The fact that Bitcoin has flourished despite numerous high profile incidents of theft and fraud, the relative difficulty associated with buying and selling them, and the rather unsavory nature of many of its most popular uses today, is a testament to its long-term viability as a currency. The Bitcoin ecosystem has a long way to go before it is considered mainstream, but I believe its long-term success is almost inevitable at this point.
The price would likely be even higher right now if Bitinstant, once one of the most popular and easy ways to obtain Bitcoins, hadn't had serious financial and technical issues over the last two weeks. Here's hoping they get their issues sorted.
It says to me that there is a large amount of speculation. As a currency, Bitcoin is basically useless except for illicit transactions (which are usually pretty inefficient anyway). Would you use dollars if the value of a dollar could change by hundreds of percentage points in a few months? No one would.
Well your logic is obviously flawed, because people do use bitcoins for transactions and they have changed by hundreds of percentage points. "No one" is patently false.
Besides, illicit transactions are still transactions.
And.. you are just plain wrong. Bitcoin is also useful for buying many completely legal things. Including a VPN that can't be linked to your identity. (Illicit you say? What about a journalist in a repressive regime).
Illicit plus grey market and a few special cases. Fine, you win the Pedant's Prize for nitpicking. The point is that they don't make a good general-purpose currency. Just because they're awesome for buying drugs and secret VPNs doesn't mean very much in the grand scheme of things (most transactions, at least in the developed world, do not take place in the grey market).
Also, just because some people do something doesn't mean that there aren't strong incentives against doing that thing, and doesn't make a statement such as "people don't do that" false. It just means that there are exceptions, but when the exceptions don't affect the point it is common to ignore the exceptions in general conversation.
Money is ultimately just a standardized indicator of wealth with no intrinsic value on its own, a definition shared by both USD and BTC. The downside of USD being that it can be counterfeited, illegally by unscrupulous individuals or legally by the Federal Reserve (see: QE Infinity).
Regrettably, it's still super common for people to turn up their noses in disgust, claiming "Bitcoin Boogey Man, oh noezzz"!
I'm sorry, does the USD somehow not come with a Boogey Man? Because last I checked HSBC was caught with their pants down directly funding terrorism through shady business practices, Bernie Madoff is still in prison for running a giant Ponzi, the illegal narcotics trade is done mostly in USD, plus you have money laundering, and just about every crime conceivable being carried out in USD.
But wait, the Bitcoin Boogeyman!!!
Everyone come to look!
The USD is dirtier than Bitcoin by several orders of magnitude. It's been taking a full out mudbath every day of its life for the past several decades. It's just that the USD is all people know, so they assume it's squeaky clean, because how could it not be squeaky clean??
I personally don't care what people use it for. My point is that it is primarily good for illicit and "grey market" transactions, and really nothing else. You entire argument demonstrates that you missed my point completely.
Why would I buy a cheeseburger with Bitcoins? Say the cheeseburger costs 0.1 Bitcoins (today). Tomorrow, who knows what those (fractional) Bitcoins will be worth!
Dollars (or whatever) on the other hand are generally pretty stable. Currency fluctuations, on a day-to-day basis, are very, very small. Sure, there's the occasional hyper-inflationary episode (several South American countries have experienced these somewhat regularly), but that's the exception.
The problem is that Bitcoin is, at least at this point, more of a commodity that people trade when they can't (or don't want to) use traditional money. It is not a "currency" in that sense.
Even in the presence of QE, the value of the USD remains more-or-less stable. I can go to bed confident that it's not going to cost me $10 to get a loaf of bread tomorrow. Bitcoin isn't and won't be useful to me as a currency until its value is stable.
Bitcoin is currently indeed very risky to use as store of value as the market grows quite rapidly and the exchange rate fluctuates greatly. I expect that it will improve in the future and ultimately bitcoin will be better store of value then official currencies, because the savings will not lose the value ove years due to inflation.
But fortunately bitcoin has great use even today in its current state. It is great for sending or accepting money internationaly, quickly and without ridiculous transaction fees. This is something you can't do with official curencies and is IMO big part of the success bitcoin is experiencing.
Bit Coins represent trade in an Economy independent of the Rot Schild banks.
There is no proof that the 2007 financial crises was not orchestrated on purpose. There is also no proof that that 2007 financial crises was orchestrated on purpose.
But we do know that Goldman Sachs sold financial instruments to their clients which they betted against. When the clients lost that money the profiteers was Goldman Sachs.
