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Finance fads are called bubbles, as far as I understand, and yes, there is a Bitcoin bubble. I don't think anyone's going to argue that point. But I think it'

Finance fads are called bubbles, as far as I understand, and yes, there is a Bitcoin bubble. I don't think anyone's going to argue that point. But I think it's a bad idea to dismiss Bitcoin because of the bubble. The specific value of a bitcoin is kind of irrelevant to the things you can do with bitcoin. Obviously you have to care how much a bitcoin is worth, and the fluctuations make it hard to take seriously as a currency, but the utility of bitcoin isn't really tied to its value.

maxerickson 13y ago
A more stable value would increase the utility of bitcoin. For instance, arbitration transactions would be great, except they carry something like 20% currency risk over periods as short as a day.
- interstitial 13y ago
  Funny how the volatility of gold prevents it from being a currency (see egold, etc). But the volatility of bitcoin is magic rainbow-spewing miracle of portents.
baddox 13y ago
> Finance fads are called bubbles, as far as I understand, and yes, there is a Bitcoin bubble. I don't think anyone's going to argue that point. You have to be more careful with your wording for these statements to be testable and therefore meaningful. When you say "there is a Bitcoin bubble," what exactly do you mean? Do you mean that the USD price will go down to x in the next y months (and you have to fill in x and y for it to be testable)?
- dllthomas 13y ago
  How would you have come up with an X and Y at the start of tulip mania?
  - baddox 13y ago
    I'm not saying I could have, but I would expect anyone making a definitive claim that it's a bubble to also produce a testable hypothesis.
    - dllthomas 13y ago
      I don't want to discourage that, by any means. I just am not sure "knowing it is a bubble" necessarily means knowing much about how it is going to burst.
      - baddox 13y ago
        Well, if it never bursts (for some definition of "never"), then it's not really a bubble, right? If the claim that something is a bubble isn't testable in some bounded time period, then it's not a meaningful claim.
        dllthomas 13y ago
        Maybe. Let's simplify our model a bit. Let's say we have a bag of devices of two types. Both kinds of devices, you push a button and a light turns on. One type of device (type A), the light stays on forever (we're ignoring physics for now). The other type of device (type B), the device has a mechanism to randomly turn itself off, calibrated such that over any 10 minute span of time where the device starts "on" there is a 10% chance it turns the light off. You pull a device out of the bag. You push the button. The light turns on. Is "this is a type B device" a meaningful claim?
        baddox 13y ago
        "This is a type B device" has more meaning than "Bitcoin is a bubble" because "type B device" is well-defined whereas "bubble" isn't. Of course, since the well-defined attributes of type B devices involves probability, the testability is also limited to probabilistic negative conclusions, i.e. we cannot conclude with 100% confidence that a light which remains lit is not a type B device. This probabilistic nature is the key difference between your analogy and Bitcoin. For the analogy to be perfect, we would have to create a well-defined notion of what a "bubble" is that involves probability.
- KrisAndrew 13y ago
  I think he means: "there is an intense, relatively widespread, sudden, superficial interest in bitcoin that will eventually be followed by a sudden loss of interest in bitcoin." Bubbles are only identifiable after they have popped.
  - baddox 13y ago
