8 ms·

Bitcoin Was a Bubble and It Popped

64 points by taytus 8y ago

ascendantlogic 8y ago
As it has done multiple times previously. I anxiously await reading why this time is "different", just like all the previous times.
- ummonk 8y ago
  This is the first pop that I’ve felt is likely to be the last. A lot of people got burnt and are unwilling to jump back in.
  - devereaux 8y ago
    All of this has happened before, and all of this will happen again. EDIT: and I stand by my claim.
    - koboll 8y ago
      How? Which investors are going to believe the next bubble isn't a bubble?
      - empath75 8y ago
        I am a huge crypto currency skeptic and think the market is largely driven by massive amounts of fraud. That said -- eventually the price will drop to the point where the price is entirely driven by Bitcoin's natural customer base -- tax cheats, money launderers, drug dealers, etc, and will probably in fact over correct. Just for the sake of argument, let's said that 'natural price' is $500 or $600 a bitcoin -- it bottomed out around $300 last time and we've had a 'halvening' since then. So let's imagine the price drops down to below $1000, and stays around that range for a year or more. Then a new halvening happens, the price doubles to $2000. Maybe someone figures out how to do something useful with cryptocurrency? 3-4 years from now, people will have already forgotten about the last bubble and might FOMO again. Bitcoin has a long history of boom and bust with each boom being bigger than the last. It won't take much to convince people that another boom is on the offing.
        vkou 8y ago
        Ransomware authors, heroin dealers and money launderers don't care how much BTC is worth - they only use it to cash out into USD. For them, the spot price is largely irrelevant. All their prices are denominated in USD, all they care about is that the exchange rate is stable. As for the launderers, you can launder money with BTC just as well when it is $3/coin, as you can when it is $3 million/coin.
        empath75 8y ago
        true, but there is some point at which the natural level of demand for bitcoins will match bitcoin supply.
        ascendantlogic 8y ago
        > Bitcoin's natural customer base -- tax cheats, money launderers, drug dealers, etc, and will probably in fact over correct. Funny I should read your comment about Bitcoin's use for criminal enterprise after I read about Goldman Sach's alleged hand in a multi-billion dollar fraud in Malaysia, or Deutche Bank's multi-billion dollar money laundering. Or going back a few years the Panama Papers and that entire underground financial apparatus that drummed up exactly zero long term outrage or changes. I'll be more inclined to believe crypto is only for thieves when you convince me that the existing financial system isn't also completely rife with thievery and cheats.
        TeMPOraL 8y ago
        Every system involving money will attract criminals. But a new system that's much better for criminals and much worse for regular people will obviously attract more of the former than of the latter. Still, I agree with vkou: > Ransomware authors, heroin dealers and money launderers don't care how much BTC is worth - they only use it to cash out into USD. For them, the spot price is largely irrelevant. That is, they'll still want to use Bitcoin, just not necessarily care about the spot price. The price is, I believe, driven up by gamblers.
        koboll 8y ago
      - yellowapple 8y ago
        The same ones that are jumping into stocks / real estate / etc. even after crashes within the last decade or so?
      - tracker1 8y ago
        With good timing, you can make money on a Bubble... the key is to get out before it bursts.
        tim333 8y ago
        An interesting technical point I saw on that is that you may be better getting out a little after the peak. The reason being on the way up there is no way of knowing where the peak is. For example in the recent bitcoin run up you might have bought at 1000 and sold at 2000 missing most of it. If however you waited until it looked like it was on the way back down you likely would have sold at around 16000 - 10000 and so done better. I think the key is more to buy in early rather than near the top. Indeed if you time that ok you can sell half your stake when it goes 2x and so be kind of risk free for the rest. If history is a guide bitcoin will go nowhere for 6 months to a year, then up up slowly, then have another silly bubble a few years later. So my infallible guide is buy in a years time, sell half when the price doubles, wait till there is a bubble and when it's super hyped but starts crashing sell out, probably about 1/3 below the next peak.
    - urda 8y ago
      There's an important idea when it comes to investing: "past performance is not indicative of future results" So no, it's not a sure thing to "happen again" and leading people on like that is just not right. Stop that. Edit: I don't care what "claim" you stand by.
      - devereaux 8y ago
        > leading people on like that is just not right. Stop that. You are free to disbelieve, at your own expense. About crypto, I sometimes make bold claims, that are downvoted [1], but I stand by them. And they come true [2] much more often than not. Last time was about DOGE. Went quite up as predicted, went a bit down during the last crash but still like at position #21 today. And I still expect it to go higher - at least around #15 soon, unless something similar comes. Before that, it was against ETH maximalism [3] - that ETH was not going to be #1 even while it was raising. I thought it was a good #2 but even that seems was too generous, as it is now in #3 and I can easily see it sliding down more. Likewise, I state that BTC will bubble up, again and again, until something else offers better features. I haven't seem that "something" yet, hence my claim. The only question is how low it will go before it bubbles up. I'd say 1000. There isn't blood in the streets yet, the crash is just starting :) [1] https://news.ycombinator.com/item?id=17684359 https://news.ycombinator.com/item?id=17684359 [2] https://news.ycombinator.com/item?id=17938426 https://news.ycombinator.com/item?id=17938426 [3] https://news.ycombinator.com/item?id=16364663 https://news.ycombinator.com/item?id=16364663
      - abstrct 8y ago
