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> There is nothing that can guarantee that this ride is real I'm not sure what you mean by "real" here. Even if demand is created from questionable/fraudulent

> There is nothing that can guarantee that this ride is real I'm not sure what you mean by "real" here. Even if demand is created from questionable/fraudulent sources, the transactions are just as real as any others. That's not to say it's sustainable or even driven by rational behavior (it never really is). Any trend, bubble or not, is just that - a trend. There may be numerous factors driving it, and it's almost never a good idea to make trading decisions based on the trend itself (the few exceptions of traders should be very aware of the limitations and risks involved in such a strategy). > We'll see if the new fancy infrastructure that bitcoin got is rock-solid. Are you referring to Bitcoin XT / BIP 101? As far as I'm aware[1], the support for this is still represented by a minority, so we're not really going to see any "new fancy infrastructure" tested, at least not for a while. [1] http://xtnodes.com/ http://xtnodes.com/

gwern 11y ago
You misunderstand his point. The MMM ponzi schemers presumably don't want to hold bitcoins forever, and would be selling them for local currencies; if each bitcoin bought by a MMM victim is being immediately sold by a MMM con artist, then the net effect is zero and the effect on the price is much less than however much is being laundered and the price is boosted only by the float (however much bitcoins are being held at any particular second by a victim/con artist until they can send it or sell it and complete the circle).
- dperfect 11y ago
  I understand that, but it still doesn't make the trend any less "real" than trends seen from other drivers of price movement. To explain a bit more: If a merchant receives fraudulent credit card transactions, he/she could reasonably refer to those as "not real" because once the banks discover the fraud, they have the power to move money and effectively nullify those transactions in many cases. In contrast, on the blockchain (and off the blockchain for most bitcoin exchanges), that kind of thing doesn't normally happen. Even in Mt Gox's case where they directly manipulated the price from the inside, the people who bought and sold on the exchange still experienced "real" price movement, and as long as they got their money/BTC out before Gox imploded (which is another matter), those transactions and price movements were every bit as real as any other. From the perspective of other exchanges at the time it didn't matter at all whether the driving force for the trend was fraud or completely legitimate behavior. Finally, if MMM's "net effect is zero" as you say, then we wouldn't be seeing the price movement that we're seeing (and a price "boosted only by the float" is no different from a price boosted by anything else), or perhaps MMM just isn't the primary driving force in the current trend.
  - gwern 11y ago
    > and a price "boosted only by the float" is no different from a price boosted by anything else But the float is much smaller than the total volume of the fraud. If MMM is doing $10b of fraud a year, then it's not boosting Bitcoin's marketcap by $10b as one might naively guess ('$10b fraud drives Bitcoin price growth!' scream the headlines), it's boosting the price by much much less, by just the float (which could be more like $27m).
    - dperfect 11y ago
      I don't think anyone claimed that there was 1:1 relationship between the volume of this (or any other) fraud and a change in bitcoin's market cap. As far as bitcoin is concerned, the particular details of the fraud are entirely irrelevant.
      - gwern 11y ago
        I don't think anyone was as exactly specific as that, but in reading discussions of MMM's possible contribution, the description was almost universally (on Reddit and HN) comparing, explicitly or implicitly, the previous MMM's total volume to the Bitcoin market cap, showing that pretty much everyone seems to have been intuitively confusing stocks with flows - the unspoken argument seems to be 'the old MMM's total was about as large Bitcoin's market cap is now; the new MMM is also quite large and may be a large fraction of Bitcoin's market cap; therefore, the recent near-doubling of Bitcoin's market cap may be mostly or all due to new MMM's large total'.
- hippich 11y ago
  MMM works by constantly paying out. I.e. whole thing works as long as money circulate in the system. And as part of this circulation - people withdraw bitcoins and exchange these to local currency.

gwern 11y ago

You misunderstand his point. The MMM ponzi schemers presumably don't want to hold bitcoins forever, and would be selling them for local currencies; if each bitcoin bought by a MMM victim is being immediately sold by a MMM con artist, then the net effect is zero and the effect on the price is much less than however much is being laundered and the price is boosted only by the float (however much bitcoins are being held at any particular second by a victim/con artist until they can send it or sell it and complete the circle).

dperfect 11y ago
I understand that, but it still doesn't make the trend any less "real" than trends seen from other drivers of price movement. To explain a bit more: If a merchant receives fraudulent credit card transactions, he/she could reasonably refer to those as "not real" because once the banks discover the fraud, they have the power to move money and effectively nullify those transactions in many cases. In contrast, on the blockchain (and off the blockchain for most bitcoin exchanges), that kind of thing doesn't normally happen. Even in Mt Gox's case where they directly manipulated the price from the inside, the people who bought and sold on the exchange still experienced "real" price movement, and as long as they got their money/BTC out before Gox imploded (which is another matter), those transactions and price movements were every bit as real as any other. From the perspective of other exchanges at the time it didn't matter at all whether the driving force for the trend was fraud or completely legitimate behavior. Finally, if MMM's "net effect is zero" as you say, then we wouldn't be seeing the price movement that we're seeing (and a price "boosted only by the float" is no different from a price boosted by anything else), or perhaps MMM just isn't the primary driving force in the current trend.
- gwern 11y ago
  > and a price "boosted only by the float" is no different from a price boosted by anything else But the float is much smaller than the total volume of the fraud. If MMM is doing $10b of fraud a year, then it's not boosting Bitcoin's marketcap by $10b as one might naively guess ('$10b fraud drives Bitcoin price growth!' scream the headlines), it's boosting the price by much much less, by just the float (which could be more like $27m).
  - dperfect 11y ago
    I don't think anyone claimed that there was 1:1 relationship between the volume of this (or any other) fraud and a change in bitcoin's market cap. As far as bitcoin is concerned, the particular details of the fraud are entirely irrelevant.
    - gwern 11y ago
      I don't think anyone was as exactly specific as that, but in reading discussions of MMM's possible contribution, the description was almost universally (on Reddit and HN) comparing, explicitly or implicitly, the previous MMM's total volume to the Bitcoin market cap, showing that pretty much everyone seems to have been intuitively confusing stocks with flows - the unspoken argument seems to be 'the old MMM's total was about as large Bitcoin's market cap is now; the new MMM is also quite large and may be a large fraction of Bitcoin's market cap; therefore, the recent near-doubling of Bitcoin's market cap may be mostly or all due to new MMM's large total'.
hippich 11y ago
MMM works by constantly paying out. I.e. whole thing works as long as money circulate in the system. And as part of this circulation - people withdraw bitcoins and exchange these to local currency.