I've been following this most of the day. Bids were at $98 for awhile. Started at $268 this morning. I use the following.
I've been thinking about getting into the "bitcoin fad" for awhile, mainly for the speculation flipping, not really the using/holding of them. But I won't buy any unless they drop waaaaaay down. Was hoping that was today, but looks like the plunge stopped at $100 (that article was a little bit before the actual bottom), and now it seems to be holding around $160 but still fluctuating give or take $10 here and there.
It's interesting to watch. It's such an interesting currency/market/idea. There's a mix of bullish investors gaming the market, mixed in with a bunch of libertarian/anarcho-capitalists who believe in the actual use and circulation of bit coins. So there's like economics experts and fund managers playing the bitcoin game, going up against idealistic college kids who just think bitcoins are cool or a way to get rich quick. The early adopters really DID get rich quick, and now everyone wants the same.
Either way the market is horribly volatile, and even at $150-$160 I still think bitcoins are waaaay over valued. Because the most important question is "What IS the true value of one BTC?" It's a question the market is still figuring out, and no one really knows, so it's just really interesting to read about and follow.
The "true" value of bit coin is close to nothing. It lacks purchasing power and doesn't pay a dividend. For it to have a (psuedo) share price value north of most large companies is a real head scratcher. Sure, its purchasing power could increase in the future, but until then you're buying a fantasy.
Gold had value even before we had real-world uses for it. The value was in the rarity of it.
Bitcoin, while admittedly just a bunch of bits on a storage drive, has a limited supply of 21 million coins. Its rarity is even more secure than gold is, because we know exactly what the total supply is and will be.
It's also very valuable as a transaction mechanism. You can transfer bitcoins very quickly with extremely low transaction fees. The bitcoin "miners" are supporting and verifying the network while they mine their bitcoins. Now there are ASICs in existence designed solely to mine bitcoins, and there will always be the transaction fees to earn. If nothing else, it's an interesting experiment.
I think it's likely that bitcoin might maintain value as the first digital commodity. For some time, it will be the most widely held, and the one with the most extensive infrastructure built around it. People buy and sell gold based on the strength and weaknesses of other markets, not based on a change in the perceived value of the metal itself. In that sense, BTC could serve the current role that gold does, but even better.
Currently we scoff at people trading bits, but someday I would guess that it will seem equally bizarre that we traded these:
Although they are pretty.
I think the problem is that if its value is solely derived on people investing in it then it will never be stable enough to be used as a real currency.
I think the crash (if it continues) is good for people who want bitcoins to be used as real currency because it will hopefully scare away people that are just using it as an investment. W
I don't see stability until a couple more halvings of the mining rate. However, when the total number of BTC approaches the 21M max, I think it is more likely that the price will settle down. Personally, I see BTC having more value (and being more practical) working as a commodity than a currency, but it could exist as some of both.
I can imagine bitcoins as a currency, but it is really hard for me to imagine it is as a commodity. Commodities need some sort of underlying value (currency doesn't) and bitcoin doesn't.
- Commodities need some sort of underlying value (currency doesn't) and bitcoin doesn't.
I disagree. The price of gold doesn't reflect a practical value. People employ it as a commodity as it has a limited supply, and do so based on the sentiment in other markets, not on a perceived rise in the underlying value of gold. I see gold's underlying value being its limited supply and as it cannot be duplicated. BTC shares the same characteristics, but is easier to exchange.
The recent bubble in gold is most likely due to speculation, but gold has an underlying value. As of now the majority of gold demand does not come from investment demands but from jewelery and technology. Here is a chart with the demand in tons
This is also a very new trend for gold. If you look at this PDF you'll see that investment demand for gold has gone from like 10-20% to 40% in the last decade.
I agree that it is an interesting experiment. But value does not exist when a commodity can't be traded fro anything useful. Right now, BTC has to be traded for currency before using it, so it isn't really adding much. As (if) adoption becomes prevalent, then BTC could be quite useful. To be clear, I don't think it's a bad idea, I just think that the internet buzz is driving this thing batshit silly.
