Bitcoin Fall Extends to 25% as Fears of Crackdown Linger(bloomberg.com)
bloomberg.com
Bitcoin Fall Extends to 25% as Fears of Crackdown Linger
https://www.bloomberg.com/news/articles/2018-01-16/cryptocurrencies-resume-slide-as-bitcoin-tumbles-to-december-low
361 comments
I love bitcoin and cryptocurrency as potential solutions to problems with gov-controlled currencies (I've used crypto to buy drugs, for example). But I'm still confused why people refer to purchasing currency as an "investment." Obviously the rates are going up now, but doesn't everyone expect them to just come back down? I don't convert my USD to Yen and call it an "investment."
Well, there is actual forex investing (speculating). For instance, the value of the USD versus the Argentine Peso (ARS) is something I track (my girlfriend lives there and long term I would consider moving there, current plan is for her to move here). The USD to ARS conversion is increasingly favorable for the USD, the buying power of ARS hasn't dropped significantly (in country) but the USD is worth more ARS now than 1.5 years ago (1USD:15ARS then versus 1USD:18ARS today). Someone who had currency in ARS at the time, and converted it to the USD, could see significant returns on that investment (assuming reasonable exchange fees). Almost 20% gains, that matches the US stock increases over this past year.
It is speculation, however, as you generally don't have the same sort of insight into currency movements as you will into stock movements and commodities in general. Someone watching the Brexit vote in summer 2016 would have made a decent return on ARS had they moved it to the USD before the vote and back after (changed from 1USD:13ARS to 1USD:15ARS practically overnight). But that is speculation and requires watching global and national scale events to predict.
It is speculation, however, as you generally don't have the same sort of insight into currency movements as you will into stock movements and commodities in general. Someone watching the Brexit vote in summer 2016 would have made a decent return on ARS had they moved it to the USD before the vote and back after (changed from 1USD:13ARS to 1USD:15ARS practically overnight). But that is speculation and requires watching global and national scale events to predict.
I live in Argentina. I want to add that we don't invest in dollars, we save in dollars. We don't expect to have more money after some time, we just expect not to loose money by inflation.
Although it might seem that buying dollars have a return of 20% or more in a year, by the time you sell it everything cost more in ARS because most prices are tied to US dollars. So you end up having the same. If you have saved in ARS, with the same money you could buy a lot less things
Although it might seem that buying dollars have a return of 20% or more in a year, by the time you sell it everything cost more in ARS because most prices are tied to US dollars. So you end up having the same. If you have saved in ARS, with the same money you could buy a lot less things
Out of curiosity, did you check the inflation rate of Argentina?
May be you could get same value in Argentina with 20% more Argentinian currency after a year?
I found this thinking about my home land - India..
I found this thinking about my home land - India..
I believe strongly that the word 'invest' should be used to distinguish one's activities from speculation, rather than be a superclass of it. Discourse is poisoned when people promote semantic overlap and create ambiguity, rather than using words to create meaningful distinctions.
Investing is what you do when you're not merely speculating on short-term returns, but are instead focused on long-term value creation. It is right to call it currency speculation, because instead of investing capital to create sustainable growth in something, you're just skimming the fluctuations using massive leverage.
Investing is what you do when you're not merely speculating on short-term returns, but are instead focused on long-term value creation. It is right to call it currency speculation, because instead of investing capital to create sustainable growth in something, you're just skimming the fluctuations using massive leverage.
Unless you are part of an IPO or are buying newly issued stock you are also speculating on stocks when you buy them.
Note: Not a finance person, just a personal opinion.
Note: Not a finance person, just a personal opinion.
It depends I guess on how you do your homework and how long you hold the stocks for. Warren Buffett style long-term value based investing vs speculative day trading for example.
In practice, it may not be possible to neatly classify any particular financial decision as being purely investment or purely speculation. This only increases the need to have these words mean clearly different things so that we may use them to analyze the different aspects of the ambiguous world in which we find ourselves. Blurring the meaning of the words effectively robs people of the ability to reason about their circumstances, and it is no wonder that many people feel invested in creating such confusion.
The impossibility of separating the two concepts necessitates two different words for those concepts?
That's a contradiction.
That's a contradiction.
The concepts are easy to separate: Investment is symbiotic, Speculation is parasitic. Having clear concepts is more important when the real-world examples are complicated.
Speculation isn't necessarily parasitic at all. For example it can function in assuming risk.
How is speculation parasitic?
Speculators seek to extract alpha without regard to the overall health of the instrument. Shorting is just as good as going long, so far as you make a profit.
That doesn't mean they're parasitic. To show they're parasitic, you'd have to describe how they hurt the company.
Regardless, what defines speculation is not parasitism, it's uncertainty. And there's uncertainty in any investment as well. That's why there's no clear line between the two.
Regardless, what defines speculation is not parasitism, it's uncertainty. And there's uncertainty in any investment as well. That's why there's no clear line between the two.
I disagree. I have made a clear delineation in the semantic content of my definitions, while you continue to attempt to confuse the issue.
Would you say that all short selling is parasitic?
Speculation relates to uncertainty, not timing.
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You would call it an investment, if the USD-YEN prices are so volatile and give you 1000X profit in 6 months. Again, this all goes back to whether Bitcoin is a store of value or a medium of exchange.
By now it's very clear, it can't be medium of exchange.
By now it's very clear, it can't be medium of exchange.
I disagree that short term returns make it an investment. Speculation is term that much better fits the action of buying a currency with intent to return a profit.
"A speculator is a person who trades derivatives, commodities, bonds, equities or currencies with a higher than average risk in return for a higher-than-average profit potential" https://www.investopedia.com/terms/s/speculator.asp
"A speculator is a person who trades derivatives, commodities, bonds, equities or currencies with a higher than average risk in return for a higher-than-average profit potential" https://www.investopedia.com/terms/s/speculator.asp
People keep saying that, but the lightning network is in testing at the moment and when it gets widely deployed we should start seeing near zero transaction fees on the bitcoin network.
You can say what you want about the philosophy of that - the lightning network will add yet another group of people who collectively have an outsized control over the network. But if the scaling issues get addressed I don't see any reason why it couldn't work as a currency. And it looks like they are being (slowly) addressed.
You can say what you want about the philosophy of that - the lightning network will add yet another group of people who collectively have an outsized control over the network. But if the scaling issues get addressed I don't see any reason why it couldn't work as a currency. And it looks like they are being (slowly) addressed.
Any successful Lightning Network (at scale) would require a dramatic block size increase. The last (Lightning Network tech) I saw suggested it would need a 133MB blocksize.
Blockstream struck down a modest increase to 2MB in November. They have devs who want to reduce the blocksize. I'm not sure where you're finding hope in LN.
Bitcoin Cash forked off to get back to scaling, and it's doing great. Check out how well the mempool stress test went this past week.
Blockstream struck down a modest increase to 2MB in November. They have devs who want to reduce the blocksize. I'm not sure where you're finding hope in LN.
Bitcoin Cash forked off to get back to scaling, and it's doing great. Check out how well the mempool stress test went this past week.
And Bitcoin Cash will need GB or even TB sized blocks to scale to the size of Visa. If scaling the network was as easy as changing 1 variable it wouldn't be that hard to get consensus on a scaling solution.
GB blocks are basically ready with today's hardware though the need is years out. It won't be long before TB blocks can say the same, testing is underway.
Current prevailing theory in BCH land is the block size is an unnecessary hinderance, and will likely be gone in the next 18 months.
Exciting times!
Current prevailing theory in BCH land is the block size is an unnecessary hinderance, and will likely be gone in the next 18 months.
Exciting times!
> GB blocks are basically ready with today's hardware
What are you smoking? Even 1GB blocks would be 144GB per day of blockchain growth. You can't expect people to tolerate that kind of disk usage, let alone bandwidth.
What are you smoking? Even 1GB blocks would be 144GB per day of blockchain growth. You can't expect people to tolerate that kind of disk usage, let alone bandwidth.
This breaks the HN guidelines. Commenters here aren't allowed to attack others no matter how wrong someone is. Please read https://news.ycombinator.com/newsguidelines.html and don't do this again.
7000 transactions per second is a lot of of data. If you're keeping history then you cannot store 4200000 transactions per 10 minutes in less than a 1GB block. The problem isn't the blocksize. The problem is that traditional blockchains grow indefinitively and keep onchain data forever.
It is possible today, thankfully not necessary.
By the time they're necessary, it'll be a lot less demanding, relatively speaking....
By the time they're necessary, it'll be a lot less demanding, relatively speaking....
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Arbitrage is not investment
If you earned Venezuelan currency you might consider buying USD with it an investment.
Might some argue that some of the capital being placed in these currencies, whether they're by clever millionaires who studied whitepapers, or Uber drivers (as the anecdote goes) who jumped in after taking out a line of credit on the house, is investment in some of the companies behind the tech? For example, BTC companies like Blockstream funded things like satellites, while the Ethereum founder has been donating money to companies that help the Ethereum future.
Perhaps it's 'accidental investing with a dose of roulette number thrown in'.
Perhaps it's a new type of investment/gambling hybrid that requires a new category.
Perhaps it's 'accidental investing with a dose of roulette number thrown in'.
Perhaps it's a new type of investment/gambling hybrid that requires a new category.
No, by buying some cryptocurrency you're not investing in the company behind the tech (if there even is one) at all.
If the currency does well but the company does badly, you still win. If the currency does badly but the company does well, you still lose.
You're exposed to the fluctuations of the currency, and completely unexposed to the valuation of the company.
If the currency does well but the company does badly, you still win. If the currency does badly but the company does well, you still lose.
You're exposed to the fluctuations of the currency, and completely unexposed to the valuation of the company.
Sure, there's that aspect. But the angle here is that they can take some of the capital transferred to them via crypto currency purchases to then use to directly invest in, and one thinks that by doing so they could well choose to invest in the ventures or areas that might increase the likelihood of the potential success of the currency. Which theoretically goes back to you.
I'm not trying to sugar-coat or rationalize the mania, only trying to explore the idea that this is both and neither gambling and investing.
I think people object to the idea that money used to purchase crypto currency in the first place is capital.
I'm not trying to sugar-coat or rationalize the mania, only trying to explore the idea that this is both and neither gambling and investing.
I think people object to the idea that money used to purchase crypto currency in the first place is capital.
It depends on the currency in question, but for most of them, specifically no: they aren't "issued" by the company in question or even really related to them in any way. They're only in a position to gain from a coin purchase if they happen to have done the mining themselves (which they generally don't). All these ICOs are just blockchains branded by a certain company.
I woould like people to start using the word 'currencies' because they are not.
Following Investopedia 'Currency is a generally accepted form of money, including coins and paper notes, which is issued by a government and circulated within an economy. Used as a medium of exchange for goods and services, currency is the basis for trade.'
crypto is not generally accepted form of money; not issued by a government; circulated within economy - somehow yes.
So they don't fulfill all the requirements.
Following Investopedia 'Currency is a generally accepted form of money, including coins and paper notes, which is issued by a government and circulated within an economy. Used as a medium of exchange for goods and services, currency is the basis for trade.'
crypto is not generally accepted form of money; not issued by a government; circulated within economy - somehow yes.
So they don't fulfill all the requirements.
I feel like the first two aspects - "generally accepted, issued by a government" are unnecessary. If someone will take it as a medium for exchange, then that's currency to me.
I always thought of it as "otherwise value-less representation of value." All the currency I can think of fits this definition - including gold! Gold is only really valuable recently for circuits and the like.
I always thought of it as "otherwise value-less representation of value." All the currency I can think of fits this definition - including gold! Gold is only really valuable recently for circuits and the like.
Point taken.
However, another important aspect is that currencies around the wolrd fulfill the same functions whereas when it comes to crypto - each token will represent anything that the creator intended it to be PLUS what the community uses it for (e.g. store of value). And each token will have a different 'design', different functions - from being tokens to enter the platform (e.g. Ethereuem itself) to tokens representing fractual ownership in assets (e.g. Maecenas art tokens or our RAT tokens representing a rat mascot, more about it here: https://medium.com/@katdum/what-did-i-learn-from-tokenizing-...).
So there will be coins that will be fulfilling the descirption of a currency (apart from the government requirement) but there will be only a few ones compared to the vast amount of tokens with different functions.