1. If you assume that the Rot Schild banks owned the entire English economy since June, 1815 and, If you assume that the Rot Schild bank had a value of USD 1,000,000 at that time, growing at 5% per annum for 200 years it's value would be USD 17.2 Trillion.
If you also consider that the Federal Reserve has been leaking money into the shareholders of the FED at 6% of interest on bonds raised since 1913, and if Rot Schild banks were all part share holders in the founding banks of the Federal reserve this profit has been going to them.
If the Rot Schild banks were the major investors in Goldman Sachs, it would make sense for Goldman to loose their investors money and transfer it to their biggest investors directly through dividend.
We know from 1. above that the Rot Schild holdings should easily be USD 17 trillion + and that the valuations of the banks that went under was about USD 800 billion. Hence it is highly possible that the biggest investor in Goldman is bigger than all the rest combined.
The bitcoins are there for a reason much much more important I think.
I cannot completely follow you, but your number of 17.2 Trillion is off by the factor 1.000, and the fortune of the Rothschild family spread and resolved from generation to generation, as large family fortunes always do.
In 1816, the GDP was 0.32 billion pounds. If you assume from 1816 the lending to UK govt bonds was the Rot Schild bank, the starting point of the Rot Schild base moeny that I took will be far more than USD 1 million. So I think you will arrive at a trillion any which ways.
The reason for this is that from that year going forward, the Rot Schild would have bought bonds from the govt (effectively lending them money) every year going ahead, giving them (the Rot Schilds) a passive income stream from then to now.
Each year a new income stream would have been added by loaning additional bonds, which was independent of the previous years income.
I don't know what numbers to plug in, perhaps that is left to someone more knowledgeable than me.
Your thought exercise of $1 million turning into $17.2 trillion via 5% over 200 years only works if none of the money (including any of the interest) is ever touched or spent. It is an unrealistic assumption that ignores the complexities of reality.
Bitcoins are an awesome general-purpose currency for electronically sending "money" to persons or businesses anywhere in the world, instantly. Say goodbye to: middle-men taking their high fees, currency conversion fees, bank holidays, wire transfers taking 3-5 days, wasting half an hour driving to a Western Union office, etc.
I think what you meant to say is that bitcoins don't make a good general-purpose day-to-day currency (yet). For example paying your hairdresser, paying at the supermarket, etc.
I find your reply humorously telling -- wallet app means just that: a bitcoin wallet application. Google and it's associated services/applications are not the end-all be-all ;)
To be fair, capitalizing "Wallet" makes it pretty confusing. If someone said "You need a Mac + Mail app", I would assume they meant the OSX mail app and not just a general e-mail client.
Nobody is saying Bitcoin is currently awesome and better than standard currencies. However, what is clear is its long-term viability.
You should ask yourself from where currency originates. What is its predecessor and was its acceptance ubiquitous. And take note that there was a period not long ago where saffron was used as "currency".
Also, though you may be intelligent, it would good to take a note from Socrates and consider that perhaps you don't know everything about every field.
> Nobody is saying Bitcoin is currently awesome and better than standard currencies. However, what is clear is its long-term viability.
This isn't clear to me at all.
There are a finite number of possible bitcoins, and once the last one is mined no new ones can be created. While it might be true that putting more USD into circulation causes the value of each individual dollar to go down, that's actually an incentive to spend money and create economic activity, instead of hoarding it hoping the price goes up.
Define "hoarding". Who exactly suffers from it? Especially in case of Bitcoin where nobody forces you to even care about it (unlike gov-issued legal tender).
I just put together an Android App to display physical merchants that accept bitcoin. Yes I agree the data is a bit sparse right now but I am populating it as I find lists of merchants (and you can also submit your own business if you want). The app is here : https://play.google.com/store/apps/details?id=com.ragmondo
Well it has a use even in normal transactions since you can avoid any kind of fees or hassles with a centralized service like Paypal. And in the end it doesn't matter if it becomes that mainstream or not. Exchanging between currencies is becoming more common for online shopping and presumably it wouldn't cost that much for the services that do it to support bitcoin too.
Bitcoin would make a horrible official currency for a country (inability to control the money supply, enforced deflation which discourages investment, easy for capital to flee). However, as a 'second currency' it has a lot going for it, security, fast, cheap, easy transfers between people across the world. I could see it becoming the worlds international 'second' currency.
