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Everyone that I've talked to seems to be aware of the (seemingly) inevitable price drop, but that doesn't seem to be stopping them from buying in. Most people j

Everyone that I've talked to seems to be aware of the (seemingly) inevitable price drop, but that doesn't seem to be stopping them from buying in. Most people just assume they'll be able to sell what they have when the price drops before all the 'dumb' people have a chance to do the same. They just assume they'll be the lucky ones. I don't think everyone can be the lucky ones though. I think after this all calms down and a reasonable price is reached it'll be a bit safer to use as an actual currency. Pretty sure we were all saying that when bitcoin was around $200 though so maybe it won't ever settle.

jandrese 9y ago
That's textbook bubble behavior. One caveat with Bitcoin is that the network is so slow (effectively just 3 transactions per second) that a crash would be spread out over time. If a panic starts you won't be able to get a slot to sell your bitcoins unless you pay an enormous transaction fee. It could be an interesting situation where the rich literally pay to get to the head of the line and avoid the crash.
- googletazer 9y ago
  You don't understand how trading bitcoin works. Trading is not done on the chain, its the centralized exchanges which keep the books. Its instantaneous, with people who are involved in arbitrage between the exchanges keeping the prices level across all.
  - craigc 9y ago
    That assumes you have your coins on an exchange. If you have them in a wallet you would have to send them to the exchange before selling, and that process could take hours or days.
  - jo909 9y ago
    But only if you already have your bitcoins on the exchange. If you keep them in your own wallet you need a blockchain transaction to be able to trade them at all. That will effectively put a limit on the amount of bitcoin that is able to be sold quickly in a crash.
  - jandrese 9y ago
    Historically keeping your coins on an exchange is the most effective way to have them stolen. I would hope most bitcoin users would have learned their lesson by now.
  - dimillian 9y ago
    A bubble explosion would inevitably bankrupt the exchange platform first, then you. GDAX/Coinbase will never be able to create money out of thin air if everyone are selling and the BTC is dropping to $5. So even if you sell before everyone, even if you get your money on Coinbase virtually, they'll never honour the wire transfert.
    - jfoldager 9y ago
      Why will a bubble explosion bankrupt an exchange platform? The platform doesn't need to own any bitcoins and can be unaffected by price swings. The platform likely earns bitcoins through fees, but is free to trade them at any time. In principal all the bitcoins in the care of the exchange can be owned (or owed) to the traders.
  - tarnacious_ 9y ago
    I understand bitcoin are traded like this but it doesn't address this issue the parent raises. Also if you are trading through an exchange like this you are likely exposed to even greater risks. If you buy some bitcoin from an exchange and you don't get the bitcoin in an address you control, you are effectively buying an IOU for the bitcoin. The value of the IOU depends not only on the value of bitcoin but also on the exchanges willingness/ability to repay it. If the exchange doesn't own a similar amount of bitcoins as they have sold IOUs, at the current market value they couldn't possibly repay the IOUs they issued a month ago. If a significant amount of people they have issued IOUs want to redeem them, then they will surely need to sell some bitcoins to repay the IOUs they have issued. By using a futures market they could limit their exposure price changes when buying or selling coins they don't have, but these markets are quite young and it's certainly not clear how much risk these exchanges are exposing themselves to. As you apparently understand this better than we do, what do you think will happen on these exchanges if the value of bitcoin starts falling rapidly?
- Rmilb 9y ago
  > One caveat with Bitcoin is that the network is so slow (effectively just 3 transactions per second) that a crash would be spread out over time. This is false, the majority of people selling already have their coins on coinbase or other exchanges and would not add to the transaction volume hitting the blockchain.
- kamaal 9y ago
  The fact that you can only do 3 transactions per second is totally besides the point. Selling things requires a buyer. In case of a crash, you are trying to sell to the lowest bidder. If one even exists. Everybody in a situation like that is trying to sell and no one is trying to buy. So whom are you going to sell to?
prostoalex 9y ago
It’s next to impossible to say who’s doing the buying. With regulated financial instruments like ETFs or mutual funds there’s a concept of inflows and outflows where fiat cash changes hands. With Bitcoin exchanges a trade could be new money, formerly sitting as cash in a bank account, could be a miner converting his other currencies to BTC, could be a dude trading with himself with two accounts on the same exchange. We have no clear indication of actual new money coming into the ecosystem.

