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As someone not invested in any of this at all, its fascinating to watch as people jump in completely oblivious to risk involved. I've listened to friends and f

As someone not invested in any of this at all, its fascinating to watch as people jump in completely oblivious to risk involved. I've listened to friends and family discuss investing "only $100" or "only $1000" for fractional amounts of bitcoin with the idea that they're sure fire bets for making money. I feel a bit like a rube sitting it out on the sidelines (and they're chastising me for not acting) as the price keeps going up-and-up and for most of them, these small investments (some quite large) have paid off for them. When does this bubble burst? And, what is it going to look like? 100k people in a single day is crazy to me as a layperson, but if this was to be compared to a stock run (disregarding dilution) what type of alarm bells should be ringing for those with the most to lose? Or, are we past that point now?

nickysielicki 9y ago
Why are you so sure that it's a bubble?
- and0 9y ago
  Not OP but as someone familiar with BTC tech / history I still haven't discovered any real use for it. As in, issues 99% of people in first-world countries have with fiat that it solves, rather than exacerbate (let alone the other massive hassles with using BTC). It seems to only exist for speculation. Its meteoric rise in the face of all this screams bubble to me. (But.. I've also been saying this for a while.)
  - komali2 9y ago
    Really? I often buy drugs with BTC. I have friends that use it to buy software. I guess "but that's illegal!" is a strong argument for those that have a lot of trust in governments. I... don't... so I'm happy to use non-governmental instruments. I still pay my taxes and contribute, I'm not an anarchist, I just like having means to express value that aren't controlled by governments.
    - Omnius 9y ago
      Yeah but your a small minority compared to the people using it as a means to speculate and trade. For the vast majority of buyers its pruelly investment into something they will never use beyond trading it back into cash.
      - komali2 9y ago
        Well that vast majority has no idea the wonderful drugs they are missing out on! ;P
    - aaron-lebo 9y ago
      Out of interest, is it dangerous to publicly state that you buy drugs with BTC (with or without personally identifying information attached)? As in, is it likely that someone would/could be targeted by law enforcement because of that, and could a comment like that be used in court?
      - komali2 9y ago
        Meh. If they wanted to they could fine me ten bajillion dollars for having a pirated version of Zootopia on my harddrive. I guess my words could bite me in the ass but I am fairly confident as a non-dealer I'm not exactly a target. Probably on a radar for when the Fed runs out of Big Fish, but for now probably fine.
        golangnews 9y ago
        Forever is what you need to worry about since you’ve posted this on the internet, not for now.
        jacobush 9y ago
        Who wants to live forever, if love must die?
    - rsynnott 9y ago
  - bduerst 9y ago
    For most economic bubbles, one way you can track/detect them via correlated market is signals that diverge. For example, the housing bubble in 2008 was detected when rental and mortgage prices diverged greatly. Since the bare-bones value of Bitcoin is tied to the cost of computation power and electricity to mine, you could theoretically track the price of bitcoin vs. the cost of the computational power to mine bitcoin at it's current block difficulty.
    - jacobush 9y ago
      Still looking good by that metric then?
      - bduerst 9y ago
        For Bitcoin? Dunno, I can't find the market rate for processing (i.e. $/gigaflop)
frgtpsswrdlame 9y ago
>When does this bubble burst? And, what is it going to look like? 100k people in a single day is crazy to me as a layperson, but if this was to be compared to a stock run (disregarding dilution) what type of alarm bells should be ringing for those with the most to lose? Or, are we past that point now? Well we'd need to figure out what would trigger a sell-off and whether that sell-off could be sustained. I've got no clue what would trigger a sell off but for whether a sell-off could be sustained, I'm not sure, there are lots and lots of true believers at this point. I think there could be a really interesting psychological dissection of investors in BTC and other high volatility assets because there's a sort of annealing of their risk attitude where every dip is a buying opportunity, the risk perception of people like that might be completely different from someone like me with no stake in BTC.
komali2 9y ago
I haven't been convinced that this has happened before, so other than "not diversifying is dumb," anybody that says with any authority "you should not be investing a small amount of money in cryptocurrency" has an equally strong argument as someone that says "you should be investing a small amount of money in cryptocurrency." I say as long as you follow centuries-old investment advice (diversify, always have a backup plan, have enough cash for a crash), there's no reason not to explore a new investment instrument. AKA, "fuck it, why not?" Depending on how much you make I don't see why not invest "only $1000," as long as your other tested investment instruments are already qualified (emergency savings, 401k/roth/whatever, stocks, bonds, int'l investments).
- nxsynonym 9y ago
