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The Case that Bitcoin Is a Bubble (economist.com)
An anonymous reader shares an excerpt from the Economist: It seems that every day, Bitcoin seems to hit a new high. But the reported price can move up and down by $1,000 or so within a few hours. This might have made it a great investment for those who got in at the right price and are nimble enough to get out in time. But it doesn't make it a useful means of exchange (Editor's note: the link could be paywalled; alternative source). When the price is rising fast, those who use bitcoin will be reluctant to part with it; when the price falls, those who sell goods will be reluctant to accept it.
Bitcoin, with the limitation is has on the final number which can be issued, has no real future. Governments are reluctant to legislate it right now for several reasons. One reason is because of the lobby of exchanges who are currently making a killing off it. The other is that legislators, as stiff and out of touch as they may seem on the outside, are quite well aware of the ability of this to go underground and they don't want that. However, once bitcoin's ability to increase is exhausted, it has no real future. Legislators will have no choice but to step in and either modify it, or ban it.
To see this, look at the best case scenario for bitcoin. Let's say that it is 100% successful and becomes the de facto world currency. Can you really have a world currency where a few individuals control a set percentage of the world wealth? Owning even one bitcoin in that scenario means you own one 21 millionth of the entire wealth of the world. Now think of those individuals and institutions that own chunks of this.
No, bitcoin cannot continue without an extension. The split that was going to happen was averted when greed got the better of common sense of those who were going to expand it. They think if they can just hold on, if they can just get it accepted by enough people, that they will have a shot at becoming fabulously nouveau riche - as in world-class monetary controlling rich. Not going to happen. The existing money structure will kill it from behind the scenes before this happens. You'll see a sudden spate of exchange breaches financial manipulations (or both) that make it volatile and end up tanking the value, then legislators will step in to protect the market from the failed experiment.
Stuff that matters?
Yes, if only to teach the less savvy not to get into a market at the peak of a bubble.
Bitcoin is not valuable. Gold and silver are valuable because it has uses outside of money, but bitcoin does not. That is the difference between gold/silver and fiat currency.
Unstable is a matter of degree. Is the dollar unstable? relative to what? Relative to bitcoin it is one of the most stable things you can get. I doubt you will see a price swing of nearly 50% ever, as we have seen with bitcoin.
When you cant win, ad hominem.
That's the insane rambling of someone who read Ayn Rand as an undergrad and never got over it.
Banks and governments could easily manipulate Bitcoin. Just because banks and the government can't print Bitcoin doesn't mean they can't manipulate its value. Have you ever heard of the forex scandal? The United States has manipulated the currency of Japan even though the US Mint doesn't print Yen.
All it would take is a well-placed government regulation here or a series of derivative trades there to destroy Bitcoin utterly. The only reason it hasn't happened yet is that there are some powerful people trying to see if they can make a fortune or two before they pull the rug out.
You are welcome on my lawn.
You're right it doesn't need to be, because everything like this has a bubble of some kind. The real question is just what will the ripple be when this bubble pops. How many people have say mortgaged off equity in their house to try riding the bubble? You can bet your ass that people have. How many companies have sunk short-term possible high-loss futures into this as well?
30 years ago people were selling equity in their homes at high interest rates to try cashing in on the condo bubble happening in major cities around the world. Believing that they could "sell out" and still get a head. Now just think what happens if you have a several thousand people in a major city who've done the same with the stupidly low interest rates we have and were already say $50-100/mo difference from going under, but believed they saw this as a quick way to cash out. And directly lied on the line of credit for this. People did the same thing with NORTEL stocks.
Not really gonna know just how much of a mess this is going to be until that bubble pops, but as a warning to anyone who knows someone who's done something stupid like buy into this believing that "it can only go up" when they've lost all that money, they'll probably become suicidal.
Om, nomnomnom...
The fundamental problem with BitCoin is not its volatility. The volatility will eventually go away if the underlying technology turns out to be sound.
The fundamental problem with BitCoin is that the number of transactions it can handle is orders of magnitude below what is necessary for a reasonably liquid currency with a total value in the billions of dollars. As it is, BitCoin only works as long as most of that money either sits still or moves around in huge transactions of at least thousands of dollars at a time.
It is entirely possible that the problems get solved. However, a quadrupling like BitCoin Cash has done is just nowhere near orders of magnitude improvement.
Finally! A year of moderation! Ready for 2019?
You forgot that you can't tiptoe through bitcoins
What happens with derivatives affects the underlying value of instrument from which it is derived.
Remember the economic crash in 2007-2008? Look what the trading of derivatives in mortgages did to the value of a house. Yes, if you owned a house before the crash, you still owned a house after the crash. It was just worth a hell of a lot less.
You are welcome on my lawn.
Corollary: When everyone - usually including your neighbor or friend down the street, or your grandma - is trying to buy in and ride the wave, but they can't really explain how commodity X works or will make money, it's over. It's time to get out. You've missed the wave as an investor, and you're going to get burned joining too late.
Bonus: If the "everyone" people wanting to buy commodity X can't even really explain how or why it will make money, it's going to get REALLY ugly.
The following fit the pattern:
Microsoft and other internet/tech stocks (2000)
Housing (2007)
Gold (2012)
Bitcoin (2017) will likely be the next big entry to the list.
But that is only because stuff has been nominally priced in dollars. If we instead had stuff nominally priced in 10th oz gold units, or something you'd make the same argument about accepting dollars.
