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Alright guys, let's plot. How can we crash Bitcoin? Bitcoin is obviously a bit of a new bird when it comes to what sort of financial instrument it is. To me it

Alright guys, let's plot. How can we crash Bitcoin? Bitcoin is obviously a bit of a new bird when it comes to what sort of financial instrument it is. To me it seems to be half gold, a hedge against currency and other economic troubles and half ponzi scheme, a lot of the valuation is driven by the belief that there are more people in line behind you than there are in front of you. So if we take it that there is a bubbley aspect to bitcoin built upon ponzi scheme psychology but also the new aspect which is that many participants are aware it's a ponzi scheme and still believe in it anyway - is there anyway to pop it? It seems all the normal methods of popping a bubble like this have been eliminated by the completely decentralized nature of it. Is it even a bubble anymore if that's true?

empath75 9y ago
The futures market coming online in a few weeks will almost certainly crash it.
- frgtpsswrdlame 9y ago
  How so?
AnimalMuppet 9y ago
The normal way this goes is: Asset X has good fundamental utility/value. Investors see that, and put money in X. X goes up. That's not a bubble. Other investors see X going up, and put money in X because it's going up. That's the start of a bubble - when people buy, not because they think the fundamentals are good, but because it's going up and they don't want to miss out. So of course X goes up more because of all the new money coming in. The next stage comes when, because X is reliably going up, people borrow money to put in X. Now X really shoots up, because there's so much money going in. This keeps going while new money keeps coming in, but the investors are more nervous, because it's borrowed money. They're in trouble if they can't pay it back. And the more recently they invested, the more nervous they are, because they've got less room for it to fall before they owe the bank money. This falls apart in panic selling when the price of X drops. The price drops either when nobody can believe the current price of X any more, or else when banks won't lend any more money for buying X. So, if my understanding of bubbles is correct, and if Bitcoin is going to be a typical bubble, the relevant question is, how much of the money invested in Bitcoin is borrowed?
- elliotec 9y ago
  >>> Other investors see X going up, and put money in X because it's going up. That's the start of a bubble - when people buy, not because they think the fundamentals are good, but because it's going up and they don't want to miss out. So of course X goes up more because of all the new money coming in. That isn't just the start of the bubble, that's pretty much the definition - asset trading at the price that exceeds the asset's intrinsic value. If people are buying on speculation and not for it's utility, it's a bubble. >>> So, if my understanding of bubbles is correct, and if Bitcoin is going to be a typical bubble, the relevant question is, how much of the money invested in Bitcoin is borrowed? The amount of borrowed money used to purchase Bitcoin is certainly a lot greater than zero, which while not strictly a characteristic of a bubble, probably is a sign of nearing critical levels.

empath75 9y ago

The futures market coming online in a few weeks will almost certainly crash it.

frgtpsswrdlame 9y ago
How so?

AnimalMuppet 9y ago

The normal way this goes is: Asset X has good fundamental utility/value. Investors see that, and put money in X. X goes up. That's not a bubble. Other investors see X going up, and put money in X because it's going up. That's the start of a bubble - when people buy, not because they think the fundamentals are good, but because it's going up and they don't want to miss out. So of course X goes up more because of all the new money coming in. The next stage comes when, because X is reliably going up, people borrow money to put in X. Now X really shoots up, because there's so much money going in. This keeps going while new money keeps coming in, but the investors are more nervous, because it's borrowed money. They're in trouble if they can't pay it back. And the more recently they invested, the more nervous they are, because they've got less room for it to fall before they owe the bank money. This falls apart in panic selling when the price of X drops. The price drops either when nobody can believe the current price of X any more, or else when banks won't lend any more money for buying X. So, if my understanding of bubbles is correct, and if Bitcoin is going to be a typical bubble, the relevant question is, how much of the money invested in Bitcoin is borrowed?

elliotec 9y ago
>>> Other investors see X going up, and put money in X because it's going up. That's the start of a bubble - when people buy, not because they think the fundamentals are good, but because it's going up and they don't want to miss out. So of course X goes up more because of all the new money coming in. That isn't just the start of the bubble, that's pretty much the definition - asset trading at the price that exceeds the asset's intrinsic value. If people are buying on speculation and not for it's utility, it's a bubble. >>> So, if my understanding of bubbles is correct, and if Bitcoin is going to be a typical bubble, the relevant question is, how much of the money invested in Bitcoin is borrowed? The amount of borrowed money used to purchase Bitcoin is certainly a lot greater than zero, which while not strictly a characteristic of a bubble, probably is a sign of nearing critical levels.