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The Target Value for Bitcoin is $100K to $1M

48 points by mrb 14y ago

rowanseymour 14y ago
I wonder what effect an article like this will have on Bitcoin trading today, as half of HN's readership suddenly think FREE MONEY and go try buying some Bitcoins...
- dscrd 14y ago
  Apparently quite a bit: BC on mtgox is now at $46 -- up from $35 2 days ago.
tobylane 14y ago
He's assuming perfect implementation of the highest goals of any strategy I've ever seen, and there's no one entity to carry it out. What can we look at in the past to not consider this insane?
- scotty79 14y ago
  Linux for various OS needs? Torrents for various digital content delivery needs?
  - thejosh 14y ago
    Linus would be considered the "one entity".
    - scotty79 14y ago
      Same way "Satoshi Nakamoto" can be considered "one entity". I think the parent meant someone to execute grand strategy all the way, not the very powerful and important rock that started the avalanche. I think such entity is not necessary. On the internet good things that get started tend to grow on their own to fulfill all the need if they are useful without wealthy entity to support the growth, sometimes even against coalition of wealthy entities. Easily transferable wealth storage is useful.
theDoug 14y ago
Written by a man who has gone "all-in" on Bitcoin.
- yuvadam 14y ago
  Well... yeah. If the title was "Why I went all-in on Bitcion" would that be less of an anomaly for you?
- Tichy 14y ago
  At least he puts his money where his mouth is.
  - bluedanieru 14y ago
    I think what we see here is a case of putting your mouth where your money is.
    - oleganza 14y ago
      Who is more honest: BTC advocate who has not invested in BTC, or the one who did? (Regardless of what you think about BTC yourself.)
    - Tichy 14y ago
      Since BTC is at an all-time high, at the very least if he didn't believe in BTC anymore he could get out now without a loss. So he still seems to honestly believe.
bmiranda 14y ago
Just checked MtGox, Bitcoin is now trading at $46... it was around $35 this time yesterday. Things seem to be getting out of hand.
- bmiranda 14y ago
  Historic prices in USD for those interested: http://bitcoincharts.com/charts/mtgoxUSD#tgSzm1g10zm2g25 http://bitcoincharts.com/charts/mtgoxUSD#tgSzm1g10zm2g25
  - baq 14y ago
    "you are here" comparisons are obvious. i think i'll be buying some bitcoins in 3 months.
mtgx 14y ago
I believe a Bitcoin will one day be worth at least thousands of dollars, too. However, I also think the road to that will be very bumpy, and I could see Bitcoin going to $100 now, then back to $20 all of the sudden. Then maybe go to $200 next year, and again back to $50, and so on. I don't think this will bother the people owning Bitcoin too much, and it shouldn't affect its future much, but it will probably make a lot of "normal" non-Bitcoin owners fear it and criticize it a lot. The truth is Bitcoin will not be a "stable" currency until its transactional value outweighs most of the speculations done on it, and that may not happen for a long time.
- oleganza 14y ago
  The "bumps" are getting smaller and smaller as amount of transactions and amount of users grows. As BTC dissipates through hundreds of thousands of hands, a single person's decision to sell or buy affects the price much less. The only reason for general panic would be a global problem like successful attack on the network or on popular services like MtGox, Coinbase etc. As times goes on we are having more exchanges, they get compliant with all the regulations, and most importantly, we have more businesses that accept bitcoins, so the demand for BTC-USD exchange slowly goes down (it's far from being small, but as BTC economy grows, the need for USD goes in the opposite direction). I would not expect big crashes due to pure speculation. And I'm quite confident that amount of money, people and experience in this game is big enough to ensure much more stable growth than 2 years ago.
vrotaru 14y ago
I remember some commenter saying on Scott Sumner blog, with reference to the discussion whether bitcoin is in bubble or not. *The price of bitcoin is volatile, because the future of bitcoin is volatile* Yes in one of this futures where Bitcoin is The Money having a whole bitcoin will be a big deal, in which case it will make no sense to speak of the price of bitcoin in dollars. I can think also of a transition period when bitcoin will widely acceptd and function in parallel with the dollar. For such a future the price range seems about right
DanBlake 14y ago