  This is my feeling on it too. Nobody can predict what is going to happen with BTC or the whole cryptocurrency eco-system in general. There's still potential for the technology to take off and gain widespread adoption, just as there's the potential for all the big players to lose interest and move on to something else. If you want to 'invest'(I prefer gamble, or play at this point) - go for it. Just like every fad there are groups of people who believe strongly in the idea of the thing, and those who just want to get rich off of the thing. At this point nobody has definitive answers on the future of BTC. Public interest / perception is the biggest factor at play here. There can be literally 0 uses for cryptocurrency, but if news outlets are telling a layperson to buy it, they'll buy it. As long as the big players are interested in keeping it afloat, I don't see what would cause it's price to crash down to 0 over night.
- saas_co_de 9y ago
  gambling is gambling. if you want to gamble for fun then by all means enjoy yourself. but don't pretend it is an "investment."
  - DaiPlusPlus 9y ago
    But not all gambling is "gambling": Insurance is gambling, for example. Picking mutual funds and ETFs for your retirement plan is gambling. "Gambling" has connotations of immoral behaviour, especially in zero-sum or always-lose scenarios like poker and casinos. I don't think it's fair to describe educated and informed investment or buy-ins with words like that. I think "risky venture" is a less loaded, more neutral, term to describe it instead. As it is, I don't see Bitcoin and other currencies as true investments - just yet - I see the surge in Bitcoin mainly as a "distributed Ponzi-scheme" instead: those who are cashing-out now are those who bought-in early and being paid by the people buying it now - and the people buying it now expect more other people to buy into it later, pushing the price higher while supply and availability dwindle (owing to BTC's 28M cap). However, unlike a Ponzi-scheme, Bitcoin, Ethereum and others do have utility as a means of moving money around independently of existing, often state-controlled, bank networks or remittance services - and eventually Bitcoin will be the tool of choice for that - and when the tens of millions of people wanting to move money around do so is when we will know the real, unhyped, value of Bitcoin - until then, the question is if $7,000 USD/BTC is an obscene over-valuation, or is still comically low - and I don't know which side to believe. We'll get a better idea when, or if, legacy companies like Western Union and SWIFT get involved - or when real-time BTC transactions cost less than a VISA or Mastercard transaction (say ~3%). Right now a 250 byte transaction will cost 54,240 satoshi ($3.83) and take 30 minutes to get the first confirmation - making it totally unacceptable for retail purchases, for example. Hopefully when the Lightning Network or other solutions get finalized we'll start to see some real traction, but how many bubbles will burst before then? (Disclaimer: I'm a HODLer of BTC and ETH).
nostrademons 9y ago
Eh, the SEC warning a couple months ago was to Bitcoin as Alan Greenspan's "Irrational Exuberance" Dec 1996 warning was to the dot-com bubble. In 1996 the dot-com bubble was just getting started. We've got a while to go before this one goes up in flames. The sign to watch out for is when you have personal friends investing their life savings in Bitcoin - not $100 here and there, but $100k. And not 100K people in a single day (that's peanuts in the grand scheme of consumer markets...I've run Harry Potter fansites with more users than that, and it wasn't even one of the big ones), but tens of millions.
27182818284 9y ago
> "only $100" or "only $1000 If they're truly using the word "only" when they describe it I do not think you should worry. If they're saying something like "I put in a $100 so this better pay off!" that's a much bigger cause for concern.
swearwolves 9y ago
The grossly oversimplified answer... as long as a not-insignificant amount of people keep believing in its value as we approach the 21 million cap - it will continue to rise quite significantly. Simple supply and demand. It could have literally zero utility whatsoever - as long as people keep buying the hype that this will one day be a massive store of value - it will be a massive store of value. The better answer ...no one knows anything. 100% unadulterated speculation.
rb808 9y ago
Its still early days. 100k new users is nothing. Still 99% of the population do not have BTC accounts. Once you get everyone buying then you can say its a bubble, until then there is more room to go up!
- berberous 9y ago
  My nearly 70 year old mother, technophobe and risk averse to a fault (e.g., had much of her retirement portfolio since'09 out of equities), finally asked me the other day if she should buy some Bitcoin. Yes, if cryptocurrencies prove to be a real revolution the way the Internet was, there's plenty of upside left. If not, though, I'm not sure there's too many greater fools left if my mother's almost there. As they say, you know it's time to sell when shoeshine boys give you stock tips...
dabockster 9y ago
I think the alarm bells were in the alts, not Bitcoin itself. The crypto community used to use alts as a way of testing out new transaction processing concepts (Proof of Stake, new mining algorithms to stop ASIC abuse, etc). Now, we seem to be testing out these new techniques on Bitcoin itself through the various forks that have occurred in recent months.