        Hey buddy, if you feel that investing in cryptocurrencies is too risky, and it may harm you finances and future, you should really find safer investments to consider. I would talk to a professional about it, perhaps with your local bank. Investments aside, you should really try to get your hands on some Bitcoin testnet coins and play around. Alternatively, something like Defcoin (http://defcoin-ng.org/ http://defcoin-ng.org/) is intentionally worthless and great for experimenting. It's neat stuff and helps you appreciate the technology, as well as appreciate the currency shortcomings that require smart people to try and fix. Many of us talk about how this has happened and will happened again not because we want you to invest, but because it's old news and articles like this are super boring. We have spent time working with the technology and community and see value in it. Value you may not see without wanting to go deeper, but value that is real and exciting.
  - ascendantlogic 8y ago
    How many people got burnt in the dotcom crash? In the financial crisis of 2007-2008? Black Monday of 1987? Did all of those people swear off investing in traditional equity instruments forever?
    - geezerjay 8y ago
      Why do you believe it is even remotely reasonable to compare "traditional equity instruments" with the perpetual scam that is cryptocurrencies? A comparison that's way more appropriate is tulips, but even so tulips aren't used as tokens in money laundering scams.
      - ascendantlogic 8y ago
        > used as tokens in money laundering scams. As opposed to the US dollar which is constantly used in money laundering scams perpetuated by some of the biggest names in global finance?
    - the_gastropod 8y ago
      After the 2007/2008 financial crisis—the worst financial crisis in the history of the US—the S&P500 dropped 54.1% from peak to trough. BTC is currently down over 80% since its peak. Let's also make sure we understand that the S&P500 (or any stock ownership) is owning _business(es)_. Businesses make money, and they return that money to their owners. Bitcoin is purely speculative and depends on someone else buying it from you, presumably for more than you bought it for. Good luck finding another batch of suckers to fall for this after that last round.
      - ScottAS 8y ago
        Have you ever heard of gold?
        berbec 8y ago
        Gold has a very long history, useful applications in industry, jewelry etc and is a defacto currency the world-wide. Crypto is... None of these. Whatever crypto is or will become, gold it, currently, is not.
  - Obi_Juan_Kenobi 8y ago
    So far Bitcoin investor behavior has been remarkably consistent. https://plot.ly/~unchained/37/bitcoin-utxo-age-distribution/#/ https://plot.ly/~unchained/37/bitcoin-utxo-age-distribution/... There's a lot to dissect in this chart, so take some time with it. Some observations: * Most of the market is traded during bull runs. Each bull run sees a large segment of year+ holders take profits. Between bubbles, price-discovery is driven by short-term trading. * Bear markets see remarkably little activity from holders. 'Hold waves' form between bubble cycles that clearly demonstrate that the majority of coins are held by 'firm hands' that bought in bull runs. * Right now, a large segment of people that bought in the 2013 bull are starting to mature into the 5+ year bracket. A significant amount of coins are still being held in this way. It's remarkable to see it in real time. Neither the crash to $150 or the run to $20k motivated a large selloff. * It took about 2 years after the 2017 bull for <6month bracket to fall to ~25%. It only took one year this time. * Age distribution is becoming more bimodal: stubborn holders and large healthy active market. * The current price crash is rather anomalous. An incredible 4% of coins in existence moved out of 3+ year bands very suddenly. This is among the 3 or 4 largest shifts, the others occurring in much different contexts. Given how sudden it was, and how specific the age band, I have my guess as to whether this is a cause or effect of the drop. The main takeaway from this is that Bitcoin investors are remarkably willing to hold. "Hodl" is more than a meme, and the current crop seems about the same as previous ones in this regard, with a growing 'hold wave'. I also think the last 'pop' was a lot worse due to the looming existential scaling threat. This has been addressed in an unoptimal way, but one that is remarkably true to Bitcoin and overall encouraging.
    - majewsky 8y ago
      > The main takeaway from this is that Bitcoin investors are remarkably willing to hold. How does this look like in other markets? It sure tastes like survivorship bias. As in: "Investors are willing to hold" because everyone else already quit.
- trothamel 8y ago
  Arguably, because this time it's 'mainstream' - with people pushing bitcoin as an investment for non-technical people.
- themgt 8y ago
  Because the previous times it wasn't being hyped in mainstream news and culture. The point where the guy on the elevator is taking about [bubble] is the point at which [bubble] is about to burst for real, because you've just about run out of new suckers to fuel it.
  - morgancmartin 8y ago
    Would you be willing to make a friendly wager on whether it returns bigger than ever? My ten dollars says it will within, say, two years. What do you say?
    - tn_ 8y ago
      This guy bitcoins.
      - morgancmartin 8y ago
        Haha, thanks for the laugh. Considering the downvotes I got, I suppose I was out of line suggesting a wager, but I've yet to see convincing evidence for why blockchain tech can't work. Sure it's overhyped way beyond what it deserves and it hasn't found its "killer app" or niche yet, but that doesn't mean it won't. Nano's my favorite coin. It's fee-less, near-instant, and secure. Its largest flaw (and one all coins share at this point) is its tendency to fluctuate in value. But this problem is soon to be overcome by stable coins. Once that's done, its only remaining disadvantage will be lack of adoption. And if the product's right, I don't see any reason why a superior product won't gain market share given enough time. And it's not like crypto is under some investor enforced deadline to reach a certain market share, it's got all the time in the world. Anyone care to point out any flaws in my thinking?
        berbec 8y ago
        I have no skin in the game either way, so I am curious (asked before): Is crypto: money/currency (spend able exchange of value) a store of value (investment etc) a cool technology with no current useful application or something I don't understand? If crypto is money, can I: Spend it at Amazon? My grocery store? My corner deli? Pay my rent? Pay my employees? If crypto is a store of value can I trust it will have any rational storage value over any time period?
- Ologn 8y ago
