
Bitcoin Trends in the First Half of 2015 - ntomaino
https://blog.coinbase.com/2015/07/15/bitcoin-trends-in-1h-2015/
======
Animats
The main trend for Bitcoin in 2015 is that not much happened. The price is
within 10% of where it was at the beginning of the year. Transaction volume in
dollars is flat, or down a little. Many of the companies which were accepting
Bitcoin no longer are; those that are report low transaction volumes. (There
are lots of merchants which "accept Bitcoin" because it's an option in some
shopping cart programs, but those just send the Bitcoins to Coinbase, which
converts them to dollars and sends the funds to the merchant.)

The big trends in Bitcoin seem to be:

\- Amateur hour is over. The remaining exchanges are bigger and seemingly more
stable, although none of them are up to bank-level yet. New York's Bitcoin
regulation seems to have been accepted.

\- Mining is more centralized than ever. Most of the big Bitcoin miners are in
cold areas of China with cheap power. China has well over 50% of the hash rate
now. This may just be a way to convert yuan to dollars. (China has currency
controls, but encourages exports. For a few months, it was legal in China to
buy Bitcoins with yuan through regular payment channels, then sell the
Bitcoins outside China for dollars. That drove the $1000 Bitcoin bubble, and
was shut down by the People's Bank of China last year, causing the Bitcoin
crash. _Mining_ Bitcoin in China, and selling it outside China, is considered
"exporting" and is a legal way to convert yuan to dollars.)

\- Since the shutdown of Silk Road I and Silk Road II and the related arrests,
Bitcoin is no longer considered a safe way to buy drugs. This doesn't seem to
have affected the price much one way or the other.

\- Bitcoin ATMs are disappearing. In the SF bay area, Hacker Dojo and Workshop
Cafe got rid of theirs, and Nakamoto's doesn't have theirs working. Hero City
(a co-working space) may still have one.

History of Bitcoin:

    
    
        2013: Wow!
        2014: Aargh!
        2015: Meh.

~~~
drcode
2013: "Decentralized money is amazing- Let me build a business around it!"

2014: "Hmmm... I just built a centralized business around Bitcoin, so now my
customers have the same counterparty risks as before... why was I excited
about Bitcoin again?"

2015: ???

2016: Profit

(If someone figures out the entry for 2015, please let me know what it is...)

~~~
danbruc
2016: Reward-Drop

~~~
placeybordeaux
This could be very sigificant. Down to 12.5 BTC per block. Fees are currently
not close to making that up that split. It would be really interesting to see
if some of the larger mining pools can sustain their current hash rate if the
reward drops but the fees don't particularaly increase.

As long as there isn't sigificantly more transactions than are reasonable to
be included in a block there simply won't be too much pressure on the senders
side to increase the amount of fees paid.

~~~
this_user
Some people argue that the reduced creation of new coins will take pressure
off the price which could lead to a rally. Then again, that would only be true
if miners were actually selling off their newly created coins immediately
instead of holding them while waiting for higher prices.

The other aspect is the miner's inevitable margin compression. From the
numbers we have seen (e.g. KnC in 2014), it seems that these companies are
already operating on razor thin margins. Whatever money they have made, they
needed to re-invest into upgraded hardware in order to stay competitive.
Unless there is a meaningful increase in price before the reward halving, a
lot of miners will likely run into trouble.

------
ceallen
No mention of the 'stress test' that's brought the network to its knees the
past few days, or of the soft fork that resulted in suggestions to wait for
30+ confirmations? Puff piece.

C'mon Coinbase, at least spin them into a '<X> is actually good for Bitcoin,
because <Y>' format.

~~~
bduerst
For those who don't know, the stress test was where a company tested what
would happen if someone filled the network with transactions.

The results were not favorable for bitcoin and highlights key design problems
-> some transactions cost $280/transaction to put through, and other
transactions that had <$20 fees were not processed and stuck in limbo.

~~~
mths
> The results were not favorable for bitcoin and highlights key design
> problems

Some would disagree, considering the system kept functioning exactly as
intended under the circumstances imposed on it.

Personally I agree that the whole thing is troubling, but was anything really
discovered here?

