Bitcoin Jumps Another 10% in 24 Hours, Sets New Record at $19,000 (arstechnica.com)

An anonymous reader quotes Ars Technica: Bitcoin's price set a new record on Saturday as the virtual currency rose above $19,000 for the first time on the Bitstamp exchange. The gains came just hours after the currency crossed the $18,000 mark. Bitcoin's value has doubled over the last three weeks, and it's up more than 20-fold over the last year.

Bitcoin's value keeps rising despite a growing chorus of experts who say the currency value is an unsustainable bubble. One CNBC survey this week found that 80 percent of Wall Street economists and market strategists saw bitcoin's rise as a bubble, compared to just two percent who said the currency's value was justified. Another survey reported by The Wall Street Journal this week found that 51 out of 53 economists surveyed thought bitcoin's price was an unsustainable bubble.
Less than a month ago, Bitcoin was selling for $8,000.

Comments

I have an idea.

[AlanObject]

Let's play Who's The Greater Fool?

Re:I have an idea.

[Pseudonym]

Well I invested all my money in tulips. Who's laughing mow?

Re:I have an idea.

[Rei]

This whole situation reminds me of the old Onion article, AOL Acquires Time-Warner In Largest-Ever Expenditure Of Pretend Internet Money. The AOL-Time Warner merger was the peak in the Dot Com boom insanity, en route to it transitioning to a bust. Now: Bitcoin Plunge Reveals Possible Vulnerabilities In Crazy Imaginary Internet Money

The amount of money people are dumping into coins is just absurd. I was just checking, and Dogecoin now has a market cap of $754 - more than the combined GDPs of Tualu, Kiribati, the Marshall Islands and Palau. For a joke.

Bitcoin Mania

[Bruce Perens]

Bitcoin mania: people confuse creation of money with creation of value. Value is food, materials, information, useful work. Dollars/bitcoins are unreliable media for exchange of value, not the value itself. Creation of $300B in bitcoin won't help the world to feed one more mouth.

Re:Bitcoin Mania

[hey!]

I wouldn't say that the creation of a currency is useless, if it fill some sort of need it will probably will metaphorically feed mouths. The problem with Bitcoin is that it sucks as money. Sure if you're trading in BitCoin as an *asset* and your timing works out you'll make a killing, but the volatility of Bitcoin makes it unattractive to set a price for goods denominated in Bitcoin. If the price swings high nobody will buy. If it swings low then you could be selling at a loss.

Re: Bitcoin Mania

[Brockmire]

How about you define "useful work"? I think the words speak for themselves when talking of value. My takeaway from Bruce's comment is the value. I can buy water bottles for $1 a piece. If people around me need water, I can likely sell to them for more than a buck. If everyone else has water, I sell for less than a buck and lose money. If nobody wants to buy my water for any amount and I'm stuck with them, then at least I have the water. I had stock in a company. It was worth some $$$. The company went tits up. The paper stock certificate is not even usable to reuse. At some point, I think Bitcoin will run into a brick wall, whether from technical issues, regulatory issues, or just that the big banks who didn't get in at the bottom do their collusion thing and fuck over bitcoin. But I would have guessed that would have happened already and that Facebook would fail when the kids left after all the grandma's joined, but I was very wrong about that. So do what you want with your money, just don't fuck over the entire economy if the thing goes tits up overnight. We don't need another housing crisis from people losing their houses after mortgaging it for bitcoin.

Re: Bitcoin Mania

[orlanz]

Why is this marked insightful, in Economics sense, it is totally wrong. Creation/destruction of value and utility is straight up Econ so I will leave that to the reader. Let me tackle the -useful work- part of that. It is not an Economic term itself but used quite often to explain the general concept of utility and value; for laymen... which clearly it failed to here.

An example: If we find two robots, one digging a hole and one filling it up, one would be hard pressed to find anyone that would consider this useful work. The only exception is entertainment. If it was intended for and people find it entertaining, then it has value. Otherwise, it is not useful. And on the entertainment end, eventually it will not be so, and at that point the work no longer has value.

In such a scenario, it is fairly obvious to see that is not useful work. Who would disagree with this?

Anyway, it is very hard to define value and useful work. But we have many many examples throughout history where we determined something to not be useful work. Ponzi scheme, pyramid scheme, greater fool theory, hyperinflation, etc. Note that legal gambling is not considered such because of the entertainment aspect.

As long as Bitcoin operates on the Great Fool theory, then it does not do useful work. In some ways one could argue that in a highly inefficient way, it is providing entertainment and educational services to society but that itself normally does not deem something to be considered useful.

And before people bring up -but it is just like stocks-. NO it is NOT. Maybe the stocks you are familiar with or heard about are zero sum games or based on speculations. That makes up a very small part of the market. The majority of the market is defined by the 401ks, pensions, insurance funds, trust funds, savings accounts, etc. The type of stocks these funds generally invest in represent growth in the pie; meaning everyones slices get bigger.

Re:Bitcoin Mania

[thegarbz]

but the volatility of Bitcoin makes it unattractive to set a price for goods denominated in Bitcoin.

And this is precisely the chicken and egg problem that will be difficult to solve. Central banks can resolve this by decree but with an alternate currency stability comes through trading volumes against other more stable things. As long as that is just small one way trading against another currency in small volumes it will remain highly volatile.

It won't be stable until there's wide spread trade in goods and services in the currency.
There won't be wide spread trade in goods and services until the currency is stable.