I don't convert my USD to Yen and call it an "investment."
As stated below, some people do treat it as an investment to some extent.
The other thing is, in my opinion more interesting, how you define crypto. They aren't really currencies even though people call them this way. They are a different kind of asset. Sometimes compared to gold, sometimes to stocks but it might be that they are just a new type and we just don't know how to value them. And by supporting them people support the technology behind.
Well you might not call converting USD to yen an investment, there are some people that do. That is some people's job. It isn't that much didn't than investing in the stock market
That is because those currencies are inflationary. Without a moderate interest rate, putting it in the bank wouldn't even be considered "saving".
Some people do though (forex traders), but that is not the primary use-case
No honest forex trader would call his trading an investment, though. They/we know exactly that it's just gambling based on very limited data. Also, traders are extremely careful to limit their risk. No sane trader would hold bitcoin for extend lengths of time. Yet hodling is exactly what bitcoin "investors" advocate.
it's useless as a currency while speculators are making its value so volatile. The sooner this bubble pops and the get rich people go away, the better.
Once the current batch of speculators cash out, volatility settles and it starts getting used as a currency then its price will start to edge up again, bringing in a new wave of speculators who drive up volatility making it less useful as a currency and loop starts over.
Well, the circulation limit/deflationary part is pretty key to that. How many dollars/yen/what-have-you are printed every year leaving your existing dollars/yen/what-have-you with less buying power?
Thinking the world will flock to a fixed pool of frictionless digital exchange does not seem insane to me. I'm talking about the ones you can transact for less than a penny (BCH), not the old guard (BTC).
Thinking the world will flock to a fixed pool of frictionless digital exchange does not seem insane to me. I'm talking about the ones you can transact for less than a penny (BCH), not the old guard (BTC).
But what makes you think BCH is the one? You might like my soon to be released coin Bitcoin Cash Cash. Fees will be 0!
It's a collection of everybody who made Bitcoin great to begin with. Great community. I believe it's a bunch of doers and not talkers.
Fees are less than a penny. System works great, like Bitcoin used to.
Fees are less than a penny. System works great, like Bitcoin used to.
I'm curious, and I haven't found the answer yet - what's the scaling plan if Bitcoin Cash runs out of block room? Just keep increasing the size? Is there an upper limit before the chain increases in size too quickly to be sustainable?
It's the usual combination.
Block size as much as makes sense, optimizations where possible, if lightning works (it won't) - use it.
Gavin Andresen has published about his latest work 'Graphene' which shrinks block sizes dramatically.
They'll take/use any good ideas so long as it doesn't cripple basic onchain functionality.
Block size as much as makes sense, optimizations where possible, if lightning works (it won't) - use it.
Gavin Andresen has published about his latest work 'Graphene' which shrinks block sizes dramatically.
They'll take/use any good ideas so long as it doesn't cripple basic onchain functionality.
The reason is simple.
Blocksize and fees are a tradeoff.
1 cent fees are a significant advantage over 20$ fees.
But 0.0001 cent fees aren't really that much more useful for your coffee transactions.
Sure, maybe someone will come up with another chain that is used for true micro transactions.
But what we are saying is, that each of these fee levels are good for different use cases.
Bitcoin's high fees and high security are great for a digital gold product that isn't traded much.
Bitcoin Cash made a different tradeoff in the attempt to go after the daily spending market.
Pros and cons.
Blocksize and fees are a tradeoff.
1 cent fees are a significant advantage over 20$ fees.
But 0.0001 cent fees aren't really that much more useful for your coffee transactions.
Sure, maybe someone will come up with another chain that is used for true micro transactions.
But what we are saying is, that each of these fee levels are good for different use cases.
Bitcoin's high fees and high security are great for a digital gold product that isn't traded much.
Bitcoin Cash made a different tradeoff in the attempt to go after the daily spending market.
Pros and cons.
What’s also different is few individuals/entities in South Korea and elsewhere are responsible for driving the value upstream. Anything that is manipulated does not last long. As somebody wise (Buffet) once said this will have a bad ending.
This is naive of Buffet when his only evidence of a "bad ending" is the existence of a massive rally. The entire near-future automated economy depends on programmable money. There is literally nothing interesting happening in FinTech right now apart from the crypto space.
Why should Bitcoin cost so much just because the future may depend on it? That's a good case for why it will continue to exist, but it could also exist and do it's job at $1.00 / btc.
I think it's a couple of things that Buffett is looking at. First, like gold, Bitcoin is not a business and does not produce earnings. Second, people seem to be buying it for no other reason than that they think it'll keep going up. That's usually a good argument for the asset not being a bargain. Third, Buffett is self admittedly not an expert when it comes to tech.
I think it's a couple of things that Buffett is looking at. First, like gold, Bitcoin is not a business and does not produce earnings. Second, people seem to be buying it for no other reason than that they think it'll keep going up. That's usually a good argument for the asset not being a bargain. Third, Buffett is self admittedly not an expert when it comes to tech.
What people are overlooking is that it's really easy to start a new cryptocurrency. There's no reason why the first mover should remain dominant for ever, or even that there needs to be a single dominant global cryptocurrency for all purposes.
This is only a valid argument if it is hard or too expensive to exchange between first and nth mover.
Because the price of any currency is proportional to GDP/velocity, and since it's costly to exchange cryptocurrency with fiat, there's a limit to how high the velocity can go.
The quantity of money is proportional to nominal GDP/velocity (in the quantity theory of money). This doesn't tell you anything about the "price of a currency" in another currency, ie the exchange rate.
So you're claiming that if Bitcoin did $1 trillion dollars worth of transactions in a year, and people held it for a year on average, that wouldn't necessarily imply a total value for all bitcoins of $1 trillion?
The quantity theory of money is concerned with one currency at a time.
The trick in your paragraph above is that you introduced “$1 trillion dollar”. Of course, if you say that the sum of all transactions (in BTC) has a certain USD value, then you’ve brought the exchange rate in (through the back door).
The trick in your paragraph above is that you introduced “$1 trillion dollar”. Of course, if you say that the sum of all transactions (in BTC) has a certain USD value, then you’ve brought the exchange rate in (through the back door).
The total value of all bitcoins could still be $10 trillion or $100 billion.
I'm curious how you think that could actually happen. If the value is $100 billion and it changes hands once per year, then that's $100 billion that changed hands, and the GDP is $100 billion. If it changed hands twice, that's a GDP of $200 billion.
Note that I'm not making a price prediction; I'm just saying that if the price is low, and the velocity isn't unrealistically high, then that necessarily means that Bitcoin is playing a minor role in the economy because it trivially implies a low aggregate value of transactions.
Conversely if the price is high, Bitcoin still might be playing a minor role, if the average velocity is very low because lots of people are holding coins for a long time. But for Bitcoin to play a major role in the economy, it would need either a high price or a high velocity, so the aggregate value of transactions is a major portion of GDP.
A really high velocity would require fast and extremely cheap conversions with fiat, so you can hold fiat and convert to/from bitcoin at transaction time.
Note that I'm not making a price prediction; I'm just saying that if the price is low, and the velocity isn't unrealistically high, then that necessarily means that Bitcoin is playing a minor role in the economy because it trivially implies a low aggregate value of transactions.
Conversely if the price is high, Bitcoin still might be playing a minor role, if the average velocity is very low because lots of people are holding coins for a long time. But for Bitcoin to play a major role in the economy, it would need either a high price or a high velocity, so the aggregate value of transactions is a major portion of GDP.
A really high velocity would require fast and extremely cheap conversions with fiat, so you can hold fiat and convert to/from bitcoin at transaction time.
> Because the price of any currency is proportional to GDP/velocity
wat
wat
> but it could also exist and do it's job at $1.00 / btc.
Probably one of the stupidest comments I've read on here. You display not even a basic understanding of how Bitcoin or economics work.
If I have a successful company with 100 shares. People will want those shares which will drive the price up. To fix the price at $1.00, or to dilute shares to keep the price at $1.00 is just ridiculous.
Probably one of the stupidest comments I've read on here. You display not even a basic understanding of how Bitcoin or economics work.
If I have a successful company with 100 shares. People will want those shares which will drive the price up. To fix the price at $1.00, or to dilute shares to keep the price at $1.00 is just ridiculous.
Who's saying anything about "fixing" a price or diluting shares?
Bitcoin's exchange rate is a function of supply in demand. It could exist and do its job with low demand (e.g. $1.00 / btc) or high demand (today's price). What is the reason for the high demand? The answer is speculation that the price will continue to rise.
The point I was making is that if people were using it only as a only as a currency, then the price very well could be $1.00 / btc. The reason it's so high is because people in large numbers are buying and holding it as an investment, reducing the supply.
Bitcoin's exchange rate is a function of supply in demand. It could exist and do its job with low demand (e.g. $1.00 / btc) or high demand (today's price). What is the reason for the high demand? The answer is speculation that the price will continue to rise.
The point I was making is that if people were using it only as a only as a currency, then the price very well could be $1.00 / btc. The reason it's so high is because people in large numbers are buying and holding it as an investment, reducing the supply.
Fiat currency is already programmable.
How so?
In various ways. ACH is essentially FTP. Traders execute trades programatically. There's no one standard API, but there are many programmatic ways to move money.
“entire near-future automated economy depends on programmable money”
It also depends on banks and states signing up to that vision. We have seen zero adoption on that front. On top of that, it still does not explain the hundreds of alt coins.
It also depends on banks and states signing up to that vision. We have seen zero adoption on that front. On top of that, it still does not explain the hundreds of alt coins.
Hundreds of coins and hundreds of tokens. This is the growth phase for crypto, people are trying out new things. Some of these coins and tokens will not be here in 5 - 10 years and some will be used every day by all of us.
Uber would probably disagree that you need permission for anything.
"it still doesn't explain the hundreds of alt coins"
It's open source. How many Linux distros are there?
It's open source. How many Linux distros are there?
Isn't there some adoption of ripple among banks? Then again ripple isn't decentralized like Bitcoin.
Banks are rapidly trying to adopt the use of blockchain.
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Successful use of blockchain is not the same as successful cryptocurrency.
Agree. Just because banks are using ripple blockchain and ethereum blockchain is being used by apps does not mean their currencies are useful. Nothing explains why Ether is so expensive.
No way. Some of them did the smart thing BTFD.
https://www.youtube.com/watch?v=l4v8rLEI4Pg
https://www.youtube.com/watch?v=l4v8rLEI4Pg
Yes, big drops like this is how the cryptocurrency internet continuously rids itself of infidels and discourages people from investing too large amounts and risking too much - By encouraging people to only invest small amounts, it helps with decentralization.
Just like with dot com burst, it doesnt mean someone will turn the lights off forever. Just like the internet eventually got mainstream and websites are being bought and sold for billions these days, same way BitCoin will never be at 0,001 cent with nobody touch it with a long stick.
Bitcoin isn't the Internet in that example. Blockchain is. Bitcoin may be DrKoop.com or it may be AOL or Cisco, of the dotcom bubble.
Wealth is created primarily from productivity gains. Bitcoin generates very little in the way of productivity gains. Services built on top of blockchain or similar tech, will be where most of the wealth will be generated, because those services / products will or might spur productivity gains.
Wealth is created primarily from productivity gains. Bitcoin generates very little in the way of productivity gains. Services built on top of blockchain or similar tech, will be where most of the wealth will be generated, because those services / products will or might spur productivity gains.
The internet had a significant use. Bitcoin hasn't really found one yet.
And I would say that the proper comparison would be to a company during the .Com bust.
And I would say that the proper comparison would be to a company during the .Com bust.
Sure, if you cherry pick.
What ever happened to the supposed value of "hot" domain names? Right, we got search, and got used to typing in weird strings, and stopped caring about owning car.com or whatever.
> What ever happened to the supposed value of "hot" domain names?
Skyrocketed in value from hundreds of dollars in the mid-late 90's to tens/hundreds of thousands of dollars today?
Not sure that's the point you were trying to make though :)
Skyrocketed in value from hundreds of dollars in the mid-late 90's to tens/hundreds of thousands of dollars today?
Not sure that's the point you were trying to make though :)
There are a lot of very generic domain names out there that were worth millions in the late 90s and never got used, and sit parked today.
Businesses are more willing to spend to have "their" domain name, perhaps, but the overall value of a "hot" domain name seems lower.
