I don't have a strong opinion on Bitcoin, but seeing the price double repeatedly over the course of 12 months gives me a physiological feeling that I can only describe as FOMO. I know it's irrational, and I'm not going to buy any Bitcoins just based on my gut feeling, but it's still disturbing that seeing a chart go up and to the right makes my brain think that I ought to be buying a piece before it's too late. I bet this is what it felt like to be in the middle of the Tulip Bubble.
The price has gone up by 20% in 24 hours, not just doubled in the last 12 months - I think in twelve months (according to bitcoin charts) it has gone from around $10 to around $600 - 4900% increase. That's clearly unsustainable and yes it does look like a speculative bubble, particularly when people expect it to continue to grow indefinitely in price without a commensurate rise in usage as a currency.
It'll be interesting to see this play out as it's a great example of a completely unregulated market at work.
I don't see bitcoin becoming a world currency without some large changes to the protocol - for example to track users and link them with real world IDs, reversible transactions etc, and there are also political reasons which would make it very difficult - governments enjoy being able to fund deficit spending and control the economy by manipulating the currency, they won't easily give up that power.
I remember looking at it when it was below a dollar... at the time I had no money and told everyone I know to buy. I also managed to mine 50 coins, but have since lost the wallet.
I was going to buy $300 worth when they were 30 cents each. I didn't, though, as it involved travel to a nearby town and I was working on a book and thought I should be practical and spend the weekend on that. Ah well, one less house.
My sympathies. I do think the current price is due to speculation rather than real value, but what is the value of a currency? If it is simply what you can exchange it for, in the case of bitcoin that is a freely floating value based on confidence, which will go down as well as up.
A Bitcoin wallet is a file that contains the private keys that allow you to transfer bitcoins from a certain address. If you lose that file, you can't use those coins, they'll just sit there forever.
If the bitcoins in the lost wallet never get recovered, does that mean that the amount bitcoins available for trading has just decreased? My small understanding of bitcoin tells me that there only a limited number of bitcoin available once it has all been mined.
Bitcoin will never become useless because of such stupid reason. If people need smaller divisions than 1 satoshi (10^-8 of BTC), the protocol will accommodate that easily with small extension. But most probably, smaller transactions will be carried outside the blockchain on a decentralised clearing networks (where debts are cleared with real BTC transactions every day to limit the risks).
This is pretty far away. Making some quick and dirty calculations:
The lowest bitcoin denomination is one Satoshi, which is 0.00000001 BTC. If one Satoshi would equal one cent, this means that one US dollar would equal 0.000001 BTC.
Given that the maximum number of Bitcoins is ~21 million, this amounts to a max capitalization of ~21 trillion USD.
If you do upload your wallet to "the cloud", you should definitely encrypt it with strong encryption and with a password of appropriate entropy. Otherwise, you're just asking for someone to steal your coins.
1. You will never miss out. Even if you never by bitcoins and it becomes world money, you'll benefit from it indirectly (and taking no risk in the process).
2. It's never too late. The bet is that Bitcoin becomes world money. If so, all the wealth stored in cash, gold, silver, bonds and other low-risk less liquid assets will go into Bitcoin. This will make it worth more than 10 million of today's USD per BTC.
It's also worth noting that the US government now owns 0.686% of all bitcoins that will ever be created. (They seized 144k coins in the Silk Road raid, and eventually there will be 21 million total coins.)
There are enough of private investors willing to buy without crashing prices on the open exchange. Financially, it'll be a good deal for both a buyer and a seller. I heard SecondMarket's BIT (bitcoin investment trust) can't buy new bitcoins fast enough from private hands to satisfy the demand.
...all the wealth stored in cash, gold, silver, bonds and other low-risk less liquid assets will go into Bitcoin
This is rather utopic vision. None of the gold owners would sell significant part of their gold for btc - gold is used to store value for ages, bitcoin is a currency.
I personally know a gold owner who dumped all his gold (accumulated over past several years) for Bitcoin in February. Bitcoin has different risks than gold, but you can 1) move it cheaply and quickly to a safer location any time 2) you can buy stuff with it directly. Gold sits there and you always have to fear that government or someone else confiscates it, to makes it PITA to sell a portion of it.
Both are commodities and containers for wealth. If there's an arbitrage opportunity in exchanging one for the other, they'll likely be exchanged.
The thing about "store of value" principles is that the ascribed value of things changes. It generally has a floor of the marginal cost of production / extraction / acquisition, though sometimes it can fall below even that (viz: inflated currency literally not worth the paper it's printed on).
If someone's willing to pay more for bitcoin than gold, or you're betting that that the value of bitcoin will increase, trading gold for BTC makes sense.
