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Litecoin and Ethereum buys and sells are temporarily disabled (coinbase.com)
331 points by tomduncalf on Dec 12, 2017 | hide | past | favorite | 548 comments

I've made about $110k profit this year in crypto on a $21k investment earlier this year, and I think this is all a giant bubble. I was at my parents' house for Thanksgiving and a commercial with Ron Paul talking about Bitcoin came on, which coincided with around the time it went to $10k, and it hit me really hard that this isn't going to last forever (and probably will hurt sooner rather than later). I liquidated everything and just entertain myself doing some day trading on GDAX. I don't hodl anymore.

The entire thing is absolutely stupid, and isn't going to last forever. People are way too bullish on it. People who have no business investing in it are taking on debt to do so, with no clear exit strategy other than "the moon." A lot of people who don't have any money are going to get absolutely toasted when the pendulum swings the other way. They're in it to get rich. They have no idea what blockchains are. They just think they're buying magic internet money people get rich from.

To put a little perspective on how ridiculous this all is: Last night after Coinbase came back from maintenance, there was the (expected) sell-off, so I figured I'd make a quick buck and bought 300 LTC for about $241 each, then sold it a few minutes later for $251 after the instant rebound and went to bed with a nice $3k profit. I woke up this morning and was astonished to see that LTC was about $380. This was in the course of about 5 hours. Had I not sold it last night, I would have made almost $40k. I'm a little annoyed about that, but again: this is a stupid, irrational bubble that makes absolutely no sense. It's entirely speculative.

I think crypto and blockchain has a future, but it has to solve a few problems first (transaction fees/time and anonymity). None of the big three currencies do that well enough yet. This bubble is going to pop soon and I'm worried that a lot of people are going to get impacted badly.

Even if it is a bubble, that doesn't mean it can't go another 20x from here, depending which crypto you put your money in.

There's cheap liquidity (ho ho ho said the FED and the ECB), there are institutions (pension funds) that are starting to buy in, and in comparison, the dot-com bubble (which was mainly a US led bubble, not global) went to $5.7tn to $1.7tn. Gold is worth $8tn globally. Why couldn't Bitcoin get to part of that level, e.g. $2tn?

It sure looks like a bubble, and it probably is, but it could literally be the largest bubble in our lives -- unlike one stock in the market, this is a global phenomenon + you only have a few currencies that matter.

It's strayed so far from fundamentals that it's bound to crash. I really hope it's not that big when it does...

Bitcoin doesn't have fundamentals. Stocks are a claim on assets, buildings, inventories, and future profits. Real shit, like a parking lot full of trucks or something. Those are the fundamentals. Cryptocurrencies dont have anything like that.

To the extent that there is an analogous concept it's their utility as a means of exchange. Which outside of drugs and hard drive ransoms is minuscule at best.

Bitcoin has fundamentals though. Per the whitepaper it was designed to be just a means for individuals to transfer money to each other digitally without much friction. The further it gets from that the more we're asking the network to stretch to meet demands it was never designed to.

This only works if the value of BTC is pegged to one or more fiat currencies. As it is, people are basically speculating on blockchain address space on BTC.

And looking at this fundamental value, other cryptocurrencies have arguable superceded it in terms of better tech/efficiency, so the value seems incredibly hard to justify.

Just curious, which ones in your opinion are better tech/efficiency?

Look into DASH, it has a fundamentally different architecture than bitcoin. The biggest pros are instantSend, privateSend, and the DAO (A governance system).

In addition to the other response, another example is ethereum's ability to offer smart contracts, which is not possible with bitcoin. Transaction rate limits and power consumption also are more efficiently handled.

They're different, which is why I used the term arguable--there's no clear reason afaik that bitcoin should be so valued relative to others, but I could be wrong.

One reason of bitcoin possibly being more valued would be its cap at 21 million (which AFAIK is not there with Ethereum)

The pedantic response:

- if 1 BTC were $100 trillion, then it's clearly passed the fundamentals of "being a unit of exchange between commercial entities", since it would be way more than what any form of exchange would ever require.

The truth behind the pedantic answer:

- if it's a store of value, then the "fundamental" value is the amount of fiat that's gone into the system so far. If all the exchanges have roughly $100 in USD deposits, the base value of their bitcoin deposits will be at least $100, roughly.

- If it's as a means of transactions, then the fundamentals are linked to how much transaction volume is going on. For example the flow of USD into BTC and vice-versa. BTC <-> BTC exchanges in that universe probably help to define things as well, as it would be used as an alternative to USD.

The dollars don't come from nowhere, so there's at least some base numbers you can think about. Thinking of it as "USD going into the ecosystem" and "USD going out" is a good proxy for now I think. Obviously very fluid, though.

You’re forgetting currency control evasion. If a businessman from a country with tight controls wants to move money out of the country he would buy bitcoin and then sell it the other side of the border. This sort of activity is going on all the time, and it creates demand for crypto currencies.

I don't see how bitcoin can facilitate currency control evasion. The government can simply shut down all local exchanges, and some already did.

With amounts this large they could meet in person to trade.

If you have to do that, it doesn't seem particularly advantageous over existing methods. You're meeting in person, exchanging cash illicitly, etc. If someone is willing to do that, why not just buy USD in a foreign bank account directly? (That's my understanding of the current system; people with clean histories open accounts with varying amounts of money in USD / EUR / JPY jurisdictions, then transfer control of those accounts to someone else, for a small profit margin, who then transfers them again, in exchange for cash at a significant margin, in, say, China.)

Either way, someone ends up with cash CNY and the other person ends up with electronic USD or EUR or whatever.

The immediate limiting factor is the vulnerability of any in-person transaction to traditional law enforcement mechanisms, and the eventual limiting factor is that the exchange rate is going to be impacted by the demand for cash CNY. Eventually nobody is going to want to sell you USD (or whatever) for your cash-in-a-bag CNY, or will only do it at exorbitant rates.

I don't disagree with this, but if true, then it means that the value of cryptocurrency comes at the expense of other currencies. Every time someone in china sells their renminbi to buy bitcoin, bitcoin's value increases while the value of renminbi decreases. If that is the case, then bitcoin does indeed have value, and will reflect the differential of the cost of renminbi vis-a-vis its value on the world market.

Easy enough to rob someone for this amount of money too. As Eric Schmidt said (in the context of a hostile government, but it works here too): no passcode in the world is going to protect you from a man holding a gun to your head and demanding said passcode.

Split your loot into 100 pieces and convert to BC one by one. So you get robbed five time out of a hundred, no big deal. Eventually find a reliable trader and take your business to him.

You don’t have to make it totally safe, just safer compared to other methods of evading control.

Can you lie convincingly enough to someone with a gun to your head (or the head of someone you care about) who demands the other 99 pieces as well?

> You’re forgetting currency control evasion. If a businessman from a country with tight controls wants to move money out of the country

Before you can move it out of the country, you have to get it out of the bank, and your bank will refuse to do that with currency control measures in effect.

What I don’t get is that you can’t buy a car with bitcoin. So surely this should also create a selling pressure, unless they just buy bitcoins with the intent to transfer money at a later stage.

Yet you do realize that Bitpay just converts BTC to USD, correct?

It's the equivalent of you selling your BTC holdings at market rate and buying the car with USD.

It's not obvious to me that "fundamentals" apply here. This is literally unprecedented and cryptocurrency economies are uncharted territory.

The fundamentals are at the current price of $17,000/btc bitcoin mining costs are about $14.5B annually(144 blocks of 12.5 btc/block plus ~3.8 btc/block in fees) in electricity expenses due to paying off miners which is about on par with the 8th largest company in the world Facebook. Bitcoin's revenue/year is however much money people feel like FOMOing in + however much tether money bitfinex feels like printing which right now is more than the mining costs. Once this figure changes, the price will decline. For reference, Facebook has ~$24B in revenue/year.

It isn't crazy to imagine crypto becoming adopted for actual transactions. Even if people are currently speculating, they're still downloading wallets they can spend from and loading it up with currency. For all these users there is now nearly zero obstacles to spending. This isn't even to say bitcoin is the transaction layer, but bitcoin still provides liquidity to any alt/2nd layer solution.

You don't need to physically control your own coins to speculate. I suspect many people are just keeping their stash on exchanges or online wallets.

The vast majority of novice speculators are using Coinbase. They at least attempt to maintain the appearance of compliance; but I suspect a large market run would wipe them out of USD fairly quickly.

The fact that “experienced” Bitcoin speculators are getting nervous is a sign the bubble is about to pop. Tether volumes are hockey-sticking up as a result. There has been enough technical analysis to show that USDT volume drives BTC price and not the other way around. USDT volume is hockey-sticking over the last few weeks. Feels like a Ponzi scheme and the whales are cashing out.

The price of one bitcoin is arbitrary. $1 is no more crazy than $1 million. It's all crazy. But the question is, what's the supply and what's the demand.

At some point there will be a correction. This velocity can't be maintained forever. But this is also a technology that heavily relies on going viral to become functional (payments/contracts) - and based on real world interactions I think crypto is heading towards an adoption curve that justifies its price.

Bitcoin can never achieve mainstream adoption since the transaction throughput is capped at 3 per second.

Maybe other technologies will, but Bitcoin cannot.