Bad analogy as bitcoins wouldn't stop your VPN host from being searched.
In fact, if we're completely honest, paying for a VPN with bitcoins doesn't mean your identity is hidden anyway. All it would take is one connection record in one log file and you're exposed.
>Bitcoin is also useful for buying many completely legal things. Including a VPN that can't be linked to your identity.
The "can't be linked to your identity" part depends entirely on how you get your BTC in the first place.
If you buy them with cash from a guy on the street who has no idea who you are, fair enough.
If you buy them from an exchange by making a deposit from your bank account, the level of anonymity you enjoy depends entirely on how much you trust the exchange. They know your real name and the wallet you used to receive the BTC. If they share this information with anyone, a sufficiently motivated attacker can trace the BTC to their ultimate destination (the wallet of the VPN firm). If you launder the BTC through a few intermediary wallets first, I suppose you might have some plausible deniability, but if you're a journalist in a repressive regime how much is plausible deniability worth?
Bitcoins are almost useless for legal and non-illicit transactions. Paypal is cheaper than bitcoins in these situations, if you account for the astronomical currency risk and thus the premium bitcoin-traders and shops accepting btc have to charge in order to not go out of bussiness in an eyeblink.
That's not true. If i'm not mistaken, paypal charges percentage of the ammount recieved to all merchants recieving money. Also, fees are charged for any international transfer and paypal can disable your account and freeze your funds on a whim.
On the other hand, i don't know what "astronomical currency risk" are you talking about. Merchants accepting bitcoin are not forced to keep their balance in bitcoins. They can exchange it for dollars or other official currency every hour if they wish so. They are not affected by the volatility of the bitcoin exchange rate as you probably asume.
There's also no way to recover your Bitcoins if they get stolen (as many, many people have discovered already). My credit card on the other hand, can be made whole again with a simple phone call to my bank (YMMV, please no stories about banks being big meanies).
The act of conducting a transaction posts the wallet id's of the participants to the global ledger, and associating wallet id's to real identities is far from impossible.
> Bitcoin is basically useless except for illicit transactions
I'd never spend my bitcoins on drugs or gambling. That's what the rapidly devaluing dollar is for. Recall that the US dollar is Narco Currency #1 on the planet.
Bitcoins are useful as leverage due to their rapidly expanding (and sometimes deflating) value. I bought my first bitcoins for ~$3 two years ago and held them, even through the first spike and afterwards. I bought more btc at $5-12 as they were floating along last year.
I recently traded some of my btc for hard assets, gold and silver. I then sold some of the gold to a friend and bought more bitcoins.
Useless? No, Bitcoin is a very useful tool. It's the email of money.
> Bitcoin is a very useful tool. It's the email of money.
I hope not because email should have been replaced a decade ago (no native end-to-end nor encryption. Node-to-node encryption (eg SSL) isn't standard let along the default, no native support for binary objects and base64 MIME increases files sizes by ~30%, and the mess of plain text and half supported HTML across the plethora of clients make designing mailshots a complete nightmare so there should be some sub-standard of HTML that is both secure and universally supported.
What exactly would be the point of native end-to-end encryption over PGP? The problem with email encryption is solving the authentication part, not the encryption itself.
> What exactly would be the point of native end-to-end encryption over PGP?
Basically just universal compatibility with clients and ease of use.
It's a bit how you could have all your important Word documents in a password protected compressed archive. But having password protection and zip compression native in OOXML is more convenient for users and guarantees than anyone with an OOXML compatible office suite has support to open the same documents (baring authentication of course).
> The problem with email encryption is solving the authentication part, not the encryption itself.
It's both. Emails are typically transmitted in clear text so having something having them encrypted by default is a huge step up. (a bit like how people should be moving away from FTP and using SFTP, or SSH instead of telnet).
No. And I resent the fact that you couldn't be bothered to read past my first sentence.
The e-mail protocol (and I'm talking about the entire stack, from SMTP to the client's handling) is old and really not best suited for the modern way we send documents and modern security concerns. Which was the crux of my point.
So I'm not talking about replacing the paradigm nor ownership, just it's the implementation.
Actually, with modern software bitcoins are among the easiest way to transfer money between people. I load up my phone app, point it at the relevant QR code and the money is transferred securely and quickly, usually with no transaction costs. If I want to receive money, I can just give the person my QR code (or show them on the screen of my phone) and they can give me money just as easily.