Considering that the price has been rising, if you believe in prediction
markets, these design problems could likely be overcome. After all, people
have been working on it since long before any of these stress tests were
performed.

~~~
dogecoinbase
_Some would disagree, considering the system kept functioning exactly as
intended under the circumstances imposed on it._

Yes, hence the GP stating, very clearly, that the results "[highlighted] key
design problems".

The results of the stress test were not surprising to anyone who's been paying
close attention, but it was a valuable demonstration that Bitcoin is it
currently operates is misarchitected and will require some fundamental
redesigns in order to operate at scale. These problems have been under
discussion since at least 2011 and have been constantly disregarded, so
perhaps this will help. It seems unlikely.

------
contingencies
Trends as I see them: decreased media interest, loss of trust in the Bitcoin
Foundation and by extension the core development team, lots more government
surveillance of related businesses (helped by a stabilization of centralized
exchanges), still virtually no banks globally willing to work with Bitcoin-
related companies, failure to achieve any real 'killer app' at scale: beyond
tax or forex-restriction evasion or international drug distribution.

On the plus side, scope creep seems to have slowed, more people are aware of
the overall concept, and Merkle trees have begun to be applied experimentally
to additional problem domains.

PS. Reading between the lines, new user growth has slowed dramatically at
Coinbase. IIRC they sent an email this week begging for referrals, offering
$25/signup. And like all startups, it probably defines users as people who
once gave them their email address, rather than actual regular users of some
nontrivial part of the service. "A trillion wallets!" indeed.

PPS. What percentage of increased Bitcoin transactions are due to the use of
automated gambling sites for Bitcoin-trail erasure type money laundering
through numerous microtransactions?

~~~
joeyspn
While what you say is true, there are also increasing good vibes because of
news like this one...

[http://www.businessinsider.com/bnp-paribas-bitcoin-
blockchai...](http://www.businessinsider.com/bnp-paribas-bitcoin-blockchain-
securities-firms-redundant-2015-7)

These are the kind of "news" and media attention that matter. The big guys are
starting to bet heavily on the technology.

~~~
davidgerard
That report is literally "one analyst mentioned it in passing in some report".

------
minimaxir
I'm calling statistical shenanigans. While the data presented is likely
correct, the narrative is completely misleading.

> _While the price is down 9% YTD (as of July 13), it 's up over 213% over a
> two year time frame._

So they are ignoring the price drop from $1,000?

> _This has attracted more institutional investors to the market and
> volatility has decreased as a result._

Chart indicates a gradual decrease, it's hard to establish causality. Also, it
ignores the fact that 50% volatility for a currency is absurd.

> _As of June 30, there were 6,109 Github repositories referencing Bitcoin. By
> comparison, there were 2,352 Github repositories referencing Stripe and
> 2,318 repositories referencing Paypal._

Comparing a currency with a currency processor is blatantly comparing Apples
and Oranges. How many GitHub repositories are there mentioning Coinbase?

~~~
ytdht
makes sense from a Coinbase's perspective to present facts like this, I
guess...

~~~
02
The alternative is to admit the ship is slowly sinking.

------
vdnkh
Wow, the first graph in this article looks exactly like the graph of the
bubble phenomenon
([http://i.imgur.com/Amon5PR.jpg](http://i.imgur.com/Amon5PR.jpg)). I guess
stability will increase, which is a good thing.

~~~
koonsolo
Great graph, haven't seen this before. Although according to that graph,
bitcoin hasn't reached 'despair' yet :(.

~~~
ewillbefull
I believe that in all of bitcoin's major bubbles, it has never crashed below
the previous bubble's high.

~~~
drcode
That was only true until January 2015, when the price dropped to 152.4, well
below the previous bubble's high.

~~~
ubersync
That was just a flash crash. It has stayed well about 200 the past 6 months.

------
sanswork
I notice they are still pushing out the number of wallets and accounts they
have as a sign of anything. Coinbase you are now a few years old and have
raised over $100m. It's time to leave behind local social networks, and
underused sites everywhere and start reporting MAU. No one but fanatics care
how many people have signed up. How many people regularly use your service.

------
slg
>As global events that highlight the restrictions of closed banking systems
and insecure data security practices (e.g. the Greece debt crisis and recent
United States Office of Personnel Management data breach) continue to occur,
we believe that bitcoin is likely to be adopted by more people looking for
digital money that is global, secure, and inclusive.

How would Bitcoin have prevented or mitigated the OPM hack?