The biggest problem is that getting bitcoins is a major, major pain in the ass. You need to setup bank transfers, confirm your DNA and get a rectal exam to buy them from any exchange. You are looking at about a week to buy your first bitcoin from when you decide to do that. (3 days to confirm bank, 3 days to do a deposit) - This will never change for online purchases, because the way bitcoin works- there is no takey backeys (so credit card purchasing is out to buy bitcoins). So, either there will be massive fraud, or massive barrier to entry. The only way around it is retail, in person bitcoin exchanges/stores. Sort of like you see in international airports with currency exchanges. Also, Even though Bitcoin cant be destroyed in a physical sense, it can still be completely devalued by litigation. The US has shown they are serious about anti-gambling and if this starts taking off, they simply need to go after the exchanges. Making it hard to buy bitcoins = BTC value goes down. Making it hard to sell (remember when pokerstars was shutdown? Everyone withdrew everything from ALL sites) and the value goes down catastrophically fast. Basically, all it takes to completely devalue bitcoins is to have one event that makes most bitcoin owners think the amount of time they have to cash out is minimal. How do you think the market would react if mtgox had a 'megaupload' style moment? It doesn't even have to be realistic- The US gov could just say terrorists might be using it to funnel funds or something. But anyways, If mtgox was raided or taken down (and please don't say its not possible- Its totally possible) the effects on the market would be massive and instantaneous. When megaupload was taken down, all its competitors shut down out of fear as well. Its likely that would happen in this situation in a similar fashion. There is no intrinsic value in bitcoins unless it is possible to easily trade them with a outcome of receiving capital. Yes you can trade bitcoins for services, but the person giving you services is not going to do that unless HE can get cash from this. People are not going to trade services/items to each other in a giant circle if the value of the currency is not hinged on a dollar amount. I think the pro-bitcoin line to counter what I am saying is that someday people wont care if it converts into USD, because bitcoins will be more valuable. Its not totally bullshit- The USD is no more 'real' than a bitcoin, with the exception of it being established and backed by our gov. However, I doubt BTC would ever get gov backing, so it will eternally be at risk.
- jaggederest 14y ago
  > Yes you can trade bitcoins for services, but the person giving you services is not going to do that unless HE can get cash from this. Nice try, buddy, but it's services all the way down. If I can pay for food and rent with it, no exchange is needed. That said, right now you basically can't. Soon, though, soon.
jval 14y ago
Agree that long term the value of Bitcoin will go up provided that there is no technical flaw that gets exploited in the long run (which I'm not sure will be the case). However, these predictions are completely wrong. At best the drivers of Bitcoin growth in the foreseeable future will be illegal trade and people trying to capitalise on the growth in value by speculatively buying up Bitcoins. The growth of Bitcoins has a theoretical cap though, because the more common they become in illegal trade, the more likely they are to be outright banned by governments. If they can't ban people from buying drugs they will just stop them by proxy by banning Bitcoins. The idea that ordinary people will go through the hassle of transacting in Bitcoins is nonsensical.
meric 14y ago
I don't like bitcoin because everytime I turn on the Bitcoin app it takes so long to "Synchronize with the network". Basically confirm transactions for other people. I'm not sure what is the algorithm's running time. Is it O(n) where n is number of transactions? That would be excessive, because the number of transactions is very much bigger than O(m) where m is the number of people. Anyway, there is a chance I'll be wrong and bitcoin will be worth $1 million one day. To hedge against this possible situation I have procured myself 0.05 of a coin, some year or two ago when they were worth $0.8 each. At the time I basically took the number of bitcoins that will ever exist and divided by current population of the US. 21m/300m = 0.07, of which my 0.05 is pretty close to.
- sounds 14y ago
  Try a "lightweight" client. The official bitcoin-qt client is designed to be always on, 24/7/365. Example of a lightweight client: electrum.org
- eksith 14y ago
  You've waited too long between running the app so naturally there will be a long wait. If you do this at least daily, it won't be such a problem. Bitcoin economy exists solely by the confirmation of transactions by other people, so you're just doing normal housekeeping. The network is the bank. The very nature of the currency makes you to take some odd ways about generating and maintaining it.
- kolinko 14y ago
  You don't need to install any apps on your computer, nor to synchronize with the network.
gusgordon 14y ago