I agree, the true value is next to nothing.
I'm secretly hoping it crashes under $20, even though I still think that's overvalued, it's low enough that it would rise again from that point I think. If it drops below $10 I'd honestly buy a grand worth. That's 100 BTC, if it even go to $20 again I'd make a quick grand. But at these current prices? No way, it's a fools bet. Sure, some people are getting rich quick off it, but it's still way too risky for my tastes. It's true value is somewhere between $1-$5 in my opinion.
Like you said, it lacks purchasing power, and if I'm not buying drugs or other illegal contraband, why do I care about it's anonymity? I simply don't. It won't pay my mortgage, or my bills, or anything important unless I convert it back to USD. And since it's constantly changing what it's worth in USD, it's silly to hold it as a usable currency. The only reason I'd even consider holding them would be as a temporary investment with the hopes of selling at a higher price. And that's how the vast majority of it's participants are using it, as a speculative commodity for return on investment, and that makes for an AWFUL currency as far as utility goes.
The people who know what they are doing will come out of this fine, the people who think it's rising in price because it's so edgy and useful are going to end up sad, broke, and with a good life's lesson under their belts.
Also, two words no bitcoin believer wants to hear: Government Regulation. It will happen at some point, and since it can't be regulated, look for making it illegal. It's already illegal to circulate paper currencies that compete with the dollar, it's only a matter of time til that legislature gets updated to include digital currencies. People can't just be making money hand over fist and avoiding taxes. The government WILL do something at some point, and it will destroy the bitcoin market back to underground where only people who buy acid on the Silk Road will be using it again.
- "What IS the true value of one BTC?" It's a question the market is still figuring out, and no one really knows, so it's just really interesting to read about and follow.
Watching BTC play out is fascinating -- the birth of a grassroots currency. How often do we get to see these things begin? Can you imagine having some USD and not knowing what they were worth yet? Just so odd.
I also like "anarcho-capitalists" and am borrowing it.
- I also like "anarcho-capitalists" and am borrowing it.
By all means, but it's a common political position of many 16-25 year old somethings of the US... it's not a term I coined myself.
http://en.wikipedia.org/wiki/Anarcho-capitalism
Call my a cynic, but it's an EXTREMELY idealistic and silly sounding political position.
anarcho-capitalist are also often most reviled by other anarcho-X's.
There is a strong division in the community.
I remember like 3 months ago they were like 25$. I almost bought some then for the fuck of it. Then I would probably not have sold out yesterday, and then I probably would've wanted to kill myself today. Poor people who hopped on the bandwagon yesterday (there were like 8 reddit threads)
There was a kid on Reddit who put $4,000 of his savings in and bought at $270, because all the kids over there are saying it's going to hit $2,000/BTC by the end of the year... even if it did hit that, it's not because that's the value of the coin, it's because pump-n-dump firms road it up that high only to take everyones shirts and make ridiculous profits on something that has a value somewhere at or below $5 at best.
That's awful. Stuff like this needs to be taught in school. I cannot think of any instance where there was widespread speculation about a bubble, and it not eventually being revealed as one. If there is no clear rationale for a steep price increase, the price will fall just as easily. That really needs to be taught. It's awful that those that get burned the worse are often those that can afford it the least. I think its because bad financial decisions are driven by emotion, and if you are at great risk, it was probably an emotional decision that got you in that situation. The poor kid probably fell asleep dreaming about what he'd do with his $400k.
- It's awful that those that get burned the worse are often those that can afford it the least. I think its because bad financial decisions are driven by emotion, and if you are at great risk, it was probably an emotional decision that got you in that situation. The poor kid probably fell asleep dreaming about what he'd do with his $400k.
