Bitcoin Surges Past $7,000 to Extend Record Rally

Not to say Bitcoin isn't in a speculative bubble, who knows?

Aside: I don't know if it's fair to call bitcoin pseudonymous. Tumblers mean that one can effectively obscure their transactions if that's their goal, pseudo-pseudonymous if you will.

I agree with this completely, but think there are a few other factors that will matter in the future but have not yet become widely used. The relative importance of all of these factors has changed over time and will continue to change in the future.

> As far as I can tell from my napkin analysis, I would guess that bitcoin appears to be in a pretty speculative bubble.

Again, I agree. Every time the price of Bitcoin has gone up a great deal in a short time, it's been a bubble caused by speculation or by a new wave of people joining for the first time. Every time that's happened, the bubble has burst. Every time the bubble has burst, it's bottomed out at a level significantly higher than the previous baseline, and every time it's bottomed out it the price has stabilized and ultimately recovered.

If you want to day trade, now is probably a great time to get in - assuming we're still on the way up. If you're wanting to hold long-term, then the safest time to buy will be as soon as the price stabilizes after the next pop. As for me... I buy on a regular basis without regard to the price. I'm something of a "true believer" though, and don't expect to ever sell my entire holdings again.

That’s what I never understood about small bitcoin purchases.

I think you didn't read the context. My post was concerning actual, current use cases, not speculations about a hypothetical "conclusion".

Unless you need it.

Secondly, the inherent deflationary nature of Bitcoin has not yet come to pass. Coins are currently being mined at a rate of 4% per year, halving about every 18 months. Once the inflation rate for Bitcoin goes negative, only then will we be dealing with a truly deflationary currency. It only seems deflationary now because the demand for Bitcoin is drastically outpacing the rate at which it's being inflated.

Finally, the inability of the state to inflate Bitcoin at will is the point. If you want to keep your capital in a state-controlled inflationary currency no one is going to stop you. What I and others in the Bitcoin community believe will happen is that "bad money will drive out good". People will spend their dollars and hoard their Bitcoin, as they will understand that dollars will be worth less and Bitcoin more in the future. The only way to stop that from happening will be a drastic reduction in the number of dollars in circulation... which again, is kind of the whole point for many of us.

> The use case for bitcoin is the same use case that makes up 95% of the price of gold - its predictably scarce. Thats its value.

That's one use case, yes. It's not the only use case.

Yes. Exactly how US dollars cannot function as effective "buying an iPhone" currency since they are deflationary: In a year, the same amount of dollars will get me a better iPhone, or more iPhones of the same quality.

This super-simplified deflation argument is mostly bullshit, no matter how often it's repeated in economics textbooks. People have needs, and they are fine with fulfilling some needs later, but others they want fulfilled immediately.

This graph is evidence against that theory:

https://bitinfocharts.com/comparison/transactions-btc-eth.ht...

Note that Bitcoin's tx volume hasn't been able to increase since the blockchain reached its 1 MB limit. Otherwise it would have seen continued growth like Ethereum.

This isn't much of a surprise after looking at some of your prior comments regarding Bitcoin. A few gems:

> Yeah, imagine using Netscape in 2017 and not Chrome - that's pretty much how I look at Bitcoin.

> Thanks, but no thanks! I'd keep as far away from this stinking pile as possible!

> Mere mortals do not have Bitcoin and are not interested in it - at all.

> everything you can say about Bitcoin, you can say about land as well - it's scarce, but unlike Bitcoin, it has a real utility.

> the conspiracy theory that CIA/NSA created Bitcoin to catch crooks now makes more sense than ever.

> I don't believe in Bitcoin, which is majorly driven by low-class Chinese speculators and exchanges!

patio11 is that you in there?

Bitcoin's use-case is not microtransactions or payments among friends. It is providing secure and trustworthy payments when no trusted third party exists, independent of governments, companies, etc.

Better to leave random warehouses in China to control the entire pool? How does supporting asics matter in the least other than making it less accessible?

It is useless as a global currency now, and any more complicated smart contracts built on top of it need trust in a third party, eventually, if it's ever built.

All it has left for it is brand recognition and large transactions as a settlement network.

The current price increase is obviously because people need to be in Bitcoin before this upcoming attack. Because if there is a back and forth fight over the hash power, you won't know who is the winner immediately.

It might be trust that you can't double spend BTCs, trust in the issuing algorithm, trust that you can only lose your bitcoins if you do something stupid with your wallet, etc.

Of course, we can't compare right now bitcoin's ecosystem with the ecosystem of the fiat currency, but who knows what will happen in the future if more and more people and businesses choose to adopt it.