I have been sort of an outsider on this bitcoin investing, but I know about the service. Do you really think bitcoin is going to continue increasing in value? It seems to me like people are almost exclusively buying bitcoin as an investment. Very few people buy it to spend it. Doesn't that mean that as soon as people lose a bit of confidence, which is likely to happen some point, the price will completely dump? I am sure this has been talked about a lot - is there a better argument one way?
- dragontamer 14y ago
  Bitcoin volume is only ~100k / day. So, with just ~200k BTC, it would be possible to force a crash in the BTC market, right? So, here's the question. Is anyone willing to lend me 200k BTC for a few days?? :p This seems like the better investment right now... borrow someone else's bit coins, sell them on the market, and then buy them back after the crash. Its called "short selling". And if enough people short sell at the same time, the short sellers can spook the market into a selling frenzy, and the short sellers will siphon out all the money from the system...
  - xyzzy123 14y ago
    I'm not sure the volume is what you want to be looking at. Perhaps you're thinking of market depth? Here's the mtgox depth: http://bitcoincharts.com/markets/mtgoxUSD_depth.html http://bitcoincharts.com/markets/mtgoxUSD_depth.html If you sold 200k BTC in a "fill or kill" fashion without giving the market time to respond, you would definitely wipe out most of the bid order book. The highest bid price standing after your apocalyptic trade would be $5. You would get about 4MM for your 200k coins (avg $20 ea). However, there are currently only 66,000 bitcoins for the asking on mtgox. So how are you going to cover your short? You might trigger enough of a panic to pump another 100k bitcoins or so into the market at fire sale prices. However, it's much more likely you will get killed on the ask side trying to buy your 200k BTC back.
    - dragontamer 14y ago
      Thanks for the market depth information. If Mr. Shark were a bitcoin bank (such as Flexcoin), then they would have enough BTC to cover the short. Mt.Gox themselves presumably has ~100k BTC on hand, and would also have the power to crash the market in this manner. FlexCoin and Mt.Gox however have a vested interest in making sure Bitcoins succeed. So they probably wouldn't do this. A more likely malicious actor would be the hackers who stole 50,000 BTC some time a year and a half ago. http://www.dailytech.com/Inside+the+MegaHack+of+Bitcoin+the+Full+Story/article21942.htm http://www.dailytech.com/Inside+the+MegaHack+of+Bitcoin+the+... Crashing BTC with stolen BTC is free. The presumption is that a lot of people right now would sell their BTC when they see BTC drop down to $5. People panic when they see losing value... and you buy back the BTC you sold at that point.
dragontamer 14y ago
So... lets say we have this guy, lets call him "Mr. Shark". Mr. Shark notices that MtGox only has 107159 BTC trading volume. When converted into USD, that is about $5 Million. So... Mr. Shark learns that he can control the market price in any direction, with approximately only $5 million USD of investment. Mr. Shark's strategy therefore, is to build up enough money to "spook" the market by controlling it for a full day. ~100,000 BTC would be enough to crash the market for a full day: and hopefully the spooked long investors will help create the crash afterwards. Mr. Shark would then make sure the majority of his bet is in the form of a Long Straddle. Mr. Shark rides the market up till BTC has hit some absurdly high value, maybe issue a press release or two to help fuel BTC's rise. One day, Mr. Shark sells 100,000 BTC all at once on the Mt. Gox market. He cashes in at BTC's high price, then BTC crashes. (EDIT: For clarification... Mr. Shark loses some money here, on purpose). Mr. Shark then cashes in on his Call Options portion of his Long Straddle, and makes money because the market went down. Long story short: Mr. Shark wins a ton of money, and everyone who has "invested" into BTC these past few weeks loses their money to Mr. Shark. Mr. Shark leaves the market without any worries that investigators will be after him. (Its not like there is a Bitcoin version of the FTC) Until Mt. Gox's volume gets high enough to resist an adversarial trader, or until there is some group in charge to make sure that blatantly adversarial trading doesn't happen on the Bitcoin market... the BTC currency will be too risky for me.
- nazgulnarsil 14y ago
  it's absurdly easy to beat the "wallstreet sharks" at their own game. Buy shares of an index and hold.
- nandemo 14y ago
  > One day, Mr. Shark sells 100,000 BTC all at once on the Mt. Gox market. He cashes in at BTC's high price, then BTC crashes. If the the daily volume is about 100,000 BTC, how do you expect to sell 100,000 at once at "the high price"?
  - dragontamer 14y ago
