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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?

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.
    - xyzzy123 14y ago
      OK, so I still don't think what you're describing could be profitably executed. But playing devil's advocate... > Crashing BTC with stolen BTC is free. Yes, agree that you could definitely crash the bid price by dumping 50k stolen BTC. This might also happen naturally if someone holding lots of BTC is forced to sell to get USD quick (e.g. "oh no, huge unexpected medical bill, tax bill, fine..."). [Not sure it's "free" though; what about opportunity cost?] > 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. So during your buyback, you'll be bidding against all the bitcoin loons who also want to buy after you crashed the price. These people are just irrationally exuberant about internet play money and have been waiting for the price to hit $5 or $10 again. You also have to convince the other loons who are holding lots of BTC that their play money is now worthless. You need to convince them to put down the cheetos, transfer BTC to mtgox and plug those sell orders in there. I'm not convinced crashing the bid price alone would be enough to achieve that. As well as manipulating price, you also need to kill the enthusiasm and belief. I think to really trigger some selling for your buyback, you would want to carry out a smear campaign at the same time. You want to inject some fake news articles (either via hacking or social engineering) and create confusion on the forums. Convince people that bitcoin is doomed (e.g. "all BTC exchanges to be illegal, say regulators"). Or that you have a technical attack on the network. Pub the articles first, smear forums, then DoS forums (to prevent corrections), then trigger the "mother sell"... that would give you the best chance of success for the attack you are thinking of. </devilsadvocate> What I wanted to finish with though, is that anyone trying to pull something this would have to actually believe that BTC are valuable, or equivalently that suckers will pay more for them later. Otherwise they wouldn't be buying them back.
brazzy 14y ago
That already happened in 2011, to a limited degree (exchange rate dropped from over 25 to below 5). But recently there have been quite a number of reports of perfectly legitimate businesses starting to accept Bitcoins, lending some credibility to the scenario that people will start using Bitcoins like just another currency.
mrb 14y ago
It certainly seems hoarders have pushed the exchange rate up in the past 1 or 2 months. But overall, if you look at a scale of 1 year, Bitcoin spending has clearly increased: http://news.ycombinator.com/item?id=5296889 http://news.ycombinator.com/item?id=5296889 More and more people are spending bitcoins.

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.
  - xyzzy123 14y ago
    OK, so I still don't think what you're describing could be profitably executed. But playing devil's advocate... > Crashing BTC with stolen BTC is free. Yes, agree that you could definitely crash the bid price by dumping 50k stolen BTC. This might also happen naturally if someone holding lots of BTC is forced to sell to get USD quick (e.g. "oh no, huge unexpected medical bill, tax bill, fine..."). [Not sure it's "free" though; what about opportunity cost?] > 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. So during your buyback, you'll be bidding against all the bitcoin loons who also want to buy after you crashed the price. These people are just irrationally exuberant about internet play money and have been waiting for the price to hit $5 or $10 again. You also have to convince the other loons who are holding lots of BTC that their play money is now worthless. You need to convince them to put down the cheetos, transfer BTC to mtgox and plug those sell orders in there. I'm not convinced crashing the bid price alone would be enough to achieve that. As well as manipulating price, you also need to kill the enthusiasm and belief. I think to really trigger some selling for your buyback, you would want to carry out a smear campaign at the same time. You want to inject some fake news articles (either via hacking or social engineering) and create confusion on the forums. Convince people that bitcoin is doomed (e.g. "all BTC exchanges to be illegal, say regulators"). Or that you have a technical attack on the network. Pub the articles first, smear forums, then DoS forums (to prevent corrections), then trigger the "mother sell"... that would give you the best chance of success for the attack you are thinking of. </devilsadvocate> What I wanted to finish with though, is that anyone trying to pull something this would have to actually believe that BTC are valuable, or equivalently that suckers will pay more for them later. Otherwise they wouldn't be buying them back.

brazzy 14y ago

That already happened in 2011, to a limited degree (exchange rate dropped from over 25 to below 5). But recently there have been quite a number of reports of perfectly legitimate businesses starting to accept Bitcoins, lending some credibility to the scenario that people will start using Bitcoins like just another currency.

mrb 14y ago

It certainly seems hoarders have pushed the exchange rate up in the past 1 or 2 months. But overall, if you look at a scale of 1 year, Bitcoin spending has clearly increased: http://news.ycombinator.com/item?id=5296889 http://news.ycombinator.com/item?id=5296889 More and more people are spending bitcoins.