In terms of tangible value -- Gold is more likely a persistent store of value than BTC, but where you need to move wealth quickly and easily (say, you're fleeing an unstable situation), a BTC wallet somewhere else might be a lot easier than smuggling out gold ingots. Even a (moderately) modest amount of wealth, say, $50m, would be somewhat over a ton of gold. Hard to run with that in your pockets.
If you want to limit yourself to a maximum of 45# of weight, you could carry slighltly under $850,000 at current market prices. Not insignificant, but depending on the loot you're trying to, well, loot, possibly less than you might hope.
Understand that no-one has any damn clue where the price is going. If you'd invested at the peak of the last bubble and held on to it, you'd have doubled your money. Work out a plan, write it down, stick to it regardless of price. Mine is investing £100 on the same day of each month, including this month, and selling in five years. Work out what your position is - mine is massive realization in five years - and then don't b swayed by the day to day.
In the UK, £100 gets you about a week's worth of smokes for a heavy smoker.
Putting it in BTC rather than cigarettes is a sensible strategy because even if BTC goes up in smoke (see what I did there?), at least that smoke didn't end up inside your lungs.
I'm a smoker. I'm quitting. My cig spend will likely go on BTC. Maybe.
I noticed you're based in London, happen to work near Shoreditch? I'm in contact with Dishoom - trying to get them to accept BTC. Another reason to quit, eh? ;)
This reminds me of a story of Sir Isaac Newton and South Sea Company bubble. He got out early, then watched all his friends get rich, jumped back in again with both feet, lost a fortune. Even smart people are not immune to bubbles.
Okay, maybe it's more like a pyramid scheme. As long as more people keep flocking to it, prices will go up. But you don't know how long people will keep flocking to it.
No, you would have $1500 in bitcoins. This feels completely different to having the same in $, because you've already made the leap.
Only if you had invested and cashed out would you have $1500. And then you might feel exactly the same as you do now in a weeks time. Then again bitcoin might crash and you would feel good for getting out now.
If you want to invest you have to be entirely willing to lose all of that money. You can't lose money that you didn't invest so it is pointless thinking about the past.
Honestly I would withdrawl $1000 from it so you have that $500 again. You pull your winnings and keep your base invested. That's the safe play. Doubled your money, you have it secured. Let that extra winnings be the gamble. If you lose you still won.
Satoshi Nakamoto in February 2009: "In this sense, [Bitcoin]'s more typical of a precious metal. Instead of the supply changing to keep the value the same, the supply is predetermined and the value changes. As the number of users grows, the value per coin increases. It has the potential for a positive feedback loop; as users increase, the value goes up, which could attract more users to take advantage of the increasing value." http://p2pfoundation.ning.com/forum/topics/bitcoin-open-sour...
EDIT: It seems I've got the details wrong, please excuse this comment. I'm just leaving my original text intact so the replies make sense.
The MtGox USD price is not real. At least not for the purposes of arbitrage. Although it says $600 USD, no one (or almost no one) is actually buying or selling BTC on MtGox for $600 USD. They are buying/selling it for other currencies and MtGox is using an internal exchange rate to convert it to USD. Their internal exchange rate does not reflect the risk free rate you can actually get if you were to try to arbitrage it across borders (namely china/japan). MtGox does not allow you to withdraw USD.
MtGox does allow you to withdraw in USD, it's just that you get put on a long processing queue. The problem is that their Japanese bank has restricted them to only 10 international wires per day. They've been having a really tough time with banks. Interestingly, if you have a Japanese bank account, you can withdraw Yen from MtGox within a few hours.
Regarding price - MtGox's has been fairly in step with BTCChina's price. BTCChina and MtGox both represent the top exchanges by 30-day volume, so it would seem to me that MtGox's price is more accurate than BitStamp's price which lags miserably behind every rally.
This is not true. Look at the price on BTCChina and you'll see it's pretty much equivalent to the USD price on MtGox. Bitstamp and Coinbase are lagging behind because BTCChina and MtGox make up most of the volume.
Hm I had read previously that they only had one order book for all currencies, but now that doesn't seem accurate (or reasonable). Guess that's what I get for believing it without looking into it myself :/
No, there is no way to get your US Dollars out of Mt.Gox, after you sell you BitCoin, in a reasonable timeframe. Supposedly they only process about 10 total USD wire transfer withdrawals per day. There is also a question of bankruptcy risk as it is common knowledge that the US Government seized several million dollars from MtGox earlier this year.
Anyone that quotes MtGox as the reference bitcoin price almost certainly has little experience trading bitcoin. Bitstamp is a much better reference price or if you want to be US centric CoinBase.
It's not that arbitrage opportunities don't exist in the Bitcoin world. There are some rare and fleeting ones. This just isn't a good one.