    On the contrary. Mr. Shark doesn't want to sell BTC at the high price. He just wants BTC to crash. Mr. Shark makes his money from options trading and short-selling. The $5 million / 100k BTC is seen as an investment, its the cost that Mr. Shark pays to have unilateral control over the market for a day. Short Selling is when Mr. Shark comes up to you and says "Hey, I'll give you $100 right now if I can borrow 10k bitcoins for a week. I promise I'll give the bitcoins back". Mr. Shark can now build up 100k BTC to sell without actually risking $5 million USD. Call options is when Mr. Shark comes up to you and says "Hey, I'll give you a BTC on Wednesday next week if you give me $20 today". Since Bitcoins cost $40 today, its a good deal, so you buy these contracts. On Saturday, Mr. Shark crashes the market. He not only sells his 100k BTC, he short-sells more BTC. The BTC market panics, and BTCs drop down to pennies again. Come next Wednesday, Mr. Shark fulfills his contract. He buys a bitcoin for $1, and gives it to all of the people he sold Call options to, or participated in his Short-selling deal. Again, the $5 million is just the amount of money Mr. Shark is willing to lose to gain control of the market. Mr. Shark is making money through other means.
dave1010uk 14y ago
Whilst it is believable that a system like Bitcoin could have a market cap that supports a BTC price of $100k, how do we know that a different system won't take its place before it does? Bitcoin is in a strong position as it is first to the market but I think something similar could easily take its place if it was considerably better technically. Whether this will be a totally different system or a Bitcoin 1.1 that can be migrated to, I don't know. You could have said that the total market for IRC is 7bn people using it every day but now there are more people using other systems like Facebook Messenger.
raverbashing 14y ago
Ok, here goes, and I confess I don't know anything much about bitcoins, so you may help me here: Bitcoins are fractionable to 8 decimal places Maximum existance of 21Mi bitcoin. (If we disregard the decimal places) So, let's see, if, as he says, the value of BtC should be 100k dollars, that would represent 2.1e12 dollars (or 2 Trillion dollars) Unless there's a massive devaluation of the dollar, I don't see this happening. BtCs have no intrinsic value. It's not a reliable store of value (ok, you lost your wallet.dat now what). Right now even pieces of paper issue by a central bank somewhere under the mattress seem more reliable. Reliable: liquid and is not subject to big variations.
- scotty79 14y ago
  > It's not a reliable store of value (ok, you lost your wallet.dat now what). Now you learn to keep you wallet.dat as safe as you keep your wallet with same amount of money. :-) > Right now even pieces of paper issue by a central bank somewhere under the mattress seem more reliable. Nothing forbids you from keeping your wallet.dat on a pendrive or DVD under your mattress. Good read about reliability of paper money here: http://en.wikipedia.org/wiki/Hyperinflation http://en.wikipedia.org/wiki/Hyperinflation
  - raverbashing 14y ago
    Thank you, having lived in a country with an episode of Hyperinflation have taught me a lot about how that works. Even though the monetary expansion of BtC is limited, I think we may see other events that have not have happened with 'real money'
- mrb 14y ago
  His point is that if the worldwide money supply is estimated to 60 trillion USD, and if Bitcoin manages to capture, say, 10% of that then the 21 million bitcoins should be worth 6 trillion USD. There is no need for the USD to be massively devalued for this scenario to be possible. Technically and economically speaking, all the currencies in the world need to be devalued by merely 10% for this scenario to be possible. PS: you can back up your wallet.dat, which you cannot do with physical money.
reaclmbs 14y ago
Anyone in San Francisco willing to sell me some bitcoins? I'm looking to buy up to 10. We'll meet up in a café and I'll give you cash for them. I don't feel like jumping through hoops getting verified with Mt Gox. Happy to pay a 10% price premium...and happy to show you some ID.
csomar 14y ago
This leads us to a target market cap of 600 billion to 6 trillion USD, to be fulfilled by about 6 million bitcoin, which makes for easy calculations. That means that each bitcoin would be worth $100,000 at the low market cap and $1,000,000 at the high market cap. There is some terrible math/economics here. You can have the bitcoin value @ $1/bitcoin and fulfill 6 trillion USD/day transactions if you want. The author forgot that Btc velocity matters here, and a lot. BTC can be worth $1m right now, we don't have to wait for the 6 trillion USD transactions for that to happen. It's about investors, speculators and hoarders. Will the velocity of BTC be different than other currencies velocities? Well, we can't know for sure now, but it'll be interesting to watch how this currency evolve. If you are betting on BTC, you should bet on a BTC business and not on the value of BTC itself.