I have been wishing for my bank to give me this kind of service for a long time, but still no sign of it happening.
If you buy and hold certainly. While bitcoin is pretty volatile, you can turn dollars into bitcoins and then transfer them or transfer them and turn them into dollars quickly enough that the risk is pretty small.
Sure, holding bitcoins is a risky proposition - like holding gold, or anything else of similar volatility.
I was wondering what your reasoning behind this was. Do you have any past examples to support this assertion? Or do you base this position on some prior principles?
A rising price does not imply long-term viability. A stable price does. For long term viability, people can't just be buying and selling it, they should be transacting with it. It seems like the most active form of Bitcoin use that I've seen is trading. There's nothing wrong with that, but it's a double-edged sword, as people learned last year. Once more and more regular people actually start using it for real purchases, then I'd be more willing to say there is long-term viability.
You are correct that a rising price does not necessarily imply long-term viability. It indicates a sharp increase in demand. In Bitcoin's case, I believe demand is rising because of fundamental advantages it has over other forms of virtual currency that won't soon be rivaled. It enables new business models and transactions that would not have otherwise occurred (in many cases, for legal reasons). For this reason, I believe that demand (and resulting prices) will continue to rise.
Oh come off it. You mean illegal reasons. You know you do. If you believe people should be free to buy any kind of drug they wish then say so, I don't think HN would view it as too radical a view. But your post sounds like typical corporate bullshit.
"For legal reasons" doesn't mean "because what they're doing is legal", it means "for reasons related to the law" (i.e., what they're doing is against it). That wasn't doublespeak, it was pretty clear.
> In Bitcoin's case, I believe demand is rising because of fundamental advantages it has over other forms of virtual currency that won't soon be rivaled.
So demand has increased 1000% since the low of $3 less than a year ago? I don't buy that reasoning. I think it is 90% speculation and 10% increased demand. Demand is increasing, but nowhere near the amount to explain the large price shifts.
Disclaimer: I have a reasonably sized investment in bitcoins.
it has to reach a plateau before it becomes stable, it does this by finding the market rate, which is what is hapenig with the price rise. eventually it will hit a point where daily demand and supply of BTC will match and at that point the price should become steady. Given the scarcity of the product it is not surpising the price is considered low at the moment.
That's not how a market works. First it overshoots its "true value" because of a buying frenzy and then falls back down, rinse and repeat. I can't speak to whether right now it is still on the rise, or if has overshot its "true value" and then it's going to drop. Some people believe the former, others believe the latter. Differing opinions is what makes a market.
So far, momentum is on the upside, but don't think that it will just neatly and asymptotically reach its "true value". Expect a lot of volatility. The fact there isn't a lot of volatility here means that consensus is that prices will continue to rise.
It's more a testament to high demand than long term viability. In addition to the other things mentioned in this thread, Bitcoin lets you evade oppressive currency controls.
For example, Argentina's real inflation rate is around 18-25%. Because of that, they've taken drastic measures to prevent their citizens from transferring money out of the country.
As the Euro crisis deepens, and the chances of one or more countries leaving the Euro gets higher, we should see a spike in Bitcoin prices. For example, if Greece was about to leave the Euro, they'd have to impose draconian currency controls, because everyone's bank deposits would be devalued overnight.
You speak of this as though it is a inherently bad thing to have centralized control. I'm as techno-libertarian as the next HN user, but I know that when the market riegns completely free there is a non-trivial chance that boons can swiftly turn into depressions.
There is a reason the Greek government will impose draconian currency controls. It is for the benefit of the Greek people, so their savings accounts will only drop 50% rather than 80-90%.
A purely decentralized currency may be the way of the future, but it will be replacing old problems with new ones. Whether it is ultimately better is anyones' guess.
Please enlighten me. I know the story of how Argentina wound up in the situation of needing to prop up their currency. It's an old story, the same as Greece's except for the ending which is uncertain. The government went into massive debt mostly for public works projects (yes, for the people of Argentina), but when the debt came due, the people of Argentina voted to default. Now all future governments have to try to clean up this mess. Is there corruption? Absolutely. But that is only tangential to the real problem.
I read this a little different. I think this is proof of incredible demand. I'd also add poor usability and difficult to understand to the list of hurdles that bitcoin is overcoming.