  It's different because when the market cap of Bitcoins was less than one million, an 80% drop or pop did not mean much. One somewhat wealthy person could pump the price up at will. When it hits a market cap of $334 billion, it becomes something more real. That is when Warren Buffett and Charlie Munger take a look at it and declare it something to avoid "like the plague" (Munger called Bitcoin "rat poison"). The greater market looks at it and it drops 80%. Bitcoins are completely worthless. They have no value whatsoever. So the entirety of its current supposed market value of $61 billion (which was supposedly $334 billion a year ago), is closer to $0 than $61 billion. Many overpriced dot-com stocks in 2000 or over-priced real estate in 2008 are still things which have value, even if the price went down for a while. Bitcoins have no value. I said so when the market cap was supposedly $240 billion ( https://news.ycombinator.com/item?id=15986475 https://news.ycombinator.com/item?id=15986475 ), I say so now, when the market cap is supposedly $61 billion, and I will say so until its graph starts hitting the $0 limit. People say "it's valuable because it can be traded electronically", which is meaningless. Dot-com stocks could be traded electronically in 1999. The important thing is the value underlying what is traded. Bitcoin has none.
reidjs 8y ago
Why’s it still so darn expensive then?
- gargarplex 8y ago
  Venture investment in Blockchain went up in 2018. The median deal size increased over $1.0mm and the number of deals is also up. [1] Once the ecosystem of complements matures, Bitcoin's utilization is expected to increase. [2] The price of Bitcoin is driven by speculation that utilization of Bitcoin creates value. [3] [1] https://medium.com/@PanteraCapital/market-update-pantera-blockchain-letter-december-2018-f48ad020f9d6 https://medium.com/@PanteraCapital/market-update-pantera-blo... [2] Crossing the Chasm, 3rd Edition: Marketing and Selling Disruptive Products to Mainstream Customers. Paperback – January 28, 2014 [3] https://www.investopedia.com/articles/investing/091814/what-bitcoins-intrinsic-value.asp https://www.investopedia.com/articles/investing/091814/what-...
  - deleted 8y ago
    [deleted]
  - verdverm 8y ago
    Private blockchain seems to be crossing the chasm at a much better place. Bitcoin has yet to offer something of value to the mass market. My money is pretty much digital already, and I'm not really down with my transactions being out in the public. Perhaps another crypto currency will meet the needs of the major market, though I have a hunch the current financial institutions will get there first.
    - yellowapple 8y ago
      I think Bitcoin would be a good fit for transferring value between large entities (governments, banks, etc.), where having public accountability would be especially valuable. Those entities could then exchange it with other lower-valued cryptocurrencies, fiat currencies, precious metals, seashells, etc. more suitable for day-to-day consumption by the general public.
KasianFranks 8y ago
Like the dot com bubble, and here we are today bigger, better and stronger. Think in terms of a public trading vehicle that enables anyone to raise capital in a global marketplace. Either real value gets translated to that vehicle or it does not.
- the_gastropod 8y ago
  "Everyone said Bob was an idiot for playing the lottery, but look at him now!" "<X> is a $10 Billion/year industry! If we could just capture 1%..." Just because some other thing was successful doesn't mean your pet thing will be successful too.
  - KasianFranks 8y ago
    So lets just stop innovating right here right now. Bad logic.
    - the_gastropod 8y ago
      Negative. Innovation is great. But new inventions won’t all be successful. And claiming one will because another invention was successful in the past is bad logic.
      - KasianFranks 8y ago
        "New inventions won't all be successful" thanks for the stroke of brilliance!
pazimzadeh 8y ago
Buy low, sell high.
- vkou 8y ago
  Or buy low, sell lower. You're just gambling.
  - pazimzadeh 8y ago
    The trick is not to sell lower. And if you sell enough when it's high, then you're not gambling any more.
vokep 8y ago
Sure it did, oh man, ah jeez, I'm so sad my bitcoins are all now worthless, gosh, the price is...so...so low now... buys 5 more
bengrunfeld 8y ago
You have adoption of crypto all the way up to the state level - you can now pay your taxes using BTC in Ohio. According to Binance, you can book over 450,000 hotels using their coin, BNB. Booms and crashes are part of healthy market activity. If it didn't crash regularly, that would worry me more. IMHO - the most important consideration is adoption (cuz ppl need to actually use the damn thing). Everything follows that.
abstrct 8y ago
"Millennials, like generations before them, just got a painful lesson about speculation." and yet the first tweet is from McAfee... I know life has been hard to him but that is one very aged Millennial. Just add this bad article to the 300+ Bitcoin Obituaries, and the even more writings that try to point out the hard lesson learned by us idiot Millennials. A reminder that some Millennials are almost 40 now, we were the first generation to grow up with the internet, and we lived through things like the dot com bubble and the 2008 housing crisis. What could we possibly know about technology and money? What could we possibly desire to see possible change and improvement in?
- kokokokoko 8y ago
  Cryptocoin speculation will likely be remembered closer to beanie babies or baseball cards as opposed to the dot com bubble etc. This was just the first time we saw this happen globally and with digital goods. Which, possibly coincidentally, happened to baby boomers right when they were around the same age/point in life as the millennial generation is now.
  - abstrct 8y ago
    > Cryptocoin speculation will likely be remembered closer to beanie babies or baseball cards as opposed to the dot com bubble etc. What exactly do you base this idea on? Are you involved in the technology at all? An economics major? Or do you just believe that Mr Noah Smith has the expertise to opine on such a situation.
    - abstrct 8y ago
      Sure, downvote me because I was a bit mean sounding, or maybe because you are sick of hearing about Bitcoin. I feel like it's a fair question though. To say that Bitcoin will be remembered more like beanie babies and baseball cards, rather than the dot com bubble, sounds absurd to me. You have the worlds largest tech companies, banks (the IMF!), the Big Four advisory firms, top lawyers around the world, governments at all levels, and just some incredibly active open source communities, all working with this technology. Why belittle it like what was done in that comment? Can't we at least agree that after ten years, Bitcoin has been an experiment worthy of its own story rather than being lumped on either side of "beanie babies or baseball cards as opposed to the dot com bubble"
