
The Target Value for Bitcoin is $100K to $1M - mrb
http://falkvinge.net/2013/03/06/the-target-value-for-bitcoin-is-not-some-50-or-100-it-is-100000-to-1000000/
======
DanBlake
The biggest problem is that getting bitcoins is a major, major pain in the
ass. You need to setup bank transfers, confirm your DNA and get a rectal exam
to buy them from any exchange. You are looking at about a week to buy your
first bitcoin from when you decide to do that. (3 days to confirm bank, 3 days
to do a deposit) - This will never change for online purchases, because the
way bitcoin works- there is no takey backeys (so credit card purchasing is out
to buy bitcoins). So, either there will be massive fraud, or massive barrier
to entry. The only way around it is retail, in person bitcoin
exchanges/stores. Sort of like you see in international airports with currency
exchanges.

Also, Even though Bitcoin cant be destroyed in a physical sense, it can still
be completely devalued by litigation. The US has shown they are serious about
anti-gambling and if this starts taking off, they simply need to go after the
exchanges. Making it hard to buy bitcoins = BTC value goes down. Making it
hard to sell (remember when pokerstars was shutdown? Everyone withdrew
everything from ALL sites) and the value goes down catastrophically fast.

Basically, all it takes to completely devalue bitcoins is to have one event
that makes most bitcoin owners think the amount of time they have to cash out
is minimal.

How do you think the market would react if mtgox had a 'megaupload' style
moment? It doesn't even have to be realistic- The US gov could just say
terrorists might be using it to funnel funds or something.

But anyways, If mtgox was raided or taken down (and please don't say its not
possible- Its totally possible) the effects on the market would be massive and
instantaneous. When megaupload was taken down, all its competitors shut down
out of fear as well. Its likely that would happen in this situation in a
similar fashion.

There is no intrinsic value in bitcoins unless it is possible to easily trade
them with a outcome of receiving capital. Yes you can trade bitcoins for
services, but the person giving you services is not going to do that unless HE
can get cash from this. People are not going to trade services/items to each
other in a giant circle if the value of the currency is not hinged on a dollar
amount.

I think the pro-bitcoin line to counter what I am saying is that someday
people wont care if it converts into USD, because bitcoins will be more
valuable. Its not totally bullshit- The USD is no more 'real' than a bitcoin,
with the exception of it being established and backed by our gov. However, I
doubt BTC would ever get gov backing, so it will eternally be at risk.

~~~
ccozan
But what I actually don't get it is: what is stopping me ( or anybody else )
to start creating similar, let me quote "experimental new digital currency
that enables instant payments to anyone, anywhere in the world" ?

Isn't a second, or third such p2p currency due to come? Won't this distroy the
current bitcoin uniqness, thus devaluation, etc, ?

What is protecting the bitcoin from this?

~~~
DanBlake
Just that the masses currently agree that bitcoin is 'the' current p2p
currency. Nothing would stop the US Gov (or walmart!) from making/publicizing
its own bitcoin competitor which would instantly, immediately, crush bitcoin.
(Why use bitcoin when you can use usgovcoin, all other things being equal)

~~~
ccozan
So my bitcoin-based new business will depend on a popularity contest??

I believe more in a energy-bound trading value for the future, much like the
petro-dollar. Why not solar-coins, based on the value of solar energy ( GWh
based ) traded on the markets? We all consume energy, right?

~~~
scotty79
All your web business depends on popularity of HTTP.

------
raverbashing
Ok, here goes, and I confess I don't know anything much about bitcoins, so you
may help me here:

Bitcoins are fractionable to 8 decimal places

Maximum existance of 21Mi bitcoin. (If we disregard the decimal places)

So, let's see, if, as he says, the value of BtC should be 100k dollars, that
would represent 2.1e12 dollars (or 2 Trillion dollars)

Unless there's a massive devaluation of the dollar, I don't see this
happening. BtCs have no intrinsic value.

It's not a reliable store of value (ok, you lost your wallet.dat now what).
Right now even pieces of paper issue by a central bank somewhere under the
mattress seem more reliable.

Reliable: liquid and is not subject to big variations.

~~~
mrb
His point is that if the worldwide money supply is estimated to 60 trillion
USD, and if Bitcoin manages to capture, say, 10% of that then the 21 million
bitcoins should be worth 6 trillion USD.

There is no need for the USD to be massively devalued for this scenario to be
possible. Technically and economically speaking, all the currencies in the
world need to be devalued by merely 10% for this scenario to be possible.

PS: you can back up your wallet.dat, which you cannot do with physical money.

~~~
raverbashing
About the "only 10% of the world value", top-down estimates rarely work =)

Working backwards (bottom-up) usually gives a more realistic estimate.
Especially if you base this on existing data.