More specifically, you have trust in the continued trust that others have in it. It's a self-fulfilling prophesy: as long as people continue to trust it, it continues to be valuable, but as soon as people start to doubt that others will continue to trust it, it's instantly worthless. There's no real value backing it up. This makes it very vulnerable to hype and hysteria.

The Fed themselves wrote an article [2] expressing some concern about the "nontraditional monetary policy" that instigated this sharp change in the monetary base. In their closing words, "Recent increases in the monetary base are far greater than any previously in American history (even adjusted for the size of the economy), surely a "noble experiment" in policymaking. Will these policies be successful without accelerating inflation? The epitaph to this curious case of monetary base expansion is yet to be written."

And really I think that final line quite succinctly sums up the state of modern economics. We've entered into an age of currency growing, inflation chasing, debt drive economics. And it's been working great for the briefest glimpse of time that we've been carrying out this experiment. Does that mean we've finally 'solved' economics, or does an epitaph that looks back somewhat less fondly on our decisions await? I don't know, but I do think the inherent stability of the fundamentals of bitcoin (e.g. - everything except the exchange rate) and the lack of trust it requires makes it a nice balance to our fiat experiments.

[1] - https://fred.stlouisfed.org/series/BASE

[2] - https://www.stlouisfed.org/Publications/Regional-Economist/J...

If you want to do business with drug vendors over the internet, you do it in BTC.

(Altnerately: If you want to donate to Wikileaks...)

If you buy something with $100 instead of buying it with bitcoin, that's $100 less you could've put into bitcoin. Or thinking about it another way, if you spend bitcoin and feel like you have less than you'd like to hold, you can simply buy more.

You could convert USD to BTC and buy something while maintaining exactly the same held balance, no?

Against dictators, we have democracy.

Against a centrally controlled currency, there's not much but crypto currencies. They're actually democratic, the majority wins.

Also, I don't want to be the one who will handle security for the single server with a Postgres database that has 100B$ in it. Do you? Do you want to be on call when the RAID array crashes or the datacenter goes dark?

I do believe there will be alternatives to proof of work, but a single database server isn't one of them.

I agree if you change "isn't" to "couldn't be".

Consider if I'm a small company and want to process cards. So I try to sign up for a payment provider. Except, oops, I'm outside the US where terms tends to be stricter. And, oops, I'm in a legal field (in my jurisdiction) but one that the payment provider considers risky or morally suspect, such as, say gambling, or adult products, or prostitution, or even just travel.

A lot of companies find themselves spending ages sorting out payments because of this. I've worked with startups (in travel, in one case) that spent weeks getting approvals from one provider before suddenly getting "no" - in the end it took four attempts and several months in case; we developed the whole platform faster than we could get approval from a payment provider. That's unusual, but it happens, and in general having dealt with payment processors in various companies over a period of nearly 20 years: it's been nothing but pain and misery most of the time.

That's not a problem of the "traditional centralized database" directly, but indirectly because the centralized database allows for centralized gatekeepers of transactions: Your payment provider may or may not care about the nature of your business, but if the card association does, or the issuing banks does, or the bank handling the merchant account does, it doesn't matter.

This, to me, is the biggest potential value of crypto-currencies: The rising importance of card payments over cash have been one of the largest un-democratic power-grabs of our time by handing power to those controlling the approvals process.

Some previous developments, like PayPal, had the potential to change this, but quickly ended up as steeped in problems as the card providers.

I understand why: They're taking significant risk, and they're managing that risk. I'm not suggesting some sinister cabal trying to control morality through payments; merely that these companies first interest is to protect their share holders investment, not the public interest.

But crypto-currencies has the potential to give us "digital cash", of sorts, in that while it's not exactly the same (it's much easier to track for starters), it is much closer to cash than cards in terms of inability to control its use. We can track it after the fact like we can with cards, but we can't easily stop people from making payments or taking payments.

That has value. Whether that's enough to sustain Bitcoins current momentum is another matter.

These days it's run on block chain making it virtually impossible to claim a container that isn't yours.

A similar use case could be used for almost any sort of ownership record in the public sector, like landownership.

You know how PayPal blocked payments to Wikileaks? (Back when it wasn't yet obviously evil.) That's what traditional, centralized databases can do for you. Note that donations to Wikileaks weren't illegal, governments were just efficient in pressuring PayPal into enforcing rules that didn't even exist officially.

Also, traditional, centralized banks simply do not currently offer me the possibility of near-instantaneous money transfers. (This varies depending on where you live.) Bitcoin does.

There are a lot of things wrong with Bitcoin, the fees are much too high, and yes, its proof-of-work scheme is terribly wasteful. But the view that it doesn't offer anything useful is a bit one-dimensional.