NathanCH 8y ago
I would love an analysis on who is moving the market today. In the last month there have been three occurrences where the price of BTC jumped 10% in a single moment (followed by equal sell-offs hours/days later). Stranger still, all coins seem highly correlated. BTC goes up, all coins go up. I realize this behavior is not new and the market has been highly correlated since the beginning, ...but why?
- jboles 8y ago
  In a stock market, some companies outperform others by being more valuable at one moment than another. The difference in value results from differences in the companies’ expected future cash flows. Crypto coins, despite ICO promises, have not historically been revenue generating assets, so there is no future cash flows generated by them. Thus they can be considered fungible, retaining the same value despite their different symbols and nominal prices. With the level of distrust in the ecosystem, only “bad” news affects a given ICO, sending its value to zero. Neutral news, or good news, does not increase a given coin’s price, so they all settle around the same “value”, and all their “values” move together. When anyone or their pet monkey can clone a Git repo, change some variables, and launch their own ICO with zbsolutely zero proprietary innovation, it is to be expected that all crypto coins will approach the same value. (I put “value” in quotes because different coins have wildly different prices, being a function of some variables in the coin’s software determining e.g. how many were “issued”, but you have to ignore those prices and instead think about the underlying “value” represented by the coin. It’s really not much at all — perhaps only the sunk cost of electricity, but likely less than even that.) I would also love an analysis on what is moving the market. It has to be more than Tether at this point.
- cesarb 8y ago
  > Stranger still, all coins seem highly correlated. BTC goes up, all coins go up. My current theory is that Bitcoin is the "reserve currency" of all these coins. That is, their price is better understood as being expressed in Bitcoins, not in USD or other currency.
- abstrct 8y ago
  Most exchanges that have coins other than Bitcoin use Altcoin/Bitcoin pairs. So you're not trading in relation to the US Dollar, you're trading in relation to Bitcoin. For a trader, that means that to them 1 ETH is currently worth 0.02678663 BTC. The USD price of Bitcoin doesn't come into play here. So, if Bitcoin goes down, the relation to ETH means that it follows, since 1 ETH is still worth 0.02678663 BTC. Edit: Why would they do this? A number of reasons, the biggest two being habit and volume. Most coins are traded on networks that don't have fiat currencies, so they had to choose a cryptocurrency base. Also, many traders in the realm started out with Bitcoin, and love Bitcoin, and want more Bitcoin. So they don't care if a trade gets them USD, they just want to grow their BTC holdings. Finally, with trading, volume is very important - you want as much being offered for sale as possible. If you split up every order book (btc/eth, xrp/eth, ltc/eth, usd/eth, xrp/ltc, xrp/usd, ltc/btc, etc etc) then the volume of each 'book' is divided amongst the options, making it harder to move larger amounts from one to the other.
yellowapple 8y ago
This article lost all credibility when it had managed to frame itself in a "haha stupid millennials" attitude by the very first sentence.
apo 8y ago
The Bitcoin hype cycle is driven by the mass media. Like this article, they pile on when BTC/USD exchange rate falls through the floor. During the period of stability that follows, they're nowhere to be found. After things have already turned around, they jostle with each other in an attempt to explain it all to Joe Sixpack. What the article fails to mention is that each "pop" has left the exchange rate higher than the previous top. Missed opportunity to investigate an emerging asset class with no direct analogy to anything preceding it, periodic manias or not.
- will_brown 8y ago
  >The Bitcoin hype cycle is driven by the mass media. It’s much more nefarious...the boom and bust articles are essentially ordered by individuals/groups with the influence as part of the market manipulations. It’s not entirely unlike what people refer to as submarine articles, what’s lurking underneath these publishing’s are attempts to move the markets (the first wall street movie actually does a decent job of demonstrating this practice in the 80’s for the stock market). These details will be exposed now that the SEC is beginning to target manipulations in these markets.
deleted 8y ago
[deleted]
bitxbitxbitcoin 8y ago
Bubbles only pop once. Bitcoin has spiked and crashed multiple times and it isn't unreasonable to expect it to do so again. Eventually, we might see the terminology change from "bubble" to "spike." It's already happening... Albeit slowly [0]. Can anyone think of a better term? [0] https://trends.google.com/trends/explore?date=all&q=%22bitcoin%20bubble%22,%22bitcoin%20spike%22 https://trends.google.com/trends/explore?date=all&q=%22bitco...
- orev 8y ago
  A spike is something that happens and completes in a very short period of time, not drawn out over a year like this was. The terminology used pretty clearly follows the shape of the price charts — there’s no need to try to redefine terms to meet whatever point one is trying to make.
matchagaucho 8y ago
I knew we were at peak in Dec 2017 when a fellow tourist in Mexico proclaimed his iPhone was stolen, apparently along with his BTC wallet, and he no longer had funds to continue the vacation.
shuntress 8y ago
The thing that really bothers me the most about crypto trading is all the wanna-be day-trader bros who fundamentally misunderstand what they are actually buying and selling. "Open source distributed transaction ledger" sails right over their heads but if I said I hand out a new dirtcoin to whoever moves the most dirt around my yard each day and here are some exchanges carrying dirtcoin I'm met with an avalanche of Wall Street jargon about how dirtcoin is the best investment anyone can ever make.
vminkov 8y ago
What we won't tell you is that many investors have realised that the price will fall freely if the supply can't be limited in demand drops. And they are now seeking to gain control over as much of the circulating supply as possible.
wtracy 8y ago
Either McAfee was being facetious in that tweet, or he was smoking something good. It's one thing to believe that Bitcoin is the future, it's another to believe that "Bubbles are mathematically impossible in this new paradigm. So are corrections and all else."