Re:Bitcoin Mania

[thegarbz]

Gold's stability was created through the near universal acceptance as a currency which lead to large trading volumes against more stable items with known value like food, wood, etc. Fiat currencies achieved the same thing via a decree from the government.

The GP described a chicken and egg problem. Why would you sell goods and services against an unstable currency? How do you stabilise a currency if you can't trade it against goods and services. The best you can do is trade it in high volume against a fixed currency, but all that achieves is pegging it to the dollar.

Re:Bitcoin Mania

[Solandri]

people confuse creation of money with creation of value.. Value is food, materials, information, useful work.

The purpose of money is to facilitate trade. Say you raise chickens, and you go to the market with eggs to sell. You want to buy some milk, so you visit the dairy farmer. He has milk, but he doesn't want eggs. He wants carrots. So you visit the vegetable farmer. Yes he has carrots, but he doesn't want eggs either. He wants apples. So you visit the orchard farmer who sells apples. He doesn't want eggs either, but he does need his horse shoed. So you visit the blacksmith, who does want eggs. So:you give the blacksmith some eggs so he'll shoe the orchard owner's horse, so the orchard owner will give some apples to the vegetable farmer, so the vegetable farmer will give some carrots to the dairy farmer, who will give you some milk.

Having a universal currency that everyone can trade in eliminates the need to chain together multiple trades like this just to accomplish a single transaction. Everyone can just do their trades immediately against the currency. This is what a lot of people who are anti-money miss. Value is not always tangible. There is value in making trade easier with currency. (Likewise there is value in more efficient distribution of goods. In the above example, the number of eggs, milk, carrots, apples, and horseshoes is exactly the same before and after the trade, but their value has increased after the trade because they've been distributed to the people who want them - i.e. who value them more than the original owners. That is how trading creates wealth/money/value seemingly out of nothing.)

But as noted in other comments, bitcoin's wild fluctuations in value make it a terrible currency. So aside from its anonymous nature facilitating illicit transactions, I'm not really sure what value bitcoin adds to the economy. Hence why economists conclude it's a bubble.

How is that different from other currency?

[SuperKendall]

So what is your view on the difference between the non-value of BTC and the non-value of "real" paper money (which doesn't feed people either, but is equally a convenience).

I mean, is this a non-subtle way to tell everyone they should buy only gold? Or do you mean to say people should trade only using potatoes.

Re: How is that different from other currency?

[orlanz]

The US Dollar or any currency equivalent backed by a large and productive workforce provides economic value by lowering transaction costs and increasing liquidity.

Only one question left:

[Gravis Zero]

Who will be the ones left holding the bag?

Lots of useless things

[Roger W Moore]

Creation of $300B in bitcoin won't help the world to feed one more mouth.

Neither will the creation of one more video game or the invention of some new beauty product. People invest money in lots of useless things, why should Bitcoin be any different?

Re:You're a fool if you don't hedge investments

[Rei]

Just admit this is new territory and doesn't work the same as traditional stocks.

All forms of financial assets function as a form of promissory note: an asset that can later be exchanged for desired goods and services. The "selling point" for BTC was that it going to be some new global payment system replacing credit cards, unbacked by anything but public trust, but with sufficient public trust that it can retain value without physical backing assets or a country behind it. How's that assumption going?

  * BTC is a terrible payment system from a technological perspective due to the huge processing cost and delays per transaction. Bitcoin fees aren't high because of gouging, they're high because bitcoin is technologically awful.
  * It's far too volatile for such a role
  * It already has a market cap as high as the major credit card companies combined, yet is accepted by a minuscule fraction as credit cards for the above reasons - which just screams "massive bubble".
  * Indeed, many early "forward thinking" adopters have been going backwards and eliminating bitcoin payment options - the very excuse for justifying its price.
  * Bitcoin is favoured target of hackers; it's proven much easier to compromise exchanges and wallets than traditional financial networks.
  * Governments have numerous reasons to crack down on bitcoin (drugs, money laundering, deliberately crashing the assets of states with bitcoin reserves like North Korea, trying to pop a bubble gently to prevent a recession, etc), and extensive tools to do so, effectively driving it back to its innate value (a currency for underground criminal activity). Historically, the loss of one market - for example, China - has been compensated for by growth in western markets. But if you take western markets out of the picture, you're taking the vast majority of the world's capital out of the picture, period. It's even worse because western markets have disproportional leverage on the world's global financial systems, and decisions taken by them can reach well beyond their borders.

"Neck beards" also pointed out that the dotcom bubble was, in fact, a bubble, even though they couldn't tell you when it was going to burst. Yes, sometimes "neck beards" may underestimate the general public's willingness to mortgage all of their assets into internet fads when they blinded by a growth curve. But that doesn't change the basic issues underlying it all.

That doesn't mean that nothing will survive. Some of the dotcom crash's survivors became giants today eBay, Google, Amazon, etc. But most people who had their money lost their shirts. Perhaps some "coin" future may survive and even ultimately flourish. But what I can say is that BTC itself is going to pop at some point or another.

Re:You're a fool if you don't hedge investments

[JaredOfEuropa]

Of course they said that and of course they were wrong. Nobody knows exactly when the bubble will burst, otherwise they'd be milking it for all it's worth. Though maybe a good many speculators are actually realistic about the long term prospects of BTC and are in fact just milking it while the going's good. Just keep in mind: when the crash comes, don't think you can unload gradually on the way down. When it comes, it will be extremely hard to get rid of your coins at any price...