    > Bubbles are only identifiable after they have popped. Then it is reasonable for me to call BS when people identify Bitcoin as a bubble.
    - cicero 13y ago
      We already see the "intense, relatively widespread, sudden, superficial interest in bitcoin", so what remains to be seen is if it "will eventually be followed by a sudden loss of interest in bitcoin." Since we already have the first half of the bubble phenomenon, it is not unreasonable (or BS) to suspect the second half will follow. Especially since we are seeing lots of bubbles these days. Remember, a bubble doesn't mean something is worthless, but only overvalued, e.g. the housing bubble didn't mean that housing was worthless, but it was overvalued.
    - KrisAndrew 13y ago
      Not really. Your role is to tease out the real issue for discussion, rather than shutting down the conversation with demands of testable hypotheses. Offer the other guy a chance to save face or explain himself. Being utterly contrarian is pointless. Here, the next time someone calls bitcoin a bubble, give him this link (http://www.ft.com/intl/cms/s/2/0ca06172-bfe9-11de-aed2-00144feab49a.html#axzz2nCp5NYvE http://www.ft.com/intl/cms/s/2/0ca06172-bfe9-11de-aed2-00144...) to Soros's Theory of Reflexivity and ask him to provide a hypothesis within the framework Soros provides.
      - baddox 13y ago
        When I said "call BS," I didn't mean literally just saying that, I just meant denying the claim and perhaps asking for a definition of "bubble" or a testable prediction, much like I originally did in this thread.
- notahacker 13y ago
  One of the defining traits of a bubble is that it continues to exist partly because people convinced there is a bubble are unwilling to bet on when it will burst. "The market can stay irrational longer than you can stay solvent". (BTC and pre-IPO tech companies also have the added advantage of being impossible to short) But here's a testable hypothesis for you: ten years from now a Bitcoin will not be convertible into more than $10, if it's reliably convertible into currency at all.
  - corresation 13y ago
    BTC and pre-IPO tech companies also have the added advantage of being impossible to short Is it impossible? Couldn't you essentially short by borrowing bitcoins? (e.g. I will borrow 10 bitcoins today, immediately sell them, paying back say 12 bitcoins in three months. That sort of deal). I seriously contemplated such notions during the recent upswing.
    - notahacker 13y ago
      Fair point, you technically can short it, but given there's no mature infrastructure to support and regulate this sort of trade (and Bitcoin is very volatile and illiquid, and a legal grey area), I'm not sure you'd find anyone to do the deal, especially since I think you'd need to short for a very long period to be on the safe side.
      - corresation 13y ago
        Curious I went looking and there are a couple of providers that offer this. For instance Bitfinex - https://www.bitfinex.com/pages/features#short https://www.bitfinex.com/pages/features#short I have zero experience with them so that isn't a recommendation, just someone who does it.
      - ramchip 13y ago
        Bitfinex allows shorting, and icbit.se lets you sell futures for a similar effect. It's actually very cheap to borrow bitcoins on bitfinex last I checked due to so many people holding them. I consider both exchanges to be risky, though, compared to mtgox or bitstamp (and naked short sell of bitcoins is extremely risky, think about the margin you'd need if it goes up to $5000 before popping).
richcollins 13y ago
I don't think anyone's going to argue that point Apparently lots of people are willing to argue that point by putting their money where their mouth is.