I think this is one of those cases where the demand is so strong that people put up with anything. Online Payments really sucks, for both sides. Merchants aren't guaranteed that the money they get will stay in their accounts. They need to become experts in fraud & risk & money laundering. The whole process is mitigated by a duopoly with 150 years of technical debt. Credit Cards, Payment Gateways, Merchant Accounts, Paypal, Chargebacks. All these suck. Not everyone has access to them. No one feels safe using them.
When natural demand is that high, it can overcome everything else. There's a whole class of products priced at insane prices. Quality is uncertain. They product can be dangerous. It's only available from dangerous criminals. You need to be introduced to the vendor by your least favorite "friend." If this product was breakfast cereal, people would just eat something else. But since natural demand for ilegal narcotics is so high, all those hurdles get jumped.
Not saying it's good or bad, but when people hear that demand for BTC is increasing, the natural assumption is that it is attracting lots of new participants. What seems to be happening instead is that the people who have already surmounted the hurdles involved in becoming users are responding to the positive press recently by doubling and tripling down on their bets. The stats don't indicate a large wave of new users - yet.
There have been hundreds of virtual currencies introduced both before and after Bitcoin. However, Bitcoin remains the most popular of all of them. While it has some obvious advantages over many of the other schemes, it would be speculative to try to explain exactly why it has succeeded where others have failed. However, regardless of the reasons, it has a strong enough foothold to last for a very long time.
My personal opinion is that Bitcoin is popular because it makes money more flexible, and enables people to take absolute control over their money - in the same way that the mp3 standard enabled them to take control of their music.
It's not an easy feat to accomplish.
You can't reliably outlaw it for citizens because in democratic societies it's kind of very hard to reliably harass citizens. Look at the copyright lobby and still not many people are really scared of persecution.
They can easily take bitcoin-based businesses down but they would just shift to different/distributed jurisdictions (Japan, Eastern Europe) where they will be hell to control or influence.
I'm a fan of bitcoin, and I think it may well have a bright future, but this recent rise over the last couple of months is probably a bubble.
New mining equipment called asics are being produced, at least one manufacturer, demands payment in bitcoin, and the price of bitcoin rises. Other people see the rising price and start thinking, hmmm should I buy an asic?.
My prediction is that by the end of the summer the price will be back to around $15, lots of people will have received their asic and will want to pay off the cost of the unit (~$1200+).
Of course there is always silk road, according the ars article last year they were doing 10,000 btc a week in revenue. Apart from SR I don't see where the demand is coming from except asics.
As I hold a few bitcoins, I would love to be proved wrong.
ASIC hardware sales don't even make 1 days worth of transactions (when we account for the "number" of transactions). I don't see the bitcoin price going back to where it was 3 months ago.
Interesting, I wonder how much of that is Satoshi Dice though?. Not that SD doesn't count as demand, but it's unlikely to be sustainable due to the way it bloats the blockchain.
I had read that 55% of all transactions are due to Satoshi Dice. Can't find the source right now, but it seems about right by going through the latest transactions on blockchain.info
Looking at the history of Bitcoin and saying “Wow, the price of Bitcoins will never drop because it hasn’t dropped so far” is like looking in the back mirror of your car saying “Wow, there will always be a freeway ahead of me because I have been driving on the freeway for so long now”. The fact that is has flourished can have a million explanations, where one is that it does actually have a long term viability as a currency. We do, however, not have enough information to say with any certainty that that is indeed the case.
What we do know, is that so long as new users flock to the currency there is an increasing demand, and this will drive the price up – until the recruitment halts. Then what will happen? We don’t know. It might disappear, it might drop slightly, and it might stay the same. That will be the true experiment. Right now we don’t have enough data to say whether it is sustainable over the long term.
Bitcoin is a deflationary currency since it's supply is limited.
Doesn't that mean that it's expected to rise in price? This also ends up being the currency's downfall, since there's an incentive to hoard it rather than spend it.
> deflationary ... there's an incentive to hoard it rather than spend it.
By that logic, everyone would put their dollars into investments that beat inflation (this is a form of saving). Yet they do not. You can hold (hoard?) securities (VBLTX, HTS, JNJ) that beat inflation, yet people spend dollars on depreciating assets (cars, computers). There are other less-risky financial instruments [1] that beat nominal CPI, yet people spend dollars.
> Doesn't that mean that it's expected to rise in price?
Sure, relative to an inflationary currency. But bitcoin fluctuates quite a bit.
By they way, currency is just a good, like anything else. One trades currency for some other good that one values more than the currency [2].