64 points by taytus 8y ago

As it has done multiple times previously. I anxiously await reading why this time is "different", just like all the previous times.

ummonk 8y ago
This is the first pop that I’ve felt is likely to be the last. A lot of people got burnt and are unwilling to jump back in.
- devereaux 8y ago
  All of this has happened before, and all of this will happen again. EDIT: and I stand by my claim.
  - koboll 8y ago
    How? Which investors are going to believe the next bubble isn't a bubble?
    - empath75 8y ago
      I am a huge crypto currency skeptic and think the market is largely driven by massive amounts of fraud. That said -- eventually the price will drop to the point where the price is entirely driven by Bitcoin's natural customer base -- tax cheats, money launderers, drug dealers, etc, and will probably in fact over correct. Just for the sake of argument, let's said that 'natural price' is $500 or $600 a bitcoin -- it bottomed out around $300 last time and we've had a 'halvening' since then. So let's imagine the price drops down to below $1000, and stays around that range for a year or more. Then a new halvening happens, the price doubles to $2000. Maybe someone figures out how to do something useful with cryptocurrency? 3-4 years from now, people will have already forgotten about the last bubble and might FOMO again. Bitcoin has a long history of boom and bust with each boom being bigger than the last. It won't take much to convince people that another boom is on the offing.
      - vkou 8y ago
        Ransomware authors, heroin dealers and money launderers don't care how much BTC is worth - they only use it to cash out into USD. For them, the spot price is largely irrelevant. All their prices are denominated in USD, all they care about is that the exchange rate is stable. As for the launderers, you can launder money with BTC just as well when it is $3/coin, as you can when it is $3 million/coin.
        empath75 8y ago
        true, but there is some point at which the natural level of demand for bitcoins will match bitcoin supply.
      - ascendantlogic 8y ago
        > Bitcoin's natural customer base -- tax cheats, money launderers, drug dealers, etc, and will probably in fact over correct. Funny I should read your comment about Bitcoin's use for criminal enterprise after I read about Goldman Sach's alleged hand in a multi-billion dollar fraud in Malaysia, or Deutche Bank's multi-billion dollar money laundering. Or going back a few years the Panama Papers and that entire underground financial apparatus that drummed up exactly zero long term outrage or changes. I'll be more inclined to believe crypto is only for thieves when you convince me that the existing financial system isn't also completely rife with thievery and cheats.
        TeMPOraL 8y ago
        Every system involving money will attract criminals. But a new system that's much better for criminals and much worse for regular people will obviously attract more of the former than of the latter. Still, I agree with vkou: > Ransomware authors, heroin dealers and money launderers don't care how much BTC is worth - they only use it to cash out into USD. For them, the spot price is largely irrelevant. That is, they'll still want to use Bitcoin, just not necessarily care about the spot price. The price is, I believe, driven up by gamblers.
        koboll 8y ago
    - yellowapple 8y ago
      The same ones that are jumping into stocks / real estate / etc. even after crashes within the last decade or so?
    - tracker1 8y ago
      With good timing, you can make money on a Bubble... the key is to get out before it bursts.
      - tim333 8y ago
        An interesting technical point I saw on that is that you may be better getting out a little after the peak. The reason being on the way up there is no way of knowing where the peak is. For example in the recent bitcoin run up you might have bought at 1000 and sold at 2000 missing most of it. If however you waited until it looked like it was on the way back down you likely would have sold at around 16000 - 10000 and so done better. I think the key is more to buy in early rather than near the top. Indeed if you time that ok you can sell half your stake when it goes 2x and so be kind of risk free for the rest. If history is a guide bitcoin will go nowhere for 6 months to a year, then up up slowly, then have another silly bubble a few years later. So my infallible guide is buy in a years time, sell half when the price doubles, wait till there is a bubble and when it's super hyped but starts crashing sell out, probably about 1/3 below the next peak.
  - urda 8y ago
    There's an important idea when it comes to investing: "past performance is not indicative of future results" So no, it's not a sure thing to "happen again" and leading people on like that is just not right. Stop that. Edit: I don't care what "claim" you stand by.
    - devereaux 8y ago
      > leading people on like that is just not right. Stop that. You are free to disbelieve, at your own expense. About crypto, I sometimes make bold claims, that are downvoted [1], but I stand by them. And they come true [2] much more often than not. Last time was about DOGE. Went quite up as predicted, went a bit down during the last crash but still like at position #21 today. And I still expect it to go higher - at least around #15 soon, unless something similar comes. Before that, it was against ETH maximalism [3] - that ETH was not going to be #1 even while it was raising. I thought it was a good #2 but even that seems was too generous, as it is now in #3 and I can easily see it sliding down more. Likewise, I state that BTC will bubble up, again and again, until something else offers better features. I haven't seem that "something" yet, hence my claim. The only question is how low it will go before it bubbles up. I'd say 1000. There isn't blood in the streets yet, the crash is just starting :) [1] https://news.ycombinator.com/item?id=17684359 https://news.ycombinator.com/item?id=17684359 [2] https://news.ycombinator.com/item?id=17938426 https://news.ycombinator.com/item?id=17938426 [3] https://news.ycombinator.com/item?id=16364663 https://news.ycombinator.com/item?id=16364663
    - abstrct 8y ago
      Hey buddy, if you feel that investing in cryptocurrencies is too risky, and it may harm you finances and future, you should really find safer investments to consider. I would talk to a professional about it, perhaps with your local bank. Investments aside, you should really try to get your hands on some Bitcoin testnet coins and play around. Alternatively, something like Defcoin (http://defcoin-ng.org/ http://defcoin-ng.org/) is intentionally worthless and great for experimenting. It's neat stuff and helps you appreciate the technology, as well as appreciate the currency shortcomings that require smart people to try and fix. Many of us talk about how this has happened and will happened again not because we want you to invest, but because it's old news and articles like this are super boring. We have spent time working with the technology and community and see value in it. Value you may not see without wanting to go deeper, but value that is real and exciting.