48 points by mrb 14y ago

I wonder what effect an article like this will have on Bitcoin trading today, as half of HN's readership suddenly think FREE MONEY and go try buying some Bitcoins...

dscrd 14y ago
Apparently quite a bit: BC on mtgox is now at $46 -- up from $35 2 days ago.

tobylane 14y ago

He's assuming perfect implementation of the highest goals of any strategy I've ever seen, and there's no one entity to carry it out. What can we look at in the past to not consider this insane?

scotty79 14y ago
Linux for various OS needs? Torrents for various digital content delivery needs?
- thejosh 14y ago
  Linus would be considered the "one entity".
  - scotty79 14y ago
    Same way "Satoshi Nakamoto" can be considered "one entity". I think the parent meant someone to execute grand strategy all the way, not the very powerful and important rock that started the avalanche. I think such entity is not necessary. On the internet good things that get started tend to grow on their own to fulfill all the need if they are useful without wealthy entity to support the growth, sometimes even against coalition of wealthy entities. Easily transferable wealth storage is useful.

theDoug 14y ago

Written by a man who has gone "all-in" on Bitcoin.

yuvadam 14y ago
Well... yeah. If the title was "Why I went all-in on Bitcion" would that be less of an anomaly for you?
Tichy 14y ago
At least he puts his money where his mouth is.
- bluedanieru 14y ago
  I think what we see here is a case of putting your mouth where your money is.
  - oleganza 14y ago
    Who is more honest: BTC advocate who has not invested in BTC, or the one who did? (Regardless of what you think about BTC yourself.)
  - Tichy 14y ago
    Since BTC is at an all-time high, at the very least if he didn't believe in BTC anymore he could get out now without a loss. So he still seems to honestly believe.

bmiranda 14y ago

Just checked MtGox, Bitcoin is now trading at $46... it was around $35 this time yesterday. Things seem to be getting out of hand.

bmiranda 14y ago
Historic prices in USD for those interested: http://bitcoincharts.com/charts/mtgoxUSD#tgSzm1g10zm2g25 http://bitcoincharts.com/charts/mtgoxUSD#tgSzm1g10zm2g25
- baq 14y ago
  "you are here" comparisons are obvious. i think i'll be buying some bitcoins in 3 months.

mtgx 14y ago

I believe a Bitcoin will one day be worth at least thousands of dollars, too. However, I also think the road to that will be very bumpy, and I could see Bitcoin going to $100 now, then back to $20 all of the sudden. Then maybe go to $200 next year, and again back to $50, and so on. I don't think this will bother the people owning Bitcoin too much, and it shouldn't affect its future much, but it will probably make a lot of "normal" non-Bitcoin owners fear it and criticize it a lot. The truth is Bitcoin will not be a "stable" currency until its transactional value outweighs most of the speculations done on it, and that may not happen for a long time.

oleganza 14y ago
The "bumps" are getting smaller and smaller as amount of transactions and amount of users grows. As BTC dissipates through hundreds of thousands of hands, a single person's decision to sell or buy affects the price much less. The only reason for general panic would be a global problem like successful attack on the network or on popular services like MtGox, Coinbase etc. As times goes on we are having more exchanges, they get compliant with all the regulations, and most importantly, we have more businesses that accept bitcoins, so the demand for BTC-USD exchange slowly goes down (it's far from being small, but as BTC economy grows, the need for USD goes in the opposite direction). I would not expect big crashes due to pure speculation. And I'm quite confident that amount of money, people and experience in this game is big enough to ensure much more stable growth than 2 years ago.

vrotaru 14y ago

I remember some commenter saying on Scott Sumner blog, with reference to the discussion whether bitcoin is in bubble or not. *The price of bitcoin is volatile, because the future of bitcoin is volatile* Yes in one of this futures where Bitcoin is The Money having a whole bitcoin will be a big deal, in which case it will make no sense to speak of the price of bitcoin in dollars. I can think also of a transition period when bitcoin will widely acceptd and function in parallel with the dollar. For such a future the price range seems about right