>You can hold (hoard?) securities (VBLTX, HTS, JNJ) that beat inflation, yet people spend dollars on depreciating assets (cars, computers).
No-one buys a dozen computers and puts them in their basement as savings for retirement. People buy cars and computers to use, not as investments. People with nontrivial quantities of "spare" dollars generally do put them into inflation-beating investments.
I'm not sure I get that "currency is just a good". If people hoard gold, then the price of gold spikes, and it will be hard to come by gold, but you can probably still buy other things. But if people hoard a currency, to the point where there's not enough freely flowing to pay for stuff, it will affect all kinds of transactions. Doesn't that make it different?
(So I mean, the point of the securities you mention is exactly to hold/hoard them, whereas the point of a currency is not to hold it, but to pass it around, or?)
Critics keep saying that there is no incentive to spend it. But all the numbers indicate that there is increased spending: http://news.ycombinator.com/item?id=5296889 Therefore, no, I do not think it will cause its downfall. I guess people are irrational and still spend bitcoins despite knowing about deflation.
Spending makes sense because the future of bitcoin is uncertain. If you could guarantee that bitcoin wasn't going to crash, hoarding would be a guaranteed winner and people would stop spending (and ironically enough, it then would crash).
Consider that it's not a just a currency; it's also a commodity, and a tool, and possibly a few other things. IMHO it is a mistake to apply traditional notions of currency to bitcoin as it has several other non-traditional characteristics.
Currently bitcoin supply is inflationary because 25 bitcoins are created every 10 minutes, and a similar amount will be generated for decades.
True, this amount is set to decrease to 0 eventually. However, with some planning conceivably this could be changed, as long as the majority of bitcoin users agree it should be changed.
Prices adjust to reflect expectations. Theoretically, if everyone knew with certainty that prices will increase in the future, it would rise now instead. It would rise to reflect the NPV of the future price at any point where its NPV is highest.
The mechanism that would happen through is just as you predict. People would buy & hold bitcoin. Buying & holding is an increase of demand (buying) & a decrease in supply (holding). These both increase prices until the point where buying and holding isn't any more attractive than buying and holding some other asset with a known future value (like government bonds).
In reality that certainty doesn't exist. Current prices of bitcoin a reflection of all sorts of wild guesses about possible future effects that are dependent on all sorts of things.
It leads to value instability as bubbles form and pop. In theory the total value of bit coins in circulation is not all that important to an individual however price instability is a major downside so deflation does hurt adoption.
If the designed-in deflation works (and is widely understood), then yes, there's an incentive to hoard.
Whether that means a 'downfall' is far less clear. If Bitcoin just keeps becoming more valuable, serving a role but not circulating as much as other currencies (be they traditional or digital-of-a-post-Bitcoin-design), is that a 'downfall', or just a peculiar kind of success?
Bitcoin is like a new form of monetary/economic matter... some lessons from traditional domains may apply, but others not at all. Casual, confident pronouncements either way are silly.
"The argument that increasing value means people would prefer to hold Bitcoins rather than spend them is specious. While it will make people want to have Bitcoins more, it will also make people want to convince others to give them Bitcoins more so they can have them."
It is a coy answer to the question. Currency is a good, like anything else. An economic agent (human) trades currency for some other good precisely when that currency becomes less valuable to that individual than the good.
I say that because investing has different skill levels and different risk/reward profiles. The lowest level is perhaps savings accounts and CDs and at the most extreme end are derivative financial instruments. Long before you get to currency speculation you go through equity value investing, bond investing, and equity option investing. After going through those things you get to commodities, precious metals (a form of commodity) and then currencies.
So to ask the question "should I invest in this right now?" doesn't make a lot of sense to an investor who is always looking at what they have invested, the risks of those investments, and the forces that move things. If you are wondering what the outlook is for price expansion of bitcoin relative to the Yen or Yuan, or what geo-political events are most likely to move the value of bitcoin and in which way, then you are looking at the investment in context and really the only answer is one with your other context which isn't part of your question. If you portfolio was a million dollars and you wanted to put $10K into bitcoin as a 'kicker' (something that would potentially kick up a big return but if you lost it in its entirety it would only represent 1% of the return. That's an interesting question. It has far more downside than upside at this point.
A voice of reason in a world gone mad! He would have to clarify the amount of risk he wants to take and how much time he wants to spend on it. A friend has very successfully invested in bitcoin (1000%+ return), but I am very sure he has the price up on his smartphone 24/7 and can sell very quickly.
