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Bitcoin has been through at least 3-4 major "run ups" already. Those who do not look at the log chart think that "this time it's different" and Bitcoin will sur

Bitcoin has been through at least 3-4 major "run ups" already. Those who do not look at the log chart think that "this time it's different" and Bitcoin will surely die for good. Later it'll crash from $250K to $50K and then it will certainly be the end. 2011: $1->$30->$3. 2012: $5->$15->$10. 2013: $10->$270->$80. 2013-14: $100->$1100->$250. 2016-2018: $500->$20000->$6000 (so far).

fru2013 8y ago
Past performance is not indicative of future results.
- 21 8y ago
  Then why do people say "invest in the stock market for the long run by buying an index fund?"
  - GhostVII 8y ago
    Because over time, stocks tend to increase in value, because you are investing in a company that is producing something of value. You have a reason to believe that stocks will increase in value over a long period of time, other than just historical information.
  - Retric 8y ago
    Because of minimizing risk, and minimizing transaction fees. If you buy 100 stocks and 10 of them go to 0 you are out 10%. However, if the other 90 stocks are up more than 15% then you have gained a little money. But, if you buy 100 different stocks by hand then you pay 100 different transaction fees and have to keep track of them independently for tax etc.
    - jonas21 8y ago
      I'm pretty sure you still need to pay taxes on the dividends even if you're reinvesting them.
      - tedunangst 8y ago
        If it's an IRA, there's no tax unless withdrawing.
      - Retric 8y ago
        Sorry, your right. There are tax advantages, but it's more complex than simply not paying short term capital gains on dividends.
  - cubano 8y ago
    Because the fees are the lowest and it's been proven over and over again that the number 1 headwind against long-term equity growth is the fee structure. Index funds require no special knowledge to build...just buy the S&P100 stocks in equal amounts and boom, so the fees for such a fund can be super low.
  - gomox 8y ago
    Amazingly only one of the three replies you got so far understood the point of your comparison.
  - JumpCrisscross 8y ago
    > Then why do people say "invest in the stock market for the long run by buying an index fund?" Because the American economy has historically grown. Buying an index of Austrian stocks on the eve of WWI would have been about as effective as buying cryptocurrencies.
    - SilasX 8y ago
      IOW, taking past performance as indicative of future returns.
    - oleganza 8y ago
      Considering that US is getting into debt on an accelerated schedule and runs wars all over the world non-stop since WW2, and has biggest military budget, and otherwise resembles the roman empire at its peak, do you think that musical chairs game will never end?
- SilasX 8y ago
  Past performance doesn't guarantee similar future results. If you think it's not indicative, then you're rejecting induction, the cornerstone of learning.
guildenstern 8y ago
Consider how much money had to enter the market for the price to reach $1000. Consider how much money had to enter the market for the price to reach $20,000. Now consider how much money will have to enter the market, after everyday “normal” people from outside of tech have lost hundreds or thousands, for the price to reach $250,000.
- charlesdm 8y ago
  Just look at the valuation of the dot-com bubble, which was mostly US driven. The market went up to about $10tn (in todays dollars). We saw $800bn for crypto at the height, and it's down to about $200bn at the moment.
- sdf43543t345 8y ago
  The price is the last price paid for the coin. So by definition, if nobody sold any coin, it would only take 250000-6000 dollars for the price to reach 250k. Its not so much about how much money enters the market, but supply/demand for the underlying asset.
rootusrootus 8y ago
That looks like skillful manipulation to me. There is an important difference with the most recent bubble -- now bitcoin is a household name. Where is the next pool of gamblers coming from?
- tryptophan 8y ago
  Greater fool theory works great until you run out of fools! With the amount of attention that bitcoin got, I feel we are close to tapping into the last of the fools.
- judah 8y ago
  Institutional investors via Bitcoin futures ETFs[0]. It will likely result in a lot of money flowing into the market via funds and investment houses where investors seek to diversify their investments. That will probably bring the cryptocurrency market back up to $20K and above. It probably won't happen until 2019 or 2020, though. The SEC is still on the fence about it, but I see it as an eventual inevitability. [0]: https://www.coindesk.com/sec-bitcoin-futures-etf/ https://www.coindesk.com/sec-bitcoin-futures-etf/
  - rootusrootus 8y ago
    Good grief, I hope that does not happen. I think any professional financial services people who blatantly speculate with clients' funds should be on the hook for criminal penalties. It's one thing for Joe Blow to play the speculation game with his own money, it's entirely different for a professional to do it with everyone else's.
    - tim333 8y ago
      Trouble is Joe Blow often wants it. You say you want to invest in this thingy that seems to go up 100% a year or nice sensible bonds and quite a few will want the thingy.
    - spiralx 8y ago
      Don't worry, the SEC has now declined to approve two separate attempts at a Bitcoin-based ETF, both times citing the extensive manipulation of Bitcoin markets as one of the reasons. I don't see them changing their attitude given that rampant market manipulation is the main thing keeping Bitcoin alive at all right now.
orblivion 8y ago
Your data shows that it's reasonably possible for it to spike again. However the sort of mockery of people who do think that it's different this time (and I see it all the time, it's not just you) is sort of funny. As if people who don't have faith in Bitcoin are somehow the naive ones. As if it's established wisdom by now, proven time and again through the ages, that Bitcoin always bounces back and outdoes itself by a factor of 10. Again, it's quite possible that it will. I'll likely buy in when I get around to it. But this attitude is just a little silly.
- Exuma 8y ago
  "Bitcoin always bounces back" is also silly. It could, or it could not.
  - orblivion 8y ago
    Yep, that was a subset of my point. Maybe I wasn't totally clear.
lifeformed 8y ago
And it'll keep going to quadrillions of dollars, right? Obviously there's a limit somewhere. It seems reasonable to think that $20k is already pushing it.
- sdf43543t345 8y ago
  The limit is somewhere near M2 of planet Earth. Thats quite a high number! something like $10M USD/coin. Would be nice.

fru2013 8y ago

Past performance is not indicative of future results.