- ascendantlogic 8y ago
  How many people got burnt in the dotcom crash? In the financial crisis of 2007-2008? Black Monday of 1987? Did all of those people swear off investing in traditional equity instruments forever?
  - geezerjay 8y ago
    Why do you believe it is even remotely reasonable to compare "traditional equity instruments" with the perpetual scam that is cryptocurrencies? A comparison that's way more appropriate is tulips, but even so tulips aren't used as tokens in money laundering scams.
    - ascendantlogic 8y ago
      > used as tokens in money laundering scams. As opposed to the US dollar which is constantly used in money laundering scams perpetuated by some of the biggest names in global finance?
  - the_gastropod 8y ago
    After the 2007/2008 financial crisis—the worst financial crisis in the history of the US—the S&P500 dropped 54.1% from peak to trough. BTC is currently down over 80% since its peak. Let's also make sure we understand that the S&P500 (or any stock ownership) is owning _business(es)_. Businesses make money, and they return that money to their owners. Bitcoin is purely speculative and depends on someone else buying it from you, presumably for more than you bought it for. Good luck finding another batch of suckers to fall for this after that last round.
    - ScottAS 8y ago
      Have you ever heard of gold?
      - berbec 8y ago
        Gold has a very long history, useful applications in industry, jewelry etc and is a defacto currency the world-wide. Crypto is... None of these. Whatever crypto is or will become, gold it, currently, is not.
- Obi_Juan_Kenobi 8y ago
  So far Bitcoin investor behavior has been remarkably consistent. https://plot.ly/~unchained/37/bitcoin-utxo-age-distribution/#/ https://plot.ly/~unchained/37/bitcoin-utxo-age-distribution/... There's a lot to dissect in this chart, so take some time with it. Some observations: * Most of the market is traded during bull runs. Each bull run sees a large segment of year+ holders take profits. Between bubbles, price-discovery is driven by short-term trading. * Bear markets see remarkably little activity from holders. 'Hold waves' form between bubble cycles that clearly demonstrate that the majority of coins are held by 'firm hands' that bought in bull runs. * Right now, a large segment of people that bought in the 2013 bull are starting to mature into the 5+ year bracket. A significant amount of coins are still being held in this way. It's remarkable to see it in real time. Neither the crash to $150 or the run to $20k motivated a large selloff. * It took about 2 years after the 2017 bull for <6month bracket to fall to ~25%. It only took one year this time. * Age distribution is becoming more bimodal: stubborn holders and large healthy active market. * The current price crash is rather anomalous. An incredible 4% of coins in existence moved out of 3+ year bands very suddenly. This is among the 3 or 4 largest shifts, the others occurring in much different contexts. Given how sudden it was, and how specific the age band, I have my guess as to whether this is a cause or effect of the drop. The main takeaway from this is that Bitcoin investors are remarkably willing to hold. "Hodl" is more than a meme, and the current crop seems about the same as previous ones in this regard, with a growing 'hold wave'. I also think the last 'pop' was a lot worse due to the looming existential scaling threat. This has been addressed in an unoptimal way, but one that is remarkably true to Bitcoin and overall encouraging.
  - majewsky 8y ago
    > The main takeaway from this is that Bitcoin investors are remarkably willing to hold. How does this look like in other markets? It sure tastes like survivorship bias. As in: "Investors are willing to hold" because everyone else already quit.
trothamel 8y ago
Arguably, because this time it's 'mainstream' - with people pushing bitcoin as an investment for non-technical people.
themgt 8y ago
Because the previous times it wasn't being hyped in mainstream news and culture. The point where the guy on the elevator is taking about [bubble] is the point at which [bubble] is about to burst for real, because you've just about run out of new suckers to fuel it.
- morgancmartin 8y ago
  Would you be willing to make a friendly wager on whether it returns bigger than ever? My ten dollars says it will within, say, two years. What do you say?
  - tn_ 8y ago
    This guy bitcoins.
    - morgancmartin 8y ago
      Haha, thanks for the laugh. Considering the downvotes I got, I suppose I was out of line suggesting a wager, but I've yet to see convincing evidence for why blockchain tech can't work. Sure it's overhyped way beyond what it deserves and it hasn't found its "killer app" or niche yet, but that doesn't mean it won't. Nano's my favorite coin. It's fee-less, near-instant, and secure. Its largest flaw (and one all coins share at this point) is its tendency to fluctuate in value. But this problem is soon to be overcome by stable coins. Once that's done, its only remaining disadvantage will be lack of adoption. And if the product's right, I don't see any reason why a superior product won't gain market share given enough time. And it's not like crypto is under some investor enforced deadline to reach a certain market share, it's got all the time in the world. Anyone care to point out any flaws in my thinking?
      - berbec 8y ago
        I have no skin in the game either way, so I am curious (asked before): Is crypto: money/currency (spend able exchange of value) a store of value (investment etc) a cool technology with no current useful application or something I don't understand? If crypto is money, can I: Spend it at Amazon? My grocery store? My corner deli? Pay my rent? Pay my employees? If crypto is a store of value can I trust it will have any rational storage value over any time period?
Ologn 8y ago
It's different because when the market cap of Bitcoins was less than one million, an 80% drop or pop did not mean much. One somewhat wealthy person could pump the price up at will. When it hits a market cap of $334 billion, it becomes something more real. That is when Warren Buffett and Charlie Munger take a look at it and declare it something to avoid "like the plague" (Munger called Bitcoin "rat poison"). The greater market looks at it and it drops 80%. Bitcoins are completely worthless. They have no value whatsoever. So the entirety of its current supposed market value of $61 billion (which was supposedly $334 billion a year ago), is closer to $0 than $61 billion. Many overpriced dot-com stocks in 2000 or over-priced real estate in 2008 are still things which have value, even if the price went down for a while. Bitcoins have no value. I said so when the market cap was supposedly $240 billion ( https://news.ycombinator.com/item?id=15986475 https://news.ycombinator.com/item?id=15986475 ), I say so now, when the market cap is supposedly $61 billion, and I will say so until its graph starts hitting the $0 limit. People say "it's valuable because it can be traded electronically", which is meaningless. Dot-com stocks could be traded electronically in 1999. The important thing is the value underlying what is traded. Bitcoin has none.