Businesses are more willing to spend to have "their" domain name, perhaps, but the overall value of a "hot" domain name seems lower.
I'm still kicking myself for getting out of the domain market in 2008. The aftermarket prices crashed following the recession.
I remember at one point, I bought out all the remaining 5 number .com names (like 78542.com). Must have been close to 400.
I let them all expire since they were worthless a year later.
Fast forward to 2015 and they're all selling for a minimum of $200+.
I remember at one point, I bought out all the remaining 5 number .com names (like 78542.com). Must have been close to 400.
I let them all expire since they were worthless a year later.
Fast forward to 2015 and they're all selling for a minimum of $200+.
How much do you think car.com is worth?
the internet is far more useful than an alternative currency
As the blockchain grows ever larger the thing gets more and more useless as a currency. Just look at how long it takes a transaction to confirm.* It's digital Beanie Babies.
*https://blockchain.info/charts/avg-confirmation-time?timespa...
*https://blockchain.info/charts/avg-confirmation-time?timespa...
Yep, these comparisons between Bitcoin and other successful technologies are like a new type of fallacy (techno-fallacy?) where people assume that because it's technically-complex it is somehow destined to succeed like other technically-complex successes.
It's a form of survivor bias because you never see or think about the technically-complex failures, or "not-successes", like the Tamagatchi, Laser disc, WebTV, Webvan, etc. I mean, how come none of it's proponents compare Bitcoin to the Segway? Sure, you can say we have hoverboards now but those are not Segway, the same way Eth and Monero are not Bitcoin.
It's a form of survivor bias because you never see or think about the technically-complex failures, or "not-successes", like the Tamagatchi, Laser disc, WebTV, Webvan, etc. I mean, how come none of it's proponents compare Bitcoin to the Segway? Sure, you can say we have hoverboards now but those are not Segway, the same way Eth and Monero are not Bitcoin.
Tamagotchi were actually a success that has rescued Bandai. Millions were sold. Tiny numbers are still sold to this day which is quite a longevity for a fad toy.
The self balancing technology in the Segway, revolutionary at the time, paved the way for hoverboards. The forms are changed but the underlying technology is the same.
In the same way, Eth and Monero are further iterations of Bitcoin.
In the same way, Eth and Monero are further iterations of Bitcoin.
No, Segway didn't. Hoverboards are specifically based off of a patent made by some guy living in Oregon, and are actually ingenuitive in their own right. There's a good planet money podcast about it: https://www.npr.org/sections/money/2015/11/27/457404184/epis...
Bitcoin, Eth, and Monero are all implementations of blockchain. Bitcoin is technically inferior to Eth, Monero, even Dogecoin, but that doesn't stop GP and others from comparing it to the internet's success in saying that Bitcoin is destined for similar success.
Bitcoin, Eth, and Monero are all implementations of blockchain. Bitcoin is technically inferior to Eth, Monero, even Dogecoin, but that doesn't stop GP and others from comparing it to the internet's success in saying that Bitcoin is destined for similar success.
>As the blockchain grows ever larger the thing gets more and more useless as a currency. Just look at how long it takes a transaction to confirm.
Blockchain size and confirmation times are two entirely different things.
Blockchain size and confirmation times are two entirely different things.
Good to know, what is it based upon? I know you can spend coin to prioritize a transaction, is it formulaic?
No, why are you making claims such as Bitcoin is the new Beanie Babies when you have literally no idea how any of it works?
You don't have to be a carpenter to know if a house is built poorly, just if you try to describe the cause. They were right in their criticism of transaction fees, but were off in what was causing it.
Block size is limited by bytes allowed in the block, usually about 7 transactions a second (on average) for Bitcoin. Increased demand for transactions increased tx fees.
The length of the chain can affect processing power and bandwidth, as each block contains all previous blocks.
The length of the chain can affect processing power and bandwidth, as each block contains all previous blocks.
The blockchain is only growing linearly isn't it? I just downloaded almost the entire blockchain the other day. It was a struggle, but it was also a struggle years ago. It hasn't become impossibly difficult or started to require fancy computers or internet connections.
The whole Tethers thing scares me the most:
https://twitter.com/Bitfinexed/status/953398351889944576
There's $5B worth.
https://twitter.com/Bitfinexed/status/953398351889944576
There's $5B worth.
Quarter of a billion were created in the last three days.
This seems like a fairly frantic attempt to prop up the value on their part.
This seems like a fairly frantic attempt to prop up the value on their part.
Can somebody ELI5 this?
Bitfinex is a company that produces a cryptocurrency called Tether. Tether is in terms of the tech just like any other cryptocurrency; the big difference is that Bitfinex has pegged its value to the US dollar.
This is great in theory, because transactions between two types of cryptocurrencies are (relatively) easy and cheap, and with one coin pegged to a real currency, it means the crypto ecosystem is much more liquid.
Now, the downside: you may have heard of the macroeconomic "Impossible Trinity"[1]. One outcome of that is that it means Bitfinex has to keep US dollars on hand equal to the total value of Tethers created.
Now, the real downside: over the past couple of months (and even more over the past week), Bitfinex has issued a quantity of Tethers that most people don't actually believed are backed by US dollars, meaning they are vulnerable to a "It's a Wonderful Life"-style run. And worse yet, the liquidity Bitfinex provides has been "baked in" to the price of other cryptocurrencies for a while.
At any rate, the accusation the Tweet is making is that Bitfinex is now significantly overextended, and can no longer promise to convert all the issued Tethers, meaning the Tethers (and thus all the other cryptocurrencies) are not nearly as liquid as "investors" thought they were. As many predicted[2].
Most irritatingly, this exact thing happened over, and over, and over again when countries were on the gold standard. It's why fiat currency is such a good idea.
1: https://en.wikipedia.org/wiki/Impossible_trinity
2: http://fortune.com/2017/12/05/bitcoin-btc-price-usd-tether-l...
This is great in theory, because transactions between two types of cryptocurrencies are (relatively) easy and cheap, and with one coin pegged to a real currency, it means the crypto ecosystem is much more liquid.
Now, the downside: you may have heard of the macroeconomic "Impossible Trinity"[1]. One outcome of that is that it means Bitfinex has to keep US dollars on hand equal to the total value of Tethers created.
Now, the real downside: over the past couple of months (and even more over the past week), Bitfinex has issued a quantity of Tethers that most people don't actually believed are backed by US dollars, meaning they are vulnerable to a "It's a Wonderful Life"-style run. And worse yet, the liquidity Bitfinex provides has been "baked in" to the price of other cryptocurrencies for a while.
At any rate, the accusation the Tweet is making is that Bitfinex is now significantly overextended, and can no longer promise to convert all the issued Tethers, meaning the Tethers (and thus all the other cryptocurrencies) are not nearly as liquid as "investors" thought they were. As many predicted[2].
Most irritatingly, this exact thing happened over, and over, and over again when countries were on the gold standard. It's why fiat currency is such a good idea.
1: https://en.wikipedia.org/wiki/Impossible_trinity
2: http://fortune.com/2017/12/05/bitcoin-btc-price-usd-tether-l...
Tether performs public service of "quantitative easing" :)
When the demand for USDT shrinks, will they also do quantative uneasing? As in buying back USDTs to the extend the value of one USDT cannot drop below $1? I do not think they will, because I do not think they can...
Essentially, this is what interest rates and the bond market is for.
Please explain. I think you are not aware of what USDT (Tether) is, but that's just my quick judgement.
It's like all the Goldbugs forget that this is what happened, over and over and over again, when countries were on the gold standard: entities would make allegedly convertible instruments that everybody knew weren't really convertible, but everybody acted like they were, until a run finally forced a suspension of convertibility.
Like, once a decade or so. At the cost of great human suffering.
Like, once a decade or so. At the cost of great human suffering.
I hope people recognize how bad that is for holders.
Holy Shit, are they just trying to print out tethers out of thin air right now to pump Bitcoin? And it seems to be working, at least for now. This can't end up well.
Not to pump bitcoin but to sell tethers. They sell tethers to people who want to trade the tether/bitcoin currency pair on their exchange. But there is no way to turn tethers back into fiat currency. So they are just keeping all of the money that people "invest" in tether.
> Holy Shit, are they just trying to print out tethers out of thin air right now to pump Bitcoin?
That's the line I often see on Twitter / Reddit and usually gets a lot of upvotes, despite being irrational, with no proof to back it up.
As bitcoin falls, the demand for Tethers goes up. To keep Tethers pegged to, say, $1 USD, they need issue more to meet the demand, which would be a more rational explanation why more were issued.
That's the line I often see on Twitter / Reddit and usually gets a lot of upvotes, despite being irrational, with no proof to back it up.
As bitcoin falls, the demand for Tethers goes up. To keep Tethers pegged to, say, $1 USD, they need issue more to meet the demand, which would be a more rational explanation why more were issued.
> As bitcoin falls, the demand for Tethers goes up.
Or maybe people want USD, but the exchange forces them to go through Tether to get there. So there'll be a brief demand for Tethers, then a big selloff of Tether for USD.
Or maybe people want USD, but the exchange forces them to go through Tether to get there. So there'll be a brief demand for Tethers, then a big selloff of Tether for USD.
Yes, that's what I meant by "demand for tethers go up". Although at present, there are only two exchanges that offer Tethers/USD market (Kraken & Bitfinex). Eventually, majority of those holding Tether will probably get back in to crypto. Indeed, holding Tethers could be risky, especially if the peg brakes, there are no guarantees that it will always be stable.
I have been trying to figure out eventual equilibrium price of BitCoin and here is one approach:
Due to wealth inequality, we assume that majority of the crypto investment would be from ultra-rich. It might become quite normal for them to invest 1% of their wealth in crypto for uncorrelated diversification. In a way this is very similar to buying art which probably doesn't have much utility except among other wealthy people as socially agreed upon store of value. These folks have estimated wealth of $10T so that puts market cap contribution from them to $1T. Let's assume same amount comes from non-ultra-rich investors. So we can estimate btc market cap to $2T. This puts reasonable eventual upper bound value of 1 btc to $95,000. This eventual value might never be reached however because all 21M coins never be mined, not all wealthy people might do this, and also other coins will fragment the market. May be 3/4 discount is reasonable at this point to accommodate these factors which might put the value to $25K at this point. This is obviously assuming no black swan events like countries making it illegal or some other virtual currency tech doesn't become popular.
Due to wealth inequality, we assume that majority of the crypto investment would be from ultra-rich. It might become quite normal for them to invest 1% of their wealth in crypto for uncorrelated diversification. In a way this is very similar to buying art which probably doesn't have much utility except among other wealthy people as socially agreed upon store of value. These folks have estimated wealth of $10T so that puts market cap contribution from them to $1T. Let's assume same amount comes from non-ultra-rich investors. So we can estimate btc market cap to $2T. This puts reasonable eventual upper bound value of 1 btc to $95,000. This eventual value might never be reached however because all 21M coins never be mined, not all wealthy people might do this, and also other coins will fragment the market. May be 3/4 discount is reasonable at this point to accommodate these factors which might put the value to $25K at this point. This is obviously assuming no black swan events like countries making it illegal or some other virtual currency tech doesn't become popular.
Why can't we just estimate the "real" value of BTC with the amount of work that goes into operating it.
We know the hashrate, we basically know what the hardware is that does the "mining", we know the cost of the hardware and we can estimate some mean electricity cost.
The hardware has no other real use (except for heating) so there is an upfront investment the miners were willing to pay and also how much they are continually willing to invest.
This is a real world in investment that is not easy to withdraw from the Bitcoin system
We know the hashrate, we basically know what the hardware is that does the "mining", we know the cost of the hardware and we can estimate some mean electricity cost.
The hardware has no other real use (except for heating) so there is an upfront investment the miners were willing to pay and also how much they are continually willing to invest.
This is a real world in investment that is not easy to withdraw from the Bitcoin system
The equilibrium price ultimately boils down to energy. How much gasoline can you buy with $1? How much BitCoin can you mine using $1 worth of energy? These will eventually even out.
about 25% of all bitcoins are lost and this number can only increase.
That doesn't make any sense. Using this logic you could argue that basically anything should have an eventual market cap of ~$1 trillion.
He's merely talking about upper bound. Which is probably true.