Any given piece of data is, usually, required to be private to a small number of parties but is, usually, all required to be available to some parties i.e. regulators.

Doing all that is absurdly costly and error-prone. And that's when you're doing it well. Do it badly and the costs are eye-watering (ask, well, anyone).

Some of the ideas and techniques, particularly the cryptographic ones, used in the blockchains have opened the banking folks eyes to what could be possible. And this is a very active area of interest.

But it's not the bitcoin blockchain, per se, that's particularly interesting. For example, the trustless piece is largely a pointless waste in the problem I outlined above. We know all the participants and can safely move keys etc around. In the same vein, proof of work is unnecessary, we can identify block creators and easily use external remedies if they play silly buggers (no-one is suggesting we get rid of all our lawyers).

Now, you could argue that, if using the relevant techniques, you could keep all of that in a big, central DB and you'd be right. But it's not "big, central"-ness that's key. It's the "globally ordered, immutable, common"-ness. Along with selective privacy. Postgres doesn't give us what we want any more than Bitcoin does. The real change has been that we know relational DBs really well but we're learning about the possibility of the crypto and block chain tools. It's as much a mental shift as a technical one.

One final, minor point. A central DB, though possible, would be quite painful in practice. Although not fundamental, having a distributed ledger is actually quite handy. Although it would mean that we wouldn't completely do away with reconciliation hell, it wouldn't surprise me if something like a gold copy plus validated replicas approach or similar became popular. And again, some of the crypto techniques make this sort of thing much more tenable.

(I don't think you responded to the point that Wikileaks is a non-illegal use case for BTC.)

I also think my first sentence applies to bitcoin and ethereum which together have a bigger market cap than all the other cryptocurrencies added together.

Cryptocurrency uses blockchain but blockchain isn't cryptocurrency.

Blockchain technology is already incredibly useful for banks doing interbank currency trading iirc.

I guess you could be talking about banks doing crypto trading, then I would guess that they are but a number are still stuck in the stone ages.

Some banks are already trying to address such needs, like Monese (which I'm also using).

I do think BTC is flying, but some are still sceptical, despite a 100B market cap...

I do bet on BTC to change the world... so I pay in BTC when I can too!

From what you described above, every single speculative/overinflated asset would be a pyramid scheme. That's not the case.

Founders throw 1k$ in the pot, investors 100M$, the public 1B$, yet the founder has benefited a lot, by being there first.

If people start thinking "he's a con", the company's value will drop to 0. Bankruptcy.

Is the whole stock market a pyramid scheme?

A market isn't a pyramid scheme just because you didn't enter it at the beginning (that's also true for real estate).

The alternative would be a market where you'd benefit more if you enter last, which means there would be no incentive for anybody to enter first and create the market. That's why the alternative doesn't exist and markets do reward the first mover.

You just described any investment. FX market, stock market, housing, etc. It doesn't make them "pyramid schemes".

I suspect people underestimate the game theoretic consequences of stake systems like Algorand as compared to PoW. (For example, the dynamics of contentious forks may look quite different.) I don't know which is better! But those types of consequences are likely much larger (for better or worse) than the electricity savings.

if you wanna compare it to all stored value instead (about $100bn), then the "electricity safety fee" comes out to ~0.001% per day.

(these comparisons are just meant to help put the electricity costs roughly in scale against the benefits they help provide)

And why is a decentralised ledger even relevant to tulips? They're not bits of code, they're real things you own irrespective of whether other people know you own it.

Also, you need to distinguish between the blockchain technology and the value of bitcoins. Blockchain does not depend on bitcoin. Bitcoin can fail while blockchain continues to change the world.

The real value of bitcoin at this moment comes from trust that the hype will continue. It might. Or it might not.

People who make the tulip comparison simply don't understand the Tulip craze.

https://d32dm0rphc51dk.cloudfront.net/ujCq3y5qVUrIyPCG-M_v3w...

Don't get me wrong, he has a lot of pretty paintings too. Definitely some I'd pay upwards of $500 for to hang in my living room.

What do you base the idea on that only some of the price of art is based on speculation?

I don't think Bitcoin is an outlier at all. And if you don't believe Bitcoin is an outlier, as many people are starting to do now, you can understand why its price is going up so fast.

Gold prices don't do anything because they're "supposed" to do anything. Gold moons whenever the market decides it wants gold to moon, just like Bitcoin, just like wine and just like art.

https://i.imgur.com/V0u1KHG.jpg

When I went to put the money back into BTC, I found out that I would have made the same amount just by leaving in BTC for the 3 weeks I was out of the market.