This is incorrect. Firstly, it's 10 per second. Secondly, it shouldn't be all that hard to imagine "side chains" or even "local-party networks" being built to handle transactions and use the underlying blockchain as a settlement mechanism. This is, as I understand it, how the lightning network works/will work, and I see no reason to think it wouldn't improve Bitcoin's adoption, which is already orders of magnitude better than other cryptos.

>Croman, Kyle; Eyal, Ittay (2016). "On Scaling Decentralized Blockchains" (PDF). doi:10.1007/978-3-662-53357-4_8. Retrieved December 10, 2017. The maximum throughput is the maximum rate at which the blockchain can confirm transactions. Today, Bitcoin’s maximum throughput is 3.3–7 transactions/sec [1].

1. http://www.comp.nus.edu.sg/~prateeks/papers/Bitcoin-scaling....

I’d be interested in seeing evidence that USDT “drives” the USD-BTC exchange rate. I do think it’s a good indicator of sentiment about the exchange rate. Typically it’s within $0.02 of its supposed $1.00 value, but today it reached at least $1.08 and is still at $1.06. That means people are willing to pay a 6% premium just to be able to cash out of BTC today.

Maybe USDT is used in cross exchange arbitrage, where USD would be a lot slower and thus not worth as much.

There is a whole (and very good) book titled “this time is different”


It's not obvious to me that "fundamentals" apply here. This is literally unprecedented and the Internet economy is uncharted territory.

-- said a million articles in 2000

But how far? Corrections of 30% in say Bitcoin are common. Does this matter? I would say not -- it's not something I lose sleep over. It's fine, boom and bust.

If you buy in, buy in during a consolidation phase, when you see the price is stable. Ethereum had a huge run up, yet then consolidated for around 6+ months around $300. I would say that is healthy. Now it's heading higher. "Fundamentals" aside, of course.

You love bankers that much? Boy we have come a long way since 2008.

edit: Oh you said "hope it is not" - my mistake.

It's not that I love banks; it's that we rolled back all the banking regulation that kept that stuff in check prior to 2008. Replacing that with a system with zero regulation does not seem like progress...

Can you provide proof of one pension fund that has bought in to crypto?

I have heard many anecdotes about finance money coming in. We are witnessing it.

Also, rich Saudis are scared shitless about losing their wealth when political winds change. They put their money into crypto and it's much, much harder to take it from them, provided they own the private key. This is the best mechanism of wealth storage yet created, provided the value holds, which as more around the globe believe in, it becomes more likely. Bitcoin could be digital gold, but we shall see.

>>>They put their money into crypto and it's much, much harder to take it from them, provided they own the private key.

That's not exactly trivial - how do you store a private key in such a way that it's safe, accessible to you and only you, cannot be destroyed by your enemies, and can be passed on to your heirs upon your death?

Judging by the lifestyle of the playboy branch of the Bin Laden family[1], probably stick it in a safe deposit box at a bank in NYC or London.

[1] yes, there's such a thing: https://www.goodreads.com/book/show/2211931.The_Bin_Ladens

It's comparatively safer than holding millions in government-controlled banks, property which can be seized with the stroke of a pen, physical wealth like gold which is tough to store and move, and has value anywhere in the world (not many people in Europe care about your franchise holdings in Riyadh).

In contrast, if you buy bitcoins, when you flee the country you can bring your wealth with a memorized 24-word code or a slip of hidden paper, and people in other places will accept your Bitcoin.

They will accept it now. Not when everyone wants to sell. But yes, instead of having the state take it away, it's better to store some value in BTC.

Use Shamir Secret Sharing.

If you have enough trusted friends, that should work.

no, it's not trivial, but you can just follow these steps. https://glacierprotocol.org

Maybe not yet as of today, but they're coming. I have a friend (wealthy family with a substantial family office) who bought into crypto at the beginning of last year.

His dad runs quite a large traditional investment fund and knows of people in his network working at pension funds that are looking at putting money into Bitcoin / Ethereum and others. The family has done private equity deals together with some of these funds (mostly raising debt financing from them).

I'm not an extreme crypto bull, but I honestly think it's still early. But there will be massive volatility along the way.

Note: not investment advice, obviously. Just my opinion.

Wow, pension funds should not be doing currency speculation. That's bad.

The problem with crypto-_currency_ is that it's not a productive asset. A share of a business pays dividends over time and thus has intrinsic value (and _some_ speculative value), while a currency does not. A currency transaction is a zero-sum game, which is good because it minimizes friction.

Buying cryptocurrency with the expectation of increases isn't investment, it's _speculation_.

Crypto has been one of the better performing asset classes in the last 5 years. That is just a fact -- if looking in percentage terms.

Pension funds generally allocate up to 5% of their portfolio to alternatives, which could be smaller funds investing in art, watches, music royalty rights, farmland, wine, and the likes. This also includes crypto.

If you're an investment manager, it isn't necessarily crazy to allocate 0.2 or 0.5% of your portfolio to crypto and try to capture some of those gains.

Absolutely -- To the parent: think of it this way. If you had $200 in your fund last year to invest last year, and put $1 into crypto, then at worst, you lose that entire $1, and your portfolio is down to $199 (notwithstanding what you did with the other money), a loss of 0.5%. If you happened to pick Litecoin, and bought 0.25 LTC when they were at a stable price of $4 a piece, today that 0.25 LTC would be worth $80, giving you $280 in your fund, or a gain of 40% in your total portfolio value. You can look at ETH, Bitcoin as well and also see large gains.

Even without perfect timing of the market, it's a pretty easy decision for a portfolio manager to look at this and say: "While, like any other asset, past performance isn't an indicator of future performance, given the price history and increasing trading volume over time, the risk/reward balance skews heavily in favor of putting at least some tiny bit of money into crypto for all but the most risk-averse."

You and your parent comment are describing a kind of hedge, not a material investment. That’s fine but did not seem to be what my parent was implying. Funds may just as well choose to maintain several points in cash (also not a productive asset).

The analysis presented is a bit disingenuous. If you put money into every thing that could pop 400x, you’d have no money. Pension funds in particular need to be conservative and even if they’re doing “risky” things like venture capital for example, they would want late stage funds — lower returns, lower risk.

I don't understand why you are being downvoted. Pointing out the difference between productive and non-productive assets is exactly what is needed at the moment.

Everyone is talking about what if scenarios where huge offshore money or sovereign wealth or whatever comes into Bitcoin YUGE. Well, ok, do you think that money is just parked somewhere or is actually invested somewhere in a productive business?

Most dollars which aren't spent on consumption are converted into equity in productive businesses. In this case, dollars are merely the unit of account. You aren't invested in dollars, you are invested in businesses that produce the things that people need and those investments are measured in dollars.

> Most dollars which aren't spent on consumption are converted into equity in productive businesses.

Like real-estate?

You can take the crypto out of the above statement and it's still true - yet I know plenty of funds that speculate on currencies.

You know pension funds that spend a material portion of their holdings speculating on currencies? I’m skeptical. Currency trading is zero sum and highly risky. Pension funds may keep small amount as a hedge, but to actively speculate on currencies seems like a breach of fiduciary duty.

I used to work for a hedge fund. Now I'm in a different industry. While many individuals at the fund were interested in cryptocurrencies, they weren't going to put client money there. In order for pension funds to invest in cryptocurrencies there have to be very liquid securities that they can invest in. Futures don't count because almost no pension fund will use them directly (though pension funds do invest in hedge funds, which might have a futures strategy).

This is my belief too. I think if you can buy and hold for the next 5 years or so, massive volatility doesn't affect you. Volatility affects the day traders and the like.

To draw a parallel to the stock market is not appropriate, but those who bought into MSFT or AMZN even during the peak of the dot com bubble have nothing to regret today.

What about people who bought pets.com or webvan stock, or any number of countless stocks which soon became worthless?

Most coins will become close to worthless, but many will survive and support whole new industries. And this time it looks like it wont be an ad supported future, thank $DIETY.

That’s a risk on any day of any calendar year. We can find points and counterpoints to prove any scenario.

That was my point... OP had cherry picked the examples of microsoft and amazon to support the claim that buying and holding cryptocurrency through a bubble is a smart investment, which is of course absurd.

What I meant was that if you distribute your money across all cryptocurrencies even if some of them become worthlesss you won’t have anything to regret, in he long run. I don’t know if anyone who had the foresight to cherrypick MSFT and AMZN. Most of them invested in the tech basket. This is just general diversification principle nothing new

It can also lose 20x. Losses hurt more than gains feel good. Utility theory suggests to sell if probability weighting of loss is high enough.

How? If the value goes to 0 you lose 1x, not 20x.

It can become worth 1/20 of it's original value.

Going to $0 is -Inf% loss.

Then if I lose 100% of my investment, how much have I lost?


Sometimes its easier to describe this in terms of words, than numbers and symbols.

Everything is not that bad. Many people lose more than that on the regular stock market (using leverage).

Usually there is margin liquadation levels that are in place so you can't lose ore than 100%.

You're not wrong. It very well could. I think there will be a major correction before (if) that happens, though.

You're not wrong either. And the higher it goes, the riskier it gets. And while I'm seeing signs of a bubble, I don't think that (excluding a few volatile 30-40% corrections along the way) we will see an implosion in 2018 just yet. The entire crypto space "only" equals the value of Facebook.