Anything that the rich would want to put 1% of their wealth in.
Could you clarify something for me that has been bothering me every time I see someone make an argument along these lines? Why does BTC === crypto? I see it over and over that people make arguments about the potential value of the cryptocurrency 'market' and then immediately use that to put a value on bitcoin. Aren't there hundreds of other cryptocurrencies already?
It's often just metonymy, just as your usage of "crypto" to refer to "cryptocurrency" is.
Yes, that absolutely could explain it, except for one detail -- only bitcoin has an arbitrary 21 million coin limit. So making the argument that bitcoin is kinda like gold is implying that bitcoin is the only cryptocurrency. Is there a good argument here that first-mover advantage will be enough to ensure that bitcoin remains the only viable cryptocurrency? Because if not, then the $1T theoretical market value has to be split amongst all the players, and then the argument for a $25K BTC 'value' is pretty thin.
I'm not sure, but I think it's possible that BTC runs away with it. The value of BTC, much like the value of gold, is due to network effects. That's the only reason AFAICT that gold is ~60x more valuable than silver.
http://about.ag/debate.htm There’s lots of reasons
> In a way this is very similar to buying art which probably doesn't have much utility except among other wealthy people as socially agreed upon store of value.
Art may not have "utility", but it does have value, so the analogy here doesn't quite work.
Also, 1% of 10T is 100B, not 1T.
Art may not have "utility", but it does have value, so the analogy here doesn't quite work.
Also, 1% of 10T is 100B, not 1T.
1% of $10T is $100B. Add $100B younge BTC upper bound at $9,523.
Animal spirits
Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than mathematical expectations, whether moral or hedonistic or economic.
Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits—a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities.
https://en.wikipedia.org/wiki/Animal_spirits_(Keynes)
Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than mathematical expectations, whether moral or hedonistic or economic.
Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits—a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities.
https://en.wikipedia.org/wiki/Animal_spirits_(Keynes)
or in other words the "exploration" part of the "exploration vs. exploitation"
This is what happens when you have high correlation and low exchange liquidity . All it takes is 150 coins sold ($1.5 million) to make it fall 1000 points, and then the other exchanges and coins mirror this. If the major exchanges were consolidated there would be much less volatility. http://https://greyenlightenment.com/why-bitcoin-is-so-volat...
I cannot wait for video cards to flood the market and become reasonably priced again
That's because of ETH not BTC
If it becomes fully enforced and illegal in China, I assumed that is a lot of hardware that won't be used for mining any longer
Or monero or hundreds of other currencies.
In January 2017, Bitcoin dropped from 1176$ to 755$ (35%). Today, it's still 10 times higher than last year.
Fun chart from Reddit today:
https://i.redd.it/dnlduddb5ha01.jpg
https://i.redd.it/dnlduddb5ha01.jpg
I love that it is a classic bitcoin log chart designed to hide the massive volatility of bitcoin. The financial prowess of the average bitcoin "investor" never ceases to amaze. As they say, a sucker is born every minute and a fool and their money are soon parted...
>classic bitcoin log chart designed to hide the massive volatility of bitcoin
No, it's not designed to hide volatility, it's designed to show a quick overview of the long term changes of Bitcoin. Logarithmic scales are incredibly useful when you have very fast rate of change. Look at a linear chart of Bitcoin over the same range, it's not very useful.
You can quickly see from this chart that Bitcoin is still on a massive tear, though the annotations are a bit cheeky.
No, it's not designed to hide volatility, it's designed to show a quick overview of the long term changes of Bitcoin. Logarithmic scales are incredibly useful when you have very fast rate of change. Look at a linear chart of Bitcoin over the same range, it's not very useful.
You can quickly see from this chart that Bitcoin is still on a massive tear, though the annotations are a bit cheeky.
A log graph is more honest.
The same size drop is always the same % drop, a linear graph would be dishonest
The same size drop is always the same % drop, a linear graph would be dishonest
Yeah, nice use of log chart there.
It's difficult to graph that period of time and still capture the drawbacks without a log chart.
If someone misreads the chart as linear the current drop would be terrifying though, with no previous precedence.
If someone misreads the chart as linear the current drop would be terrifying though, with no previous precedence.
It still looks volatile even on a log chart!
yes, i can't believe people still fall for that..
Fewer and fewer fools left to fool each go-around.
Not sure what you're implying with that statement, but past economic growth can't be used to predict the future.
I bought $200 worth of bitcoin years ago that I cashed out at 7k when it was around 19k$.
Now I'm thinking I should cash back in incase it rebounds strongly again.
I guess I should be happy with my free money and not get greedy.
Almost same story, but I didn't sell. Just moved around in ETH and BCH. Will never sell, unless it reaches like 100k USD worth or something. Its an experiment for me, out of interest/belief in technology. Personally not affected by this fall, but feel sad, on reading stories e.g. I'd heard of BitConnect, but never bothered about it until today. What an obvious scam.
I think this thing is like dot-com crash. And obvious ones have fallen. But some should survive. I am glancing through all the sub reddits, and I like the behavior on /r/ethereum the best. Nonplussed (largely) and just focusing on the tech. /r/bitcoin is the worst, but bitcoin has the most solid people (cause early adopters etc).
I think this thing is like dot-com crash. And obvious ones have fallen. But some should survive. I am glancing through all the sub reddits, and I like the behavior on /r/ethereum the best. Nonplussed (largely) and just focusing on the tech. /r/bitcoin is the worst, but bitcoin has the most solid people (cause early adopters etc).
Buy $200 again and you haven't lost anything :-)
Considering the profits he can buy $6,800 — not $200 — and be even.
Nope, because $6800 are actual money that he can lose now.
Just like you go to casino with $5 play all night up to $2 million, then lose all go back home and tell your wife you only lost $5 so it was not that bad.
Just like you go to casino with $5 play all night up to $2 million, then lose all go back home and tell your wife you only lost $5 so it was not that bad.
Time to buy. Down from what price since January? Cryptocurrency is a long term play from a software and financial engineering vantage. It also continues to irritate the hell out of banks (bank accounts are being closed and restricted from exchange transfers, including coinbase) and general investors. It's not liquid enough yet, creates no need for middle men and Bitcoin itself is now being manipulated by futures contracts based on supply being increased artificially.
Yes, but what? Ripple's seen maybe the biggest loss, but it's not clear that part of its loss isn't due to decreasing confidence in the underlying, which is bad if you want to BTFD. Same can be said for many others.
Though if you look at todays charts e.g. in ETH, it's clear someone's probably made good money intraday buying dips.
Though if you look at todays charts e.g. in ETH, it's clear someone's probably made good money intraday buying dips.
A lot of people don’t understand how ripple works and how the underlying mechanism works, it seems far more useful than bitcoin because of the transaction speed. But I think it is going down because that is the one they went up the most recently, which means the gains are more likely from hype than anything
Agreed. Crypto is experiencing manipulation like stocks, bonds, debentures, CDs and derivatives of all kinds. Sharks, snakes, wolves are part of the game now for all kinds of reasons but the development communities also have a real chance at creating a better balance with assets based on the blockchain.
Does it even matter?
Everything went up LTC for example went from 3$ to 360$
Just wait till everything goes to the bottom and diversify between the top coins put them on an usb stick an forget about them until the next wave.
Ripple will bounce back up (maybe not back up to $3 anytime soon, but I'm pretty sure it will go back up). A lot of people that got out are just trying to time the bottom as well as they can. I'm tempted to buy more myself. Part of me wants to wait to see if it drops more, part of me thinks I should just get in instead of trying to time the market and missing the opportunity.
Why so sure? It seems to have gone up based on the news that Japanese banks were getting involved, but then it turns out they likely won't use the actual coins, just the tech?
Just based on the general patterns and trends, and that it seems to be the favored coin of the banking world, at least so far. But I very well could be wrong. Someone can be very confident and very wrong.
But as a general rule I'm conservative with how much I put into these things, just a small amount each month. I can afford to be very confident and very wrong about Ripple.
But as a general rule I'm conservative with how much I put into these things, just a small amount each month. I can afford to be very confident and very wrong about Ripple.
Ahh the "time to buy cheap coins" rally of the die-hard bitcoin shysters. Your own post says "It's not liquid enough yet, creates no need to middle men and Bitcoin itself is now being manipulated by futures contracts based on supply being increased artificially." Does that sound like buying now is a good idea? Doesn't to me...
Bitcoin is, was and always will be a highly manipulated penny stock. It spiked from $1000 to $20k for absolutely no reason, and now it is dropping down to $10k for absolutely no reason. Any price bitcoin spikes or drops to has no reason behind it... what kind of "store-of-value" / "currency" does that?
Bitcoin is, was and always will be a highly manipulated penny stock. It spiked from $1000 to $20k for absolutely no reason, and now it is dropping down to $10k for absolutely no reason. Any price bitcoin spikes or drops to has no reason behind it... what kind of "store-of-value" / "currency" does that?
What do you mean "no reason"? Supply and demand are the reasons the prices are shaped the way they are. It's a near perfect market.
What is the P/E ratio of Bitcoin? There is none. So there is no rational basis for any price. $1 is as valid as $1 million. There is no traditional way to analyze this investment and figure out its real worth.
To the limited extent that Bitcoin helps Chinese citizens out-maneuver the capital controls that the Chinese government has tried to enforce, then it could be analyzed as a shadow of the Chinese currency, but since the action is illegal, the data is dark. Thus Bitcoin, and other crypto currencies, are the world's most opaque investment.
To the limited extent that Bitcoin helps Chinese citizens out-maneuver the capital controls that the Chinese government has tried to enforce, then it could be analyzed as a shadow of the Chinese currency, but since the action is illegal, the data is dark. Thus Bitcoin, and other crypto currencies, are the world's most opaque investment.
What's the "rational basis" for a specific value of the P/E ratio?
There are many stocks that belong to companies that have no mechanisms in place nor could they be reasonably expected to introduce mechanisms to directly return profits to shareholders. These stocks have the same form of "intrinsic value" as gold or Bitcoin: whatever the hell the next person is willing to pay for it.
Pretending that an underlying asset that doesn't throw off any yield or return of capital is somehow more rationally valuable than another doesn't make sense.
There are many stocks that belong to companies that have no mechanisms in place nor could they be reasonably expected to introduce mechanisms to directly return profits to shareholders. These stocks have the same form of "intrinsic value" as gold or Bitcoin: whatever the hell the next person is willing to pay for it.
Pretending that an underlying asset that doesn't throw off any yield or return of capital is somehow more rationally valuable than another doesn't make sense.
Glad you asked. P/E ratios can be anchored (with expected earnings growth and a risk premium) to interest rates.
Whether stocks pay dividends or not is not terribly relevant, see Modigliani-Miller.
Thus, share prices are rationally anchored to economic reality. Of course, there's a lot of estimation involved, and people can get it wrong for a while, individually or collectively.
Whether stocks pay dividends or not is not terribly relevant, see Modigliani-Miller.
Thus, share prices are rationally anchored to economic reality. Of course, there's a lot of estimation involved, and people can get it wrong for a while, individually or collectively.
>Pretending that an underlying asset that doesn't throw off any yield or return of capital is somehow more rationally valuable than another doesn't make sense.
Lets say I have a company with 1 billion dollar worth of assets and a 100 million dollar profit per year. I have issued 100 million shares during IP. How much is a single share worth? At the very least $10.
Next year I have a 1.1 billion dollar company. How much is a single share worth? At the very least $11.
You have 1000 shares worth $11000.
I can now either pay the profit out as dividend or not. Your shares will be worth less by exactly the amount that was paid out. Your 1000 shares will be worth $10000 and you will have $1000 in cash or alternatively I don't pay out a dividend and you still have 1000 shares worth $11000.
Where did that growth come from? With a company it's easy to answer. They sold more of their existing products. Released a new product. Reduced costs through technology. We have more stuff now. Investing in a stock helps a company indirectly even if stock buybacks never happen. The company receives better lending conditions from banks.
What about cryptocurrency? A currency shouldn't move in price at all. Where did that growth come from? From other people. Nothing new was created. Existing wealth merely gets redistributed.
Lets say I have a company with 1 billion dollar worth of assets and a 100 million dollar profit per year. I have issued 100 million shares during IP. How much is a single share worth? At the very least $10.