I don't know how much downside it has, as a long term gamble, because there's an upper limit on the amount of currency. If it does take off with the general public, the longer you can hold the more it will be worth.
"Hard limit of about 21 million Bitcoins" say you bought 1 million bitcoin at $1 and bitcoin becomes a replacement for paypal?
Well the downside is that that loses all value. That can occur for a number of reasons but the two most widely speculated on are a global response (something like the G8 deciding that they won't allow trading it) or a technical defect (which invalidates some part of either the transaction train or the currency itself).
But that said, its also very volatile as a currency and that makes for a lot of speculation and rapid market changes. Not for the faint of heart and certainly not a place for any money you might actually need a year from now.
the word you meant to use is speculate, not invest.
and no, you shouldn't. there is a set of people who hold piles of bitcoins obtained when mining activity was minuscule or because they run pools, exchanges or such. The bitcoin spot price is almost entirely determined by how much this group is selling, and the general amount of demand from speculators.
While they've learned a lot about effective market control since the last time they got it up to 30 and then crashed it to 5 in an almost instant panic caused by one big seller and everyone else's fear of being left behind, it's still a fragile process.
In the end, even though BTC stands a fair chance of continuing to rise from here, you stand a strong chance of not timing the peak and holding into a big crash. Timing a speculative market you know little about, has no fundamental value floor and that's primarily driven by a small number of players is probably not the best way to try to make money.
Surely the BTC price couldn't have anything to do with factors external to the market participants themselves ... ?
Whenever the BTC price moves up or down, do you honestly believe "It's those blasted early adopters, at it again I tell you"
You also appear to assume, incorrectly, that early adopters are just itching to exchange out into fiat currencies, as if their eyes are glued to their computer monitors, just waiting for their lucky day to "cash out BIG" ... into fiat currency. Hmmmm
This goes without saying. As with PM investors, many Bitcoin holders see real issues with fiat currency, specifically that banks are a terrible place to put your life savings.
>Whenever the BTC price moves up or down, do you honestly believe "It's those blasted early adopters, at it again I tell you"
Because of bitcoin's ludicrous generation curve the early adopters own what, 3/4 of all the bitcoins, guaranteed to be at least half of all those there will ever be? So yeah, price movements are likely to be their influence because they're the biggest owners.
>You also appear to assume, incorrectly, that early adopters are just itching to exchange out into fiat currencies, as if their eyes are glued to their computer monitors, just waiting for their lucky day to "cash out BIG" ... into fiat currency. Hmmmm
It only takes a few. They're sitting on these bitcoins that have shown themselves to be highly volatile, and at the moment their value is increasing by the day. Sooner or later many of these people are going to be in a position where they could get several hundred thousand dollars by selling up, if they're not there already. Is a crash certain? No, but it's wise to plan for that contingency.
It's a double edged sword. The unique point of difference benefits of BTC itself remain unchanged regardless of current market price, and furthermore, should early adopters dump all old coins onto the markets all at once, the lower price would only make it more affordable for newcomers to buy at discounted rates.
Recall that early adopters of questionable loyalty to BTC already had a chance, or two or three, to cash out at very favorable rates. Many did. The result is Bitcoins continue to drift into stronger and more loyal hands. Meaning, as time passes it grows less and less likely for there to be ANY event capable of destroying confidence in the markets. If you get into BTC at this point, you should know fully well what the risks are.
As a general rule, if you don't know the answer to this question, you shouldn't invest. Unless you can come up with a solid reason for why a particular asset should provide a long-term return (net income, interest, or the correction of a current undervaluation) the best you can really do is speculate, and you mostly likely don't have a large enough asset base to make speculating worthwhile (since you should only use a small fraction of your investment holdings.) If you take a whole bunch of your net worth and put it in, then you're just gambling, not investing, the same as if you went into the FX or commodities market and bought a bunch of paper hoping it will rise.
The problem with giving blanket investment advice is that different investors have different methodologies and timetables. For example, some people buy and sell stocks every few minutes, while some hold stocks for years. They also use different methods to predict future value, like algorithms. If you were to trust someone to tell you when to buy, you'd also need him to tell you when to sell.
I mean people can tell you their opinions, but the reality is that nobody knows - as in all other investments...
Now that I think of it, at least with BitCoin there can be no insider trading, because there is no company that owns BitCoin. (There could still be information not available to all, for example somebody could have cracked the protocoll and short BTC knowing that it would be dead once he releases the information).