This is silly. If you have the liquidity, who cares if you have to wait 6 weeks for free money? This is why other exchanges are dry. Not everyone is a broke college kid for whom six weeks waiting for money is a life-stopping crash
MtGox withdrawal issues are huge. I wouldn't downplay their issues at all. Speaking from personal experience I had a $10,000 June/July withdrawal stuck for 8 weeks. Customer service wouldn't give any timeline.
After a lot of back and forth they said I could pay a 5% fee and get my USD in 7 days. Basically a bribe for them to convert to JPY and send the transfer through..
At the time, they said withdrawals would take 2 weeks.. Now if they say 6 weeks you should pray :p
I ended up buying back some BTC (at about 10% loss due to price) and then selling later on bitstamp due to the recent price rise. Worked out okay for me but please DO NOT USE GOX FOR USD.
Problem is, it isn't just 6 weeks. Not to mention restricting withdrawals is the same strategy you would take to prevent a run on the bank if you were insolvent. You should give it a try though and let us know how long it takes.
It would be if it was easier to get money in and out of the exchanges. As it is now it can take days/weeks to move money between accounts, especially on Mt Gox.
"Well you see, when Bitcoin was only worth $8, Daddy tried to buy some, but to buy them he had to scan his passport and send it to MtGox, Daddy thought that was a bother, so he shrugged and moved on."
The reason is that it's perceived as anonymous is that there is no ceremony involved with making a bitcoin 'bank account', that means that you can do it without identifying yourself. You can make a Bitcoin address even without connecting to the internet, you can make a private key that fits to an address, and not let anyone know that you have it.
Now you have an anonymous account, that you can send money to, but everything that happens to that money is public.
Order a Pizza delivered to your door, paid with bitcoin? Gone anonymity.
Are you the one person that buys 3 apples every tuesday at a particular food stand paid with bitcoin? Gone anonymity.
Relevant to this example: Every entity that exchanges Bitcoin for Dollars or Euros is legally required (anti-money laundering laws) to identify you. In Canada they apparently even need your palm print.
This is a doubled thread... I asked a bunch of questions on the old one (https://news.ycombinator.com/item?id=6753033). Now I found this article that seems to address a lot of my reservations about Bitcoin so I thought I'd post.
Debatably, a big issue with Bitcoin is that there is no reliable/trustworthy way to short sell it (I could be misunderstood). I think academic study has suggested that markets that can be shorted are less susceptible to bubbles than those that aren't. If there was a ready pool of people ready to trade a view that the Bitcoin price should be lower than it is, perhaps there would be less volatility/exuberance?
All buyers, no sellers, price will continue up. There is a steady stream of new people hearing about Bitcoin, believing in the idea, and wanting a piece of it for when it becomes a dominant world currency. Everybody is holding, nobody's selling. This will continue for a good long while - there are still very few people outside tech circles who own bitcoins.
my (nontechy) mother in law mentioned them to me yesterday, I (techy) bought 2 kebabs last night with bitcoin (through takeaway.com). I think you're right that mainly techy people have them at the moment, but I also think that with the right friendly UX exchange we could soon be approaching a tipping point.
Another thing; I didn't buy from my usual takeaway because they didn't accept bitcoin. So bitcoin acceptance was the primary factor in making me choose a new takeaway.
When someone without knowledge in the markets tells you to buy something, it's time to get out. They either heard that golden advice either on TV, the radio or read it in a newspaper but the common denominator was that it was probably a paid ad by someone who wants to offload as much as possible to the next sucker^Winvestor.
So remember, when your bus drivers or barista tells you to buy Microsoft shares, it's probably best to consider Put options.
Buyers and sellers need to agree on a price, it is not always the case that they agree for the listed price, hence bid and ask prices are different.
For example, when thousands of people want to sell at $1000, then there will be downward pressure on the bitcoin. When someone tries to sell out $1,000,000 worth of bitcoin, he will need to find a buyer that is willing to part with $1,000,000 USD. Good luck!
1. I'm probably too lazy to look this up, but given mining Bitcoins essentially boils down to solving hard math problems and there is no centralisation, what prevents collisions from two miners mining the same bitcoin at the same time? Is there a GUID element involved? (if so, then perhaps collisions are possibly, just extremely unlikely as to be practically zero).
2. If the bitcoin mining difficulty increases on a known path, would it be possible to tie the current BTC price (probably would have to try estimate a forward price) vs the current cost of GPU processing on EC2 (ie. via Amazon's spot market mechanism). Has anyone done this?
Regarding #1: it's not really coins that are mined, it's blocks (which happen to include a reward paid to the miner). Blocks are numbered and include a hash of their parent, so you can get a tree-like structure of blocks. But only the longest branch "counts", so miners have an incentive to spread information about the current highest block as quickly as possible.