In the end, if it goes another 30x from where we're at today, and then has an 80% correction, you'll still be up 6x. It only makes sense to exit if you think such a correction is imminent, or you believe the entire space is going to zero.

Gold is worth $8tn globally

Drawing comparisons between gold and a fiat currency (BTC) is completely confusing.

“Fiat” usually implies something different from the way you are using it. No government has issued Bitcoin via fiat, there are no treasuries or armies backing it.

Gold is a tangible commodity. I’ve been in the cryptoasset space for a while and I’m still not exactly sure how to cleanly classify it.

>I woke up this morning and was astonished to see that LTC was about $380. This was in the course of about 5 hours. Had I not sold it last night, I would have made almost $40k.

I can relate. If I'd done the exact paired trades i did this month (only between btc, bch, eth, and usd), only at different times than i did, i would have doubled my money yet another time, for a life-changing sum.

Instead I've been sleeping well every night for a month on a healthy exit. Even with hindsight, I don't have any regrets.

I didn't get into the space to get rich and sweat at night, I got in to socialize monetary control. Now crypto doesn't even want to be money. Once this bubble cools off I can start dreaming again.

Astonished, why? Capital is fleeing BTC to LTC probably because of BTC holders getting nervous about high volatility and exchanges going down or temporarily suspending transactions. Which in turn will also screw LTC. This article is a clear indicator about this.

The correct way to look at a missed investment in my opinion is to look back and consider if given the information you had at the time and the risk you were willing to take, you would have made any other decision. Ignoring these two factors is like regretting not having picked the right lottery number.

Do you feel any guilt that your profits are at the expense of naive speculators who "have no business investing in it are taking on debt to do so, with no clear exit strategy" ?

Not a bit.

> naive speculators

They are doing it willingly to get rich.

If you invest in something you can lose, especially if you have no idea of what you're doing. There's no guilt to be had.

They shouldn't be investing in unregulated markets.

BTC will supplement gold for value storage and will hit a $5T market cap in a few years IMO. It certainly has utility for storing and moving value. Don't underestimate that.

Gold doesn't have 30% volatility over 24h.

BTC will not once it gets into multitrillion dollars. It's a young asset with no derivatives that the market isn't sure how to value. Also there are ways to hedge volatility.

Gold doesn't go up 15x in a single year.

You can't steal gold because someone forgot to update their machine and left it connected to Internet. For bitcoin, yes you can.

This is really cool that you made a profit on this bubble, and if I were to take that point to heart and start investing USD in BTC, I guess I would just become part of that. As you say, I would just be out to get rich.

But what about all the non-fiat purposes of crypto currency? It seems that is what’s currently getting lost in the conversation.

For example, I simply want a way to accept electronic payments from people without dealing with middle men.

I want merchants and the general public to become aware of the inherent value in some blockchain by itself as a way for us all to spend “money” and get “paid” in a peer-to-peer manner.

I hope the people who are buying into this bubble come to see this. But I’m afraid if they do get burned, they will have missed the whole point.

This is the "intrinsic value" the media claims does not exist.

Do you feel all crypto projects are included in the bubble you described?

Personally, I think many are extremely overbought (BTC, LTC, ETH, etc) but can't help but feel that those with real utility and industry value are (relatively) undervalued.

Wait, I'm confused by your numbers there.

Buy: 300 LTC @ 241 = $72,300 + 1.49% fee ($1077) = $73,377 cost basis

Sell: 300 LTC @ 251 = $75,300 - 1.49% fee ($1122) = $74,178 gross

$74,178 - $73,377 = $801 net

and that's before accounting for taxes. What am I missing here?

There are no fees on GDAX (Coinbase’s exchange) if you are a market maker, i.e. post only limit orders. So $801 + $1122 + $1077 = $3000.

Even if you don’t plan to trade, it might be a good idea to buy/sell through GDAX rather than Coinbase to avoid the fees.

I only post limit orders and pay 0% maker fee on GDAX. I've never paid to make a trade. If you do pay as a taker, BTC is 0.25% and LTC is 0.3%, but I set relatively conservative exits for my positions and haven't had much trouble making them.

are those coinbase fees? gdax fees are lower, and they're zero if your resting order gets hit

When you start trading, you quickly learn that regrets is the norm, and feel less bad about making mistakes.

Hey, good on you: always be happy about selling early and not sad over selling late.

> I don't hodl anymore.

I've just been told that hodl means "hold on for dear life".


"it has to solve a few problems first (transaction fees/time and anonymity)"

Bitcoin Lightning currently works on testnet ... give it a few months and those problems will be solved. The price is exploding in anticipation of events like this.

I've used the testnet wallet and it works just like you'd expect. Very exciting.


Some people could be in it for the adrenalin. People do dangerous things all the time, so it can still go on... what's the serotonin level for crypto users? :)

I'll admit, I'm a gambler, so trading is kind of a rush.

I had the exact same experience visiting family over Thanksgiving. They watched foxnews the entire time and I remember seeing that Ron Paul commercial and also another one that was throwing out buzzwords and phrases like "Built with blockchain technology."

I was just like wow, this is going to be pulling in a lot of people that have no idea what they are doing. Everything seems irrational. Who knows though.

I guess this applies to non-crypto trading as well, but, how do you manage taxes on these transactions?

I know what I put in, and I know what my profit is, so I am going to report the net gain and pay the tax on that (ugh)

[IanaA] If your liquidated positions are open for over a year, you can do 15% long-term capital gains in the US.

The exchanges have an export history feature, which I'm planning to put into a spreadsheet to calculate profit. That's gonna be a fun weekend project.

There's a very nice library called ccxt that uses a code generator to produce python (async and standard), javascript, and PHP libraries that implement a standard interface for dozens (hundreds?) of crypto exchanges. I think a nice project would be an in-browser JS app that accessed each of the APIs in my exchanges (via logged in cookies or API keys or whatever) to pull trade history, deduct fees, and create a CPA-friendly tax form from all of my crypto exchanges.

Is there an email I can reach out to you at?

sure hope you put some aside for Uncle Sam..

What prompted your initial $21k investment?

This thread's audience is obviously a 'developed nations' one.

From our perspective yes, Crytpo's use case as currency make absolutely no sense (yet), we tap our Visa card to pay instantly with no fees and no fraud liability, hard to beat.

As a store of value however there is a very strong use case in the western world. Of the top my head, it is estimated that 10% of our GDP is in off shore havens, think about that infamous 1% moving just half of that 10% into Bitcoin ..

I digress..

If you venture your mind a little outside the borders of our empire and think about the 'unbanked' parts of our planet, entire populations whom live under poverty for the sole reason that they do not have access to the equity and efficient markets directly. If you look there, people are DYING for something like Bitcoin and other crypto's. There is absolutely no reason an African farmer to have to sell his Oranges to Europe in Euro then buy it back from there (Sell Euro to local currency) for local use.

Currency is an abstraction, an expression of a market, just like language is.

Here we tap to pay and need everyone to protect us from fraudsters, pornographers, money laundry , <insert your favorite horse man of the apolocyple here>, in other parts of the world , that far out number the western world in population, they don't care to be protected by the above because quite frankly the price they pay for that 'protection' is insanely oppressive governments that use the above to legitimize the oppression.

It is exactly in those markets where you start to see a VERY stong use case as both store of value and currency for crypto and it is exactly that market that will drive the world's demand for good UI for crypto that will eventually usher in mass adoption.

The average "unbanked" person in a third world nation couldn't afford a $20 transaction fee for their ordinary transactions. But bitcoin certainly looks like a way for some portion of this group to protect their capital since it's not controlled by states want capital controls.

Of course, there's a reason third world countries want capital controls - a lot of the people seeking to export capital are corrupt non-owning possessors of resources. Just as an example, whatever rank administrators within state oil companies and such who want to take things that actually belong to the nations - because such nations have rather weak administrative classes (not that the US isn't moving closer to "kleptocracy" itself).

So everywhere, bitcoin certainly looks like a device for protecting value - except once all the money that wants to move in has moved, then bitcoin's lack of actual practical use (see $20 fees) will make it not terribly valuable and all that money in it will be at a bit of risk.

Plus, phone-based money systems already are coming/in Africa. They solve the ordinary transaction problem. The problem of "how do you get money out of X currency or resource" isn't a logistics problem, it's a power-struggle. The reason Y person is fighting to get money out of X currency is Z person wants to stop that happening. But overall, remember neither Y nor Z are likely to be less than fully corrupt.

Spot on.

Use as currency for Bitcoin (and other coin networks) is still in it's infancy and cannot scale the way it needs to should it want to replace fiat.

The important distinction I would draw though that stores of value have historically been cumbersome to transport and liquidate, Bitcoin solves that problem in a very good way.

I feel it's important to also address this 20$ bitcoin fee meme that seems to be going around. While based in truth it is not 100% accurate.

You have the capacity to set your own txn fee on the Bitcoin network. If you don't mind waiting a couple of blocks (1-3 hours) to get your transaction confirmed , then the fees fall down to single dollars and even lower. If you're selling a bulk commodity to a distributor in another market , you don't need ecommerce style confirmation times. Same goes for transferring large sums of wealth.

With that said, things like the lightning network will resolve alot of issues with Bitcoin scaling and in my (humble) opinion this is why LTC is pumping. (Atomic swap + Transfer over LTC )

> You have the capacity to set your own txn fee on the Bitcoin network. If you don't mind waiting a couple of blocks (1-3 hours) to get your transaction confirmed , then the fees fall down to single dollars and even lower.

