7 ms·

Betting on Bitcoin: Fundamentals vs Technical Analysis

58 points by eof 15y ago

kiba 15y ago
Related: one of my writer wrote an article that concluded the fundamental for bitcoin is strong, since the economy is growing. http://bitcoinweekly.com/articles/causes-behind-the-bitcoin-price-rally http://bitcoinweekly.com/articles/causes-behind-the-bitcoin-... (P.S, I hope I am not spammy)
- hugh3 15y ago
  Has an article in bitcoinweekly ever concluded that the fundamentals for bitcoin are weak?
  - kiba 15y ago
    I think you would realize that there are only...25 articles in the archive, and that this was the only article that actually analyze the Bitcoin currency market.
    - ceejayoz 15y ago
      I think the point just wooshed over your head.
      - hugh3 15y ago
        Was that typed on an iPhone, or is "woodshed over your head" some expression with which I was not previously familiar?
        Estragon 15y ago
        I kind of assumed it meant he got a woodsheding, but was too ignorant to realise it.
        anamax 15y ago
        "whooshed" is past tense of "whoosh", as in "it went right over your head, with you totally unaware".
pemulis 15y ago
I think that Mt. Gox needs to place limits on how quickly the 'official' bitcoin exchange rate can rise or drop. This would help to limit the intra-day volatility that is the defining feature of bitcoin speculation. Since the trading volume is so low right now, savvy professional traders can manipulate the market up or down with only a few thousand USD. This makes the current bitcoin economy impractical for most ordinary merchants and consumers. If people want to trade in dark pools or OTC exchanges at rates different from the 'official' rate, that's fine. And in situations where there is an actual reason for the price to shoot up (like PokerStars announcing they will start accepting bitcoins), those side markets are where we would see the 'real' price. The official rate on Mt. Gox would lag behind because of the restrictions in place, but I think that would be a small price to pay for an end to the bot- and speculator-driven volatility in the exchange.
- barmstrong 15y ago
  Wouldn't speculation driven volatility be automatically solved as the number of participants and size of the market goes up?
  - ceejayoz 15y ago
    http://en.wikipedia.org/wiki/Tulip_mania http://en.wikipedia.org/wiki/Tulip_mania
- topynate 15y ago
  You can't force people to fill bids and asks at pre-freeze prices, as that would just lead to participants being horribly arbitraged against (and even if Mt. Gox were the only way of trading Btc for USD, it would still be a terrible idea); so the only other option is to suspend trading. Well, now what? Btc will still be traded; the market price will still move; but you won't be able to see it happening on Mt. Gox anymore. The effect would be to harm the liquidity of holders of Mt. Gox accounts, not to reduce volatility; and in fact, by reducing volume, volatility would likely increase. The site would lose its business in a few days or hours. My theory of what could rapidly reduce volatility in Bitcoin: liquid markets in futures and vanilla options. It's an easy way of generating more volume. It provides price stability to businesses accepting Bitcoin as payment. Empirical evidence exists that the more options purchased by hedgers, the less volatility exists in the underlying: http://www.terry.uga.edu/finance/docs/pearson.pdf http://www.terry.uga.edu/finance/docs/pearson.pdf.
heyrhett 15y ago
Since the author didn't bring this up, I think that the biggest technical problem with bitcoin is that it takes 10 minutes to verify a transaction. It can't be used in real stores until someone figures out a way to get that down to under a minute.
- shazow 15y ago
  You can include a transaction bounty (traditionally 0.01 BTC) with your payment which the verifiers receive if they're the first to verify your payment. Effectively, this puts your transaction at the top of the priority queue. When you're connected to a healthy number of peers, this can bring down the verification time down to seconds. Another approach is to have "trusted sources" which are Bitcoin banks/ewallets. If your customer is using a Bitcoin bank like eWallet to send a payment, you can pretty much assume that the transaction is valid based on the source, without verification. Either way, this is merely a short term problem. As more Bitcoin infrastructure springs up (more banks, more verification hubs, more incentive on transaction fees rather than mining, when mining gets too expensive) then these problems will be organically mitigated. If the Bitcoin infrastructure were to remain the way it is now forever, it won't scale for many other reasons (like requiring peers' wallets to store significant transaction history that could grow at the rate of gigabytes per hour with "real world" volume).