reidjs 8y ago

Why’s it still so darn expensive then?

gargarplex 8y ago
Venture investment in Blockchain went up in 2018. The median deal size increased over $1.0mm and the number of deals is also up. [1] Once the ecosystem of complements matures, Bitcoin's utilization is expected to increase. [2] The price of Bitcoin is driven by speculation that utilization of Bitcoin creates value. [3] [1] https://medium.com/@PanteraCapital/market-update-pantera-blockchain-letter-december-2018-f48ad020f9d6 https://medium.com/@PanteraCapital/market-update-pantera-blo... [2] Crossing the Chasm, 3rd Edition: Marketing and Selling Disruptive Products to Mainstream Customers. Paperback – January 28, 2014 [3] https://www.investopedia.com/articles/investing/091814/what-bitcoins-intrinsic-value.asp https://www.investopedia.com/articles/investing/091814/what-...
- deleted 8y ago
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- verdverm 8y ago
  Private blockchain seems to be crossing the chasm at a much better place. Bitcoin has yet to offer something of value to the mass market. My money is pretty much digital already, and I'm not really down with my transactions being out in the public. Perhaps another crypto currency will meet the needs of the major market, though I have a hunch the current financial institutions will get there first.
  - yellowapple 8y ago
    I think Bitcoin would be a good fit for transferring value between large entities (governments, banks, etc.), where having public accountability would be especially valuable. Those entities could then exchange it with other lower-valued cryptocurrencies, fiat currencies, precious metals, seashells, etc. more suitable for day-to-day consumption by the general public.

KasianFranks 8y ago

Like the dot com bubble, and here we are today bigger, better and stronger. Think in terms of a public trading vehicle that enables anyone to raise capital in a global marketplace. Either real value gets translated to that vehicle or it does not.

the_gastropod 8y ago
"Everyone said Bob was an idiot for playing the lottery, but look at him now!" "<X> is a $10 Billion/year industry! If we could just capture 1%..." Just because some other thing was successful doesn't mean your pet thing will be successful too.
- KasianFranks 8y ago
  So lets just stop innovating right here right now. Bad logic.
  - the_gastropod 8y ago
    Negative. Innovation is great. But new inventions won’t all be successful. And claiming one will because another invention was successful in the past is bad logic.
    - KasianFranks 8y ago
      "New inventions won't all be successful" thanks for the stroke of brilliance!

pazimzadeh 8y ago

Buy low, sell high.

vkou 8y ago
Or buy low, sell lower. You're just gambling.
- pazimzadeh 8y ago
  The trick is not to sell lower. And if you sell enough when it's high, then you're not gambling any more.

vokep 8y ago

Sure it did, oh man, ah jeez, I'm so sad my bitcoins are all now worthless, gosh, the price is...so...so low now... buys 5 more

bengrunfeld 8y ago

You have adoption of crypto all the way up to the state level - you can now pay your taxes using BTC in Ohio. According to Binance, you can book over 450,000 hotels using their coin, BNB. Booms and crashes are part of healthy market activity. If it didn't crash regularly, that would worry me more. IMHO - the most important consideration is adoption (cuz ppl need to actually use the damn thing). Everything follows that.

abstrct 8y ago

"Millennials, like generations before them, just got a painful lesson about speculation." and yet the first tweet is from McAfee... I know life has been hard to him but that is one very aged Millennial. Just add this bad article to the 300+ Bitcoin Obituaries, and the even more writings that try to point out the hard lesson learned by us idiot Millennials. A reminder that some Millennials are almost 40 now, we were the first generation to grow up with the internet, and we lived through things like the dot com bubble and the 2008 housing crisis. What could we possibly know about technology and money? What could we possibly desire to see possible change and improvement in?

kokokokoko 8y ago
Cryptocoin speculation will likely be remembered closer to beanie babies or baseball cards as opposed to the dot com bubble etc. This was just the first time we saw this happen globally and with digital goods. Which, possibly coincidentally, happened to baby boomers right when they were around the same age/point in life as the millennial generation is now.
- abstrct 8y ago
  > Cryptocoin speculation will likely be remembered closer to beanie babies or baseball cards as opposed to the dot com bubble etc. What exactly do you base this idea on? Are you involved in the technology at all? An economics major? Or do you just believe that Mr Noah Smith has the expertise to opine on such a situation.
  - abstrct 8y ago
    Sure, downvote me because I was a bit mean sounding, or maybe because you are sick of hearing about Bitcoin. I feel like it's a fair question though. To say that Bitcoin will be remembered more like beanie babies and baseball cards, rather than the dot com bubble, sounds absurd to me. You have the worlds largest tech companies, banks (the IMF!), the Big Four advisory firms, top lawyers around the world, governments at all levels, and just some incredibly active open source communities, all working with this technology. Why belittle it like what was done in that comment? Can't we at least agree that after ten years, Bitcoin has been an experiment worthy of its own story rather than being lumped on either side of "beanie babies or baseball cards as opposed to the dot com bubble"