Oh sure, you can back your wallet.dat.

It also can be copied over the internet by a malicious sw, unlike physical
money.

~~~
mrb
_It also can be copied over the internet by a malicious sw, unlike physical
money._

There are multiple efforts from different groups/companies developing hardware
wallets to precisely reduce this risk (think tamper-proof chips storing your
coins). This format would still allow backups to exist (eg. saving coins in a
2nd identical chip, or saving the "seed" generating private addresses
externally, for example on paper if you want to mimic the security feature of
physical money).

------
rowanseymour
I wonder what effect an article like this will have on Bitcoin trading today,
as half of HN's readership suddenly think FREE MONEY and go try buying some
Bitcoins...

~~~
dscrd
Apparently quite a bit: BC on mtgox is now at $46 -- up from $35 2 days ago.

------
theDoug
Written by a man who has gone "all-in" on Bitcoin.

~~~
Tichy
At least he puts his money where his mouth is.

~~~
bluedanieru
I think what we see here is a case of putting your mouth where your money is.

~~~
Tichy
Since BTC is at an all-time high, at the very least if he didn't believe in
BTC anymore he could get out now without a loss. So he still seems to honestly
believe.

------
csomar
_This leads us to a target market cap of 600 billion to 6 trillion USD, to be
fulfilled by about 6 million bitcoin, which makes for easy calculations. That
means that each bitcoin would be worth $100,000 at the low market cap and
$1,000,000 at the high market cap._

There is some terrible math/economics here. You can have the bitcoin value @
$1/bitcoin and fulfill 6 trillion USD/day transactions if you want. The author
forgot that Btc velocity matters here, and a lot.

BTC can be worth $1m right now, we don't have to wait for the 6 trillion USD
transactions for that to happen. It's about investors, speculators and
hoarders. Will the velocity of BTC be different than other currencies
velocities? Well, we can't know for sure now, but it'll be interesting to
watch how this currency evolve.

If you are betting on BTC, you should bet on a BTC business and not on the
value of BTC itself.

------
meric
I don't like bitcoin because everytime I turn on the Bitcoin app it takes so
long to "Synchronize with the network". Basically confirm transactions for
other people. I'm not sure what is the algorithm's running time. Is it O(n)
where n is number of transactions? That would be excessive, because the number
of transactions is very much bigger than O(m) where m is the number of people.

Anyway, there is a chance I'll be wrong and bitcoin will be worth $1 million
one day. To hedge against this possible situation I have procured myself 0.05
of a coin, some year or two ago when they were worth $0.8 each. At the time I
basically took the number of bitcoins that will ever exist and divided by
current population of the US. 21m/300m = 0.07, of which my 0.05 is pretty
close to.

~~~
eksith
You've waited too long between running the app so naturally there will be a
long wait. If you do this at least daily, it won't be such a problem.

Bitcoin economy exists solely by the confirmation of transactions by other
people, so you're just doing normal housekeeping. The network is the bank. The
very nature of the currency makes you to take some odd ways about generating
and maintaining it.

------
jval
Agree that long term the value of Bitcoin will go up provided that there is no
technical flaw that gets exploited in the long run (which I'm not sure will be
the case).

However, these predictions are completely wrong. At best the drivers of
Bitcoin growth in the foreseeable future will be illegal trade and people
trying to capitalise on the growth in value by speculatively buying up
Bitcoins. The growth of Bitcoins has a theoretical cap though, because the
more common they become in illegal trade, the more likely they are to be
outright banned by governments. If they can't ban people from buying drugs
they will just stop them by proxy by banning Bitcoins.

The idea that ordinary people will go through the hassle of transacting in
Bitcoins is nonsensical.

------
bmiranda
Just checked MtGox, Bitcoin is now trading at $46... it was around $35 this
time yesterday.

Things seem to be getting out of hand.

~~~
bmiranda
Historic prices in USD for those interested:

<http://bitcoincharts.com/charts/mtgoxUSD#tgSzm1g10zm2g25>

~~~
baq
"you are here" comparisons are obvious. i think i'll be buying some bitcoins
in 3 months.

------
dave1010uk
Whilst it is believable that a system like Bitcoin could have a market cap
that supports a BTC price of $100k, how do we know that a different system
won't take its place before it does? Bitcoin is in a strong position as it is
first to the market but I think something similar could easily take its place
if it was considerably better technically. Whether this will be a totally
different system or a Bitcoin 1.1 that can be migrated to, I don't know.

You could have said that the total market for IRC is 7bn people using it every
day but now there are more people using other systems like Facebook Messenger.

------
vrotaru
I remember some commenter saying on Scott Sumner blog, with reference to the
discussion whether bitcoin is in bubble or not.