~~~
mikeash
It's possible that one could use the data leaked in the OPM hack to hijack
someone's bank account. I imagine a lot, maybe all, of the verification info a
bank would ask for in order to do a password reset would be in those files for
many people.

The link is a bit of a stretch, though.

------
deadmik3
I believe this is what's referred to as the "pump"

------
xasos
> 47% of Coinbase users are now from countries outside the US

I wonder what the country breakdown estimation is for all Bitcoin
transactions. I would guess more international use than Coinbase numbers

------
jhanschoo
I really doubt that most people see Bitcoin's features as pluses rather than
minuses.

I have always thought that the financial institutions we have in mainstream
currencies are institutions that societies want. If ever Bitcoin goes
mainstream, the Bitcoin economy would end up a lot like the world economy when
it was gold-backed, albeit one where the transaction costs were not physical
but hidden in the work done in blockchains.

It seems to me like people are mistakenly thinking that Bitcoin's lack of
financial institutions are a property inherent to the currency rather than the
simple fact that Bitcoin is a currency that is not mature enough to have
actors sufficiently invested in it to want to create regulatory institutions
on top of the currency.

Correct me if I'm wrong, but it seems to me easier to regulate Bitcoins than
say, gold. It is far easier to trace and verify the provenance of Bitcoins
than that of gold, and hence far easier to classify Bitcoins into "clean
Bitcoins" and "dirty Bitcoins". A cabal of influential institutions can simply
refuse to deal with wallets and businesses that deal in "dirty Bitcoins", and
that can serve as a basis of institutional regulation of Bitcoin as a
currency.

------
Ologn
91 year old billionaire Charlie Munger has referred to Bitcoin as "rat
poison". His friend, 84 year old Warren Buffett has said Bitcoin is "not a
currency" and advised people to "stay away from it".

Now you can ascribe this to them being old fuddy duddies who "just don't get
it". You can also ascribe this to the wisdom of people who lived through the
Great Depression, World War II etc. and have seen every scam and snake oil
pitch under the sun.

Which is exactly what Bitcoins are. They are worthless, they have no value.
They're not only a scam, they're a scam that should be obvious on the face of
it, like subprime real estate, or a Pets.com IPO. People talk about a Silicon
Valley bubble - nothing is more indicative of a bubble than Bitcoins. These
guys may not know the specifics of blockchain algorithms, but from decades of
hard experience they can distinguish value from non-value, and Bitcoins have
no value.

I can't think of a commodity it makes less sense to hold onto than a Bitcoin.
Gold has value, as do other precious metals, oil has value - Bitcoins have no
value. The only comparison I've seen made to Bitcoins is fiat money, but it
would take too long to fully explain why Bitcoins don't have the value of a US
dollar in a post here.

I was warning people of this scam here when Bitcoin was over $460 (
[https://news.ycombinator.com/item?id=6753545](https://news.ycombinator.com/item?id=6753545)
). It has since fallen to $290. It will be falling to $0.

For some laughs, read [http://bitcoin.org/en/faq#why-do-bitcoins-have-
value](http://bitcoin.org/en/faq#why-do-bitcoins-have-value) \- "Bitcoins have
value because they are useful as a form of money. Bitcoin has the
characteristics of money (durability, portability, fungibility, scarcity,
divisibility, and recognizability) based on the properties of mathematics
rather than relying on physical properties (like gold and silver) or trust in
central authorities (like fiat currencies)."

What? Commodities which _already have value(!)_ become currencies because they
have "durability, portability, fungibility, scarcity, divisibility, and
recognizability". Gold has all of those properties so it has made a good
currency through history - but even if it had none of those properties, it
derives its value from it being a commodity with useful physical traits - like
the ability to fill a tooth, or conduct electricity, and so forth. Bitcoins
have no such traits - they have the traits which would make a commodity with
value a good currency, but it has no inherit value as a commodity!