  - arst 15y ago
    You can include a transaction bounty (traditionally 0.01 BTC) with your payment which the verifiers receive if they're the first to verify your payment. Effectively, this puts your transaction at the top of the priority queue. When you're connected to a healthy number of peers, this can bring down the verification time down to seconds. Isn't transaction verification tied to block generation, and isn't block generation limited to about 1 every 10 minutes?
    - shazow 15y ago
      Someone correct me if I'm wrong, but I don't think transaction verification is tied to generating new blocks. From how I understand it, verification involves: 1. Confirming the privately-signed transaction against the public key of the source wallet (transactions not forged). 2. Confirming against the historical transaction chain that the coins actually belong to the source wallet (coins not forged). 3. Passing the verified transaction along to other peers.
Teckla 15y ago
What happens if you lose your Bitcoin wallet? Are your Bitcoins gone forever, with no recourse? Do those Bitcoins effectively leave the limited Bitcoin money supply forever?
- kiba 15y ago
  They are lost forever if you do not back up your bitcoin wallet. Also, it's impossible to distinguish between a hoarded bitcoin or a lost bitcoin. But if it is lost, it effectively leave the money supply forever.
  - caf 15y ago
    I was wondering about this myself. There's a fixed total supply of bitcoins, and a non-zero rate of loss can be expected - this doesn't seem like a good long-term combination.
    - stuhood 15y ago
      The Bitcoin protocol allows for 8 decimals worth of divisibility, meaning that there are actually 2.1E16 or 21 quadrillion "units" (aka "Satoshi's") available.
      - Groxx 15y ago
        And the divisibility can be extended. The 8 decimals are largely just because the current client(s) only understand it to that degree.
    - jared314 15y ago
      It sounds like a few good "money burning" viruses and you would double the value of bitcoins by reducing supply. Back up your wallet!
Estragon 15y ago
> there are already competing exchanges being set up on 4 > more continents that will allow liquidity between bitcoin > and other currencies Anyone got a cite listing the four countries?
- eof 15y ago
  > https://en.bitcoin.it/wiki/Trade#Currency_exchange https://en.bitcoin.it/wiki/Trade#Currency_exchange Additionally, glbse I believe will be open sourcing their server (the client is already open).
  - Estragon 15y ago
    Thanks.
jaysonelliot 15y ago
If you lose your wallet, you lose your bitcoins. This means that losing data from your hard drive is equivalent to losing your bank account. I get the idea that people ought to back up regularly, but look at the reality of the situation. How many times have you heard a friend or relative bemoan the loss of important photos or files because they didn't back up their computer? I assume that the eventual goal of bitcoin is to be accepted by the mainstream public. Unless I'm misunderstanding something (which is entirely possible), we'd be asking people to accept the idea that their money is only as safe as the data on their hard drive. Do I have this all wrong?
- jpadkins 15y ago
  So use mybitcoin.com then. Or another 3rd party you trust.
  - jaysonelliot 15y ago
    And what happens if mybitcoin or whatever third party proves itself untrustworthy? I can't see myself trusting any unregulated, unsecured entity with any significant amount of my personal wealth.
    - jpadkins 15y ago
      Who regulates the Federal Reserve? You trust the SEC to secure your wealth?
      - ceejayoz 15y ago
        It's a lot easier to go to the SEC offices (or the offices of our elected reps who appointed them) with pitchforks than it is to get to the folks running mybitcoin.
- DenisM 15y ago
  If you lose your wallet, you lose your cash. That does not mean cash is unworkable, that only means people will learn to keep their money in a safe place. Might take some time, but they'll learn all the same.
ww520 15y ago
I actually want to work for BitCoins. Anyone has a small project that needs work and is willing to pay it in BitCoins?
- sgornick 15y ago
  You can list your availability as a freelancer on http://bitcoiners.org http://bitcoiners.org or on the Bitcoin wiki: http://en.bitcoin.it/wiki/Category:Freelancers http://en.bitcoin.it/wiki/Category:Freelancers
- dublinclontarf 15y ago
  Check this out. http://www.bitcoin.org/smf/index.php?topic=8437.msg123203 http://www.bitcoin.org/smf/index.php?topic=8437.msg123203 Seems they're going to go with Python though. You know python?
anonymous 15y ago
Can we just stop talking about bitcoins?