jandrese 9y ago

That's textbook bubble behavior. One caveat with Bitcoin is that the network is so slow (effectively just 3 transactions per second) that a crash would be spread out over time. If a panic starts you won't be able to get a slot to sell your bitcoins unless you pay an enormous transaction fee. It could be an interesting situation where the rich literally pay to get to the head of the line and avoid the crash.

googletazer 9y ago
You don't understand how trading bitcoin works. Trading is not done on the chain, its the centralized exchanges which keep the books. Its instantaneous, with people who are involved in arbitrage between the exchanges keeping the prices level across all.
- craigc 9y ago
  That assumes you have your coins on an exchange. If you have them in a wallet you would have to send them to the exchange before selling, and that process could take hours or days.
- jo909 9y ago
  But only if you already have your bitcoins on the exchange. If you keep them in your own wallet you need a blockchain transaction to be able to trade them at all. That will effectively put a limit on the amount of bitcoin that is able to be sold quickly in a crash.
- jandrese 9y ago
  Historically keeping your coins on an exchange is the most effective way to have them stolen. I would hope most bitcoin users would have learned their lesson by now.
- dimillian 9y ago
  A bubble explosion would inevitably bankrupt the exchange platform first, then you. GDAX/Coinbase will never be able to create money out of thin air if everyone are selling and the BTC is dropping to $5. So even if you sell before everyone, even if you get your money on Coinbase virtually, they'll never honour the wire transfert.
  - jfoldager 9y ago
    Why will a bubble explosion bankrupt an exchange platform? The platform doesn't need to own any bitcoins and can be unaffected by price swings. The platform likely earns bitcoins through fees, but is free to trade them at any time. In principal all the bitcoins in the care of the exchange can be owned (or owed) to the traders.
- tarnacious_ 9y ago
  I understand bitcoin are traded like this but it doesn't address this issue the parent raises. Also if you are trading through an exchange like this you are likely exposed to even greater risks. If you buy some bitcoin from an exchange and you don't get the bitcoin in an address you control, you are effectively buying an IOU for the bitcoin. The value of the IOU depends not only on the value of bitcoin but also on the exchanges willingness/ability to repay it. If the exchange doesn't own a similar amount of bitcoins as they have sold IOUs, at the current market value they couldn't possibly repay the IOUs they issued a month ago. If a significant amount of people they have issued IOUs want to redeem them, then they will surely need to sell some bitcoins to repay the IOUs they have issued. By using a futures market they could limit their exposure price changes when buying or selling coins they don't have, but these markets are quite young and it's certainly not clear how much risk these exchanges are exposing themselves to. As you apparently understand this better than we do, what do you think will happen on these exchanges if the value of bitcoin starts falling rapidly?
Rmilb 9y ago
> One caveat with Bitcoin is that the network is so slow (effectively just 3 transactions per second) that a crash would be spread out over time. This is false, the majority of people selling already have their coins on coinbase or other exchanges and would not add to the transaction volume hitting the blockchain.
kamaal 9y ago
The fact that you can only do 3 transactions per second is totally besides the point. Selling things requires a buyer. In case of a crash, you are trying to sell to the lowest bidder. If one even exists. Everybody in a situation like that is trying to sell and no one is trying to buy. So whom are you going to sell to?

prostoalex 9y ago

It’s next to impossible to say who’s doing the buying. With regulated financial instruments like ETFs or mutual funds there’s a concept of inflows and outflows where fiat cash changes hands. With Bitcoin exchanges a trade could be new money, formerly sitting as cash in a bank account, could be a miner converting his other currencies to BTC, could be a dude trading with himself with two accounts on the same exchange. We have no clear indication of actual new money coming into the ecosystem.