    
    
      *The price of bitcoin is volatile, because the future of bitcoin is volatile*
    

Yes in one of this futures where Bitcoin is The Money having a whole bitcoin
will be a big deal, in which case it will make no sense to speak of the price
of bitcoin in dollars.

I can think also of a transition period when bitcoin will widely acceptd and
function in parallel with the dollar. For such a future the price range seems
about right

------
tobylane
He's assuming perfect implementation of the highest goals of any strategy I've
ever seen, and there's no one entity to carry it out. What can we look at in
the past to not consider this insane?

~~~
scotty79
Linux for various OS needs?

Torrents for various digital content delivery needs?

~~~
thejosh
Linus would be considered the "one entity".

~~~
scotty79
Same way "Satoshi Nakamoto" can be considered "one entity".

I think the parent meant someone to execute grand strategy all the way, not
the very powerful and important rock that started the avalanche.

I think such entity is not necessary. On the internet good things that get
started tend to grow on their own to fulfill all the need if they are useful
without wealthy entity to support the growth, sometimes even against coalition
of wealthy entities.

Easily transferable wealth storage is useful.

------
gusgordon
I have been sort of an outsider on this bitcoin investing, but I know about
the service.

Do you really think bitcoin is going to continue increasing in value? It seems
to me like people are almost exclusively buying bitcoin as an investment. Very
few people buy it to spend it. Doesn't that mean that as soon as people lose a
bit of confidence, which is likely to happen some point, the price will
completely dump? I am sure this has been talked about a lot - is there a
better argument one way?

~~~
dragontamer
Bitcoin volume is only ~100k / day. So, with just ~200k BTC, it would be
possible to force a crash in the BTC market, right?

So, here's the question. Is anyone willing to lend me 200k BTC for a few
days?? :p This seems like the better investment right now... borrow someone
else's bit coins, sell them on the market, and then buy them back after the
crash.

Its called "short selling". And if enough people short sell at the same time,
the short sellers can spook the market into a selling frenzy, and the short
sellers will siphon out all the money from the system...

~~~
xyzzy123
I'm not sure the volume is what you want to be looking at. Perhaps you're
thinking of market depth?

Here's the mtgox depth: <http://bitcoincharts.com/markets/mtgoxUSD_depth.html>

If you sold 200k BTC in a "fill or kill" fashion without giving the market
time to respond, you would definitely wipe out most of the bid order book. The
highest bid price standing after your apocalyptic trade would be $5. You would
get about 4MM for your 200k coins (avg $20 ea).

However, there are currently only 66,000 bitcoins for the asking on mtgox. So
how are you going to cover your short?

You _might_ trigger enough of a panic to pump another 100k bitcoins or so into
the market at fire sale prices.

However, it's much more likely you will get killed on the ask side trying to
buy your 200k BTC back.

~~~
dragontamer
Thanks for the market depth information.

If Mr. Shark were a bitcoin bank (such as Flexcoin), then they would have
enough BTC to cover the short. Mt.Gox themselves presumably has ~100k BTC on
hand, and would also have the power to crash the market in this manner.

FlexCoin and Mt.Gox however have a vested interest in making sure Bitcoins
succeed. So they probably wouldn't do this. A more likely malicious actor
would be the hackers who stole 50,000 BTC some time a year and a half ago.
[http://www.dailytech.com/Inside+the+MegaHack+of+Bitcoin+the+...](http://www.dailytech.com/Inside+the+MegaHack+of+Bitcoin+the+Full+Story/article21942.htm)

Crashing BTC with stolen BTC is free.