58 points by eof 15y ago

kiba 15y ago

Related: one of my writer wrote an article that concluded the fundamental for bitcoin is strong, since the economy is growing. http://bitcoinweekly.com/articles/causes-behind-the-bitcoin-price-rally http://bitcoinweekly.com/articles/causes-behind-the-bitcoin-... (P.S, I hope I am not spammy)

hugh3 15y ago
Has an article in bitcoinweekly ever concluded that the fundamentals for bitcoin are weak?
- kiba 15y ago
  I think you would realize that there are only...25 articles in the archive, and that this was the only article that actually analyze the Bitcoin currency market.
  - ceejayoz 15y ago
    I think the point just wooshed over your head.
    - hugh3 15y ago
      Was that typed on an iPhone, or is "woodshed over your head" some expression with which I was not previously familiar?
      - Estragon 15y ago
        I kind of assumed it meant he got a woodsheding, but was too ignorant to realise it.
      - anamax 15y ago
        "whooshed" is past tense of "whoosh", as in "it went right over your head, with you totally unaware".

pemulis 15y ago

I think that Mt. Gox needs to place limits on how quickly the 'official' bitcoin exchange rate can rise or drop. This would help to limit the intra-day volatility that is the defining feature of bitcoin speculation. Since the trading volume is so low right now, savvy professional traders can manipulate the market up or down with only a few thousand USD. This makes the current bitcoin economy impractical for most ordinary merchants and consumers. If people want to trade in dark pools or OTC exchanges at rates different from the 'official' rate, that's fine. And in situations where there is an actual reason for the price to shoot up (like PokerStars announcing they will start accepting bitcoins), those side markets are where we would see the 'real' price. The official rate on Mt. Gox would lag behind because of the restrictions in place, but I think that would be a small price to pay for an end to the bot- and speculator-driven volatility in the exchange.

barmstrong 15y ago
Wouldn't speculation driven volatility be automatically solved as the number of participants and size of the market goes up?
- ceejayoz 15y ago
  http://en.wikipedia.org/wiki/Tulip_mania http://en.wikipedia.org/wiki/Tulip_mania
topynate 15y ago
You can't force people to fill bids and asks at pre-freeze prices, as that would just lead to participants being horribly arbitraged against (and even if Mt. Gox were the only way of trading Btc for USD, it would still be a terrible idea); so the only other option is to suspend trading. Well, now what? Btc will still be traded; the market price will still move; but you won't be able to see it happening on Mt. Gox anymore. The effect would be to harm the liquidity of holders of Mt. Gox accounts, not to reduce volatility; and in fact, by reducing volume, volatility would likely increase. The site would lose its business in a few days or hours. My theory of what could rapidly reduce volatility in Bitcoin: liquid markets in futures and vanilla options. It's an easy way of generating more volume. It provides price stability to businesses accepting Bitcoin as payment. Empirical evidence exists that the more options purchased by hedgers, the less volatility exists in the underlying: http://www.terry.uga.edu/finance/docs/pearson.pdf http://www.terry.uga.edu/finance/docs/pearson.pdf.

heyrhett 15y ago

Since the author didn't bring this up, I think that the biggest technical problem with bitcoin is that it takes 10 minutes to verify a transaction. It can't be used in real stores until someone figures out a way to get that down to under a minute.

shazow 15y ago
You can include a transaction bounty (traditionally 0.01 BTC) with your payment which the verifiers receive if they're the first to verify your payment. Effectively, this puts your transaction at the top of the priority queue. When you're connected to a healthy number of peers, this can bring down the verification time down to seconds. Another approach is to have "trusted sources" which are Bitcoin banks/ewallets. If your customer is using a Bitcoin bank like eWallet to send a payment, you can pretty much assume that the transaction is valid based on the source, without verification. Either way, this is merely a short term problem. As more Bitcoin infrastructure springs up (more banks, more verification hubs, more incentive on transaction fees rather than mining, when mining gets too expensive) then these problems will be organically mitigated. If the Bitcoin infrastructure were to remain the way it is now forever, it won't scale for many other reasons (like requiring peers' wallets to store significant transaction history that could grow at the rate of gigabytes per hour with "real world" volume).
- arst 15y ago
  You can include a transaction bounty (traditionally 0.01 BTC) with your payment which the verifiers receive if they're the first to verify your payment. Effectively, this puts your transaction at the top of the priority queue. When you're connected to a healthy number of peers, this can bring down the verification time down to seconds. Isn't transaction verification tied to block generation, and isn't block generation limited to about 1 every 10 minutes?
  - shazow 15y ago
    Someone correct me if I'm wrong, but I don't think transaction verification is tied to generating new blocks. From how I understand it, verification involves: 1. Confirming the privately-signed transaction against the public key of the source wallet (transactions not forged). 2. Confirming against the historical transaction chain that the coins actually belong to the source wallet (coins not forged). 3. Passing the verified transaction along to other peers.

