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I'm becoming more convinced that Bitcoin must be in a bubble. The transaction fees are so high now that it's not really usable for actual transactions. For inst

by Nition 9y ago

I'm becoming more convinced that Bitcoin must be in a bubble. The transaction fees are so high now that it's not really usable for actual transactions. For instance Steam just dropped support for that reason and because it's so volatile[1]. The power consumption to process those transactions has gotten similarly insane, and there's no sign of a move to proof-of-stake or anything less intensive. I don't think cryptocurrency is a bad idea in itself but Bitcoin really doesn't seem like a good currency right now, and there's little sign of it heading to a good place. [1] https://steamcommunity.com/games/593110/announcements/detail/1464096684955433613 https://steamcommunity.com/games/593110/announcements/detail...

onion2k 9y ago
This is what I've been thinking lately too. Crytocurrencies are likely to prove useful, but Bitcoin's limitations make it much less useful than it's competitors. It's big right now because it was the first one. That won't keep the value high forever.
- ryan_j_naughton 9y ago
  Bitcoin is useless as a currency. It is naturally deflationary, which makes for a terrible currency as no one wants to spend a unit of currency that is going to be worth more tomorrow in real terms. What bitcoin is useful for is simply as a store of value -- as digital gold. In that regard it is working perfectly. It is a well defined property right on a good with limited quantity. Given that there will be way fewer transactions for a store of value than for a currency, I am not as concerned. Further, it makes sense for its value to soar as more demand increases for it as a store of value. I'm not saying it isn't a bubble -- it will likely correct at some point. But long term I think it will still hit $100K to 200K per coin given the limited supply and still increasing group of people who will use it as a store of value.
  - kamaal 9y ago
    'Store of value' is a dead on arrival concept in a world where inflation exists. Investments have a 'Store of value' feature by default built into them. For Bitcoin to be viable its value has to endlessly increase over time. Or you are simply better off storing your cash beneath your mattress.
aardvark291 9y ago
"I'm becoming more convinced that Bitcoin must be in a bubble." Well, what else could it be?
gst 9y ago
Let's assume you're already invested in Bitcoin and you're sure it's a bubble. What's the best strategy going forward? I've been convinced that it's a bubble since 2011 or so so if I'd sold everything because of that I'd sold it at a fraction of the current price. On the other hand you don't want to hold it forever, as you assume it's going to crash at some future point. I think slowly selling on the way up is a good strategy. For example everytime it doubles you sell 10% or 20% (depending on the risk you are willing to take). At https://bitcointalk.org/index.php?topic=345065.0 https://bitcointalk.org/index.php?topic=345065.0 there's a better description of this approach and at http://bitcoinsavingsplan.com/ http://bitcoinsavingsplan.com/ there's a calculator to check scenarios with different numbers. Any other better approaches?
- NicoJuicy 9y ago
  I went out 3 times completely and went in with the starting amount ( 3% of my savings, so not much). The last rebuy was lower, i think the bubble will almost pop ( banks are investing, they will let it drop when they want). I truelly regret people going all-in, once it collapses. They won't get their money out because of time-outs on the exchanges. If I lose the current amount, i won't care and every time it goes to high, so I would care. I just go out. I don't need to stress about it and I don't have FOMO, because I have some. Also, I set/adjust my limit orders every 3-4 days and hope one hits.
  - kamaal 9y ago
    >> They won't get their money out because of time-outs on the exchanges. Timeouts and software glitches are hardly the point here. You can't sell it, unless you have a buyer. And you won't have a buyer because every one is trying to sell it. You are forced to hold it, because what else can you do?
- hyperpape 9y ago
  Rebalancing is the concept you're looking for. https://www.investopedia.com/terms/r/rebalancing.asp https://www.investopedia.com/terms/r/rebalancing.asp As for your strategy, if it really keeps doubling, and you only take out 10-20% per doubling, you'll end up with 90% of your net worth in bitcoin, which seems unreasonable. But that comes down to a question: even if you give it high odds that it will continue to go up, if you're not certain of it, then you should probably want to accept some risk of losing future gains to avoid some risk of losing what you have. If you are certain it will go up...you have bad judgment.
marshray 9y ago
I looked at this the other day. There is about one recorded Bitcoin blockchain transaction, ever, for every $1000 of current valuation. The early transactions were at a much lower conversion rate so they would be of larger BTC that tended to raise the average $/txn. But if Bitcoin as a payment network were growing exponentially, we would expect a large proportion of transactions to be relatively recent and at recent valuations. So either: A. Bitcoin is used for transactions of over $1000 on average, or B. speculation is driving up the valuation far beyond its utility. In either case, it's clearly not about frictionless microtransactions anymore.
- leggomylibro 9y ago
  Could it maybe be about getting 8-10 figures of dirty money out of <insert country here> and into Switzerland? I mean, if I had made a killing out of the various petty crimes available to public officials and wanted to retire on that, what's my other option? Trying to ferry precious gemstones through customs? I'd take the transaction fee, the challenge would probably be finding an exchange that would let you cash out that kind of money.
  - marshray 9y ago
    Why would you ever want to use an immutable public blockchain for such a transaction? Bitcoin is perhaps the most traceable currency in the world. This is something I just don't understand about Bitcoin's value proposition. > what's my other option? I hear Oriental rug import businesses are popular. > the challenge would probably be finding an exchange that would let you cash out that kind of money. Even if, I hear the IRS is requesting transaction records from the major exchanges.
    - deleted 9y ago
      [deleted]
nkkollaw 9y ago
> The power consumption to process those transactions has gotten similarly insane What's involved in processing a transaction?
- rainbowmverse 9y ago
  Lots and lots of computing power. It's the basis of Bitcoin. https://en.bitcoin.it/wiki/Proof_of_work https://en.bitcoin.it/wiki/Proof_of_work I'm not well-versed on any of this, so I might be wrong.
  - nkkollaw 9y ago
    Ah, yes sorry--I thought you meant computing power to record 1 transaction in the ledger.