The fact is gold and silver are stable enough in terms of total supply, liquidity ( in the sense people are willing to part with it ), and distribution, that either could probably work as medium of exchange either directly or backing some paper/electronic system. We can have a debate about if a gold standard would be good for our society not. I see both positives and negatives of that but that is a tangent. It could be made to work through.
Btc on the other hand has some major problems. The total supply is fixed, as a practical matter there will always be more gold to mine, if deflation gets strong enough to justify it; on the other hand all practically discoverable bitcoins will be found at some point. The money supplies growth isn't just limited it essentially has a hard cap. The next problem is because its new its kinda illiquid and forces of volatility, deflation, and block-chain limitations in terms of settlements, isn't helping. People can't gain trust in for trading real tangible property beyond a speculator class. Finally the distribution is entirely to narrow currently with 1000 or so people controlling most of the market. It over incentivized the early adopters.
I don't Btc is ever going be the currency Joe Sixpack, actually buys a six pack with for these reasons. Blockchain tech is her to stay. Some future crypto currency might become ascendant and see wide use, but Btc aint going to be it.
Repeal the 17th Amendment TODAY! Also Please Read http://www.gnu.org/philosophy/right-to-read.html
So... probably not a bubble, unless the desire to move money around with no traceability ceases to be desireable
Seriously? Not traceable?
You just *might* want to take a look at how a bitcoin changes hands and how long the block chain exists. EVERY bitcoin transaction from the beginning of time is traceable and will be as long as it remains a "thing".
What BitCoin allows you to do is to remain anonymous, if you are careful, and if you never try to convert your BitCoin into something else that can be traced, and what's a BitCoin worth if you cannot convert it to something else?
So, the traceability idea is a misstatement and the anonymous ownership is not guaranteed. BitCoin may not be what you want to hold as a criminal or you don't want traceability for what you are doing. Cash might be better for you. Cash IS untraceable (assuming nobody knows the serial numbers in question), nearly universal and anonymous if you are careful.
"File to fit, pound to insert, paint to match" - Aircraft Maintenance 101
All of that completely misses the point of the argument comparing the Bitcoin bubble to the tulip craze.
It is precisely not about the nature of the commodity being traded. It could be fidget spinners, beanie babies, futures contracts in mortage-backed securities, it doesn't matter.
What does matter is lots of ordinary investors with no understanding of what they are investing in believing that because others find this commodity desirable, it must be valuable and the price will continue to rise - and importantly, that they will be able to extract that value before the price crashes leaving them "holding the bag" of something now worth much less than they've invested in it.
The tulip market was by design an annual market, with traders fighting over the rarest cultivars on a seasonal cycle.
Rare tulips were indeed scarce. Each year, new cultivars of tulips were developed and only available in small numbers, while the demand for the rarest tulips was huge. The rarest types of tulip were rare because of a virus (tulip breaking virus) that was only transferred from an infected plant to its buds; since only a few buds formed per year, only a few new tulips of that variety could be formed per year. This guaranteed an enforced scarcity.
Tulips of the same cultivar were fungible, for whatever that's worth.
Tulips were verifiable in that they were purchased in formalized markets, even futures markets, with enforceable contracts (although short selling was made illegal).
I'm not sure what the point of tulips being divisible is. Neither are yen, but people seem to have no problem using them.
Most importantly, tulips were actually in demand in and of themselves . There was a lull in the Thirty Years War, and tulips were a highly in demand luxury item at wealthy estates. What's the value of bitcoin in and of itself? What's that? An alternative payment system to credit cards? Yeah, how is that going for you? Backwards, is how - the few places that had previously started experimenting with accepting bitcoin as payment are one by one backing out of it. Even if you ignore the volatility, the overhead in bitcoin transaction processing makes it stupid as an alternative. And it always runs the risk of governments cracking down on it due to the one thing that people actually value bitcoin for in and of itself: illegal purchases and money laundering. Don't think governments can crack down on it in a way that utterly crashes its value? Yeah, good luck with that notion.
Bitcoin is currently in the "greater fool" investment mode. We know how these things end.
"This wallpaper is killing me. One of us has got to go." -- Oscar Wilde on his deathbed
That's hard because of the way Bitcoin stories work.
As Slashdot mines the news for more Bitcoin stories, they become more and more computationally expensive to find. While there may seem a lot right now, especially as more and more submitters join the craze, mining Twitter feeds, various libertarian blogs, and Reddit for undiscovered Bitcoin stories, there will eventually be an equilibrium where they just stop being profitable to find. At that point the number of stories posted to Slashdot will decrease.
Advocates of Slashdot covering Bitcoin claim that when this happens, the stories published will be more and more valuable, but many feel that the very act of reaching this equilibrium will mean that there just aren't any interesting posts left, resulting in a complete collapse of interest in this shitty "currency that's not a currency".
You are not alone. This is not normal. None of this is normal.
What you're looking for if you want something with no traceability is called "cash". Last I heard, dollar bills and coins didn't have lists of IP addresses of people who used them permanently engraved upon them.
Even cash can be traced to some degree. Each bill has a unique serial attached to it. I'm positive each bill is tracked as it goes through the banking system. Once it hits the streets though all bets are off.
Of course we have heard rumors that the feds have attached RF tags to each bill. That they can tell how much and what individual bills you have in your pocket from stealth satellites in orbit. Personally, that is so much hogwash but I suppose if they wanted to track a single bill they could.
I read at +2. If your post doesn't reach that level I will not see or respond to it.