Anyone join any mining pools lately now that prices are increasing? I figured there would be a pretty serious drop after the 50 to 25 drop, but there seems to be some dedicated miners still out there. Looks like brand new FPGA boxes are coming out for it as well.
Good point. I imagine those up North may get some use as they can double as heating (if the area's small), but besides that, it does seem like a waste of time and electricity at this point.
The value of BTC is not just based on speculation. It has a use and thats transferring wealth from one to another in the same way paypal/western union does but much cheaper. Consider that paypal alone transacted $451million per day in the 4th Qtr 2012 and another $20 Billion via western union in the same financial qtr. Now just imagine whats going to happen to the value of BTC when just 1% of the people using Paypal/WU start using Bitcoin to transfer or store their wealth. Now add in the people turning to BTC from other money transfer systems too. I think this is what is pushing up the value of BTC along with the speculators that are jumping on the gravy train too
Trading bitcoins, even in an otherwise legal fashion, is essentially money laundering at this point.
Yes, there are legal bitcoin traders or bussinesses. And No, you can't pretend these are the majority.
And it's not really a problem that I am thinking this. The big problem is that the European Central Bank is saying this too. The legal status of Bitcoin businesses remains unsolved, even if the proponents don't run out of reasons why trading Bitcoins is purportedly legal.
So if there is ever a bug discovered in the protocol or say the crytography methods get broken, or say we need more than 8 decimal places in the coins.
How do you get all members of a distributed system to upgrade? Would holders of bitcoins have to upgrade as well?
If we need more than 8 decimal places, we have a new currency of very similar nature with a more convenient base unit. By that point, the principle will have been proven.
I had this sort of issue. Back in 2010 I had mined a hundred coins (CPU mined, back in those days, lol). A month ago I decided to find the wallet file, took me 2 hours to search 5 HDDs with multiple partitions each from my old computers...
I fixed this problem now by printing the keys out, storing them securely in a safe and deleting the wallet files.
Coinbase was a giant waste of time for me. I signed up a week ago and its been a mostly crap experience. Would not recommend. Im using mtgox now and its a much more streamlined experience.
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Here was my coinbase timeline- Keep in mind I verified my account, did 2 step auth, everything. About as normal a user as possible. They make buying bitcoins near impossible.
1: Create a account and link it with a US bank. I am located in the US myself.
2: Wait 3 days to verify
3: Put in a order for a max of 10 bitcoins.
4: Wait 5 days for order to complete. You cannot order more than 10 bitcoins during this process.
5: Be told they are over capacity and have your order cancelled.
6: Go to 3
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Coinbase is only a option if you want to buy under 10 bitcoins and dont mind waiting. I wanted to buy much more than that. I wish they put up on the homepage that they only allow you to buy 10 bitcoins a day.
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Also, they say "once you are verified you can do 100 bitcoins a day" but the truth is, they do not have the supply and cannot fulfill those orders (gathered this from searching on twitter and my own experience). Also, you will need to wait a month to get this level of verification.
Once you complete all the verification steps you can buy 100 BTC per day, or almost $100,000 USD per month worth. It's a high-risk business they're entering, and they're seemingly targeting the commerce use case -- they want to be BitCoin's PayPal, not its forex brokerage account. Having new account limits seems reasonable to me.
How is it amazing when you had to wait multiple days for them to available? That seems completely backwards to me. Why aren't they available immediately once the block is confirmed, ie. within less than half an hour?
Fraud. If the transaction is too fast for new users, there's no time to identify and stop fraud before the money's left their control. Once you have the BC and can transfer it out, if you used stolen funds to pay for it, CoinBase loses twice the value transferred.
Register on mtgox and buy them with okpay currency. It's realtime as opposed to having to wait N days. Okpay currency is also obtainable in the realtime.
depending on what you have and where you are - try this website I knocked together to answer the eternal question "how do I get bitcoins" : http://bcfxer.appspot.com/
At some point Dominos Pizza or the like is going to take bitcoins for web orders and it will go mainstream. Zero transactions fees and no charge backs make it a no brainer for a big class of normal, nonillict online transactions.
The price would likely be even higher right now if Bitinstant, once one of the most popular and easy ways to obtain Bitcoins, hadn't had serious financial and technical issues over the last two weeks. Here's hoping they get their issues sorted.