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Wow -- $1030 per BTC as I write this. This is happening way faster than anyone ever expected.[1] All else being equal, the more people who decide to use or ho

by cs702 13y ago

Wow -- $1030 per BTC as I write this. This is happening way faster than anyone ever expected.[1] All else being equal, the more people who decide to use or hold Bitcoin, the higher its price will be, because the maximum number of bitcoins that can ever exist is permanently fixed. It's a scarce commodity by design. So, greater adoption = higher price. -- [1] In early 2011, I speculated it could take a decade for price to reach the thousands of US dollars per Bitcoin: http://cs702.wordpress.com/2011/05/29/on-the-potential-adoption-and-price-appreciation-of-bitcoin-in-the-long-run/ http://cs702.wordpress.com/2011/05/29/on-the-potential-adopt...

oleganza 13y ago
If at some point chain reaction is triggered (people are not afraid it's another bubble and jump in non-stop until everyone has some coins), then the growth must be not exponential, but even faster.
- fat0wl 13y ago
  that's the nature of any pyramid scheme -- the potential cashout of any individual is higher when more money is put into the system without being removed. The funny thing about the Bitcoin scheme is that everyone has the ability for the cashout, it's simply a really complex Game Theory scenario (lol, simply complex). Still though, the early adopters have a much greater shot at grabbin all the marbles, just people suspect they won't because it's been a while and they still haven't. So either they're A) Absurdly greedy. B) Asleep at the wheel. C) True believers in the idea & want to see it succeed. D) Cashing out coins periodically enough to give them a decent lifestyle without disrupting the ecosystem.
  - oleganza 13y ago
    All three A, C and D for sure. Here's a thing: in both cases, when Bitcoin is a fraud and joke, and when Bitcoin is a future world-changing technology, price must grow up like crazy. So the price alone does not give us any clue about the nature of Bitcoin. Only analysis of fundamentals and analysis of the econo-political environment we are in can tell us something about value of Bitcoin.
    - fat0wl 13y ago
      well the thing is.... all economic analyses seem to conclude that it is ridiculous. The only thing keeping it alive is that people are still willing to buy/trade it. As long as that is the case, it will exist. But I don't agree with this idea that it could be rapidly increasing in price because its "a future world-changing technology". This argument has never made sense to me because it's simply 1 implementation of cryptocurrency and has not even performed its function as such. I'm sure there are better possible versions. In fact, I highly suspect that a better alternative has ALREADY BEEN IMPLEMENTED! The only reason Bitcoin is the giant that can't be defeated is because of the lure as an investment, and this is all a sham. Early adopters probably are doing "option D" and even though it's somewhat unnoticeable to consumers it is likely sowing the seeds of destruction for the environment. Perhaps because they're abusing users trust by selling for high prices that are bound to crash. I'm not sure... but the point is, eventually people will stop buying when they realize they're paying $1000 for a coin and they don't even know wtf it is. As you said, only analysis of the fundamentals achieves anything. And these analyses have been done. And can be seen in the market. It's obvious at this point -- Bitcoin is worth what people believe it's worth. Fundamentally, it's nothing. They are sold for cash & then that cash is gone. Spent. The currency doesn't retain anything on it's own. The burden of maintaining the ecosystem stability is passed on to those who now have the money. Similarly to the way in MLM a salesman's sub-tree is responsible for making the product move, unless they can find another to pass the product along to.
      - pizza234 13y ago
        > This argument has never made sense to me because it's simply 1 implementation of cryptocurrency and has not even performed its function as such. I'm sure there are better possible versions. In fact, I highly suspect that a better alternative has ALREADY BEEN IMPLEMENTED! Quality of an implementation doesn't imply success. Success also depends on other factors. History is full of examples (e.g. Betamax). Plus, it's very naive to assume that a Bitcoin is nothing because the only things that gives it value is the belief of people. Belief of people has value. Plus, it's not clear how long the prices will rise, and if something's going to happen in the meanwhile (e.g. more shops accepting it). If it's a bubble, it can't be said with certainty until the bubble bursted.