maxerickson 13y ago

A more stable value would increase the utility of bitcoin. For instance, arbitration transactions would be great, except they carry something like 20% currency risk over periods as short as a day.

interstitial 13y ago
Funny how the volatility of gold prevents it from being a currency (see egold, etc). But the volatility of bitcoin is magic rainbow-spewing miracle of portents.

baddox 13y ago

> Finance fads are called bubbles, as far as I understand, and yes, there is a Bitcoin bubble. I don't think anyone's going to argue that point. You have to be more careful with your wording for these statements to be testable and therefore meaningful. When you say "there is a Bitcoin bubble," what exactly do you mean? Do you mean that the USD price will go down to x in the next y months (and you have to fill in x and y for it to be testable)?

dllthomas 13y ago
How would you have come up with an X and Y at the start of tulip mania?
- baddox 13y ago
  I'm not saying I could have, but I would expect anyone making a definitive claim that it's a bubble to also produce a testable hypothesis.
  - dllthomas 13y ago
    I don't want to discourage that, by any means. I just am not sure "knowing it is a bubble" necessarily means knowing much about how it is going to burst.
    - baddox 13y ago
      Well, if it never bursts (for some definition of "never"), then it's not really a bubble, right? If the claim that something is a bubble isn't testable in some bounded time period, then it's not a meaningful claim.
      - dllthomas 13y ago
        Maybe. Let's simplify our model a bit. Let's say we have a bag of devices of two types. Both kinds of devices, you push a button and a light turns on. One type of device (type A), the light stays on forever (we're ignoring physics for now). The other type of device (type B), the device has a mechanism to randomly turn itself off, calibrated such that over any 10 minute span of time where the device starts "on" there is a 10% chance it turns the light off. You pull a device out of the bag. You push the button. The light turns on. Is "this is a type B device" a meaningful claim?
        baddox 13y ago
        "This is a type B device" has more meaning than "Bitcoin is a bubble" because "type B device" is well-defined whereas "bubble" isn't. Of course, since the well-defined attributes of type B devices involves probability, the testability is also limited to probabilistic negative conclusions, i.e. we cannot conclude with 100% confidence that a light which remains lit is not a type B device. This probabilistic nature is the key difference between your analogy and Bitcoin. For the analogy to be perfect, we would have to create a well-defined notion of what a "bubble" is that involves probability.
KrisAndrew 13y ago
I think he means: "there is an intense, relatively widespread, sudden, superficial interest in bitcoin that will eventually be followed by a sudden loss of interest in bitcoin." Bubbles are only identifiable after they have popped.
- baddox 13y ago
  > Bubbles are only identifiable after they have popped. Then it is reasonable for me to call BS when people identify Bitcoin as a bubble.
  - cicero 13y ago
    We already see the "intense, relatively widespread, sudden, superficial interest in bitcoin", so what remains to be seen is if it "will eventually be followed by a sudden loss of interest in bitcoin." Since we already have the first half of the bubble phenomenon, it is not unreasonable (or BS) to suspect the second half will follow. Especially since we are seeing lots of bubbles these days. Remember, a bubble doesn't mean something is worthless, but only overvalued, e.g. the housing bubble didn't mean that housing was worthless, but it was overvalued.
  - KrisAndrew 13y ago
    Not really. Your role is to tease out the real issue for discussion, rather than shutting down the conversation with demands of testable hypotheses. Offer the other guy a chance to save face or explain himself. Being utterly contrarian is pointless. Here, the next time someone calls bitcoin a bubble, give him this link (http://www.ft.com/intl/cms/s/2/0ca06172-bfe9-11de-aed2-00144feab49a.html#axzz2nCp5NYvE http://www.ft.com/intl/cms/s/2/0ca06172-bfe9-11de-aed2-00144...) to Soros's Theory of Reflexivity and ask him to provide a hypothesis within the framework Soros provides.
    - baddox 13y ago
      When I said "call BS," I didn't mean literally just saying that, I just meant denying the claim and perhaps asking for a definition of "bubble" or a testable prediction, much like I originally did in this thread.
notahacker 13y ago
One of the defining traits of a bubble is that it continues to exist partly because people convinced there is a bubble are unwilling to bet on when it will burst. "The market can stay irrational longer than you can stay solvent". (BTC and pre-IPO tech companies also have the added advantage of being impossible to short) But here's a testable hypothesis for you: ten years from now a Bitcoin will not be convertible into more than $10, if it's reliably convertible into currency at all.
- corresation 13y ago
  BTC and pre-IPO tech companies also have the added advantage of being impossible to short Is it impossible? Couldn't you essentially short by borrowing bitcoins? (e.g. I will borrow 10 bitcoins today, immediately sell them, paying back say 12 bitcoins in three months. That sort of deal). I seriously contemplated such notions during the recent upswing.
  - notahacker 13y ago
    Fair point, you technically can short it, but given there's no mature infrastructure to support and regulate this sort of trade (and Bitcoin is very volatile and illiquid, and a legal grey area), I'm not sure you'd find anyone to do the deal, especially since I think you'd need to short for a very long period to be on the safe side.
    - corresation 13y ago
      Curious I went looking and there are a couple of providers that offer this. For instance Bitfinex - https://www.bitfinex.com/pages/features#short https://www.bitfinex.com/pages/features#short I have zero experience with them so that isn't a recommendation, just someone who does it.
    - ramchip 13y ago
      Bitfinex allows shorting, and icbit.se lets you sell futures for a similar effect. It's actually very cheap to borrow bitcoins on bitfinex last I checked due to so many people holding them. I consider both exchanges to be risky, though, compared to mtgox or bitstamp (and naked short sell of bitcoins is extremely risky, think about the margin you'd need if it goes up to $5000 before popping).

richcollins 13y ago

I don't think anyone's going to argue that point Apparently lots of people are willing to argue that point by putting their money where their mouth is.