Next year I have a 1.1 billion dollar company. How much is a single share worth? At the very least $11.
You have 1000 shares worth $11000.
I can now either pay the profit out as dividend or not. Your shares will be worth less by exactly the amount that was paid out. Your 1000 shares will be worth $10000 and you will have $1000 in cash or alternatively I don't pay out a dividend and you still have 1000 shares worth $11000.
Where did that growth come from? With a company it's easy to answer. They sold more of their existing products. Released a new product. Reduced costs through technology. We have more stuff now. Investing in a stock helps a company indirectly even if stock buybacks never happen. The company receives better lending conditions from banks.
What about cryptocurrency? A currency shouldn't move in price at all. Where did that growth come from? From other people. Nothing new was created. Existing wealth merely gets redistributed.
Even if a stock does not return dividends, it still represents a share of ownership in the company. It has a real value to anyone who might want to purchase a controlling share in the company, value in reasonable proportion to the profit or profit potential of the company.
From that perspective, taking control of Bitcoin may have a measurable monetary value but as I understand the system the value isn't in the coins, it's in the miners.
From that perspective, taking control of Bitcoin may have a measurable monetary value but as I understand the system the value isn't in the coins, it's in the miners.
Buy enough of the company stock and you own the company. You can't do that with Bitcoin.
Bitcoin isn’t a stock that has earnings. They are more like gold or silver. The usefulness + scarcity should determine its price. Right now people are buying because other people are buying, and a whole lot o hype
Even gold has some real-world usefulness that can drive demand as it's used in electronics manufacturing.
> There is no traditional way to analyze this investment and figure out its real worth.
Is that bitcoin's problem or a traditional economists problem?
Behavioral economics does have frameworks for thinking about bitcoin price, but then again, behavioral finance is not traditional and highly controversial. For once, it dispenses with the myth of the rational investor (homo economicus)
Is that bitcoin's problem or a traditional economists problem?
Behavioral economics does have frameworks for thinking about bitcoin price, but then again, behavioral finance is not traditional and highly controversial. For once, it dispenses with the myth of the rational investor (homo economicus)
> Behavioral economics does have frameworks for thinking about bitcoin price, but then again, behavioral finance is not traditional and highly controversial.
So, how does behavioral economics supply a price for Bitcoin?
So, how does behavioral economics supply a price for Bitcoin?
> What do you mean "no reason"?
As in "why is the price what it is". Saying "because of supply and demand" is useless, unhelpful pedantry.
As in "why is the price what it is". Saying "because of supply and demand" is useless, unhelpful pedantry.
I think that's an unfair accusation, ultimately the price is determined by supply and demand for the product, your question should really be what are the fundamental reasons behind people buying at X price and I think those are many and varied.
Was that sarcasm ??
In case you don't know, things like https://en.wikipedia.org/wiki/Market_manipulation exists..
In case you don't know, things like https://en.wikipedia.org/wiki/Market_manipulation exists..
With a healthy dose of FUD from several directions.
Efficient Market Theory is dead. There is no zero sum game. In the Markets things do not work based supply and demand but on perceived supply and perceived demand. Based on what I've learned I'd rather work with crypto than stocks or other more manipulated trading vehicles.
creates no need to middle men
I've seen this consistently touted as a structural advantage to (bit)coins, but have yet to see a compelling technical explanation as to how/why this would be the case. The Satoshi paper doesn't discuss middlemen at all.
Very few people (relatively) are actually mining and most are just buying with USD from an exchange which by default is a middleman. Many of the other coins are pre-mined so aren't decentralized at all, which takes that whole point out of possibility.
Where's the proof of this claim?
I've seen this consistently touted as a structural advantage to (bit)coins, but have yet to see a compelling technical explanation as to how/why this would be the case. The Satoshi paper doesn't discuss middlemen at all.
Very few people (relatively) are actually mining and most are just buying with USD from an exchange which by default is a middleman. Many of the other coins are pre-mined so aren't decentralized at all, which takes that whole point out of possibility.
Where's the proof of this claim?
The Satoshi whitepaper calls middlemen "trusted third parties"
Yes, good point, however I interpreted the "trusted third party" as preventing a central bank managed authority process that would "devalue" a currency through monetary creation. Nothing prevents that with bitcoin unless it was strictly used - you can always create derivatives that you sell to people.
It's like expecting people to trade goods with gold etc...
It's like expecting people to trade goods with gold etc...
The futures contracts trade less than 1% of the global spot btc volume on any given day.
The products so far have been a failure.
The products so far have been a failure.
I'd wait few months. Bitcoin tends to stabilize for few months before next ride up.
> irritate the hell out of banks (bank accounts are being closed and restricted from exchange transfers, including coinbase)
It irritates banks not, by the way, because they're oh so scared about this fantastic new competitor to "their" money and money related businesses, but because it's often used (when it's used) for illegal transactions.
It irritates banks not, by the way, because they're oh so scared about this fantastic new competitor to "their" money and money related businesses, but because it's often used (when it's used) for illegal transactions.
I think it decentralizes account fees, lending, term deposits, funds, everything. It turns the traditional banking model on its head because anyone can "become a bank" and handle the traditional "keep your money safe" model that banking was originally created for. Those getting paid for transactions will be those investing in the network infrastructure - which is also decentralized, because again - anyone can jump in and do it.
The only downside to it all is if whoever handles your "account" (or wallet) is breached, or someone steals your "money".
Right now - no one will insure it. It'll come, and when it does - it'll likely be decentralized again, because that's entirely possible - throw 1% of your "account" into "insurance" and suddenly everyone is paying for their own insurance and third-party investigations into claims. That in itself will be heavily regulated by the companies running it, and I think the lower the fee - the more information they'll want from users.
The only downside to it all is if whoever handles your "account" (or wallet) is breached, or someone steals your "money".
Right now - no one will insure it. It'll come, and when it does - it'll likely be decentralized again, because that's entirely possible - throw 1% of your "account" into "insurance" and suddenly everyone is paying for their own insurance and third-party investigations into claims. That in itself will be heavily regulated by the companies running it, and I think the lower the fee - the more information they'll want from users.
Do bitcoin pumpers ever come up for air? None, I mean absolutely none of what you are writing will ever happen. Why? Because if Bitcoin boosters understood anything about politics, economics, math, finance, computer science, monetary policy, business, accounting, marketing or seemingly life in general.... they too would look at it and go "sounds way to good to be true. no thanks".
Every single thing in your post makes zero sense.... it is all breathless hype.
Every single thing in your post makes zero sense.... it is all breathless hype.
Aren't we already seeing this in developing countries? Zimbabwe for instance has a great peer-to-peer lending platform. Currently backed by a bank, but what if the currency was simply tokens pegged to fiat such as USD by another company? (Similar to what Cryptopia has done with NZDT.)
Another example I've seen in real world use is the "startup" retail banks popping up throughout Africa that have no offices, and are purely operated over mobile.
The lack of regulation in these countries have lead to massive leaps in innovation in the banking space. Seriously, you can read articles about it - but until you go to countries like Nigeria or Kenya and try it out, it's incredibly impressive.
I'm not a major investor in crypto anything, I think most, if not all, coins created right now are completely pointless - but blockchain as a public, auditible ledger and fiat-backed crypto/tokens I think we'll see some very cool innovation that own't overhaul the banking industry completely. There's too many smart people in banking to get "caught out".
However I do think we'll see some new contenders in the space as the industry begins to break down into smaller units. And that'll be good for everyone.
Another example I've seen in real world use is the "startup" retail banks popping up throughout Africa that have no offices, and are purely operated over mobile.
The lack of regulation in these countries have lead to massive leaps in innovation in the banking space. Seriously, you can read articles about it - but until you go to countries like Nigeria or Kenya and try it out, it's incredibly impressive.
I'm not a major investor in crypto anything, I think most, if not all, coins created right now are completely pointless - but blockchain as a public, auditible ledger and fiat-backed crypto/tokens I think we'll see some very cool innovation that own't overhaul the banking industry completely. There's too many smart people in banking to get "caught out".
However I do think we'll see some new contenders in the space as the industry begins to break down into smaller units. And that'll be good for everyone.
> Every single thing in your post makes zero sense
Not true. Most of the post makes sense. Trustlessness and decentralization are pretty much the only benefits to bitcoin and others like it. There are obviously real costs for these features, but also real benefits. Do the benefits justify the current valuations - only the market can determine that. I personally am quite bearish on almost all cryptoassets (so I would not be considered a "pumper"), but certainly you must see the threat they pose to the incumbent masters of the monetary system?
Not true. Most of the post makes sense. Trustlessness and decentralization are pretty much the only benefits to bitcoin and others like it. There are obviously real costs for these features, but also real benefits. Do the benefits justify the current valuations - only the market can determine that. I personally am quite bearish on almost all cryptoassets (so I would not be considered a "pumper"), but certainly you must see the threat they pose to the incumbent masters of the monetary system?
"Anyone can become a bank" isn't a good thing. What stops people at the moment is the requirement to be regulated. Compliance with that regulation costs money and is a barrier to entry but a necessary one.
Your "only downside" is enormous! I'd never consider paying my salary or keeping my savings in an organisation that has no regulation. My money could just disappear overnight.
You add that I could put 1% of the account into insurance, but that is essentially a 1% (yearly?) cost. Why would I do that when I can have a GBP bank account regulated by the FCA for free? In fact, the FSCS guarantees up to £85,000 per banking group (eg. HSBC).
Your "only downside" is enormous! I'd never consider paying my salary or keeping my savings in an organisation that has no regulation. My money could just disappear overnight.
You add that I could put 1% of the account into insurance, but that is essentially a 1% (yearly?) cost. Why would I do that when I can have a GBP bank account regulated by the FCA for free? In fact, the FSCS guarantees up to £85,000 per banking group (eg. HSBC).
That was just an example, it may be larger - it may be smaller depending on the amount you hold. I assume it'd be less than current fees you pay to hold accounts, make transactions, margins paid in FX. I'm thinking aloud, and I totally get the "why would I do that when I can use something that's existing and trusted".. But think about the early days of banking.
We've seen entire banks collapse and people lose their money in the past decade alone. The early days of banking was rife with fraud and scams.
I don't expect this to change in the short-term, however think about the convenience you'd see on day-to-day banking and how fast new features could be developed compared with our current banking system. Even if you only held a very small amount in a "new bank" and "currency" and kept you significant savings and assets in a traditional bank, I could see this slowly chipping away at existing banking services very quickly once a consensus on currency is reached within a community.
We've seen entire banks collapse and people lose their money in the past decade alone. The early days of banking was rife with fraud and scams.
I don't expect this to change in the short-term, however think about the convenience you'd see on day-to-day banking and how fast new features could be developed compared with our current banking system. Even if you only held a very small amount in a "new bank" and "currency" and kept you significant savings and assets in a traditional bank, I could see this slowly chipping away at existing banking services very quickly once a consensus on currency is reached within a community.
If the threat of regulation drops it 25%, that's not a very good store of value or medium of exchange.
Non sequitur. That only means that it is not a good store of value from before being regulated to after being regulated.
If however, governments figured out some standard harmonized regulations and consistently enforced them, then afterwards there would no longer be a threat of regulation. In fact, getting regulation applied might actually reduce volatility, because the uncertainty about the threat of regulation would be taken out of people's pricing estimates.
If however, governments figured out some standard harmonized regulations and consistently enforced them, then afterwards there would no longer be a threat of regulation. In fact, getting regulation applied might actually reduce volatility, because the uncertainty about the threat of regulation would be taken out of people's pricing estimates.
By that logic if it goes to zero there technically is no uncertainty about the price nor any volatility
Compared to some currencies, it is. Brazil Real has lost 80% of its value relative to the dollar since 2013. I think this is overdone considered the last time Korea threatened regulation it only fell 10%.
USD quoted in BRL achieved a minimum of around 1.96 BRL in 2013. Currently it is 3.23 BRL. So the Brazilian Real has lost 40% of its value relative to the dollar, not 80%.
First, BRLUSD went from 0.488 at the start of 2013 to 0.309 now, which is only a 37% depreciation.
Second, and more important, unlike crypto, BRLUSD paid 10%ish interest rates every year since then, so the total return of a US investor who invested into BRL currency forwards at the start of 2013 is +2.67%, a far cry from an 80% loss.
