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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.
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.
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.
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.