I advised him against it and told him "Only put in what you are willing to lose 100% of, if this is MOST of your money, you shouldn't be buying something you know so little about."... and I was heavily downvoted.
Poor kid knew nothing about it, just saw everyone else talking about "how rich they have gotten" on bitcoin, which is probably mostly just made up BS anyway, and he decided to jump in because everyone on there yesterday was convinced that $270 was "just the beginning".
Poor guy bought into it. But hey, maybe he'll stay in it for the long haul and be successful, but if he panicked and sold today he's out over a grand in under 24 hours.
People need to be careful, and for fucks sakes don't take investment advice from a circlejerk forum like /r/bitcoin! You can make money on bitcoin, yes, but only if you know what you're doing and understand it's volatile. If you listen to the "ONLY GOING UP!" people you won't have two twenties to rub together a month or a year from now.
They've been doing this for like 6 months or so. They are absolute shit, but this is the first article I found about the crash.
Even though I have BTC, I was hoping that this would drop even more. The BTC I have I am holding for the long-term. Unfortunately just before I tried to buy, coinbase froze their buys for the rest of the day. My plan was to buy today, and sell tomorrow. -It's already recovered quite a bit. :/
I don't think today was a crisis of confidence. I think it was manipulation of the exchanges.
It's madness. I don't believe anyone that has a strong opinion on bitcoin. There's no satisfactory analogy, IMHO.
mk! Dont buy BTC. It's fool gold. Try to sell what you have around 150 if it reach those value again. Else sell it once it goes under 80, and never think of it again.
plenty of analogy: http://www.slate.com/articles/news_and_politics/view_from_chicago/2013/04/bitcoin_is_a_ponzi_scheme_the_internet_currency_will_collapse.html
It could have worked as a nice exchange alternative if you could not buy or sell it for money. (As you can always buy or sell something for money, decentralized solid exchange currency is nothing but a dream)
:) No worries. I already cashed my intial USD investment out, so the BTC I have is risk-free.
But, I don't buy the "bitcoin will be worthless because it's not a currency" arguments. I don't think bitcoin is a currency. I think it has some characteristics of currency, but not all, and it has some others too. One thing I like about bitcoin is how much disagreement there is about it. That's what makes it very interesting to me.
As for my own investment in it, I'd never put money that I needed or cared about in something that is so difficult to define and understand.
Update: Mt. Gox (highest volume BTC exchange) has suspended trading until tomorrow. That is not good. Price seems to be headed below $100/BTC right now, and will probably drop further.
Yikes... BTC just plummeted to $60 USD/BTC on other exchanges.
https://btc-e.com/exchange/btc_usd
People wanted regulation and the closing of exchanges? Well... this is what happens when you only close ONE exchange during a run on a stock/commodity/etc. BTC is tumbling.
EDIT: BTC-E.com is unavailable now periodically, other exchanges are lagging and taking the brunt of MtGox being offline. Looks like complete panic selling at this point. Wow.
I find this call for action over on /r/bitcoins really interesting.
For those not wanting to click it is a request for four things to be focused on:
1) Change in max block size. 2) Decentralization of mining/end of guilds. 3) Decentralize the exchanges. 4) Improvement on hardware wallet and services like bitpay.
I find it really interesting because 2 and 3 are basically issues attacking trusts. This is something that regulators go after. Bitcoin supporters solution to these problems is to lower the barrier to entry for people it seems (at least for 3, not sure about 2). This might solve it, but they are fighting against people who want to pool their resources, and especially for an exchange this has a lot of advantages that I believe would consistently lead to monopolies or oligopolies in exchanges.
I hope this makes sense. And for clarity. I am not super knowledgable of bitcoins.
I find this part a bit hypocritical about the bitcoin communities. They wanted an anonymous and unregulated currency to be free from "the evil banksters", now they are crying out for regulation and oversight of the market because suddenly it's become an investment of a lot of money to them, and not just a "neat online currency they can use". It's so silly when you stand back and look at the big picture.