Second, and more important, unlike crypto, BRLUSD paid 10%ish interest rates every year since then, so the total return of a US investor who invested into BRL currency forwards at the start of 2013 is +2.67%, a far cry from an 80% loss.
80%? Where did you pull that number from?
No, it means its value is lower if governments try to mess with something they don't understand and want to ruin in fear of their power being diminished.
BTC is still above 10K. Think about that for a while. I remember 500 like it was yesterday. This drop is nothing. Except for those poor idiots who took at loans to buy at 19K
honest question: do you believe there's a price point where it's /not/ stupid to go into debt to invest in cryptocurrencies?
how much capacity to service the debt? If you meant "...go into debt you cannot afford" then the answer is always no. If you have sufficient assets and liquidity you can service the debt, then isn't this just normal leverage? The risk equation on any speculative investment includes the risk to go into debt to achieve it.
I see bitcoin ads all the time. Including a "Bitcoin IRA" (Individual Retirement Account) and "See what the experts say the next BitCoin is". Marketed at laypeople. They're definitely marketing the heck out it (they being brokers I guess), because its not really that easy to figure out.
I've been getting a lot of "This is the 'penny stock' of bitcoin!" ads.
And as the Asia market of retail investors cashes out to spend money on their families for Lunar New Year.
So let me get this straight. Gold can be compared to bitcoins in terms of scarcity and and store of value. But bitcoin itself is in practical term a proof of concept technology that is only useful when applied properly in another block chain. While gold actually has great uses. Can i say if you are investing in bitcoin, you are basically investing in equivalent a scarce physical paper with not a whole lot of use?
Comparing gold with Bitcoin is weird. People invest in gold because its values is very stable, obviously Bitcoin's isn't :-)
Gold is highly volatile.
Volatility only exists in comparison.
BTC and Gold in one graph: http://static5.businessinsider.com/image/59975b50f1a85079738...
I'd say in this comparison gold is the stable option.
BTC and Gold in one graph: http://static5.businessinsider.com/image/59975b50f1a85079738...
I'd say in this comparison gold is the stable option.
No, it doesn't. Volatility is defined in terms of an asset's past prices, not in terms of other assets.
Ok. I stand corrected. But what I meant to say is, that labeling something as "very volatile" only works in comparison.
I hear this "no real use" a lot, but I don't think it's valid. You can put 90% of your money in bitcoin and 10% in stocks. Then you have a hybrid investment where 10% of it has real use, and the other 90% is fun investment money with almost the same returns as being 100% bitcoin. Just like with gold, if Fort Knox/etc. were all sold off and used to make computer parts and jewelry, the value of gold would collapse to some fraction of what it is now.
It doesn’t help that every news organization in the world is talking about bitcoin and even worse, some of these people are predicting $100,000 price tags. Who wouldn’t want a 6x return from the peak?
$100,000? No, James Altucher is predicting $1 million / Bitcoin!!! https://www.cnbc.com/2017/11/29/james-altucher-predicts-bitc...
Easy come.
I wonder if this is a reverse P&D by the Chinese gov
The last time South Korea hinted at banning it the price only fell to $13k . No one knows what is going to happen or when.
Just happy I sold some around $18-19k
Just happy I sold some around $18-19k
The backlash was enormous tho.
I bought $15000 last year in Litecoin when it reached the 300s. Debating if I should sell off now and get out with at least half of my money. Looks like this crypto frenzy is coming to an end.
Buy high, sell low is not a sound investment strategy. Just hold and cash out when it gets back to 300 if you can't stomach the crypto world.
This was not investment, it was speculation. I doubt Litecoin will ever go back to the 300s at this point. The crypto bubble might be popping.
Depends. If you desperately need the money, you probably should. If not, wait for a few years and hope for another frenzy.
I wonder why Ripple isn't getting more coverage... I told my father to cash out last week. Ashamed he didn't as he would of made his win and could reinvest at $1.10 again.
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Still waiting for tulips to recover back to the January 1637 price.
Why not gold? It's doing fine. When do you expect that bubble will burst?
I wonder if governments would take even more drastic measures if currency weakness was driving people into crypto. The US made owning gold illegal in the past.
Really? When?
This keeps coming back to HN. What the order ban is actually hoarding the gold. Since each dollar was backed by physical gold, people that hoard physical gold were limiting government with ability to move currency and relese it as soon as needed. Obviously taking us off gold standard fixed the problem (by making US an insolvent nation btw)
"Hoarding gold" was defined as having more than 6-ounces of gold (roughly $6500 in 2018 USD)
Which basically means gold was dead as an exchange medium after EO 6102. It was illegal to have more than $6500 (today's money) worth of gold / 5-ounces or so, so transactions would have to be way smaller than that!!
In 1930s money, 5-ounces of gold was just $100.
Which basically means gold was dead as an exchange medium after EO 6102. It was illegal to have more than $6500 (today's money) worth of gold / 5-ounces or so, so transactions would have to be way smaller than that!!
In 1930s money, 5-ounces of gold was just $100.
Interested in what someone with deep Bitcoin experience thinks the bottom is this time, before it starts to rebound...and why.
Edit: Yes! Ggm's request below too.
Edit: Yes! Ggm's request below too.
My mild bitcoin experience (also invested) says: I have seen this before, and I don't care that much. I also don't know what the value of 1 BTC should be even in a booming crypto economy. I believe bitcoin and blockchain technology are the future so I bet on all of the projects I think are viable.
Yes. Also the comparison with somebody not Bitcoin, with experience of irrational exuberence, investment behaviour, risk and markets: same questions.
this is a TA based idea, so please know I'm presenting it neutrally with full knowledge that TA is anathema to this crowd: volume profile at the various price points suggests somewhere in the 5k range. You can talk yourself into higher ones, lots of experienced people expect 8k, but to me the "clear" support is closer to 5k. Who knows, though; I don't claim to.
Appreciate it. Not betting on the situation, just morbidly curious.
The suicide prevention hotline is pinned to the top of cryptocurrency subreddits because the price of bitcoin is where it was at the beginning of last month. Think about that for a minute.
When we really have a bear market people are going to lose their minds.
When we really have a bear market people are going to lose their minds.
Naive speculators are buying cryptocurrencies on their credit cards without understanding the volatility
https://www.bloomberg.com/news/articles/2018-01-11/bitcoin-b...
> Naive speculators
The problem with this characterization is when enough people lose their shirts on leveraged crypto purchases, a problem of individual finances becomes one of collective policy. I'd be careful with dismissing the problem as one contained to the stupid.
There was a thread on the front page, earlier, where multiple commentators were equated the odds of a massive and permanent Bitcoin crash with that of a meteor impacting the earth [1]. Multiple people honestly could not imagine how Bitcoin could possibly become absolutely worthless. These are otherwise-reasonable people who, through a combination of misinformation and FOMO, got involved in something over their heads.
Korea may be at the point where a 50% sustained drawdown plunges a significant fraction of the population into hardship. That, in turn, could trigger a recession. In case it needs to be said, now is not a good time for the Seoul to plunge into a financial and political crisis.
I've gone from finding this Bitcoin fascinating, to being cautiously weary, to being outright dismissive, to becoming worried about systemic risks.
[1] https://news.ycombinator.com/item?id=16160346
The problem with this characterization is when enough people lose their shirts on leveraged crypto purchases, a problem of individual finances becomes one of collective policy. I'd be careful with dismissing the problem as one contained to the stupid.
There was a thread on the front page, earlier, where multiple commentators were equated the odds of a massive and permanent Bitcoin crash with that of a meteor impacting the earth [1]. Multiple people honestly could not imagine how Bitcoin could possibly become absolutely worthless. These are otherwise-reasonable people who, through a combination of misinformation and FOMO, got involved in something over their heads.
Korea may be at the point where a 50% sustained drawdown plunges a significant fraction of the population into hardship. That, in turn, could trigger a recession. In case it needs to be said, now is not a good time for the Seoul to plunge into a financial and political crisis.
I've gone from finding this Bitcoin fascinating, to being cautiously weary, to being outright dismissive, to becoming worried about systemic risks.
[1] https://news.ycombinator.com/item?id=16160346
I'd be careful with dismissing the problem as one contained to the stupid.
The subtle genius of the truly stupid, is their unstoppable penchant for making their problems yours as well!
The subtle genius of the truly stupid, is their unstoppable penchant for making their problems yours as well!
See also: the 2016 US election result and the aftermath that continues to this day.
>The problem with this characterization is when enough people lose their shirts on leveraged crypto purchases, a problem of individual finances becomes one of collective policy. I'd be careful with dismissing the problem as one contained to the stupid.
It's probably worse than that. The collective craze around crypto is likely spurned by social media influence tactics. Most of this is from me just reading the forums as I obviously don't have proof, but along with ICO scams, exchange failures, software vulns, and SEC cautionary notices, there's enough for me to be broadly suspicious that these tactics are at least partly coming from the top owners of bitcoin who are manipulating the price.
You have to make huge efforts to pretend that a currency with virtually no regulation around it that works across borders has only honest actors trading on honest information. And low-dollar investors are certainly not going to band together and run price manipulation schemes.
And this will be utterly dumb if the major banks get involved significantly.
It's probably worse than that. The collective craze around crypto is likely spurned by social media influence tactics. Most of this is from me just reading the forums as I obviously don't have proof, but along with ICO scams, exchange failures, software vulns, and SEC cautionary notices, there's enough for me to be broadly suspicious that these tactics are at least partly coming from the top owners of bitcoin who are manipulating the price.
You have to make huge efforts to pretend that a currency with virtually no regulation around it that works across borders has only honest actors trading on honest information. And low-dollar investors are certainly not going to band together and run price manipulation schemes.
And this will be utterly dumb if the major banks get involved significantly.
> Korea may already be at the point where a 50% sustained drawdown plunges a significant fraction of the population into hardship. That, in turn, could trigger a recession.
That seems unlikely. Something like 2M of 51M people have any crypto there, and only a small fraction would be overextended significantly. Anyone buying a couple months ago would still be up.
That seems unlikely. Something like 2M of 51M people have any crypto there, and only a small fraction would be overextended significantly. Anyone buying a couple months ago would still be up.
> Something like 2M of 51M people have any crypto there, and only a small fraction would be overextended significantly
How do you know that?
For traditional securities, we have margin and prudential lending rules. These systems aren't perfect. But they incorporate lessons from crises past. One of those lessons is about how system risk can grow exponentially unexpectedly quickly.
How do you know that?
For traditional securities, we have margin and prudential lending rules. These systems aren't perfect. But they incorporate lessons from crises past. One of those lessons is about how system risk can grow exponentially unexpectedly quickly.
> How do you know that?
I don't have the hard data of course. It's a guess based on crypto still being up over a 2 month period. I also assume people are roughly the same in Korea as everywhere else so only a fraction are being crazy reckless in their investment.
That's not to say that the losses aren't enormous for the largest margin speculators, but the vast majority can't be hurting too badly.
I don't have the hard data of course. It's a guess based on crypto still being up over a 2 month period. I also assume people are roughly the same in Korea as everywhere else so only a fraction are being crazy reckless in their investment.
That's not to say that the losses aren't enormous for the largest margin speculators, but the vast majority can't be hurting too badly.
Except almost anyone get get authorization to sell naked puts in the US market.
Margin only handles the expected volatility of an instrument, not the tail risk.
Margin only handles the expected volatility of an instrument, not the tail risk.
> almost anyone get get authorization to sell naked puts in the US market
Your broker is on the hook if you default. This means collateral requirements and risk limits. For example, see TD Ameritrade's rules [1]. These rules are filed with and reviewed by various regulators.
> Margin only handles the expected volatility of an instrument, not the tail risk
This sentence doesn't make sense.
The Federal Reserve's Regulation T limits initial margin to 50% [2]. If you have $10 of cash, you can't buy more than $20 of securities. This limits your losses to twice your principal, which margin lenders are supposed to ensure you can afford (via suitability checks).
This rule is part of why brokers won't accept deposits from credit cards. It's also why they ask you for information on your net worth, income, et cetera. There are further controls in place to make it difficult to e.g. take out a line on your home and use it to buy securities. None of these safeguards exist with cryptos.