In cases there two blocks happen to be mined simultaneously there's a brief period of uncertainty regarding which transactions were committed and who earned the mining reward. But as blocks are generated on both branches at random intervals, eventually one will become longer and snowball from there. The key is that the average time between blocks is about 10 minutes, muck longer than the communication delay between miners.
As to #2: first of all, the Bitcoin protocol knows nothing about exchange rates. And secondly, in a market-based exchange, you can't just "tie" a price to anything. You could set up a fixed-price exchange, but if the market price was different from the one you picked, either buyers or sellers would look elsewhere to get a better deal. (That is, unless you provided some additional benefit over the existing exchanges that was considered valuable enough to make up for the price difference.)
I didn't explain myself for #2 very well... I can imagine a setup where a bot is monitoring the exchanges for the current BTC price, and perhaps (if such data is exposed) the market depth at and near that price. Then, monitor the Amazon spot price for GPU instances (if Amazon makes GPU instances available at spot rates, otherwise use their fixed price). At some point, the cost of BTC in USD would be greater than the cost of EC2 compute hours in USD required to obtain coins, in which case ramp up EC2 instances and get to work!
I'm afraid the spot price of EC2 has never been even close. EC2 GPUs are nVidia anyway, which don't have the specific on die instruction that made ATI/AMD cards so good for mining back in 2010-2012. That's all been superseded by ASIC tech which is already in a race to smaller and smaller feature sizes.
The math can be most easily done at mining.thegenesisblock.com
> what prevents collisions from two miners mining the same bitcoin at the same time?
Absolutely nothing. There can, in fact, be two blocks at the same height. This is a temporary fork. What happens is that miners mine the next block on top of one or the other at random, and the chain which gets the next block "wins", and everyone then mines on top of that.
To make it clearer, at any time, the longest chain of blocks wins. There can be two chains of the same length at any point, but that doesn't last for long, as it's statistically incredibly unlikely that this will continue for more than a block or so.
> mining Bitcoins essentially boils down to solving hard math problems
Nitpick: it boils down to solving the same ridiculously simple math problem billions of times with a different parameter until by pure blind chance you get the right result.
All bitcoin has done so far is make the people with as little as $50 to spare (in 2011, 2012) into rich people. The rest of us in recession hit Europe have merely been screwed by it. I'm not saying it will crash or won't, but it's promoted more inequality than most other instruments.
and saying "the value of the bitcoin economy is $5bn" or whatever is disingenuous. Economies are measured by the FLOW of money - the gdp, not the STOCK - the total value of the money supply in a different currency. The amount of money changing hands is what matters - and afaik, that's miniscule in comparison.
> All bitcoin has done so far is make the people with as little as $50 to spare (in 2011, 2012) into rich people. The rest of us in recession hit Europe have merely been screwed by it. I'm not saying it will crash or won't, but it's promoted more inequality than most other instruments.
Distributing a brand new decentralized currency is a hard problem. I think Bitcoin did a pretty good job with its mining reward mechanism. Also, it's not "all" Bitcoin has done. Would you say "all" Paypal has done is make Peter Thiel and co rich?
> and saying "the value of the bitcoin economy is $5bn" or whatever is disingenuous. Economies are measured by the FLOW of money - the gdp, not the STOCK - the total value of the money supply in a different currency. The amount of money changing hands is what matters - and afaik, that's miniscule in comparison.
When people quote Bitcoin's market cap they generally do so to illustrate how tiny Bitcoin is compared to USD or other currencies. The fact that it is still so small is an argument people use to justify its rising price. If anything, using a lower figure is what would be disingenuous.
you realise that people said that when it reached the dizzy heights of $10/BTC, $100/BTC, $200/BTC, etc. The April 2013 crash looked like a massive spike until a few weeks ago, now it's a tiny blip. Who's to say whether the November 2013 spike will look like a tiny blip in 6 months?
You realise that nothing you wrote casts any doubt on my prediction? And that I didn't say the soon-to-come crash would be the end of Bitcoin? The leadup to the April crash looked exactly like what we see now: rapid and accelerating price increases within a few days.
BTW, I correctly predicted the April crash 2 days in advance.
I'd take the bet but can't be bothered to acquire BTC for this purpose - which is kind telling, as is the fact that there's probably no better way to conducht the transaction either.
I find it amusing that the payout would be skewed in your favor by the nature of the bet.
He's still laying you odds. He has to buy the bitcoins at today's price, and if he cashes out, he gets them at...well, half the price, since that's the terms of winning.
You could say that fundamentals have not changed, so it's a bubble. But the end-game is bitcoin becoming a major currency (although, if it does that, it will inevitably become the reserve currency), so the price should be subject to intense political risk and also a long way from it's potential peak. So it's not really like the tulip bubble.