by Nition 9y ago

onion2k 9y ago

This is what I've been thinking lately too. Crytocurrencies are likely to prove useful, but Bitcoin's limitations make it much less useful than it's competitors. It's big right now because it was the first one. That won't keep the value high forever.

ryan_j_naughton 9y ago
Bitcoin is useless as a currency. It is naturally deflationary, which makes for a terrible currency as no one wants to spend a unit of currency that is going to be worth more tomorrow in real terms. What bitcoin is useful for is simply as a store of value -- as digital gold. In that regard it is working perfectly. It is a well defined property right on a good with limited quantity. Given that there will be way fewer transactions for a store of value than for a currency, I am not as concerned. Further, it makes sense for its value to soar as more demand increases for it as a store of value. I'm not saying it isn't a bubble -- it will likely correct at some point. But long term I think it will still hit $100K to 200K per coin given the limited supply and still increasing group of people who will use it as a store of value.
- kamaal 9y ago
  'Store of value' is a dead on arrival concept in a world where inflation exists. Investments have a 'Store of value' feature by default built into them. For Bitcoin to be viable its value has to endlessly increase over time. Or you are simply better off storing your cash beneath your mattress.

aardvark291 9y ago

"I'm becoming more convinced that Bitcoin must be in a bubble." Well, what else could it be?

gst 9y ago

Let's assume you're already invested in Bitcoin and you're sure it's a bubble. What's the best strategy going forward? I've been convinced that it's a bubble since 2011 or so so if I'd sold everything because of that I'd sold it at a fraction of the current price. On the other hand you don't want to hold it forever, as you assume it's going to crash at some future point. I think slowly selling on the way up is a good strategy. For example everytime it doubles you sell 10% or 20% (depending on the risk you are willing to take). At https://bitcointalk.org/index.php?topic=345065.0 https://bitcointalk.org/index.php?topic=345065.0 there's a better description of this approach and at http://bitcoinsavingsplan.com/ http://bitcoinsavingsplan.com/ there's a calculator to check scenarios with different numbers. Any other better approaches?

NicoJuicy 9y ago
I went out 3 times completely and went in with the starting amount ( 3% of my savings, so not much). The last rebuy was lower, i think the bubble will almost pop ( banks are investing, they will let it drop when they want). I truelly regret people going all-in, once it collapses. They won't get their money out because of time-outs on the exchanges. If I lose the current amount, i won't care and every time it goes to high, so I would care. I just go out. I don't need to stress about it and I don't have FOMO, because I have some. Also, I set/adjust my limit orders every 3-4 days and hope one hits.
- kamaal 9y ago
  >> They won't get their money out because of time-outs on the exchanges. Timeouts and software glitches are hardly the point here. You can't sell it, unless you have a buyer. And you won't have a buyer because every one is trying to sell it. You are forced to hold it, because what else can you do?
hyperpape 9y ago
Rebalancing is the concept you're looking for. https://www.investopedia.com/terms/r/rebalancing.asp https://www.investopedia.com/terms/r/rebalancing.asp As for your strategy, if it really keeps doubling, and you only take out 10-20% per doubling, you'll end up with 90% of your net worth in bitcoin, which seems unreasonable. But that comes down to a question: even if you give it high odds that it will continue to go up, if you're not certain of it, then you should probably want to accept some risk of losing future gains to avoid some risk of losing what you have. If you are certain it will go up...you have bad judgment.

marshray 9y ago

I looked at this the other day. There is about one recorded Bitcoin blockchain transaction, ever, for every $1000 of current valuation. The early transactions were at a much lower conversion rate so they would be of larger BTC that tended to raise the average $/txn. But if Bitcoin as a payment network were growing exponentially, we would expect a large proportion of transactions to be relatively recent and at recent valuations. So either: A. Bitcoin is used for transactions of over $1000 on average, or B. speculation is driving up the valuation far beyond its utility. In either case, it's clearly not about frictionless microtransactions anymore.

leggomylibro 9y ago
Could it maybe be about getting 8-10 figures of dirty money out of <insert country here> and into Switzerland? I mean, if I had made a killing out of the various petty crimes available to public officials and wanted to retire on that, what's my other option? Trying to ferry precious gemstones through customs? I'd take the transaction fee, the challenge would probably be finding an exchange that would let you cash out that kind of money.
- marshray 9y ago
  Why would you ever want to use an immutable public blockchain for such a transaction? Bitcoin is perhaps the most traceable currency in the world. This is something I just don't understand about Bitcoin's value proposition. > what's my other option? I hear Oriental rug import businesses are popular. > the challenge would probably be finding an exchange that would let you cash out that kind of money. Even if, I hear the IRS is requesting transaction records from the major exchanges.
  - deleted 9y ago
    [deleted]

nkkollaw 9y ago

> The power consumption to process those transactions has gotten similarly insane What's involved in processing a transaction?

rainbowmverse 9y ago
Lots and lots of computing power. It's the basis of Bitcoin. https://en.bitcoin.it/wiki/Proof_of_work https://en.bitcoin.it/wiki/Proof_of_work I'm not well-versed on any of this, so I might be wrong.
- nkkollaw 9y ago
  Ah, yes sorry--I thought you meant computing power to record 1 transaction in the ledger.