DanBlake 14y ago

The biggest problem is that getting bitcoins is a major, major pain in the ass. You need to setup bank transfers, confirm your DNA and get a rectal exam to buy them from any exchange. You are looking at about a week to buy your first bitcoin from when you decide to do that. (3 days to confirm bank, 3 days to do a deposit) - This will never change for online purchases, because the way bitcoin works- there is no takey backeys (so credit card purchasing is out to buy bitcoins). So, either there will be massive fraud, or massive barrier to entry. The only way around it is retail, in person bitcoin exchanges/stores. Sort of like you see in international airports with currency exchanges. Also, Even though Bitcoin cant be destroyed in a physical sense, it can still be completely devalued by litigation. The US has shown they are serious about anti-gambling and if this starts taking off, they simply need to go after the exchanges. Making it hard to buy bitcoins = BTC value goes down. Making it hard to sell (remember when pokerstars was shutdown? Everyone withdrew everything from ALL sites) and the value goes down catastrophically fast. Basically, all it takes to completely devalue bitcoins is to have one event that makes most bitcoin owners think the amount of time they have to cash out is minimal. How do you think the market would react if mtgox had a 'megaupload' style moment? It doesn't even have to be realistic- The US gov could just say terrorists might be using it to funnel funds or something. But anyways, If mtgox was raided or taken down (and please don't say its not possible- Its totally possible) the effects on the market would be massive and instantaneous. When megaupload was taken down, all its competitors shut down out of fear as well. Its likely that would happen in this situation in a similar fashion. There is no intrinsic value in bitcoins unless it is possible to easily trade them with a outcome of receiving capital. Yes you can trade bitcoins for services, but the person giving you services is not going to do that unless HE can get cash from this. People are not going to trade services/items to each other in a giant circle if the value of the currency is not hinged on a dollar amount. I think the pro-bitcoin line to counter what I am saying is that someday people wont care if it converts into USD, because bitcoins will be more valuable. Its not totally bullshit- The USD is no more 'real' than a bitcoin, with the exception of it being established and backed by our gov. However, I doubt BTC would ever get gov backing, so it will eternally be at risk.

jaggederest 14y ago
> Yes you can trade bitcoins for services, but the person giving you services is not going to do that unless HE can get cash from this. Nice try, buddy, but it's services all the way down. If I can pay for food and rent with it, no exchange is needed. That said, right now you basically can't. Soon, though, soon.

jval 14y ago

Agree that long term the value of Bitcoin will go up provided that there is no technical flaw that gets exploited in the long run (which I'm not sure will be the case). However, these predictions are completely wrong. At best the drivers of Bitcoin growth in the foreseeable future will be illegal trade and people trying to capitalise on the growth in value by speculatively buying up Bitcoins. The growth of Bitcoins has a theoretical cap though, because the more common they become in illegal trade, the more likely they are to be outright banned by governments. If they can't ban people from buying drugs they will just stop them by proxy by banning Bitcoins. The idea that ordinary people will go through the hassle of transacting in Bitcoins is nonsensical.

meric 14y ago

I don't like bitcoin because everytime I turn on the Bitcoin app it takes so long to "Synchronize with the network". Basically confirm transactions for other people. I'm not sure what is the algorithm's running time. Is it O(n) where n is number of transactions? That would be excessive, because the number of transactions is very much bigger than O(m) where m is the number of people. Anyway, there is a chance I'll be wrong and bitcoin will be worth $1 million one day. To hedge against this possible situation I have procured myself 0.05 of a coin, some year or two ago when they were worth $0.8 each. At the time I basically took the number of bitcoins that will ever exist and divided by current population of the US. 21m/300m = 0.07, of which my 0.05 is pretty close to.

sounds 14y ago
Try a "lightweight" client. The official bitcoin-qt client is designed to be always on, 24/7/365. Example of a lightweight client: electrum.org
eksith 14y ago
You've waited too long between running the app so naturally there will be a long wait. If you do this at least daily, it won't be such a problem. Bitcoin economy exists solely by the confirmation of transactions by other people, so you're just doing normal housekeeping. The network is the bank. The very nature of the currency makes you to take some odd ways about generating and maintaining it.
kolinko 14y ago
You don't need to install any apps on your computer, nor to synchronize with the network.

gusgordon 14y ago

I have been sort of an outsider on this bitcoin investing, but I know about the service. Do you really think bitcoin is going to continue increasing in value? It seems to me like people are almost exclusively buying bitcoin as an investment. Very few people buy it to spend it. Doesn't that mean that as soon as people lose a bit of confidence, which is likely to happen some point, the price will completely dump? I am sure this has been talked about a lot - is there a better argument one way?