[1] https://www.tdameritrade.com/retail-en_us/resources/pdf/AMTD... page 11
[2] https://en.wikipedia.org/wiki/Regulation_T
Your broker is on the hook if you default. This means collateral requirements and risk limits. For example, see TD Ameritrade's rules [1]. These rules are filed with and reviewed by various regulators.
> Margin only handles the expected volatility of an instrument, not the tail risk
This sentence doesn't make sense.
The Federal Reserve's Regulation T limits initial margin to 50% [2]. If you have $10 of cash, you can't buy more than $20 of securities. This limits your losses to twice your principal, which margin lenders are supposed to ensure you can afford (via suitability checks).
This rule is part of why brokers won't accept deposits from credit cards. It's also why they ask you for information on your net worth, income, et cetera. There are further controls in place to make it difficult to e.g. take out a line on your home and use it to buy securities. None of these safeguards exist with cryptos.
[1] https://www.tdameritrade.com/retail-en_us/resources/pdf/AMTD... page 11
[2] https://en.wikipedia.org/wiki/Regulation_T
Yes initial margin on a stock purchase for reg-t will be 50% and then reduce later to around 25%. The broker will be on the hook to their counter party, but you are now required to pay your broker. So a worse case situation is normally 4 to 1 leverage.
That is for stocks, with options the margin call can grow to a value quickly where a retail investor cannot afford it ever.
Edit: Looking at td margin schedule shows they'll require 20% in a reg-t account, so only 5 to 1 leverage at least. Still can risk $5k and owe 20k to your broker.
That is for stocks, with options the margin call can grow to a value quickly where a retail investor cannot afford it ever.
Edit: Looking at td margin schedule shows they'll require 20% in a reg-t account, so only 5 to 1 leverage at least. Still can risk $5k and owe 20k to your broker.
How much I think is key here. I'll try and find the article from late 2017 but it said that most crypto buyers invested ~3k or less. A large portion of BTC is concentrated in fewer than 1k people.
What this means is that for most people when crypto crashes, it sucks but will simply be a cool story. This isn't .com or the housing bubble where many people's lives were ruined.
Of course with the craze, the stats could have changed over the last few months.
What this means is that for most people when crypto crashes, it sucks but will simply be a cool story. This isn't .com or the housing bubble where many people's lives were ruined.
Of course with the craze, the stats could have changed over the last few months.
The question is whether people have invested a significant amount of their life savings in bitcoin, not whether they own a significant amount of bitcoin proportional to the total market. For people who have, they may be panicking about how they'll support themselves in their later years, they may have invested in a lifestyle with the expectation that they can pay for it with Bitcoin's growth, and so on and so forth.
People's lives may be ruined by this - they've often essentially been scammed into investing in cryptocurrency because they cannot understand the risks. If a financial adviser were promoting bitcoin to most people, it'd be illegal. I don't think it's fair to say this is OK because it won't affect people you know.
People's lives may be ruined by this - they've often essentially been scammed into investing in cryptocurrency because they cannot understand the risks. If a financial adviser were promoting bitcoin to most people, it'd be illegal. I don't think it's fair to say this is OK because it won't affect people you know.
The stats were not just people I know. One of the coin sites pulled them together. If 3k is a significant amount of someone's life savings, then they should not have put in BTC.
Proportional to the total market is important because it puts into perspective how few people will really be impacted, and if it is something that could spread into the economy as a whole.
Found the stats: https://coinspectator.com/news/127996/survey-finds-average-b...
Proportional to the total market is important because it puts into perspective how few people will really be impacted, and if it is something that could spread into the economy as a whole.
Found the stats: https://coinspectator.com/news/127996/survey-finds-average-b...
> If 3k is a significant amount of someone's life savings, then they should not have put in BTC.
No, they shouldn't have. But many people don't actually understand what a high-risk market is, and especially not one as volatile as Bitcoin. They've heard their cousin/friend/waiter made a couple thousand bucks off it, done some googling, and found several thousand people saying this is the next big thing, with fancy graphs and miracle use cases and so on and so forth to prove it. Big well-known news sources like Bloomberg talking about it, and how big well-known investment banks are interested in it. This is the end result of what lack of regulation looks like.
People get bamboozled - similar to many scams, you might get tricked into losing a couple of hundred bucks and calling it a life lesson, or you might get scammed into losing your life savings and winding up in severe debt.
A few people (and it's more than a few) being impacted enough to cause them to be extremely worried about how they'll pay their bills, how they'll afford to keep a roof over their head in their later years, is important. It's maybe not as important to you as widespread economic collapse, but it's nothing to pretend isn't an issue. The comment you were originally replying to wasn't talking about economic collapse - it was talking about the impact on individual people.
No, they shouldn't have. But many people don't actually understand what a high-risk market is, and especially not one as volatile as Bitcoin. They've heard their cousin/friend/waiter made a couple thousand bucks off it, done some googling, and found several thousand people saying this is the next big thing, with fancy graphs and miracle use cases and so on and so forth to prove it. Big well-known news sources like Bloomberg talking about it, and how big well-known investment banks are interested in it. This is the end result of what lack of regulation looks like.
People get bamboozled - similar to many scams, you might get tricked into losing a couple of hundred bucks and calling it a life lesson, or you might get scammed into losing your life savings and winding up in severe debt.
A few people (and it's more than a few) being impacted enough to cause them to be extremely worried about how they'll pay their bills, how they'll afford to keep a roof over their head in their later years, is important. It's maybe not as important to you as widespread economic collapse, but it's nothing to pretend isn't an issue. The comment you were originally replying to wasn't talking about economic collapse - it was talking about the impact on individual people.
> If 3k is a significant amount of someone's life savings, then they should not have put in BTC.
Is that an appeal to consequences or did you have a different point?
Is that an appeal to consequences or did you have a different point?
Beyond the concentration, there are a lot of millionaries out there. Much more than 1k. I always tell that I know more crypto-millionaries than startup ones.
Crypto-millionaires aren't millionaires until they cash out a million dollars and at least diversify. The numbers may come more in line the correction continues.
Paper crypto "millionaires" or actual cold, hard, federal reserve-backed fiat Millionaires?
That being said, scammers, shysters and pumpers always say bombastic shit like you are saying. That is how they get all the rubes to buy into their scam.
That being said, scammers, shysters and pumpers always say bombastic shit like you are saying. That is how they get all the rubes to buy into their scam.
Speak with respect: sXXt is not in my vocabulary.
Beyond the scammers there is a lot of hard computer science research happenning.
Beyond the scammers there is a lot of hard computer science research happenning.
And how many members do you know of each, in absolute terms?
What matters is the ratio: 1 to 10 only thinking about the closest ones.
Sure, but a 1000% higher likelihood is close to meaningless if we’re talking about extremely tiny fractions in absolute terms. For example, a substance that increases your baseline risk of some type of cancer from 0.000003% to 0.00003% is basically imperceptible in a population of 300M people. That’s 90 incidents instead of 9 incidents out of the entire United States.
You don’t have to tell me exact figures for how many people you personally know in each category, but my point is that if both figures are sufficiently small in absolute terms then the example is meaningless.
You don’t have to tell me exact figures for how many people you personally know in each category, but my point is that if both figures are sufficiently small in absolute terms then the example is meaningless.
Your analysis is wrong. Startups and crypto investments can be seen as bets and a 10x increase in favor of you is a lot. And you are not taking into account the effort factor: startups are hard while storing some cryptoassets works even when you sleep. Not saying this will work forever, just saying that many people found it lucky to enjoy the momentum.
> Your analysis is wrong. Startups and crypto investments can be seen as bets and a 10x increase in favor of you is a lot.
So you think a 1000% increase in likelihood to win the lottery is meaningful?
I’m not saying a 1000% increase is insignificant relatively speaking. I’m saying that in the absolute context, it can be essentially meaningless. Which circles back to my point: you should add an absolute context to your numbers instead of just saying you know more cryptocurrency millionaires than startup millionaires.
So you think a 1000% increase in likelihood to win the lottery is meaningful?
I’m not saying a 1000% increase is insignificant relatively speaking. I’m saying that in the absolute context, it can be essentially meaningless. Which circles back to my point: you should add an absolute context to your numbers instead of just saying you know more cryptocurrency millionaires than startup millionaires.
Depending the game you are playing 10x is a lot.
> you should add an absolute context to your numbers instead of just saying you know more cryptocurrency millionaires than startup millionaires.
My intention is not writing a paper here in HN but showing an observation that impacts the life of people around me because like it or not they can spend the rest of their life doing whatever they want at an scale I have not seen in my lifetime in an underdeveloped country like Argentina.
Beyond all your calculations it is something singular to note and that is why I mentioned it here.
> you should add an absolute context to your numbers instead of just saying you know more cryptocurrency millionaires than startup millionaires.
My intention is not writing a paper here in HN but showing an observation that impacts the life of people around me because like it or not they can spend the rest of their life doing whatever they want at an scale I have not seen in my lifetime in an underdeveloped country like Argentina.
Beyond all your calculations it is something singular to note and that is why I mentioned it here.
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Not everyone that buys with credit card does so because they don't have money. Many people do this because this is the fastest way to move money to an exchange. Wire transfers to exchanges sometimes wait for weeks before they are confirmed.
No public, known, good investment suddenly becomes a bad investment in a few weeks, unless something terrible happens in between.
You must not have held gold in October of 1997. Price had been stable for years, then it dropped 13% in two months on no specific underlying news. There's tons of examples like this.
The same people would probably be recklessly borrowing money to gamble and waste on other worthless crap if bitcoin wasn't around so I don't think bitcoin is really an exceptional thing here.
Just a run-of-the-mill scam and run-of-the-mill stupid people.
However, those people will be demanding government intervention when their money is gone, so get ready for the regulatory party!
Pretty safe to predict that bitcoin will the the Bernie Madoff of this business cycle.
Just a run-of-the-mill scam and run-of-the-mill stupid people.
However, those people will be demanding government intervention when their money is gone, so get ready for the regulatory party!
Pretty safe to predict that bitcoin will the the Bernie Madoff of this business cycle.
Not true, it's a very savvy move. You're gambling with someone else's money-- credit card debt can be discharged in bankruptcy.
You don't lose your house or your shirt, and the only real consequence is poor credit for a few years.
And if bitcoin goes up? Pay it off, keep the profits...you still win.
You don't lose your house or your shirt, and the only real consequence is poor credit for a few years.
And if bitcoin goes up? Pay it off, keep the profits...you still win.
In a bankruptcy that was for personal debt such as credit cards surely your house as an asset can be sold in the event of a bankruptcy?
Not if it's your primary residence.
Your summer home or a rental property, sure.
Your summer home or a rental property, sure.
Where is this? In the UK and from what I could see in the US it would be included.
The US, through the provisions of the bankruptcy homestead exemption. Though having just looked into it again, they only allow you to retain up to a certain amount of equity in your primary residence-- anything more than that (or other properties you own) is considered an asset that can be leveraged to pay back your debts, as you suggest.
So someone with a cheap house or little equity could still Bain Capital themselves with Bitcoin, declare bankruptcy and start over while avoiding homelessness. But if you're 90% of the way through a half-million-dollar mortgage then yeah you'll have a lien placed on the property.
http://www.alllaw.com/articles/nolo/bankruptcy/homestead-exe...
So someone with a cheap house or little equity could still Bain Capital themselves with Bitcoin, declare bankruptcy and start over while avoiding homelessness. But if you're 90% of the way through a half-million-dollar mortgage then yeah you'll have a lien placed on the property.
http://www.alllaw.com/articles/nolo/bankruptcy/homestead-exe...
Perfect play for the van dwelling SV crowd (or renters anywhere). What are they going to put a lien on when the most expensive thing you own is a macbook pro?
I took out a loan to buy bitcoin. I got a $10k loan in 2013, the loan was paid off in 2015. I have taken out considerably more in profit than I invested and still have most of my bitcoins. Prior to that I had bought bitcoin when it was very cheap ($3-$5) and sold it because I needed money to buy a house, once the house purchase was completed I took out the loan to buy back in. Also, at least here in the UK it is possible to arrange credit card debt to be 0% so not every investor who uses a loan or credit card to purchase btc is naive.
Yeah, people love to overreact. I follow the reddit investing forum sometimes, and people go nuts with 'plunge' and 'crash' when a tech stock moves -1%.