Teckla 15y ago

What happens if you lose your Bitcoin wallet? Are your Bitcoins gone forever, with no recourse? Do those Bitcoins effectively leave the limited Bitcoin money supply forever?

kiba 15y ago
They are lost forever if you do not back up your bitcoin wallet. Also, it's impossible to distinguish between a hoarded bitcoin or a lost bitcoin. But if it is lost, it effectively leave the money supply forever.
- caf 15y ago
  I was wondering about this myself. There's a fixed total supply of bitcoins, and a non-zero rate of loss can be expected - this doesn't seem like a good long-term combination.
  - stuhood 15y ago
    The Bitcoin protocol allows for 8 decimals worth of divisibility, meaning that there are actually 2.1E16 or 21 quadrillion "units" (aka "Satoshi's") available.
    - Groxx 15y ago
      And the divisibility can be extended. The 8 decimals are largely just because the current client(s) only understand it to that degree.
  - jared314 15y ago
    It sounds like a few good "money burning" viruses and you would double the value of bitcoins by reducing supply. Back up your wallet!

Estragon 15y ago

> there are already competing exchanges being set up on 4 > more continents that will allow liquidity between bitcoin > and other currencies Anyone got a cite listing the four countries?

eof 15y ago
> https://en.bitcoin.it/wiki/Trade#Currency_exchange https://en.bitcoin.it/wiki/Trade#Currency_exchange Additionally, glbse I believe will be open sourcing their server (the client is already open).
- Estragon 15y ago
  Thanks.

jaysonelliot 15y ago

If you lose your wallet, you lose your bitcoins. This means that losing data from your hard drive is equivalent to losing your bank account. I get the idea that people ought to back up regularly, but look at the reality of the situation. How many times have you heard a friend or relative bemoan the loss of important photos or files because they didn't back up their computer? I assume that the eventual goal of bitcoin is to be accepted by the mainstream public. Unless I'm misunderstanding something (which is entirely possible), we'd be asking people to accept the idea that their money is only as safe as the data on their hard drive. Do I have this all wrong?

jpadkins 15y ago
So use mybitcoin.com then. Or another 3rd party you trust.
- jaysonelliot 15y ago
  And what happens if mybitcoin or whatever third party proves itself untrustworthy? I can't see myself trusting any unregulated, unsecured entity with any significant amount of my personal wealth.
  - jpadkins 15y ago
    Who regulates the Federal Reserve? You trust the SEC to secure your wealth?
    - ceejayoz 15y ago
      It's a lot easier to go to the SEC offices (or the offices of our elected reps who appointed them) with pitchforks than it is to get to the folks running mybitcoin.
DenisM 15y ago
If you lose your wallet, you lose your cash. That does not mean cash is unworkable, that only means people will learn to keep their money in a safe place. Might take some time, but they'll learn all the same.

ww520 15y ago

I actually want to work for BitCoins. Anyone has a small project that needs work and is willing to pay it in BitCoins?

sgornick 15y ago
You can list your availability as a freelancer on http://bitcoiners.org http://bitcoiners.org or on the Bitcoin wiki: http://en.bitcoin.it/wiki/Category:Freelancers http://en.bitcoin.it/wiki/Category:Freelancers
dublinclontarf 15y ago
Check this out. http://www.bitcoin.org/smf/index.php?topic=8437.msg123203 http://www.bitcoin.org/smf/index.php?topic=8437.msg123203 Seems they're going to go with Python though. You know python?

anonymous 15y ago

Can we just stop talking about bitcoins?