This is infeasible because of insane volatility that BTC is experiencing. You either pay through the nose for a fast confirmation, or you are overpaying, or underpaying your counterparty.

Not to mention that VISA tends to be able to handle a bit more then 3 transactions a second. For some reason, BCH's market cap has not surpassed BTC's crippled protocol... Perhaps it's because nobody is using Bitcoin to transact.

VISA max transactions per seconds around 65000 right now. With daily average 1700 per second and daily high around 25000 transactions per second during holidays and such. I just don't see any cryptocurrency to be able to handle that.

"Single dollars" is still a nosebleed-high fee for a simple electronic value transfer. Consider that pricing on something like an ach transfer is quoted in fractions of a percent (so like 75 cents for $100 USD sent - and caps out entirely at some low value like $5 per transaction regardless of the payment size.

International ACH transfer ? Any international Wire or remittance in general will cost you at least 25$.

And you have to get permission from a bank to perform the transaction.

There are cheaper forms of transfer, yes, but there are also much more expensive forms of transfer. A wire transfer will cost you $25 or more and yet there are still millions of them sent per day.

According to this fee estimator https://estimatefee.com/, 3 hours is an $11 fee currently.

If you choose an arbitrary '3 hours' you can make that fee anything. Any transaction of 50c for a standard fee until one week ago (and they'll clear too) will have been committed to the blockchain.

>The average "unbanked" person in a third world nation couldn't afford a $20 transaction fee for their ordinary transactions.

Someone in a country, who has the equivalent of $800 is life savings, is experiencing hyperinflation (Venezuela let's say). Are you telling me that they're not willing to pay 2.5% (20/800) of their savings to save 97.5% of it? Why do you think someone would be willing to let hyperinflation destroy 100% of their life savings when there's an alternative?

If it were that simple to deal with hyperinflation, why won't they just buy USD?

Because the government will forbid it? They can forbid the purchase of BTC, or the exchange of it for goods, too.

Oh, in-person off-the-books transactions will solve the problem? Well, you don't need BTC for that, you can do in-person transactions of bolivars for USD, too.

Because there's a shortage of USD on that market, they buy it at a premium and also gov't crack down. So they are esentially forced to diversify: they buy BTC expecting to change it for USD at a later date.

There's also a shortage of people who want to exchange BTC for worthless Bolivars.

Dont buy bitcoin then. Buy any of the nearly zero transaction fee digital assets out there

Africa is actually more sophisticated than the US in many ways regarding fintech

Anyway, this is a straw man. Who is saying cryptos are useless? People are saying that they are a bubble, that the valuations are irrational.

Totally Kenya's mobile payment system evolution from SMSing minute refill codes, to an actual legally recognized form of payment is the original Blockchain in my mind :) But that is exactly my point, in that market , there is demand and need for innovation that means crypto (while inflated right now) is here to stay. People who call Bitcoin a 'Ponzi scheme' , type of plant or apply whatever reduction on a very complex and innovative product are just mind boggling to me.

M-Pesa is a centralized service run by Vodafone, quite the opposite of blockchain. It only resembles blockchain in that it involves electronics and it's recent, but by that standard, we'd call credit cards or PayPal "the original Blockchain".

And as far as I know, it's denominated in Kenyan shillings, not in its own currency (i.e., hype about M-Pesa does not result in something with Bitcoin's to-the-moon valuation relative to the prevailing currency in the land).

I suspect that most Bitcoin detractors, whether those who call it a Ponzi scheme or simply those who oppose proof of work, will be absolutely thrilled with the growth of more centralized electronic money transfer systems that are denominated in existing fiat currency. I know that I've been personally happy to use Square Cash, Apple Pay, EMV cards, etc. in the US. No mining, no or low fees, high security, quick, and suitable for small transfers.

And the fact that this is how M-Pesa works is an extremely strong existence proof that Bitcoin is not needed by the "African farmer".

I think you misunderstood him.

What he said is that others countries that doesn't have a solid electronic transaction system are actively trying new stuff. In that case, M-Pesa won that race but the fact that it was centralized isn't why it won, it won because it was needed.

Now does Bitcoin is needed for another country? No idea, but I would have said the same for M-Pesa.

But he specifically used the word "blockchain." I'm making two claims: first, that blockchain-based systems (for most people's definitions of "blockchain" other than a meaningless buzzword) are worse for people in situations like that of the "African farmer" than centralized systems, and second, that the vast majority of Bitcoin detractors dislike it specifically because of things related (directly or indirectly) to it being a blockchain-based system.

For instance, "Bitcoin is a bubble" only makes sense if it's its own unit of currency. "M-Pesa is a bubble," "Square Cash is a bubble," etc. aren't meaningful statements to make; they just support transmission of the underlying currency. ("Kenyan shillings are a bubble" is a meaningful statement, but I've never heard anyone claim that you should use cryptocurrencies to insulate yourself from hyperdeflation of a fiat currency.)

"Bitcoin is environmentally dangerous" only matters if proof-of-work is relevant; in a centralized system, you don't have the problems that lead to you wanting to even consider proof-of-work.

"ICOs are a scam" doesn't make sense in a centralized system. "The transaction rate is too low" isn't a complaint anyone has about a centralized system (the usual complaint about the US markets is that the transaction rate is too high, and HFT should be throttled). And so on and so forth.

"bubble": stocks have been said to be in "bubbles". If a person claims "M-Pesa is [in] a bubble" he would be talking about the market cap of the company, in the same way that "Bitcoin is [in] a bubble" speaks to the market cap of Bitcoin on some exchanges. Quite meaningful, actually.

"environment": Proof of work systems ensure that the ledger is secure and worthy of trust. Proof of Authority systems require trust, where the ledger is secure "because we say so." Isn't this the major reason why people are fleeing from legal tender? People can't trust the issuers, the processors, or the banks because they're colluding with politicians who provide bailouts using taxpayer dollars?

"ICO scam": absolutely makes sense in a centralized system. Are you actually claiming that people don't create scam companies with centralized currencies? Because why? Even legitimate companies can be slandered for the same reasons that people call ICOs "scams". The Franklin Mint, for example, produces coins which are sold on late-night infomercials that have little-to-no intrinsic value, but people buy for speculative reasons. Are they a scam? The reasoning is identical.

"slow/expensive transactions": One of Bitcoins main value propositions is aiding in international transfers. The centralized systems were too slow and expensive, so a better alternative was developed. Saying that speed and expense aren't complaints that people have made about existing centralized systems is simply wrong.

And so on and so forth.

I've seen a lot of people on HN take a middle ground - that blockchain and crypto have real use cases, but that crypto is currently way overhyped. I think the key is that people can have a negative outlook on the financial characteristics of BTC, while still believing in the underlying technology. Certainly I can agree with you that cryptos can solve real problems, while you say that they are currently inflated - we're essentially in agreement, it seems.

> People who call Bitcoin a 'Ponzi scheme' , type of plant or apply whatever reduction on a very complex and innovative product are just mind boggling to me.

You are mind-boggled because you have created a strawman; a caricature of what the "bitcoin non-believer" looks like.

Your mind would be less boggled if you accepted that there are valid points on both sides in this case. People who question bitcoin's current valuation or utility often have valid points, but if you immediately interpret their points to be as extreme as possible, of course they're mind boggling.

Similarly, people who are bullish on bitcoin often have good points and sound reasoning, but it's quite easy to also paint them with a brush which makes their positions and points mind boggling as well.

It's good to have some empathy and to actually listen, especially when it's about subjects that are so divisive. The most divisive things are the things that should least be divided further by constantly misrepresenting each side's points.

You are absolutely right. Again my comment was directed at : > People who call Bitcoin a 'Ponzi scheme' , type of plant or apply whatever reduction on a very complex and innovative product.

Not at the one's who are raising very valid red flags on valuation and how hot the market is becoming. In my personal opinion it is absolutely 'bubble' like behavior right now.

And i believe we both echo the same sentiment.

> a very complex and innovative product.

The main point here is that there's absolutely nothing innovative about BTC anymore, if anything it's way behind. Which is why the valuation is so suspect; it's totally disconnected from the utility BTC provides compared to alts. Anything BTC does, alts do better, except for marketing.

And universal acceptance, valuation and infrastructure support. Thats a big exception.

Who accepts or prices things in bitcoin anymore?

Crypto traders. Many people doing international trade.

And has by far the biggest hashrate, and is therefore most secure

> The main point here is that there's absolutely nothing innovative about BTC anymore

That demonstrates a fundamental lack of understanding of what makes bitcoin valuable, and what separates it from all other competitors. Bitcoin node decentralization is what keeps it censorship resistant, and in bitcoin node decentralization, it is ahead of any and all competitors. It likely has more fully validating nodes than all other cryptos combined, and by some margin.

There are a lot of people that want to sell you on a great new thing. Until they can get 150,000+ fully validating nodes to support their technology, they will be nothing more than a mildly distributed inefficient database. What is innovative about bitcoin is that it is the only real cryptocurrency, because it is the only one that isn't controlled directly by its creators, and also maintains its decentralization. The only ones that are even close are ethereum and litecoin, and ethereum is beholden to a single person who dictates changes to the network. Litecoin is simply a clone of bitcoin with minor changes to its implementation, but has a fraction of the fully validating nodes.

