewmacleod
Certainly not retailers in the context of a currency!

Things that rapidly appreciate in value also carry the risk of rapidly
depreciating in value. That’s fine as an investment vehicle, but a much less
attractive prospect in a currency.

~~~
solotronics
if they don't want to hold there are payment processors that convert instantly
to fiat, that argument is invalid.

------
joelrunyon
I'm curious what the naming conventions are going to be to transact bitcoin on
a regular (offline) basis.

Are you going to say 1/10 bitcoin or will that have a name?

One thing I haven't seen anyone talk about is the language to make bitcoin
more accessible.

No other currency (that I know of) has 1 unit as the MAX unit to transact (at
such a high value) with no smaller denominations.

If Bitcoin really DOES end up at 100k/coin - and you want to buy something
that's $10, are you really going to say .0001 bitcoin? There has to be a
cleaner way. Even that, you could easily screw up decimal spots very easily.

~~~
moronicalox
It does have a name. You're talking about mBTC and bits
[https://en.bitcoin.it/wiki/Units](https://en.bitcoin.it/wiki/Units)

~~~
joelrunyon
This all seems way more complicated than "buck", "quarter", "dime", etc?

Maybe I'm just not used to it yet - maybe they're just use the first part?
"san", "deca", "mil"

------
anonu
The real story is ETH. It's appreciating at a faster pace over the last two
months than BTC has.

There's a lot of reasons why prices move. There's obviously speculation. But
there's also utility. And the way ETH is designed is far more useful to me
than BTC.

My prediction is that both currencies will reach 10k USD in the next few
years. But ETH will get there faster

------
yuhong
What is funny is how every time the difficulty bomb for Ethereum hits so far,
the price also increased soon after.

------
gigatexal
I think I had a coin once in a wallet long since deleted. What I could do with
5k now.

~~~
tgtweak
I got one better... I traded 30 bitcoins for Diablo 3 gold when Diablo 3
launched, 1m gold was about $5 and bitcoins were about $7. Was just after
linode wallets got hacked.

I'll let you do the over/under on that one.

~~~
solotronics
I threw away hundreds of Bitcoin on formatting a drive many years ago. never
thought they would be worth more than a few cents. I revisited in 2014 and
have been accumulating ever since.

~~~
kwelstr
You still have that old drive?

~~~
gigatexal
I wouldn’t know. I likely don’t. Which is why I’m kicking myself now.

------
andy_ppp
The growth curve looks like a hockey stick... can’t be trusted of course,
certainly not any more than cash.

------
Temasik
Bitcoin have no real world use case

~~~
mrep
Bitcoin does seem to be the best payment technology for online illegal
transactions. Albeit, one could argue those shouldn't be 'real' in the first
place.

~~~
chenster
Monero could be a better choice as it is completely untraceable.

~~~
tehlike
yeah, i am planning to invest/speculate in it. along with zcash/dash/etc.

------
grizzles
It's kinda cool to be living in a tulip era like this. I wish there was some
way I could make a long term bet against the the price of bitcoin, say it's
price 10 years from now.

Of course, this is impossible. If there is anything we have learned, and I can
demonstrate that I predicted 5 years ago, it's that the definition of bitcoin
is infinitely divisible. I could claim a bitcoin fork in 2027 is the true
bitcoin, and price it at $1M a coin.

~~~
Meekro
I've been into Bitcoin since 2011, and it's interesting that people are still
making tulip comparisons 6 years later. Tulip mania itself only lasted about 9
months. I wonder how long Bitcoin will have to hold out before the tulip
argument could no longer be made.

~~~
tunetine
Probably when it is used mainly as actual currency, not for speculation or
black market exchanges and laundering.

~~~
booleandilemma
I was skeptical of Bitcoin for a long time, but the other day I was on a
(legal) website and they had it listed as a payment method, right next to
Visa. Seeing it there really showed me how far it's come.

~~~
tunetine
Are you for real? I feel like we're being trolled by Bitcoin holders who want
to keep the value propped up.

~~~
tehlike
they probably couldn't hear you over the price of their coins.