VMG 13y ago
Welcome to Extremistan http://capitalideasonline.com/articles/index.php?id=2270 http://capitalideasonline.com/articles/index.php?id=2270
wwwtyro 13y ago
> So, greater adoption = higher price. And higher price will tend to lead towards greater adoption.
- danielweber 13y ago
  Why?
  - vasilipupkin 13y ago
    Because increasing price will raise its visibility and attract more people to invest in bitcoins - and the more people hold bitcoins the more merchants will want to accept them
    - bunderbunder 13y ago
      That line of reasoning isn't entirely dissimilar to what people were saying about real estate 10 years back.
      - notdrunkatall 13y ago
        ...and home ownership subsequently hit its highest rate ever.
        bunderbunder 13y ago
        Indeed. The trick is to predict the point at which you'll no longer be able to find a greater fool, and stop just short of it.
        genwin 13y ago
        It's the musical chairs game.
    - Nursie 13y ago
      Because investors really love spending their rapidly appreciating assets...
eterm 13y ago
If BTC did become a de facto currency, what's to stop a government printing "I promise to pay the bearer 10BTC" notes, and just carry on "printing money" (I know it's not literally done these days but it's the effect) as they always have done? The gold standard was broken, can they not have a "bitcoin standard" and then break that in the same way?
- mseebach 13y ago
  Nothing could keep them from doing that, except the unwillingness of users to use the government paper money instead of the real thing. Gold has to be "converted" to paper to be practical. Bitcoin is already a whole lot more practical than almost any aspect of the modern money infrastructure, so there's no "killer app" for Bitcoin-backed currency.
  - Retric 13y ago
    Governments money is 'backed up' by the need to pay taxes in it which in the US is a multi trillion a year demand and creates a lot of stability. aka Get paid in bitcoins? The IRS does not care you need to pay taxes in USD which means you need to sell bitcoins and buy USD. As to being a fixed currency there would be a lot more bitcoins in circulation than actually exist as soon as banks started lending money and no you don't want to try and keep 100+k USD worth of bitcoins secure by your self it's just a fucking bad idea. Which means banks which means loans which inflates the currency. Of course because governments can't print money to bail out banks when they fail you just lose your money anyway and they will fail. PS: Non private wallet = bank. The reason we don't see loans is because people don't want to borrow money in bitcoins.
    - btbuildem 13y ago
      Banks lend money they don't have, they cannot do that with Bitcoin because math. Usually their reserves cover a fraction of the loans they give, and they get a massive multiplier benefit. Fortunately, the blockchain won't accept pieces of paper with IOU written on them.
boldpanda 13y ago
I'm assuming Bitcoins can be bought in fractional denominations?
- mattgibson 13y ago
  Yes, divisible down to .00000001 (a Satoshi).
- ashray 13y ago
  Most exchanges will ask you to buy at least $1 worth of bitcoins so that pushes your figure to about 0.001 BTC as a minimum purchase. However, you can certainly use them with up to 8 decimal places.
- studio816 13y ago
  Yes. You can buy as little as 0.00000001 BTC aka "satoshi"
- archQuestions 13y ago
  They can be divided down to 8 decimal places currently, yes.
joelthelion 13y ago
You should take into account that if things go as usual, there will probably be a crash in the next few days, leaving the price around $500 for a while.
- kr4 13y ago
  Never, never pay attention to what the market is doing. … Stay away from the crowd. “A good time to start in [the investing] business is when markets are terrible…." A classic value investor looks at a price drop of a stock they like as a chance to buy more, whereas the ordinary investor may panic and sell.
  - genwin 13y ago
    The value investor should be mentally prepared to endure further big drops while holding, though.
- endriju 13y ago
  Too much people hope this will happen => it will most probably not happen. People will start buying again at 700-800$ and will not let the price drop.
  - crististm 13y ago
    Just like facebook shares did not drop after IPO?
dschiptsov 13y ago
Or first ever truly global, internet-powered Ponzi Scheme, which is very interesting to watch.
kr4 13y ago
Wow! I remember PG's wrote in one of his essays "What hackers are using today will be used by regular people in 10 or so years." Though BTC is statistically yet to claim the status of being used by "regular" people, it has certainly passed the early adopter status it seems.