150k full nodes? https://bitnodes.earn.com/ says ~11.5k full nodes

That service only includes a subset of listening nodes. That variant of node is only a fraction of the full nodes used to validate the bitcoin blockchain.


160K and counting.

150k full nodes source?

Ahh thanks frogo always enjoy your input on these crypto threads you really helped me have a deeper understanding of the consensus and game theory aspect of bitcoin that i never caught onto from the white paper.


It certainly took me some time to get my head around it, that's for sure. It wasn't even a 'penny drop' type of realization either.

It's why I'm sometimes so short with people who make statements with such confidence and finality. "Bitcoin IS this." without even really understanding the subject matter. I'm not thinking of one month/year timelines for its market penetration. I want to see what it is in another 10 years. I don't subscribe to the view that fiat is going to crash, or that type of apocalyptic talk. But I do think that we are in a 50-year-old debt-bubble, and I'm not sure it is going to be quite as difficult to 'shift', if that is even the correct word, from debt-fueled monetary instruments to credit-fueled monetary instruments. Most people don't even really understand the concept of a market-cap, and how the total value of the cap has no, or very little, relationship to the amount of capital that might be extracted from it. Bitcoin could easily be 10x or even 100x its current 'market-cap' and for it to still not really have any real relationship to monetary supply IMO. Bitcoin definitely has a relationship to gold, but more importantly, I believe bitcoin has a relationship to fixed-asset debt.

I wouldn't want to be entering a career in consumer banking though. Investment banking on the other hand... that is going to freak out over the next decade as the business of supplying debt for fixed assets that are depreciating in value reverses, and people start looking to place their investment dollars in industries that increase productivity.

Just remember bitcoin could lose 85% of its current value, and for it to only have doubled in value this year, and still be the best performing asset class in the market. Because a correction will happen. The only real question is when, and how deep.

Thanks again your insight is always refreshing. Also i don't think you saw my other comment what debit card service do you use that lets you keep balance in BTC and transfer to USD upon purchase? all the ones i have seen transfer to USD when you load them.

Thanks again!

People who call Bitcoin a 'Ponzi scheme' , type of plant or apply whatever reduction on a very complex and innovative product are just mind boggling to me.

Plenty of things that were eventually successful products went into extreme bubble and correct mode before they were successful.

Blockchains may or may not be part of the finance of the future. But that doesn't mean that 99% of the price of a given blockchain product today isn't bubble based bunk to be avoided just as many 1800s railroad stocks and 90s dotcom stocks had value only from bubble-dynamics despite railroads and the Internet being technologies that went on the succeed massively.

There is no evidence that bitcoin is or isn't in a bubble. It is a conjecture either way.

There's lots of evidence it's overvalued (e.g. price vs. utility), and some evidence as well that it's undervalued (most the argument for future value as more people use it). It's not a matter of lack of evidence, it's an issue of which evidence you choose to give more credence.

It is a textbook speculative bubble. The whole idea of hodl is literally speculation.

Sure, blockchain eventually might have some use. Currently, Bitcoin doesn't.

And while we were kind of unsure whether it's a pyramid or a Ponzi, actually it _is_ something new: a Nakamoto scheme. https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/

The valuation is what it is, and eventually it will become more clear what the "real" value is - way higher, way lower, or about the same. Until then, everyone is making stuff up.

Straw man for what? The "article" is just a link to a coinbase status page. I have heard several people, technical people, say that crypto is all around worthless.

It's divided the technology space, in particular HN. One of the reasons is due to its connection to profit and gain at the core and this does not follow the purist mantra of long time software engineering culture. Source: Me, software engineer for 30 years.

I believe bllguo was referring to his own comment.

Why is it a bubble?

No it’s not. There are pockets, but virtually all of the innovation in Africa is happening in Kenya, Ghana, Nigeria, and South Africa. That’s a small slice of an enormous continent.

I don't know anything about fintech in Africa, but the countries you listed have a total population of 318 million people. That's about 26% of the total population in Africa, a pretty large slice isn't it?

Yes, but even the innovation in those countries is concentrated in a few key cities. Akkra, Nairobi, j'burg, etc. There are huge disconnected swaths of people in all of those countries.

It's nuts to imagine that Africa as a continent compares to the West in terms of fintech. We like to imagine Africa as a monolith; it's a terrible mistake.

Sure, I will concede that. Africa as a whole is not ahead. But there is financial innovation there to a degree that surprises a lot of people in the West - just meant to spread awareness of this

> we tap our Visa card to pay instantly with no fees

I hope you mean realize that merchants eat the fee and are contractually not allowed to offer discounts for cash payments. And many of them are not happy about this situation.

It's an economic compromise. They don't have to be happy about it, just sign the agreement. Or don't and forgo those customers who will only pay that way.

I doubt cypto currency is going to help that setup at all, and most likely it will just offer more avenues to do the same.

The solution to this is way easier than blockchain: Just regulate them. Personal credit card fees in the EU are capped at 0.3% and everybody is better off.

I think the necessity for regulation shows that unregulated payment processors leads to market failure (due to the nature of that market under current non-blockchain tech). Regulatuon fixes this market failure, but I see regulation as a last resort due to its being a high overhead solution (you rely on courts to interpret the regulations or check the statutory agencies, on the agencies to do their work, on lawmakers to keep the laws up to date). Of course, it is an open question as to whether blockchain tech can lead to the payment processor market not to suffer from market failure if unregulated.

> The solution to this is way easier than blockchain: Just regulate them.

Regulation is not easier. I & my merchant can use blockchain today, without any permission or buy-in from a regulatory body.

This is an example of automation taking a job. As an engineer and small(er, more efficient, more effective, more fair, more predictable) government enthusiast, it thrills me to see that we're automating away the jobs of bankers and regulators around the world.

Yup, and that liability consumers are protected from? Merchants pay that back in chargebacks and chargeback fees.

> Crytpo's use case as currency make absolutely no sense

Note that calling cryptocurrencies "crypto" doesn't make much sense either.

But wouldn't transaction fees, which are already really rough for people making a first-world salary, be even more unsustainable if that fee is a whole day's wage (or more) in the places you're describing? And how would those areas of the world have that level of connectivity?

e: for making a huge sale of crops or something to another nation, then 1 transaction fee is not bad compared converting at a %, but you'd still need to convert from Bitcoin to a local currency to actually use the money you made.

> Of the top my head, it is estimated that 10% of our GDP is in off shore havens, think about that infamous 1% moving just half of that 10% into Bitcoin ..

The IRS would crack down on this as with any other tax avoidance scheme. Offshore havens are probably safer since many rely on loopholes.

More so that argument relies on magic thinking. Unless there's good reason to believe that bitcoin will be the goto for tax avoidance it's just wishful thinking.

If just 0.000000001% of all astroids made of solid platinum land in my back yard I'll be a gazillionaire!

We have information disclosure treaties with all of the offshore havens, re FATCA. They were actually the first targets and they acquiesced almost immediately.

If you're trying to hide assets, the U.S. is the place to be, as none of our treaties actually require us to share information back with the rest of the world.

> "we tap our Visa card to pay instantly with no fees"

That's just not true, these fees are baked into the prices, since the seller pays them.

That's one of the reason cryptocurrencies are advantageous in the long run, they can eventually provide the transaction fees close to what they cost in electricity and infrastructure amortization - pretty much sub-penny to transfer any amount.

No fees? Visa and MasterCard are making off like bandits as we move from cash to card.

Credit cards aren't an apples-to-apples comparison because of the risk to banks of default. An apples to apples comparison is ACH, which is free, and now same-day service is available.

Interchange fees are restricted to 0.2% (debit cards) and 0.3% (credit cards) in Europe now.

haha, depends on the card you agree to sign off to :)

No, it does not depend on which card you're using. Everything costs a few percentage points more because of fees for the merchant. You pay this no matter what card you're using. They don't offer you a different price for using a specific card, though a handful do for using cash (gasoline comes to mind).

Sure, but merchants can generally get fees that are only slightly higher than what you get in cash back. Square charges a 2.75% fee (and some of that goes to Square, presumably), and there are 2% cash back cards with no annual fee easily available (I use the Citi Double Cash one). So even if your store is raising prices by 2.75%, you're effective price only goes up by about .7%.

If you want to get upset, get upset at how if you have poor credit, you're not eligible for these cards, so really this is credit card companies stealing from poor people.

So what you're saying is I'm getting 0% cash back and paying .7% more for everything. Still doesn't sound like a win to me, and it still doesn't matter what card you get because no card is giving you more back than they're making off your use of it. That's not how money works.

You're paying 0.7% primarily for the ability to pay, and also for the ability to pay on credit, to get a chargeback if needed, to cover fraudulent use of your physical payment device including loss, etc.

This is a) a good deal on its own and b) a much better deal than Bitcoin, which provides only the first of those things, and only reaches 0.7% if your transaction is over about 3000 USD.

If you think this is a bad deal, I'm curious what you think is a better deal and who's offering it.

A better deal is a debit card (somewhat fewer protections but saves people probably a 1% fee on average) but unfortunately the banks have set it up as a tragedy of the commons where it makes sense for me to get my 1-2% cashback since the 2.7% credit card fee is already built into the price due to other people.