The presumption is that a lot of people right now would sell their BTC when
they see BTC drop down to $5. People panic when they see losing value... and
you buy back the BTC you sold at that point.

~~~
xyzzy123
OK, so I still don't think what you're describing could be profitably
executed. But playing devil's advocate...

> Crashing BTC with stolen BTC is free.

Yes, agree that you could definitely crash the bid price by dumping 50k stolen
BTC. This might also happen naturally if someone holding lots of BTC is forced
to sell to get USD quick (e.g. "oh no, huge unexpected medical bill, tax bill,
fine...").

[Not sure it's "free" though; what about opportunity cost?]

> The presumption is that a lot of people right now would sell their BTC when
> they see BTC drop down to $5. People panic when they see losing value... and
> you buy back the BTC you sold at that point.

So during your buyback, you'll be bidding against all the bitcoin loons who
also want to buy after you crashed the price. These people are just
irrationally exuberant about internet play money and have been waiting for the
price to hit $5 or $10 again.

You also have to convince the other loons who are holding lots of BTC that
their play money is now worthless. You need to convince them to put down the
cheetos, transfer BTC to mtgox and plug those sell orders in there. I'm not
convinced crashing the bid price alone would be enough to achieve that. As
well as manipulating price, you also need to kill the enthusiasm and belief.

I think to really trigger some selling for your buyback, you would want to
carry out a smear campaign at the same time. You want to inject some fake news
articles (either via hacking or social engineering) and create confusion on
the forums. Convince people that bitcoin is doomed (e.g. "all BTC exchanges to
be illegal, say regulators"). Or that you have a technical attack on the
network.

Pub the articles first, smear forums, then DoS forums (to prevent
corrections), then trigger the "mother sell"... that would give you the best
chance of success for the attack you are thinking of.

</devilsadvocate>

What I wanted to finish with though, is that anyone trying to pull something
this would have to actually believe that BTC are valuable, or equivalently
that suckers will pay more for them later. Otherwise they wouldn't be buying
them back.

------
mtgx
I believe a Bitcoin will one day be worth at least thousands of dollars, too.
However, I also think the road to that will be _very_ bumpy, and I could see
Bitcoin going to $100 now, then back to $20 all of the sudden. Then maybe go
to $200 next year, and again back to $50, and so on. I don't think this will
bother the people owning Bitcoin too much, and it shouldn't affect its future
much, but it will probably make a lot of "normal" non-Bitcoin owners fear it
and criticize it a lot. The truth is Bitcoin will not be a "stable" currency
until its transactional value outweighs most of the speculations done on it,
and that may not happen for a long time.

~~~
oleganza
The "bumps" are getting smaller and smaller as amount of transactions and
amount of users grows. As BTC dissipates through hundreds of thousands of
hands, a single person's decision to sell or buy affects the price much less.
The only reason for general panic would be a global problem like successful
attack on the network or on popular services like MtGox, Coinbase etc. As
times goes on we are having more exchanges, they get compliant with all the
regulations, and most importantly, we have more businesses that accept
bitcoins, so the demand for BTC-USD exchange slowly goes down (it's far from
being small, but as BTC economy grows, the need for USD goes in the opposite
direction).

I would not expect big crashes due to pure speculation. And I'm quite
confident that amount of money, people and experience in this game is big
enough to ensure much more stable growth than 2 years ago.

------
dragontamer
So... lets say we have this guy, lets call him "Mr. Shark".

Mr. Shark notices that MtGox only has 107159 BTC trading volume. When
converted into USD, that is about $5 Million. So... Mr. Shark learns that he
can control the market price in any direction, with approximately only $5
million USD of investment.

Mr. Shark's strategy therefore, is to build up enough money to "spook" the
market by controlling it for a full day. ~100,000 BTC would be enough to crash
the market for a full day: and hopefully the spooked long investors will help
create the crash afterwards. Mr. Shark would then make sure the majority of
his bet is in the form of a Long Straddle. Mr. Shark rides the market up till
BTC has hit some absurdly high value, maybe issue a press release or two to
help fuel BTC's rise.

One day, Mr. Shark sells 100,000 BTC all at once on the Mt. Gox market. He
cashes in at BTC's high price, then BTC crashes. (EDIT: For clarification...
Mr. Shark loses some money here, on purpose).

Mr. Shark then cashes in on his Call Options portion of his Long Straddle, and
makes money because the market went down.

Long story short: Mr. Shark wins a ton of money, and everyone who has
"invested" into BTC these past few weeks loses their money to Mr. Shark. Mr.
Shark leaves the market without any worries that investigators will be after
him. (Its not like there is a Bitcoin version of the FTC)

Until Mt. Gox's volume gets high enough to resist an adversarial trader, or
until there is some group in charge to make sure that blatantly adversarial
trading doesn't happen on the Bitcoin market... the BTC currency will be too
risky for me.

~~~
daliusd
You are absolutely right and... Bitcoin FAQ covers this:
[https://en.bitcoin.it/wiki/FAQ#Does_Bitcoin_guarantee_an_inf...](https://en.bitcoin.it/wiki/FAQ#Does_Bitcoin_guarantee_an_influx_of_free_money.3F)

See "As an investment, is Bitcoin a sure thing?".

~~~
dragontamer
And now we've got the reason why the USD is better.

Because the FTC is the government agency designed to stop bull$$$$ like Mr.
Shark, and throw people like him into jail. Who is to protect me when Mr.
Shark come after bitcoins?

~~~
daliusd
This. IMHO the main difference between bitcoin and dollar is that dollar is
centralized and bitcoin is not. Question is who you trust more.

------
reaclmbs
Anyone in San Francisco willing to sell me some bitcoins? I'm looking to buy
up to 10. We'll meet up in a café and I'll give you cash for them. I don't
feel like jumping through hoops getting verified with Mt Gox. Happy to pay a
10% price premium...and happy to show you some ID.