21 8y ago
Then why do people say "invest in the stock market for the long run by buying an index fund?"
- GhostVII 8y ago
  Because over time, stocks tend to increase in value, because you are investing in a company that is producing something of value. You have a reason to believe that stocks will increase in value over a long period of time, other than just historical information.
- Retric 8y ago
  Because of minimizing risk, and minimizing transaction fees. If you buy 100 stocks and 10 of them go to 0 you are out 10%. However, if the other 90 stocks are up more than 15% then you have gained a little money. But, if you buy 100 different stocks by hand then you pay 100 different transaction fees and have to keep track of them independently for tax etc.
  - jonas21 8y ago
    I'm pretty sure you still need to pay taxes on the dividends even if you're reinvesting them.
    - tedunangst 8y ago
      If it's an IRA, there's no tax unless withdrawing.
    - Retric 8y ago
      Sorry, your right. There are tax advantages, but it's more complex than simply not paying short term capital gains on dividends.
- cubano 8y ago
  Because the fees are the lowest and it's been proven over and over again that the number 1 headwind against long-term equity growth is the fee structure. Index funds require no special knowledge to build...just buy the S&P100 stocks in equal amounts and boom, so the fees for such a fund can be super low.
- gomox 8y ago
  Amazingly only one of the three replies you got so far understood the point of your comparison.
- JumpCrisscross 8y ago
  > Then why do people say "invest in the stock market for the long run by buying an index fund?" Because the American economy has historically grown. Buying an index of Austrian stocks on the eve of WWI would have been about as effective as buying cryptocurrencies.
  - SilasX 8y ago
    IOW, taking past performance as indicative of future returns.
  - oleganza 8y ago
    Considering that US is getting into debt on an accelerated schedule and runs wars all over the world non-stop since WW2, and has biggest military budget, and otherwise resembles the roman empire at its peak, do you think that musical chairs game will never end?
SilasX 8y ago
Past performance doesn't guarantee similar future results. If you think it's not indicative, then you're rejecting induction, the cornerstone of learning.

guildenstern 8y ago

Consider how much money had to enter the market for the price to reach $1000. Consider how much money had to enter the market for the price to reach $20,000. Now consider how much money will have to enter the market, after everyday “normal” people from outside of tech have lost hundreds or thousands, for the price to reach $250,000.

charlesdm 8y ago
Just look at the valuation of the dot-com bubble, which was mostly US driven. The market went up to about $10tn (in todays dollars). We saw $800bn for crypto at the height, and it's down to about $200bn at the moment.
sdf43543t345 8y ago
The price is the last price paid for the coin. So by definition, if nobody sold any coin, it would only take 250000-6000 dollars for the price to reach 250k. Its not so much about how much money enters the market, but supply/demand for the underlying asset.

rootusrootus 8y ago

That looks like skillful manipulation to me. There is an important difference with the most recent bubble -- now bitcoin is a household name. Where is the next pool of gamblers coming from?

tryptophan 8y ago
Greater fool theory works great until you run out of fools! With the amount of attention that bitcoin got, I feel we are close to tapping into the last of the fools.
judah 8y ago
Institutional investors via Bitcoin futures ETFs[0]. It will likely result in a lot of money flowing into the market via funds and investment houses where investors seek to diversify their investments. That will probably bring the cryptocurrency market back up to $20K and above. It probably won't happen until 2019 or 2020, though. The SEC is still on the fence about it, but I see it as an eventual inevitability. [0]: https://www.coindesk.com/sec-bitcoin-futures-etf/ https://www.coindesk.com/sec-bitcoin-futures-etf/
- rootusrootus 8y ago
  Good grief, I hope that does not happen. I think any professional financial services people who blatantly speculate with clients' funds should be on the hook for criminal penalties. It's one thing for Joe Blow to play the speculation game with his own money, it's entirely different for a professional to do it with everyone else's.
  - tim333 8y ago
    Trouble is Joe Blow often wants it. You say you want to invest in this thingy that seems to go up 100% a year or nice sensible bonds and quite a few will want the thingy.
  - spiralx 8y ago
    Don't worry, the SEC has now declined to approve two separate attempts at a Bitcoin-based ETF, both times citing the extensive manipulation of Bitcoin markets as one of the reasons. I don't see them changing their attitude given that rampant market manipulation is the main thing keeping Bitcoin alive at all right now.

orblivion 8y ago

Your data shows that it's reasonably possible for it to spike again. However the sort of mockery of people who do think that it's different this time (and I see it all the time, it's not just you) is sort of funny. As if people who don't have faith in Bitcoin are somehow the naive ones. As if it's established wisdom by now, proven time and again through the ages, that Bitcoin always bounces back and outdoes itself by a factor of 10. Again, it's quite possible that it will. I'll likely buy in when I get around to it. But this attitude is just a little silly.

Exuma 8y ago
"Bitcoin always bounces back" is also silly. It could, or it could not.
- orblivion 8y ago
  Yep, that was a subset of my point. Maybe I wasn't totally clear.

lifeformed 8y ago

And it'll keep going to quadrillions of dollars, right? Obviously there's a limit somewhere. It seems reasonable to think that $20k is already pushing it.

sdf43543t345 8y ago
The limit is somewhere near M2 of planet Earth. Thats quite a high number! something like $10M USD/coin. Would be nice.