With regards to Bitcoin though, I agree you need a much lower fee coin to make it feasible. The lightning network brings the transaction fees on Bitcoin to zero though from what I understand so maybe thats the answer.

the merchant is paying 3-5% plus transaction fees for each transaction. It's hidden from you, but you're paying for it.

Try selling something on ebay and see how much money you get back.

Now try sending some of that money to a third world country and see how much they get between the fees they pay western union and the thugs waiting outside to 'tax' you. From sale to end point .. where'd my money go ? lol

> we tap our Visa card to pay instantly with no fees

I guess it's businesses, who pay high enough fees on your transactions.

The current Bitcoin transaction fee is $20+. Credit card processors charge you under 3%. If you're doing transactions of under about $700 USD, credit card fees are cheaper than Bitcoin fees.

Credit card processors also pay the user of the CC a cashback on a significant portion of that fee... And are also liable for fraud.

Who do I chargeback when an online merchant takes my BTC, and doesn't ship the goods I bought? BitPay will tell me to pound sand. VISA will process a chargeback, no questions asked.

Good problems to solve in this space.

By creating an off-chain payment processor called BISA, and we're back to charging merchants fees for cashback + fraud losses, except now we're for some stupid reason doing it on a blockchain.

I moved $1800 worth of LTC (Litecoin, one of the subjects of this thread) last night. The Tx fee was $0.01 and the funds were received in less than 1 minute. No more processing, no waiting for the next business day (or 3)... For 1 cent and 1 minute later the receiver can do whatever they want with it immediately.

That is cheaper than CC, faster than Venmo, or whatever.

Why are Litecoin's transaction fees multiple orders of magnitude smaller than Bitcoin's? Is this a result of genuinely better technical decisions than in Litecoin (mining is cheaper because it's less hardware-friendly, blocks are generated more quickly) or just lower transaction volume / demand for transactions because it's less well-known? That is, if Bitcoin somehow implodes tomorrow and everyone moves to Litecoin, would you still expect similarly low Litecoin fees?

Was this an on-chain transaction or a Lightning transaction?

Bitcoin's pretty broken at the moment due to some bad decisions by the development team. All other cryptocurrencies have very low fees.

As I continue to learn about the broader cryptocurrency scene and the emerging ecosystem, I have been looking at Bitcoin more and more as the Model T of crypto and less like the BMW i8...

The price of bitcoin disagrees with your assessment.

>The price of bitcoin disagrees with your assessment.

What does the price of bitcoin have to do with an objective assessment of how well the Bitcoin network is currently functioning?

If it wasn't working, people wouldn't be buying it. You are just going to have to accept that the great bulk of people who use bitcoin do not care about your use case.

partially its the 4x increase in transaction throughput, but also a lot less people use litecoin than bitcoin

> Why are Litecoin's transaction fees multiple orders of magnitude smaller than Bitcoin's?

Supply and demand. People pay more to transact in bitcoin, because it is more secure, because it is more decentralized.

> think about that infamous 1% moving just half of that 10% into Bitcoin ..

Please remember "that infamous 1%" is actually the 0.001% or much less. The top 1% income actually includes dentists, successful software engineers, etc. Normal successful people. An amount of wealth that can actually be attained regardless where you came from, given luck, talent, luck and in some cases, hard work[0].

The phrase "the 1%" was originally introduced to draw a line between people with such a ridiculous amount of wealth that it doesn't make sense and is really only attainable by being born in it, or being born with very rich family and learning the shibboleth over your lifetime. Becoming insanely wealthy by an insane stroke of luck is possibly but it only gets you in contact with this elite, not "in", but if you play your cards right your children might.

[0] don't be mistaken that "hard work" is any kind of predictor for wealth. just look around you. hard work may be considered virtuous, but that's it. it's not like "being a good person" gets you rich, either.

> From our perspective yes, Crytpo's use case as currency make absolutely no sense (yet), we tap our Visa card to pay instantly with no fees and no fraud liability, hard to beat.

Fees that are absorbed by the merchant, so not an entirely fair comparison. Still, I agree that the fees make the use cases for cryptocurrenies very limited personally. Right now, I can pay a fee to a third-party (CC fees in the form of slightly higher priced goods) BUT that third-party takes on a significant part of the liability (e.g. for goods not provided), and I can transfer money to a trusted (or untrusted providing I am OK with the risk) party in the same country for ZERO fees via my bank. For those use cases, using most cryptocurrenies would be strictly worse (I either give up the fraud protection or I am paying an unnecessary fee).

The only case where it makes sense is for international transfers, which typically do have higher bank fees, but personally they are so rare (I've used it once in the past decade) that they are barely worth considering for my personal use cases.

It seems to me like bitcoin is more comparable to a wire transfer than to the other forms . Like a wire transfer, but unlike nearly every other form of digital payment (credit card, debit card, ACH), it is irrevocable. It's fees are also competitive with the $20+ that sending a wire transfer will cost.

That would make it something of a niche form of payment compared to say credit cards. You aren't going to use it to pay for a cup of coffee, but there still are trillions of dollars worth of wire transfers per day. That is roughly one thousand times the amount currently transacted per day in bitcoin at the current valuation so even taking over a tiny portion of the wire transfer market would justify bitcoin's current valuation.

Kenya is the global leader in mobile money adoption for the same reasons you've stated. Smart money should be preaching the crypto gospel in Somalia, Zimbabwe, Venezuela etc. The average citizen from such countries is way more in tune with the need for alternative currencies

Clearly a "first-worlder" view. People in (most) oppressive regimes are not looking to move off their currencies, and nobody is looking for a decentralized solution for banking. M-pesa, Vodafone money, mobile wallets work great for people. There's no reason for costly decentralization that Bitcoin offers.

Maybe a case could be made for Venezuela where bolivars are useless, but USD is a far better candidate for their currency needs that Bitcoin, given how volatile Bitcoin is.

Visa has charge fees of 1.5%-2.5%...

BTC is used in Zimbawe, which would hardly classify as a developed nation.

Visa actually has charge fees of 1.5%-2.5%....

Well said.

Yup, that's why Dash coin has partnered with KuvaCash to help fight inflation and provide easier access to funds in Zimbabwe - https://www.dash.org/2017/11/23/KuvaCash.html

It'll be an interesting test case for the value cryptocurrencies can provide in third world countries.

A lot of emotion with LTC. People are downloading Coinbase and buying LTC simply because it is the cheapest on Coinbase. This is definitely a bubble, really cant deny that anymore. All emotional, non-rational behavior.

Having purchased several cryptocurrencies recently, I can attest that I am certainly not acting rationally. But at least I'm having fun!

I should start a business selling thin air. Thin air from France, thin air from Japan, thin air from Mexico, and so on, you can collect them all, it is super fun. Then I could introduce cold captured thin air, warm captured thin air, etc. Wet thin air, dry thin air for year 3. More fun every year.

Even better, I should sell just a paper (well, an electronic one) stating you own some thin air. Hey, geeks, how cool can this get?

I am sure I could find buyers in the same market as cryptocurrencies.

PS: This is not directed at you, but you expressed the level of pointlessness and... void that reigns in this 'market', so I picked your message to place my joke/rant.

Named "Useless Ethereum Token", with the strapline "seriously, don't buy these tokens", raised $187k worth of ETH. https://uetoken.com/

A+ for transparency.

A few years ago, Cards Against Humanity ran a Black Friday campaign where you send them $5 and get absolutely nothing in return.


I wonder what that's worth now? Be interesting to see what you could fetch by putting up the 'nothing' you bought from CAH for sale.

I wish they'd run this campaign again so I could buy a second.

Now, now; don't be greedy!

I'll sell you mine.

That also reminds me of Yves Klein's Zone de Sensibilité Picturale Immatérielle::

In the performance piece, Zone de Sensibilité Picturale Immatérielle (Zones of Immaterial Pictorial Sensibility) 1959–62, he offered empty spaces in the city in exchange for gold. He wanted his buyers to experience The Void by selling them empty space. In his view this experience could only be paid for in the purest material: gold. In exchange, he gave a certificate of ownership to the buyer. As the second part of the piece, performed on the Seine with an Art critic in attendance, if the buyer agreed to set fire to the certificate, Klein would throw half the gold into the river, in order to restore the "natural order" that he had unbalanced by selling the empty space (that was now not "empty" anymore). [1]

[1] https://en.wikipedia.org/wiki/Yves_Klein

[2] https://en.wikipedia.org/wiki/Zone_de_Sensibilit%C3%A9_Pictu...

You joke but I'd be happy to invest if I think that I could sell that thin air after a month for twice what I bought it for. So make THAT happen for thin air and we are good.

But you can hold onto it for two months, and sell it for quadruple what you bought it for instead!

You just have to make sure not to be one of those idiotic idiots left holding the idiot bag like an idiot.

> Thin air from France, thin air from Japan

That reminds me of "Perri-Air" from the movie Spaceballs: https://www.youtube.com/watch?v=gzbIrb7LUJA

At times I feel a lot like Prince Valium when reading about all the crypto-currency hubbub.

You joke, but they buy fresh air in canisters in China, shipped from non-polluted locations, like Australia, NZ & Canada. All things are not abundant in all places: http://www.bbc.com/capital/story/20170515-the-entrepreneurs-...