by cs702 13y ago

oleganza 13y ago

If at some point chain reaction is triggered (people are not afraid it's another bubble and jump in non-stop until everyone has some coins), then the growth must be not exponential, but even faster.

fat0wl 13y ago
that's the nature of any pyramid scheme -- the potential cashout of any individual is higher when more money is put into the system without being removed. The funny thing about the Bitcoin scheme is that everyone has the ability for the cashout, it's simply a really complex Game Theory scenario (lol, simply complex). Still though, the early adopters have a much greater shot at grabbin all the marbles, just people suspect they won't because it's been a while and they still haven't. So either they're A) Absurdly greedy. B) Asleep at the wheel. C) True believers in the idea & want to see it succeed. D) Cashing out coins periodically enough to give them a decent lifestyle without disrupting the ecosystem.
- oleganza 13y ago
  All three A, C and D for sure. Here's a thing: in both cases, when Bitcoin is a fraud and joke, and when Bitcoin is a future world-changing technology, price must grow up like crazy. So the price alone does not give us any clue about the nature of Bitcoin. Only analysis of fundamentals and analysis of the econo-political environment we are in can tell us something about value of Bitcoin.
  - fat0wl 13y ago
    well the thing is.... all economic analyses seem to conclude that it is ridiculous. The only thing keeping it alive is that people are still willing to buy/trade it. As long as that is the case, it will exist. But I don't agree with this idea that it could be rapidly increasing in price because its "a future world-changing technology". This argument has never made sense to me because it's simply 1 implementation of cryptocurrency and has not even performed its function as such. I'm sure there are better possible versions. In fact, I highly suspect that a better alternative has ALREADY BEEN IMPLEMENTED! The only reason Bitcoin is the giant that can't be defeated is because of the lure as an investment, and this is all a sham. Early adopters probably are doing "option D" and even though it's somewhat unnoticeable to consumers it is likely sowing the seeds of destruction for the environment. Perhaps because they're abusing users trust by selling for high prices that are bound to crash. I'm not sure... but the point is, eventually people will stop buying when they realize they're paying $1000 for a coin and they don't even know wtf it is. As you said, only analysis of the fundamentals achieves anything. And these analyses have been done. And can be seen in the market. It's obvious at this point -- Bitcoin is worth what people believe it's worth. Fundamentally, it's nothing. They are sold for cash & then that cash is gone. Spent. The currency doesn't retain anything on it's own. The burden of maintaining the ecosystem stability is passed on to those who now have the money. Similarly to the way in MLM a salesman's sub-tree is responsible for making the product move, unless they can find another to pass the product along to.
    - pizza234 13y ago
      > This argument has never made sense to me because it's simply 1 implementation of cryptocurrency and has not even performed its function as such. I'm sure there are better possible versions. In fact, I highly suspect that a better alternative has ALREADY BEEN IMPLEMENTED! Quality of an implementation doesn't imply success. Success also depends on other factors. History is full of examples (e.g. Betamax). Plus, it's very naive to assume that a Bitcoin is nothing because the only things that gives it value is the belief of people. Belief of people has value. Plus, it's not clear how long the prices will rise, and if something's going to happen in the meanwhile (e.g. more shops accepting it). If it's a bubble, it can't be said with certainty until the bubble bursted.