Witness all the angels and VC's who sing the high holy praises of this scam.
Are they just complete fools who have no understanding of the economics they
claim to have expertise in, or are they just scammers trying to fleece suckers
out there? I don't know the answer to this, but at the end of the day, all the
VC's and seeders and angels on Twitter etc. who support this Bitcoin scam are
either fools or thieves. Keynes said markets can remain irrational longer than
he could remain solvent, but it's inevitable that Bitcoins price will go to
$0. Since my first statement of this here, Bitcoin has gone from $460 to its
present $290. It will inevitably go to $0, no matter how many of the scammers
downvote this post so people won't see it. Because no matter what anyone says,
the market cap of the $5 trillion worth of gold mined will never change more
than an order of magnitude (barring some amazing chemical technological
advance). Whereas lack of doubt is all that is keeping Bitcoin's $4 billion
market cap from going to $0. From it's scammy beginnings (the anonymous
"Satoshi"), to all the legal problems and scams of Mt. Gox, Butterfly Labs
etc., it's only a matter of time before this Ponzi scheme comes to an end.
More instructive than that is all the existing VC's, seeders, angels etc. who
are vocal in their support of this scam - that's what you should really
remember.

~~~
koonsolo
Sorry you got downvoted. I don't agree with you, but I agree it's a valid
point of view to have. But in the end, only the future knows if bitcoins price
will rise or fall. Everyone is guessing here.

Let me leave you with this: If I told you 10 years ago, a website where
everyone can edit the pages, and were nobody gets paid, will create an
encyclopedia that has more content and is more accurate than professional
encyclopedia publishers, would be believe me? I definitely wouldn't, that
concept is completely absurd to me, but yet, it worked. Bitcoins seems like a
way more viable idea to me.

Bitcoin is not competing with gold, it's basically competing with "I owe you"
notes, managed by some central entity. You could argue that those "I owe you"
notes have value, but maybe so does distributed transactions.

Bitcoin might just keep itself alive: because it has value, you can do
transactions with it, and because you can do transactions with it, it has
value.

~~~
Ologn
> Bitcoin is not competing with gold, it's basically competing with "I owe
> you" notes, managed by some central entity. You could argue that those "I
> owe you" notes have value, but maybe so does distributed transactions.

As I said, it would take too long to fully explain why Bitcoins have less
value than dollars and euros (of course last year, EUR/USD was 1.35, today
it's 1.09, but the problems of Greece etc. are a little tangential...) Dollars
had no inherent value in 1970 - you could trade dollars for gold, but it was
still just a promissory note - I'd rather have an ounce of gold in my hand
than a note promising me an ounce of gold.

What does the phrase "gold reserve" mean (
[https://en.wikipedia.org/wiki/Gold_reserve](https://en.wikipedia.org/wiki/Gold_reserve)
)? The USA golds 8000 tons of gold in Fort Knox (and in NYC's Federal Reserve
building). Why? Why does it do this? It must cost a lot to hold all that gold.
The reason it does is because that gold implicitly (but not explicitly) backs
the US dollar. If the dollar began crashing tomorrow, Obama could go on TV and
say he was opening the vaults of Fort Knox and would exchange dollars for
gold. Gold doesn't have any special properties, it's just convenient to use a
currency, any commodity trade would do.

Even with economic dips, people don't think about the things underlying
economic confidence in the face of potential collapse - but governments do
think about these long term things, and major changes in policy always
indicate changes in thinking (
[http://www.nytimes.com/2013/01/17/business/global/german-
cen...](http://www.nytimes.com/2013/01/17/business/global/german-central-bank-
to-repatriate-gold-reserves.html) ).

~~~
celticninja
Gold price has been falling for the last few years. Even with all this
economic uncertainty and recession it has not had the usual uptick you would
expect to see if people considered it a safe haven. In addition it seems
likely that there is far less gold in Fort knox than there should be. They
could not actually open the doors to Fort knox to exchange for dollars because
at that stage the game it up. They just keep them closed and tell everyone
their gold is safe and secure.