Of course, this just shows how bad the air pollution is in China. Then again, water bottle brands like Nestlé's Poland Spring Water are just using "Poland Spring" as a gimmick and a ad-bait. So you definitely can sell thin air at different price based on "where the air was collected."

I'm not kidding when I say that you would be surprised at the size of the market for canned air. I made this same joke several years ago and then looked into it and was blown away.

Canned Air: It'll Blow You Away

You're not paying for the air. You're paying for the pressure differential.

That typically isn't air (80% Nitrogen 20% Oxygen) but a liquefied compressed gas such as 1,1,1,2-tetrafluoroethane. They're very handy for cleaning things, especially computer heat sinks. Much more portable and cheaper than an air compressor.

There's value added to canned air at least.

> Even better, I should sell just a paper (well, an electronic one) stating you own some thin air. Hey, geeks, how cool can this get?

That idea has been around for hundreds of years: https://en.wikipedia.org/wiki/Indulgence

Salt, sea shells and gold were used as currencies in the past, any limited limited ressources would do. Companies even trade CO2 emissions...


I'm going to fork your thin air, and create "Thick Air" with the only difference being the blocksize of the available air

It'll be able to handle 8x as much air transfer as yours and have a minority following that will always bite at your heels

As long as you record the transactions for air in a blockchain, you should be good.


It's already sold in France. "Air de Montcuq" -> air de mon cul ( air from my ass )

This has been done! At least, as a joke. Back in the dot-com bubble the financial website IEX.nl announced an April first IPO for 'F/rite Air' (fried air).

They received a significant sum in offers…

Source: https://web.archive.org/web/20050831124638/http://www.iex.nl...

> Even better, I should sell just a paper (well, an electronic one) stating you own some thin air.


In concept, it's obviously not the joke you're making. In practicality, it's exactly the content of your joke.

Even better, I should sell just a paper (well, an electronic one) stating you own some thin air.

That's basically what this is:


If you can make an app that has some variable change in the air investment every few minutes, hitting that dopamine high, you could be onto a winner.

Maybe you can sell thin air from here in Himalayas. It will actually hold some value too for polluted places.

You couldn't get me to pay a cent for air now. But please let me know when the air futures exchange opens.

No offense taken, but how can I purchase some of your foreign air bonds? I hope cash is OK!

Agreed, for someone with a relatively small amount invested in the crypto market (<1k) I find myself impersonating Gordon Gecko an awful lot. The only thing I can compare it to is my brief obsession with football stats when I used to play fantasy football.

There's a crypto currency for fantasy sports as well: https://nolimitcoin.org/ Why not combine both? xD

Yup, that's all cryptocurrencies investments are right now, a game.

Have fun, but don't bet your life on it.

Mabye in the future it can be more than a speculation, but right now it's a game.

I'm rationally delaying my irrationality. Helped by platform registration bottlenecks

It's all fun and games until the switch is flipped and PetroBTC replaces the Petrodollar. /s?

> definitely a bubble, really cant deny that anymore

You could be right.

But I don't understand everyone's certainty that cryptocurrencies are a fraud-bubble-scam-Ponzi-mania.

The growth curve fits both exponential and logistic (S-curve) functions.

Exponential growth is unsustainable, while logistic growth describes most technology adoption. Halfway through the cycle they're indistinguishable.

When there's 98% agreement this is a bubble about to burst, my instinct is that the conventional wisdom is wrong.

> But I don't understand everyone's certainty that cryptocurrencies are a fraud-bubble-scam-Ponzi-mania.

When it blows up, you won't understand why the SEC didn't protect you. By then, you'll realize it was a mirage all along, and you'll want someone to blame for letting it get so out of hand. Every piece of news you interpret will tell you that losing money was not your fault, because that's what you'll want to believe.

On the flip side, the current price action is causing the same sort of confirmation bias--just in the opposite direction.

> By then, you'll realize it was a mirage all along

This is exactly my point.

Why are you so certain?

How can you tell the difference between this and any other technology adoption logistic curve?

People make statements like you do with 100% confidence, and you could very well be right! But where do you get your certainty?

And were you equally certain about the inevitable demise of cryptocurrencies when the market was 1% or 10% of its current size?

> But where do you get your certainty?

By way of an understanding of human nature. From the book Bull! A history of boom and bust:

“...A bubble, Galbraith observed, is always supported by the belief that there is something new in the world. The history of past cycles is dismissed as irrelevant.“

That’s it in a nutshell. It is a time-tested part of who we are, and it’s almost like you’re either born with the ability to see that or you’re not. I don’t know why.

I don’t know how much the price will go up, but it going up, even to a million dollars a coin, means little. It will eventually go down and violently so, and some people will be badly hurt. Just people being people.

Assets need to be productive in order to be true investments. Like farmland or businesses. Otherwise, you’re speculating on price appreciation. Look at gold over the last 100 years and overlay its price graph over the Dow Jones during the same period. They’re not even close.



That’s the difference between speculation and investment.

> ...A bubble, Galbraith observed ...

Counterpoint: Galbraith confidently called the US stock market a "classic bubble" in April, 1999. At that time, the Dow Jones was at 10,494. Today it's at 24,504.

Looking back with 20/20 hindsight, it now looks like Galbraith was wrong.

Source: https://www.theguardian.com/business/1999/apr/18/observerbus...

> Assets need to be productive in order to be true investments

Counterpoint: Maybe assets need to be useful to have value. Land, copper, the balance on a Walmart gift card and my World of Warcraft gold don't produce anything, but they're useful, so they have value.

> > ...A bubble, Galbraith observed ...

> Counterpoint: Galbraith confidently called the US stock market a "classic bubble" in April, 1999. At that time, the Dow Jones was at 10,494. Today it's at 24,504.

No! Current day valuation versus 1999 valuation has nothing to do with each other. In 1999 the market was over valued and the bubble soon popped.

> > Assets need to be productive in order to be true investments

> Counterpoint: Maybe assets need to be useful to have value. Land, copper, the balance on a Walmart gift card and my World of Warcraft gold don't produce anything, but they're useful, so they have value.

The key difference between an asset and investment is that investments produce returns.

> The key difference between an asset and investment is that investments produce returns.

Right, but an asset can go up in price and stay there if demand increases and/or the currency the price is denominated in is losing value over time. Especially true if supply is limited.

I don't expect BTC to stay at $17000 - it could go down or up, and I wouldn't be the least bit surprised if it's currently in a bubble that pops. It might then go to near-$0, or it might proceed to regain those levels and continue even higher over time, depending on how demand evolves against the ultimately fixed supply. I remember $500 for 1 BTC seemed insanely high at the time. $675 must have seemed crazy for gold in 2006, but I don't expect it to return there again despite the intervening ups and downs.

> In 1999 the market was over valued and the bubble soon popped.

Here's a chart of the Dow Jones Industrial Average. Please identify this bubble popping that you speak of.


After 18 years we can say that Galbraith was objectively wrong.

When assets appear overvalued, sometimes they are, and sometimes people just don't see their potential at the time.

This is ridiculous. By that measure, the Great Depression never happened.

> Why are you so certain?

Because the fundamentals of Bitcoin and The Blockchain are complete garbage. Both are solutions in search of problems. Neither solve any real world problems outside of how to conduct shady, illegal business (murder for hire, crypto-ransomware, mail-order bath-salt delivery) and both do a pretty piss-poor job of even that.

This is why bitcoin will ultimately fail. It is a useless product. Full stop.

Unlike people who invest in the stock market, no one buying cryptocurrencies in under the delusion they'll be bailed out.

It's not actually a delusion, in the case of the stockmarket. That's actually happened a couple of times, now.

That there are still so many haters shows that this cryptocurrency thing has a way to go.

True. Only if they have zero leverage at play. No borrowed money, no loan to default on. If not then there is most definitely going to be some element of a bailout.

Anecdotal: but in the last month I have come across 6-8 people who have taken or know someone who has taken 2nd mortgages, maxed out their lines of credits, and credit cards to "invest" in crypto.

I'm generally a-ok with investment loans (not from credit cards), they are a good resource to reduce portfolio risk - if the loan remain tax deductible. But what is currently transpiring is insanity.

Someone will definitely get bailed out (hint: it will likely be the banks that's unknowingly provided the leverage).

The current leverage from mortgages are probably not that big. What i am worried is the combined effect of high housing prices & relaxed loan requirements, and upcoming stock market burst.

The classic case of cognitive dissonance, gets you on the way up and the way down.

Bitcoin doesn't produce anything of use to most people. I can already transfer my money from my bank to a merchant with quite low fees.

Even in Africa, the possibility of phone-based money allows people to do this.

Bitcoin's risks don't balance its benefits for most users of currency and basically, it's a currency or a "technology", it's simply a unique commodity akin to art or Tulips. I mean, if the bubble was tulips today, I could sell them as "unique biotechnological value-preservation technologies". But that wouldn't change the well known financial/psychological/social dynamics involved.

You mean a third party can do this for you.

the finance system doesnt produce anything of use to most ppl. "Liquidity" is not something you can eat.

I disagree. Buying can be 100% rational as long as you believe some other fool down the line will buy it off you. As soon as the supply of irrational buyers dries up it’s game over. But that doesn’t look like it will happen anytime soon, just look around!

It is as rational as playing roulette. Most of people buying at this point probably can't articulate what they are buying, just that it's probably going to be be worth more money soon. I had to sell my BTC on Sunday, I am waiting to get back in when the exuberance flips around and everyone says it's dead.