NathanCH 8y ago

I would love an analysis on who is moving the market today. In the last month there have been three occurrences where the price of BTC jumped 10% in a single moment (followed by equal sell-offs hours/days later). Stranger still, all coins seem highly correlated. BTC goes up, all coins go up. I realize this behavior is not new and the market has been highly correlated since the beginning, ...but why?

jboles 8y ago
In a stock market, some companies outperform others by being more valuable at one moment than another. The difference in value results from differences in the companies’ expected future cash flows. Crypto coins, despite ICO promises, have not historically been revenue generating assets, so there is no future cash flows generated by them. Thus they can be considered fungible, retaining the same value despite their different symbols and nominal prices. With the level of distrust in the ecosystem, only “bad” news affects a given ICO, sending its value to zero. Neutral news, or good news, does not increase a given coin’s price, so they all settle around the same “value”, and all their “values” move together. When anyone or their pet monkey can clone a Git repo, change some variables, and launch their own ICO with zbsolutely zero proprietary innovation, it is to be expected that all crypto coins will approach the same value. (I put “value” in quotes because different coins have wildly different prices, being a function of some variables in the coin’s software determining e.g. how many were “issued”, but you have to ignore those prices and instead think about the underlying “value” represented by the coin. It’s really not much at all — perhaps only the sunk cost of electricity, but likely less than even that.) I would also love an analysis on what is moving the market. It has to be more than Tether at this point.
cesarb 8y ago
> Stranger still, all coins seem highly correlated. BTC goes up, all coins go up. My current theory is that Bitcoin is the "reserve currency" of all these coins. That is, their price is better understood as being expressed in Bitcoins, not in USD or other currency.
abstrct 8y ago
Most exchanges that have coins other than Bitcoin use Altcoin/Bitcoin pairs. So you're not trading in relation to the US Dollar, you're trading in relation to Bitcoin. For a trader, that means that to them 1 ETH is currently worth 0.02678663 BTC. The USD price of Bitcoin doesn't come into play here. So, if Bitcoin goes down, the relation to ETH means that it follows, since 1 ETH is still worth 0.02678663 BTC. Edit: Why would they do this? A number of reasons, the biggest two being habit and volume. Most coins are traded on networks that don't have fiat currencies, so they had to choose a cryptocurrency base. Also, many traders in the realm started out with Bitcoin, and love Bitcoin, and want more Bitcoin. So they don't care if a trade gets them USD, they just want to grow their BTC holdings. Finally, with trading, volume is very important - you want as much being offered for sale as possible. If you split up every order book (btc/eth, xrp/eth, ltc/eth, usd/eth, xrp/ltc, xrp/usd, ltc/btc, etc etc) then the volume of each 'book' is divided amongst the options, making it harder to move larger amounts from one to the other.

yellowapple 8y ago

This article lost all credibility when it had managed to frame itself in a "haha stupid millennials" attitude by the very first sentence.

apo 8y ago

The Bitcoin hype cycle is driven by the mass media. Like this article, they pile on when BTC/USD exchange rate falls through the floor. During the period of stability that follows, they're nowhere to be found. After things have already turned around, they jostle with each other in an attempt to explain it all to Joe Sixpack. What the article fails to mention is that each "pop" has left the exchange rate higher than the previous top. Missed opportunity to investigate an emerging asset class with no direct analogy to anything preceding it, periodic manias or not.

will_brown 8y ago
>The Bitcoin hype cycle is driven by the mass media. It’s much more nefarious...the boom and bust articles are essentially ordered by individuals/groups with the influence as part of the market manipulations. It’s not entirely unlike what people refer to as submarine articles, what’s lurking underneath these publishing’s are attempts to move the markets (the first wall street movie actually does a decent job of demonstrating this practice in the 80’s for the stock market). These details will be exposed now that the SEC is beginning to target manipulations in these markets.

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bitxbitxbitcoin 8y ago

Bubbles only pop once. Bitcoin has spiked and crashed multiple times and it isn't unreasonable to expect it to do so again. Eventually, we might see the terminology change from "bubble" to "spike." It's already happening... Albeit slowly [0]. Can anyone think of a better term? [0] https://trends.google.com/trends/explore?date=all&q=%22bitcoin%20bubble%22,%22bitcoin%20spike%22 https://trends.google.com/trends/explore?date=all&q=%22bitco...

orev 8y ago
A spike is something that happens and completes in a very short period of time, not drawn out over a year like this was. The terminology used pretty clearly follows the shape of the price charts — there’s no need to try to redefine terms to meet whatever point one is trying to make.

matchagaucho 8y ago

I knew we were at peak in Dec 2017 when a fellow tourist in Mexico proclaimed his iPhone was stolen, apparently along with his BTC wallet, and he no longer had funds to continue the vacation.

shuntress 8y ago

The thing that really bothers me the most about crypto trading is all the wanna-be day-trader bros who fundamentally misunderstand what they are actually buying and selling. "Open source distributed transaction ledger" sails right over their heads but if I said I hand out a new dirtcoin to whoever moves the most dirt around my yard each day and here are some exchanges carrying dirtcoin I'm met with an avalanche of Wall Street jargon about how dirtcoin is the best investment anyone can ever make.

vminkov 8y ago

What we won't tell you is that many investors have realised that the price will fall freely if the supply can't be limited in demand drops. And they are now seeking to gain control over as much of the circulating supply as possible.

wtracy 8y ago

Either McAfee was being facetious in that tweet, or he was smoking something good. It's one thing to believe that Bitcoin is the future, it's another to believe that "Bubbles are mathematically impossible in this new paradigm. So are corrections and all else."