dragontamer 14y ago
Bitcoin volume is only ~100k / day. So, with just ~200k BTC, it would be possible to force a crash in the BTC market, right? So, here's the question. Is anyone willing to lend me 200k BTC for a few days?? :p This seems like the better investment right now... borrow someone else's bit coins, sell them on the market, and then buy them back after the crash. Its called "short selling". And if enough people short sell at the same time, the short sellers can spook the market into a selling frenzy, and the short sellers will siphon out all the money from the system...
- xyzzy123 14y ago
  I'm not sure the volume is what you want to be looking at. Perhaps you're thinking of market depth? Here's the mtgox depth: http://bitcoincharts.com/markets/mtgoxUSD_depth.html http://bitcoincharts.com/markets/mtgoxUSD_depth.html If you sold 200k BTC in a "fill or kill" fashion without giving the market time to respond, you would definitely wipe out most of the bid order book. The highest bid price standing after your apocalyptic trade would be $5. You would get about 4MM for your 200k coins (avg $20 ea). However, there are currently only 66,000 bitcoins for the asking on mtgox. So how are you going to cover your short? You might trigger enough of a panic to pump another 100k bitcoins or so into the market at fire sale prices. However, it's much more likely you will get killed on the ask side trying to buy your 200k BTC back.
  - dragontamer 14y ago
    Thanks for the market depth information. If Mr. Shark were a bitcoin bank (such as Flexcoin), then they would have enough BTC to cover the short. Mt.Gox themselves presumably has ~100k BTC on hand, and would also have the power to crash the market in this manner. FlexCoin and Mt.Gox however have a vested interest in making sure Bitcoins succeed. So they probably wouldn't do this. A more likely malicious actor would be the hackers who stole 50,000 BTC some time a year and a half ago. http://www.dailytech.com/Inside+the+MegaHack+of+Bitcoin+the+Full+Story/article21942.htm http://www.dailytech.com/Inside+the+MegaHack+of+Bitcoin+the+... Crashing BTC with stolen BTC is free. The presumption is that a lot of people right now would sell their BTC when they see BTC drop down to $5. People panic when they see losing value... and you buy back the BTC you sold at that point.

dragontamer 14y ago

So... lets say we have this guy, lets call him "Mr. Shark". Mr. Shark notices that MtGox only has 107159 BTC trading volume. When converted into USD, that is about $5 Million. So... Mr. Shark learns that he can control the market price in any direction, with approximately only $5 million USD of investment. Mr. Shark's strategy therefore, is to build up enough money to "spook" the market by controlling it for a full day. ~100,000 BTC would be enough to crash the market for a full day: and hopefully the spooked long investors will help create the crash afterwards. Mr. Shark would then make sure the majority of his bet is in the form of a Long Straddle. Mr. Shark rides the market up till BTC has hit some absurdly high value, maybe issue a press release or two to help fuel BTC's rise. One day, Mr. Shark sells 100,000 BTC all at once on the Mt. Gox market. He cashes in at BTC's high price, then BTC crashes. (EDIT: For clarification... Mr. Shark loses some money here, on purpose). Mr. Shark then cashes in on his Call Options portion of his Long Straddle, and makes money because the market went down. Long story short: Mr. Shark wins a ton of money, and everyone who has "invested" into BTC these past few weeks loses their money to Mr. Shark. Mr. Shark leaves the market without any worries that investigators will be after him. (Its not like there is a Bitcoin version of the FTC) Until Mt. Gox's volume gets high enough to resist an adversarial trader, or until there is some group in charge to make sure that blatantly adversarial trading doesn't happen on the Bitcoin market... the BTC currency will be too risky for me.