As a rational actor, buying Bitcoin right now is basically buying a bet that people will continue to be irrational long enough for me to make a good profit and get out. I don’t know how much faith you have in the market, but I predict the irrationality will continue until at least the stock market crashes and causes people to take a cold hard look at just what exactly it is they are doing. By the time people wake up, every rational actor better hope they’ve made their exit by then.

Sure I understand that. For BTC at least I am not sure I agree the rally will last as long as the stock market rally. I think we'll probably see a decent amount of selling in January when the gains are moved forward to the new tax year.

Litecoin is another animal. I think we'll continue to see a lot of what we're seeing now. People seeing a low price (compared to btc), sad they missed out on cheap BTC and dreaming this one is going to $15k.

Seeing as how dreamers are basically the only reason Bitcoin rose to $20k, I see no reason why the trend wouldn't replay itself with Litecoin. Great time to buy IMO.

Well one thing is Litecoin has a much larger supply (3.24x according to Coincap). In terms of market cap & supply as of today a $15k Litecoin is equivalent to ~$50k Bitcoin. The market cap of Litecoin alone would be 0.84 Trillion. It's possible I suppose but I think you'd need some pretty serious institutional buying (or gaming of the system which only lasts so long).

I think that would put a price target of Litecoin at somewhere around $4000-$5000. Not bad considering it's current price today.

Until people actually run nodes to the same distribution of bitcoin, it will always be a reduced security option, and therefore won't command the same price.

The price commanded is whatever the maximum you can get away with selling it to a fool would be, distribution be damned.

The bitcoin price isn't controlled. Supply and demand.

and even then, crypto could be seen as a better store of value than the traditional market so even a bear market might not negatively effect the crypto space or at least not to the same degree as stocks

Litecoin supports the Lightning Network, so some rationality is to be expected in Litecoin's future.

Is this the reason why? I've been scratching my head all day as to why LTC would pop today beyond the fact that the BTC rally cooled and people saw LTC as cheaper and thought "hey, thats cheap, let pump it!".

People were getting annoyed with the high fees and slow transaction times of Bitcoin. LTC is much faster, has cheaper fees, and has a higher cap on currency that can be mined. A few days ago Redditors on r/bitcoin (or maybe r/btc I cant remember) suggested people with these complaints switch to LTC. More and more posts started popping up to rally LTC. Some even mentioned that most coins had a tight correlation with Bitcoin, which LTC did not seem to have. If this were true, and Bitcoin were to crash, LTC would have the greatest chance of overtaking it. The next day LTC started to rise. Im not 100% sure of correlation, but I believe these reasons to be a part of the cause. It could also have to do with big name investors starting to research cryptocurrencies after CBOE went live, or something else entirely.

Because people are rediscovering why SEC rules exist one at a time.

Until a week or two ago the correlation between LTC and BTC was very loose, but it seems that now that BTC is cooling off other coins are warming up... But LTC has been doing pretty good for a year, so who knows... Definitely seems that people are buying more LTC because is cheaper. Maybe in the hopes that one day is going to be as valuable as BTC (of course that's not happening).

The cryptocurrency bubble is still attracting a lot of attention and people want to buy into something. Bitcoin's pretty broken right now so people are being told to buy litecoin instead.

Anecdotally yes FWIW.

I think a lot of us are aware that we're gambling, purely speculating.

I have a high tolerance for risk, so I don't mind going in big (big for me) - if it works out great, if not, it's been a helluva ride.

Trending in the App Store right now: "cryptocurrency" and "litecoin"

It's also the best crypto to transfer value between exchanges, if you don't want to use Tether.

That's not emotional and non-rational. They were buying in a cheaper market looking to sell in a more expensive one. Unfortunately the cheap market often shuts down trading when volume gets too high so the people who got trapped are screwed.

Just wait until XRP gets into Coinbase, if it makes it into Coinbase. Many people will make bank!

Of course, that's assuming that don't end 2017 (or 2018) with a massive crypto bubble burst!

Nothing new, markets are never rational

Some are more rational than others.

Especially in light of today's massive price jump for LTC. I was initially happy to see that, but thinking further on it makes me nervous.

Do you have evidence for this or have an idea of how many people have/are doing this?

Anecdotally, this weekend I've seen 4 (non-technical) friends throw $500 - $5,000 into the three CoinBase coins this weekend, all individually. Before this weekend, they were merely familiar with Bitcoin but no interest in investment, and they did not know what alt coins were. All it takes is for someone to see the hockey-stick growth on the coins to want in. It's too exciting to pass up. The atmosphere is "If I lose a few grand, that's OK, if I miss out on 100,000, that is not."

I think the really difficult part might be figuring out when to take it off the table. For example, let's say bitcoin goes up 10x. Then do you decide to sell, because it might crash back down the next week? But what if you miss out on another huge increase by selling?

Yeah, this is the dilemma, but can't beat yourself up too much over it. I mined my first bitcoin in February 2011 just out of interest in this cool experiment, not expecting it to go anywhere. I've always had a bit of btc in reserve but every time there's a big jump the impulse is "Better sell out of this silly bubble while I can". People who imagine that they'd have $50M today neglect that they'd most likely have had a similar reaction when it was $20, $100, $500, and so on, and it's unlikely they would've held a substantial portion until it hit $20k.

I think the part that's hard is that there is a stickiness to hype. Hype starts as baseless hype, but the belief and interest of others is frequently enough to sustain a company or project that has nothing of actual benefit to offer. This makes it hard to dismiss hype-fueled bubbles entirely. There's a circular effect somewhere here that converts the initial baseline hype into value just by the sheer force of will of "true believers".

This applies not only to bitcoin/litecoin, but also companies, software, and all sorts of other things. Generating hype, goodwill, and other mostly-positive forms of human attention is inarguably more valuable to a project or venture's long-term lifecycle than providing actual objective value. Get enough attention or interest on something and any objective value that may potentially exist is liable to materialize, at least in part.

You have essentially described what economists call positive feedback. Positive feedback loops are self-fulfilling.


Sell half after it doubles, then hold the rest until you need the money. Selling half returns your initial investment; what remains is pure profit and you can't lose money.

This is precisely what I did, so now I have a guaranteed net profit. Yes my potential earnings are lower but it feels good to be out of the group of potential "losers" in what looks to be a zero-sum game.

Economics and innovation are two of the least zero-sum things I can think of.

I think this is easier said than done.

You most likely need to wait until it's close to 3 X the value you bought it because you'll need to pay short-term taxes after you sell it.

And once that happens, why sell half of it, vs all of it? 3 times the current value is a LOT of money and that usually takes at least 8-10 years in the equity market. Now that it happens, you're cashing out just to recoup your costs? Cash out everything, or cash out nothing and let it all ride until it's an even larger amount.

It's a standard share trade strategy.

The net cost is 0 - cash in = cash out. And taxation is zero because your profit is (at the time) 0.

It also means you can do something else with your original investment.

If it goes up 100x - cash out whenever. If it goes down to 0 - you have lost nothing at all apart from some time.

why is your profit 0?

you buy 2 at $5k it goes up to 10k and sell 1.

profit is current value - cost basis

10k - 5k = 5k profit that will be taxed

> why is your profit 0?

Because the 5k in the market is not a realized gain

> I think this is easier said than done.


> And once that happens, why sell half of it, vs all of it? 3 times the current value is a LOT of money and that usually takes at least 8-10 years in the equity market. Now that it happens, you're cashing out just to recoup your costs? Cash out everything, or cash out nothing and let it all ride until it's an even larger amount.

I agree "just recouping your costs" is not really exciting by itself. The idea is that you think it might go much higher, but - crucially - you're not sure. It's just about reducing your exposure to risk at the cost of some upside potential. It all depends on your risk appetite.

>you can't lose money.

This is a little fallacious because it assumes that the value of your money (Dollars or something?) won't continue to lose value against until it becomes worthless paper. This has happened in recent history e.g. Weimar Germany and is happening right now e.g. Venezuela.

At the end of the day, the rationality comes from a comparison of one currency against another. Just converting back from the currency you started with doesn't mean you "can't lose".

Can confirm. Most crypto millionaires also lost "millions".

Or sell 1/n after price increases by n, for whatever n fits your risk/reward preferences.

> what remains is pure profit and you can't lose money.

Except to inflation ;). But adjust for inflation and selling enough to cover that gets you back the initial investment and also you don't lose money.

Exactly this. People should ask around for advice all the paper-millionaires from the 1999-2000 era. Lots of paper millionaires were made, most didn't materialize.

I’ve owned BTC for years, ETH for a little over a year but never had LTC until last week...just a single datum but would not be surprised if this is quite common.

bubble or not, emotion plays a big part of the normal markets too

I think you meant irrational. Non-rational is different.

Sure is. But you can still make a lot of money :)

Sorry to break it to you, this is not "new" money pouring in. This is a very well orchestrated and calibrated pump.

There has to be some new coming in. Coinbase is rocking #1 spot in the app store for a reason.

I'd be curious to see any sort of proof (or, for lack of direct proof, something pointing the finger in this direction) in this.

I say that without sarcasm. A legitimate request.

LTC has many advantages over BTC. Namely faster transaction times and waaaaaay lower fees.

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