VMG 13y ago

Welcome to Extremistan http://capitalideasonline.com/articles/index.php?id=2270 http://capitalideasonline.com/articles/index.php?id=2270

wwwtyro 13y ago

> So, greater adoption = higher price. And higher price will tend to lead towards greater adoption.

danielweber 13y ago
Why?
- vasilipupkin 13y ago
  Because increasing price will raise its visibility and attract more people to invest in bitcoins - and the more people hold bitcoins the more merchants will want to accept them
  - bunderbunder 13y ago
    That line of reasoning isn't entirely dissimilar to what people were saying about real estate 10 years back.
    - notdrunkatall 13y ago
      ...and home ownership subsequently hit its highest rate ever.
      - bunderbunder 13y ago
        Indeed. The trick is to predict the point at which you'll no longer be able to find a greater fool, and stop just short of it.
        genwin 13y ago
        It's the musical chairs game.
  - Nursie 13y ago
    Because investors really love spending their rapidly appreciating assets...

eterm 13y ago

If BTC did become a de facto currency, what's to stop a government printing "I promise to pay the bearer 10BTC" notes, and just carry on "printing money" (I know it's not literally done these days but it's the effect) as they always have done? The gold standard was broken, can they not have a "bitcoin standard" and then break that in the same way?

mseebach 13y ago
Nothing could keep them from doing that, except the unwillingness of users to use the government paper money instead of the real thing. Gold has to be "converted" to paper to be practical. Bitcoin is already a whole lot more practical than almost any aspect of the modern money infrastructure, so there's no "killer app" for Bitcoin-backed currency.
- Retric 13y ago
  Governments money is 'backed up' by the need to pay taxes in it which in the US is a multi trillion a year demand and creates a lot of stability. aka Get paid in bitcoins? The IRS does not care you need to pay taxes in USD which means you need to sell bitcoins and buy USD. As to being a fixed currency there would be a lot more bitcoins in circulation than actually exist as soon as banks started lending money and no you don't want to try and keep 100+k USD worth of bitcoins secure by your self it's just a fucking bad idea. Which means banks which means loans which inflates the currency. Of course because governments can't print money to bail out banks when they fail you just lose your money anyway and they will fail. PS: Non private wallet = bank. The reason we don't see loans is because people don't want to borrow money in bitcoins.
  - btbuildem 13y ago
    Banks lend money they don't have, they cannot do that with Bitcoin because math. Usually their reserves cover a fraction of the loans they give, and they get a massive multiplier benefit. Fortunately, the blockchain won't accept pieces of paper with IOU written on them.

boldpanda 13y ago

I'm assuming Bitcoins can be bought in fractional denominations?

mattgibson 13y ago
Yes, divisible down to .00000001 (a Satoshi).
ashray 13y ago
Most exchanges will ask you to buy at least $1 worth of bitcoins so that pushes your figure to about 0.001 BTC as a minimum purchase. However, you can certainly use them with up to 8 decimal places.
studio816 13y ago
Yes. You can buy as little as 0.00000001 BTC aka "satoshi"
archQuestions 13y ago
They can be divided down to 8 decimal places currently, yes.

joelthelion 13y ago

You should take into account that if things go as usual, there will probably be a crash in the next few days, leaving the price around $500 for a while.

kr4 13y ago
Never, never pay attention to what the market is doing. … Stay away from the crowd. “A good time to start in [the investing] business is when markets are terrible…." A classic value investor looks at a price drop of a stock they like as a chance to buy more, whereas the ordinary investor may panic and sell.
- genwin 13y ago
  The value investor should be mentally prepared to endure further big drops while holding, though.
endriju 13y ago
Too much people hope this will happen => it will most probably not happen. People will start buying again at 700-800$ and will not let the price drop.
- crististm 13y ago
  Just like facebook shares did not drop after IPO?

dschiptsov 13y ago

Or first ever truly global, internet-powered Ponzi Scheme, which is very interesting to watch.

kr4 13y ago

Wow! I remember PG's wrote in one of his essays "What hackers are using today will be used by regular people in 10 or so years." Though BTC is statistically yet to claim the status of being used by "regular" people, it has certainly passed the early adopter status it seems.