nazgulnarsil 14y ago
it's absurdly easy to beat the "wallstreet sharks" at their own game. Buy shares of an index and hold.
nandemo 14y ago
> One day, Mr. Shark sells 100,000 BTC all at once on the Mt. Gox market. He cashes in at BTC's high price, then BTC crashes. If the the daily volume is about 100,000 BTC, how do you expect to sell 100,000 at once at "the high price"?
- dragontamer 14y ago
  On the contrary. Mr. Shark doesn't want to sell BTC at the high price. He just wants BTC to crash. Mr. Shark makes his money from options trading and short-selling. The $5 million / 100k BTC is seen as an investment, its the cost that Mr. Shark pays to have unilateral control over the market for a day. Short Selling is when Mr. Shark comes up to you and says "Hey, I'll give you $100 right now if I can borrow 10k bitcoins for a week. I promise I'll give the bitcoins back". Mr. Shark can now build up 100k BTC to sell without actually risking $5 million USD. Call options is when Mr. Shark comes up to you and says "Hey, I'll give you a BTC on Wednesday next week if you give me $20 today". Since Bitcoins cost $40 today, its a good deal, so you buy these contracts. On Saturday, Mr. Shark crashes the market. He not only sells his 100k BTC, he short-sells more BTC. The BTC market panics, and BTCs drop down to pennies again. Come next Wednesday, Mr. Shark fulfills his contract. He buys a bitcoin for $1, and gives it to all of the people he sold Call options to, or participated in his Short-selling deal. Again, the $5 million is just the amount of money Mr. Shark is willing to lose to gain control of the market. Mr. Shark is making money through other means.

dave1010uk 14y ago

Whilst it is believable that a system like Bitcoin could have a market cap that supports a BTC price of $100k, how do we know that a different system won't take its place before it does? Bitcoin is in a strong position as it is first to the market but I think something similar could easily take its place if it was considerably better technically. Whether this will be a totally different system or a Bitcoin 1.1 that can be migrated to, I don't know. You could have said that the total market for IRC is 7bn people using it every day but now there are more people using other systems like Facebook Messenger.

raverbashing 14y ago

Ok, here goes, and I confess I don't know anything much about bitcoins, so you may help me here: Bitcoins are fractionable to 8 decimal places Maximum existance of 21Mi bitcoin. (If we disregard the decimal places) So, let's see, if, as he says, the value of BtC should be 100k dollars, that would represent 2.1e12 dollars (or 2 Trillion dollars) Unless there's a massive devaluation of the dollar, I don't see this happening. BtCs have no intrinsic value. It's not a reliable store of value (ok, you lost your wallet.dat now what). Right now even pieces of paper issue by a central bank somewhere under the mattress seem more reliable. Reliable: liquid and is not subject to big variations.

scotty79 14y ago
> It's not a reliable store of value (ok, you lost your wallet.dat now what). Now you learn to keep you wallet.dat as safe as you keep your wallet with same amount of money. :-) > Right now even pieces of paper issue by a central bank somewhere under the mattress seem more reliable. Nothing forbids you from keeping your wallet.dat on a pendrive or DVD under your mattress. Good read about reliability of paper money here: http://en.wikipedia.org/wiki/Hyperinflation http://en.wikipedia.org/wiki/Hyperinflation
- raverbashing 14y ago
  Thank you, having lived in a country with an episode of Hyperinflation have taught me a lot about how that works. Even though the monetary expansion of BtC is limited, I think we may see other events that have not have happened with 'real money'
mrb 14y ago
His point is that if the worldwide money supply is estimated to 60 trillion USD, and if Bitcoin manages to capture, say, 10% of that then the 21 million bitcoins should be worth 6 trillion USD. There is no need for the USD to be massively devalued for this scenario to be possible. Technically and economically speaking, all the currencies in the world need to be devalued by merely 10% for this scenario to be possible. PS: you can back up your wallet.dat, which you cannot do with physical money.

reaclmbs 14y ago

Anyone in San Francisco willing to sell me some bitcoins? I'm looking to buy up to 10. We'll meet up in a café and I'll give you cash for them. I don't feel like jumping through hoops getting verified with Mt Gox. Happy to pay a 10% price premium...and happy to show you some ID.

csomar 14y ago

This leads us to a target market cap of 600 billion to 6 trillion USD, to be fulfilled by about 6 million bitcoin, which makes for easy calculations. That means that each bitcoin would be worth $100,000 at the low market cap and $1,000,000 at the high market cap. There is some terrible math/economics here. You can have the bitcoin value @ $1/bitcoin and fulfill 6 trillion USD/day transactions if you want. The author forgot that Btc velocity matters here, and a lot. BTC can be worth $1m right now, we don't have to wait for the 6 trillion USD transactions for that to happen. It's about investors, speculators and hoarders. Will the velocity of BTC be different than other currencies velocities? Well, we can't know for sure now, but it'll be interesting to watch how this currency evolve. If you are betting on BTC, you should bet on a BTC business and not on the value of BTC itself.