nickysielicki 9y ago

Why are you so sure that it's a bubble?

and0 9y ago
Not OP but as someone familiar with BTC tech / history I still haven't discovered any real use for it. As in, issues 99% of people in first-world countries have with fiat that it solves, rather than exacerbate (let alone the other massive hassles with using BTC). It seems to only exist for speculation. Its meteoric rise in the face of all this screams bubble to me. (But.. I've also been saying this for a while.)
- komali2 9y ago
  Really? I often buy drugs with BTC. I have friends that use it to buy software. I guess "but that's illegal!" is a strong argument for those that have a lot of trust in governments. I... don't... so I'm happy to use non-governmental instruments. I still pay my taxes and contribute, I'm not an anarchist, I just like having means to express value that aren't controlled by governments.
  - Omnius 9y ago
    Yeah but your a small minority compared to the people using it as a means to speculate and trade. For the vast majority of buyers its pruelly investment into something they will never use beyond trading it back into cash.
    - komali2 9y ago
      Well that vast majority has no idea the wonderful drugs they are missing out on! ;P
  - aaron-lebo 9y ago
    Out of interest, is it dangerous to publicly state that you buy drugs with BTC (with or without personally identifying information attached)? As in, is it likely that someone would/could be targeted by law enforcement because of that, and could a comment like that be used in court?
    - komali2 9y ago
      Meh. If they wanted to they could fine me ten bajillion dollars for having a pirated version of Zootopia on my harddrive. I guess my words could bite me in the ass but I am fairly confident as a non-dealer I'm not exactly a target. Probably on a radar for when the Fed runs out of Big Fish, but for now probably fine.
      - golangnews 9y ago
        Forever is what you need to worry about since you’ve posted this on the internet, not for now.
        jacobush 9y ago
        Who wants to live forever, if love must die?
  - rsynnott 9y ago
- bduerst 9y ago
  For most economic bubbles, one way you can track/detect them via correlated market is signals that diverge. For example, the housing bubble in 2008 was detected when rental and mortgage prices diverged greatly. Since the bare-bones value of Bitcoin is tied to the cost of computation power and electricity to mine, you could theoretically track the price of bitcoin vs. the cost of the computational power to mine bitcoin at it's current block difficulty.
  - jacobush 9y ago
    Still looking good by that metric then?
    - bduerst 9y ago
      For Bitcoin? Dunno, I can't find the market rate for processing (i.e. $/gigaflop)

frgtpsswrdlame 9y ago

>When does this bubble burst? And, what is it going to look like? 100k people in a single day is crazy to me as a layperson, but if this was to be compared to a stock run (disregarding dilution) what type of alarm bells should be ringing for those with the most to lose? Or, are we past that point now? Well we'd need to figure out what would trigger a sell-off and whether that sell-off could be sustained. I've got no clue what would trigger a sell off but for whether a sell-off could be sustained, I'm not sure, there are lots and lots of true believers at this point. I think there could be a really interesting psychological dissection of investors in BTC and other high volatility assets because there's a sort of annealing of their risk attitude where every dip is a buying opportunity, the risk perception of people like that might be completely different from someone like me with no stake in BTC.

komali2 9y ago

I haven't been convinced that this has happened before, so other than "not diversifying is dumb," anybody that says with any authority "you should not be investing a small amount of money in cryptocurrency" has an equally strong argument as someone that says "you should be investing a small amount of money in cryptocurrency." I say as long as you follow centuries-old investment advice (diversify, always have a backup plan, have enough cash for a crash), there's no reason not to explore a new investment instrument. AKA, "fuck it, why not?" Depending on how much you make I don't see why not invest "only $1000," as long as your other tested investment instruments are already qualified (emergency savings, 401k/roth/whatever, stocks, bonds, int'l investments).