Well, I think that might be explained due to the popularity of cryptocurrencies amongst an audience that is otherwise not economically inclined. They end up spending some money on bitcoin due to "hearsay" or what they read in the news, and think they can quickly make a lot of money.
Without an understanding of how much can actually be lost. So when this happens, they might not think in percentages but in "how much did I just loose". Combined with the regret of "I wish I sold earlier".
This is just me speculating, I have no idea if that's what goes on in their mind, I just imagine it is.
Without an understanding of how much can actually be lost. So when this happens, they might not think in percentages but in "how much did I just loose". Combined with the regret of "I wish I sold earlier".
This is just me speculating, I have no idea if that's what goes on in their mind, I just imagine it is.
This is actually one reason for Accredited investor certification. When you read posts about people saying they can't afford rent now because of the down swing, it's a very tricky situation and one that could / should have been prevented. It's as if the financials industry had to go through these same issues to get where it is now.
I wonder, how much of the accredited investor certification is also about protecting wealthier investors from the kind of volatility/irrationality we are seeing in cryptocurrency prices stemming from fresh and unseasoned investors?
Youre probably not far off. I’ve been hearing TA works better on cryptocurrency markets than regular stock markets, probably because like you say it’s mostly relatively unsophisticated investors.
> The suicide prevention hotline is pinned to the top of cryptocurrency subreddits because the price of bitcoin is where it was at the beginning of last month.
Where on the page?
https://www.reddit.com/r/Bitcoin/
Or a different page?
Where on the page?
https://www.reddit.com/r/Bitcoin/
Or a different page?
reddit.com/r/cryptocurrency
> The suicide prevention hotline is pinned to the top of cryptocurrency subreddits
Which ones?
I checked r/bitcoin, r/btc, r/ethereum, r/litecoin, r/bitcoinmarkets. Only one I saw with it was r/cryptocurrency
Which ones?
I checked r/bitcoin, r/btc, r/ethereum, r/litecoin, r/bitcoinmarkets. Only one I saw with it was r/cryptocurrency
it's a rumor/meme. supposedly during the last crash, r/bitcoin had the suicide hotline pinned, but i wasn't able to confirm that on archive.org either.
It was pinned at the top of /r/bitcoin for a brief time during the crash in January 2014. I was there. I saw it, although I realize that wouldn't necessarily be convincing evidence to someone else. While it's easy to make fun of the suicide prevention hotline being posted (and many did make fun of it in 2014), at least one regular poster in /r/BitcoinMarkets did commit suicide during that crash.
I can confirm it was previously posted in r/bitcoin but this time it is r/cryptocurrency.
I've been in crypto since 2011. It was indeed there at the time.
So how many Lambos are there in your garage?
Please don't post unsubstantive comments here.
It actually happened in 2014:
https://static1.squarespace.com/static/51f7fbb3e4b088f41b107...
News report: http://www.esquire.com/news-politics/news/a26570/bitcoin-min...
News report: http://www.esquire.com/news-politics/news/a26570/bitcoin-min...
It's not a rumor, just saw it today and is why I guessed the values might have dropped.
[deleted]
it was for a bit but has since been removed
[deleted]
That's not without precedence, the currency has half in price before and the same threads got stuck at the top.
In the future this saga will be a great anthropological study.
In the future this saga will be a great anthropological study.
I don't see it. sometimes I see it but not this time
Well it doesn't matter what it was last month if you just took the plunge... So many stories of people putting in their college funds, taking out loans, using credit cards, exchange margin, etc.
Taking any form of fiat credit to buy cryptocurrencies is where the pedal hits the metal in terms of stupidity.
People make bad decisions. While it would be odd to be suicidal if you held bitcoin over the period you mentioned, there will be people who bought in at the top. There will also be a smaller subset of people who overextended themselves and bought in at the top. All I'm saying is that there could be people who are genuinely in trouble now, regardless of how short the time was.
It's more a comment on the volatility than anything. People see that something is up 100% in one month and assume it won't lose 25% of value the next. We humans are not super rational.
It's not like bitcoin hasn't had a record of price history, yet still when people see sh*t shooting up they don't consider it a sign of volatility, but rather return.
Read this: http://www.businessinsider.com/bitcoin-volatility-risk-adjus...
What this is telling you is, if you wanted a lot of excitement for potential gain, you could have always leveraged up your ho-hum retirement account and done better.
Read this: http://www.businessinsider.com/bitcoin-volatility-risk-adjus...
What this is telling you is, if you wanted a lot of excitement for potential gain, you could have always leveraged up your ho-hum retirement account and done better.
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Well this ignores the fact that it's down 50% for its ATH and some altcoins are down 5x+. So some people ARE looking at steep losses.
Please tell what people would do if the S&P got cut in half.
Please tell what people would do if the S&P got cut in half.
I also thought this was really a bad sign. People in that sub are day trading and getting annoyed with 50% gain in 24 hours. It's a crazy atmosphere.
It’s a joke...
I always think there will only ever be 21 million bitcoins in existence ever. Ever. So what do you think is a fair price for that?
Why is that important? Many things in this world are limited in quantity.
You know miners can just make one software update and change that right?
They'd be mining an altcoin because those blocks would be rejected by the network.
Yeah of course but what makes you think the other branch survives? No guarantees there.
And convince >51% of other miners to run that update
I'm not sure if you imply the price should therefore be high (because it's rare), or 0 (because it proves its inability to work as a currency).
> I always think there will only ever be 21 million bitcoins in existence ever. Ever.
So what? If I launch a cryptocurrency that will only ever mine 21 coins, how does that make it magically orders of magnitude more valuable than bitcoin just because it's more scarce.
So what? If I launch a cryptocurrency that will only ever mine 21 coins, how does that make it magically orders of magnitude more valuable than bitcoin just because it's more scarce.
All I can say is, finally.
the real test comes when folks try to withdrawl their fiat...
Just browse http://reddit.com/r/coinbase from the last few months, and you'll get a good idea of what's to come...
Hope we don't see headlines like this one
Atlanta massacre: Broker shoots 12 dead as stock market falls (1999)
https://www.independent.co.uk/news/atlanta-massacre-broker-s...
Atlanta Day Trader shooting 10 years later (2009) https://www.youtube.com/watch?v=Ko3l8BuFsVk
Atlanta massacre: Broker shoots 12 dead as stock market falls (1999)
https://www.independent.co.uk/news/atlanta-massacre-broker-s...
Atlanta Day Trader shooting 10 years later (2009) https://www.youtube.com/watch?v=Ko3l8BuFsVk
So don't republish them, as it encourages copycats.
> So don't republish them, as it encourages copycats.
I understand your point, but I think that remembering the past can serve as a warning.
"Those who cannot remember the past are condemned to repeat it."
I was trading in 1999 and remember very well this story and many other similar that happened on the 00's and it's been guideline ever-since for me, to always evaluate your limits and check your sanity.
I understand your point, but I think that remembering the past can serve as a warning.
"Those who cannot remember the past are condemned to repeat it."
I was trading in 1999 and remember very well this story and many other similar that happened on the 00's and it's been guideline ever-since for me, to always evaluate your limits and check your sanity.
People keep trying to convince us that video games cause violence and sexism, while we have bona-fide historical evidence that equities trading is the real problem!
I am amazed at the losses given the investment advice that I was given all of two days ago from a 'bitcoin bore'. I was told to invest all I could afford in various coins buying one coin so I could then buy the others. I would have lost 30% of my money in the last 24 hours on the coins needed for the other transactions, then in those hot coins I would have lost 45% in 24 hours on one and 44% in 24 hours on the other.
https://coinmarketcap.com/all/views/all/
So said 'bitcoin bore' spent $500 on these coins and shared the advice, there was no warning that these things could depreciate in value given, just put what you can on these coins. So simple!
So from my point of anecdata, that is a wrap, we're toast here, this bubble is truly popping. Sure there will still be people playing musical chairs for a while but I think we are there in terms of the mania reaching the required level of craziness for some sanity to take over. Crypto is not the new cool when everyone knows someone that got scammed.
My friend who gave me the advice has not told me of the losses, that is part of the deception.
https://coinmarketcap.com/all/views/all/
So said 'bitcoin bore' spent $500 on these coins and shared the advice, there was no warning that these things could depreciate in value given, just put what you can on these coins. So simple!
So from my point of anecdata, that is a wrap, we're toast here, this bubble is truly popping. Sure there will still be people playing musical chairs for a while but I think we are there in terms of the mania reaching the required level of craziness for some sanity to take over. Crypto is not the new cool when everyone knows someone that got scammed.
My friend who gave me the advice has not told me of the losses, that is part of the deception.
Huh? BTC is a bubble because your friend told you it would go up and it didn't?
Welcome to investing?
Speculation. Investing is something different entirely, just like the lottery is different than owning a chunk of a business.
Playing the Lottery is worse than speculation. Lottery has negative expected outcome. Speculation doesn't have a quantifiable outcome before hand which is why it's called speculation.
Eh, there's no hard line between the two.
No, but there are extremes that can be easily labeled as such and this one is clearly speculation, not investing.
You didn't get scammed, just like if you bought stock and it tanked you didn't get scammed. You will only make a loss upon selling the coins you purchased, it is possible they regain their value over time. Sure your bitcoin bore didn't tell you it could go down as fast as it goes up, but that's on him for not telling you and you for not investigating before investing.
If you can gain 30% in 24 hours, you can certainly lose that much (or more!). Has happened many times in the past, and will happen again in the future, regardless of where the price sits.
Here's a fun chart from Reddit today:
https://i.redd.it/dnlduddb5ha01.jpg
Here's a fun chart from Reddit today:
https://i.redd.it/dnlduddb5ha01.jpg
Nobody who will ever talk to you knows the future price of any cryptocurrency. All advice you get is a complete stab in the dark and you'd do just as well to ask a monkey. The market is liquid enough that any public knowledge is already incorporated into the price before you hear about it.
The crypto market keeps going further down because every day there’s hundreds of articles of "news" reports going with some some doomsday promoting theme. Just today some scientific report claiming bots were responsible for bitcoin's rise from $150-$1000, and now the media is taking advantage of everyone’s fear of a rising China by claiming the PRC will start freezing bank accounts, etc.
Everyone is being played. If you’ve been paying attention to the news for the past two years know how easy it is to put out fake news articles. You know that fake news has been used to alter perceptions and maybe mess with elections. This is no different. Dropping false news reports to mess with market prices to cause market swings for profit is straight out of the textbook.
There is quite a lot money at play, and you'd be naive to think that all the random articles popping up on HN today are intended to do anything other than instill further panic and sell-offs. Do yourself and everyone a favor, start spreading awareness of the fake news about crypto! I kinda like this community and I would hate HN to lose to what is an egregious and coordinated effort to induce panic and destroy the crypto market.
Everyone is being played. If you’ve been paying attention to the news for the past two years know how easy it is to put out fake news articles. You know that fake news has been used to alter perceptions and maybe mess with elections. This is no different. Dropping false news reports to mess with market prices to cause market swings for profit is straight out of the textbook.
There is quite a lot money at play, and you'd be naive to think that all the random articles popping up on HN today are intended to do anything other than instill further panic and sell-offs. Do yourself and everyone a favor, start spreading awareness of the fake news about crypto! I kinda like this community and I would hate HN to lose to what is an egregious and coordinated effort to induce panic and destroy the crypto market.
> Everyone is being played.
How do we know that you're not also playing us, just from the opposite side?
How do we know that you're not also playing us, just from the opposite side?
Which news specifically, are fake news? How is anyone being played? If cryptocurrencies indeed are underpriced right now you can get in right now and make 50%+ when it goes up again.
Maybe, just maybe, enough people are starting to look down and see that they've run off a cliff and no longer have ground under their feet. These are assets built on the promise of potential future use.
Blockchain will live, but ArbitraryCoin? Who knows.
Maybe, just maybe, enough people are starting to look down and see that they've run off a cliff and no longer have ground under their feet. These are assets built on the promise of potential future use.
Blockchain will live, but ArbitraryCoin? Who knows.
But what's different this time is that there are first time investors in millions who joined in the last 2 months. They didn't read the white paper, they didn't invest in technology, they invested for the monster returns. So I think there will be a more sell off this time before it rebounds back to $13K+ or may be the 1000th time is the charm and the bubble actually gets burst.