nxsynonym 9y ago
This is my feeling on it too. Nobody can predict what is going to happen with BTC or the whole cryptocurrency eco-system in general. There's still potential for the technology to take off and gain widespread adoption, just as there's the potential for all the big players to lose interest and move on to something else. If you want to 'invest'(I prefer gamble, or play at this point) - go for it. Just like every fad there are groups of people who believe strongly in the idea of the thing, and those who just want to get rich off of the thing. At this point nobody has definitive answers on the future of BTC. Public interest / perception is the biggest factor at play here. There can be literally 0 uses for cryptocurrency, but if news outlets are telling a layperson to buy it, they'll buy it. As long as the big players are interested in keeping it afloat, I don't see what would cause it's price to crash down to 0 over night.
saas_co_de 9y ago
gambling is gambling. if you want to gamble for fun then by all means enjoy yourself. but don't pretend it is an "investment."
- DaiPlusPlus 9y ago
  But not all gambling is "gambling": Insurance is gambling, for example. Picking mutual funds and ETFs for your retirement plan is gambling. "Gambling" has connotations of immoral behaviour, especially in zero-sum or always-lose scenarios like poker and casinos. I don't think it's fair to describe educated and informed investment or buy-ins with words like that. I think "risky venture" is a less loaded, more neutral, term to describe it instead. As it is, I don't see Bitcoin and other currencies as true investments - just yet - I see the surge in Bitcoin mainly as a "distributed Ponzi-scheme" instead: those who are cashing-out now are those who bought-in early and being paid by the people buying it now - and the people buying it now expect more other people to buy into it later, pushing the price higher while supply and availability dwindle (owing to BTC's 28M cap). However, unlike a Ponzi-scheme, Bitcoin, Ethereum and others do have utility as a means of moving money around independently of existing, often state-controlled, bank networks or remittance services - and eventually Bitcoin will be the tool of choice for that - and when the tens of millions of people wanting to move money around do so is when we will know the real, unhyped, value of Bitcoin - until then, the question is if $7,000 USD/BTC is an obscene over-valuation, or is still comically low - and I don't know which side to believe. We'll get a better idea when, or if, legacy companies like Western Union and SWIFT get involved - or when real-time BTC transactions cost less than a VISA or Mastercard transaction (say ~3%). Right now a 250 byte transaction will cost 54,240 satoshi ($3.83) and take 30 minutes to get the first confirmation - making it totally unacceptable for retail purchases, for example. Hopefully when the Lightning Network or other solutions get finalized we'll start to see some real traction, but how many bubbles will burst before then? (Disclaimer: I'm a HODLer of BTC and ETH).

nostrademons 9y ago

Eh, the SEC warning a couple months ago was to Bitcoin as Alan Greenspan's "Irrational Exuberance" Dec 1996 warning was to the dot-com bubble. In 1996 the dot-com bubble was just getting started. We've got a while to go before this one goes up in flames. The sign to watch out for is when you have personal friends investing their life savings in Bitcoin - not $100 here and there, but $100k. And not 100K people in a single day (that's peanuts in the grand scheme of consumer markets...I've run Harry Potter fansites with more users than that, and it wasn't even one of the big ones), but tens of millions.

27182818284 9y ago

> "only $100" or "only $1000 If they're truly using the word "only" when they describe it I do not think you should worry. If they're saying something like "I put in a $100 so this better pay off!" that's a much bigger cause for concern.

swearwolves 9y ago

The grossly oversimplified answer... as long as a not-insignificant amount of people keep believing in its value as we approach the 21 million cap - it will continue to rise quite significantly. Simple supply and demand. It could have literally zero utility whatsoever - as long as people keep buying the hype that this will one day be a massive store of value - it will be a massive store of value. The better answer ...no one knows anything. 100% unadulterated speculation.

rb808 9y ago

Its still early days. 100k new users is nothing. Still 99% of the population do not have BTC accounts. Once you get everyone buying then you can say its a bubble, until then there is more room to go up!

berberous 9y ago
My nearly 70 year old mother, technophobe and risk averse to a fault (e.g., had much of her retirement portfolio since'09 out of equities), finally asked me the other day if she should buy some Bitcoin. Yes, if cryptocurrencies prove to be a real revolution the way the Internet was, there's plenty of upside left. If not, though, I'm not sure there's too many greater fools left if my mother's almost there. As they say, you know it's time to sell when shoeshine boys give you stock tips...

dabockster 9y ago

I think the alarm bells were in the alts, not Bitcoin itself. The crypto community used to use alts as a way of testing out new transaction processing concepts (Proof of Stake, new mining algorithms to stop ASIC abuse, etc). Now, we seem to be testing out these new techniques on Bitcoin itself through the various forks that have occurred in recent months.