One of the Biggest Bitcoin Exchanges Just Added 100,000 Users in a Single Day
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I've listened to friends and family discuss investing "only $100" or "only $1000" for fractional amounts of bitcoin with the idea that they're sure fire bets for making money.
I feel a bit like a rube sitting it out on the sidelines (and they're chastising me for not acting) as the price keeps going up-and-up and for most of them, these small investments (some quite large) have paid off for them.
When does this bubble burst? And, what is it going to look like? 100k people in a single day is crazy to me as a layperson, but if this was to be compared to a stock run (disregarding dilution) what type of alarm bells should be ringing for those with the most to lose? Or, are we past that point now?
It seems to only exist for speculation. Its meteoric rise in the face of all this screams bubble to me. (But.. I've also been saying this for a while.)
I guess "but that's illegal!" is a strong argument for those that have a lot of trust in governments. I... don't... so I'm happy to use non-governmental instruments. I still pay my taxes and contribute, I'm not an anarchist, I just like having means to express value that aren't controlled by governments.
As in, is it likely that someone would/could be targeted by law enforcement because of that, and could a comment like that be used in court?
I guess my words could bite me in the ass but I am fairly confident as a non-dealer I'm not exactly a target. Probably on a radar for when the Fed runs out of Big Fish, but for now probably fine.
For example, the housing bubble in 2008 was detected when rental and mortgage prices diverged greatly.
Since the bare-bones value of Bitcoin is tied to the cost of computation power and electricity to mine, you could theoretically track the price of bitcoin vs. the cost of the computational power to mine bitcoin at it's current block difficulty.
Well we'd need to figure out what would trigger a sell-off and whether that sell-off could be sustained. I've got no clue what would trigger a sell off but for whether a sell-off could be sustained, I'm not sure, there are lots and lots of true believers at this point. I think there could be a really interesting psychological dissection of investors in BTC and other high volatility assets because there's a sort of annealing of their risk attitude where every dip is a buying opportunity, the risk perception of people like that might be completely different from someone like me with no stake in BTC.
I say as long as you follow centuries-old investment advice (diversify, always have a backup plan, have enough cash for a crash), there's no reason not to explore a new investment instrument. AKA, "fuck it, why not?"
Depending on how much you make I don't see why not invest "only $1000," as long as your other tested investment instruments are already qualified (emergency savings, 401k/roth/whatever, stocks, bonds, int'l investments).
Nobody can predict what is going to happen with BTC or the whole cryptocurrency eco-system in general. There's still potential for the technology to take off and gain widespread adoption, just as there's the potential for all the big players to lose interest and move on to something else.
If you want to 'invest'(I prefer gamble, or play at this point) - go for it. Just like every fad there are groups of people who believe strongly in the idea of the thing, and those who just want to get rich off of the thing.
At this point nobody has definitive answers on the future of BTC.
Public interest / perception is the biggest factor at play here. There can be literally 0 uses for cryptocurrency, but if news outlets are telling a layperson to buy it, they'll buy it. As long as the big players are interested in keeping it afloat, I don't see what would cause it's price to crash down to 0 over night.
"Gambling" has connotations of immoral behaviour, especially in zero-sum or always-lose scenarios like poker and casinos. I don't think it's fair to describe educated and informed investment or buy-ins with words like that. I think "risky venture" is a less loaded, more neutral, term to describe it instead.
As it is, I don't see Bitcoin and other currencies as true investments - just yet - I see the surge in Bitcoin mainly as a "distributed Ponzi-scheme" instead: those who are cashing-out now are those who bought-in early and being paid by the people buying it now - and the people buying it now expect more other people to buy into it later, pushing the price higher while supply and availability dwindle (owing to BTC's 28M cap). However, unlike a Ponzi-scheme, Bitcoin, Ethereum and others do have utility as a means of moving money around independently of existing, often state-controlled, bank networks or remittance services - and eventually Bitcoin will be the tool of choice for that - and when the tens of millions of people wanting to move money around do so is when we will know the real, unhyped, value of Bitcoin - until then, the question is if $7,000 USD/BTC is an obscene over-valuation, or is still comically low - and I don't know which side to believe.
We'll get a better idea when, or if, legacy companies like Western Union and SWIFT get involved - or when real-time BTC transactions cost less than a VISA or Mastercard transaction (say ~3%). Right now a 250 byte transaction will cost 54,240 satoshi ($3.83) and take 30 minutes to get the first confirmation - making it totally unacceptable for retail purchases, for example. Hopefully when the Lightning Network or other solutions get finalized we'll start to see some real traction, but how many bubbles will burst before then?
(Disclaimer: I'm a HODLer of BTC and ETH).
This is not a repeat from every bubble ever. This time it's different!
Bitcoin may well be in a bubble, but it isnt mathematically and legally guaranteed to decrease in value overall as compared to what most people consider traditional forms of "gambling".
The sign to watch out for is when you have personal friends investing their life savings in Bitcoin - not $100 here and there, but $100k. And not 100K people in a single day (that's peanuts in the grand scheme of consumer markets...I've run Harry Potter fansites with more users than that, and it wasn't even one of the big ones), but tens of millions.
If they're truly using the word "only" when they describe it I do not think you should worry. If they're saying something like "I put in a $100 so this better pay off!" that's a much bigger cause for concern.
It could have literally zero utility whatsoever - as long as people keep buying the hype that this will one day be a massive store of value - it will be a massive store of value.
The better answer ...no one knows anything. 100% unadulterated speculation.
Yes, if cryptocurrencies prove to be a real revolution the way the Internet was, there's plenty of upside left. If not, though, I'm not sure there's too many greater fools left if my mother's almost there.
As they say, you know it's time to sell when shoeshine boys give you stock tips...
--edit extra should have been extract.
If no one is actually using the coin for practical purposes, you've created a glorified Ponzi scheme. The minute that "better off holding" is no longer the most common opinion, the price of BTC will drop.
I dunno how long that will take: it took years for Enron to drop to zero for example. But I do not place much trust in the whims of stranger's opinions.
Admittedly I don't know what would need to be changed to speed up transaction confirmations to the point where you could use it in retail situations.
https://www.theverge.com/2016/4/28/11525482/bitcoin-steam-va...
The real big deal is that currently, BTC transaction fees are like $5+ right now. So its cheaper to use Paypal than to use BTC at the current prices.
Likewise, the frequency of chargebacks is so low it doesn't justify waiting up to 10 minutes to buy something for every purchase.
You're right, that's why I said it probably won't happen, but if demand were high enough it could be made to work. One scenario that would increase demand would be inflation of the US dollar. Look at what happened in Zimbabwe. I'm not saying that's likely to happen, just playing devil's advocate.
Hard to say what proportion of transactions are retail driven, but Bitpay did write about their progress towards a $1B annual payment volume milestone recently[1] which is a drop in the ocean compared to the multi-billion dollar daily trade volumes on exchanges.
- Newton after he lost everything investing in the south sea bubble for a second time, just before it popped.
This has gained mainstream attention and no-one knows what they’re investing in any more, there is no there there to justify the price. Consider the trajectory of chain - a bitcoin startup that has gone from being about bitcoin to about block chains to about distributed ledgers to being about distributed applications (note these last things don’t care what they’re denominated in).
A founder wrote one of the best write ups of this space I’ve seen, and even he is pretty skeptical:
https://blog.chain.com/a-letter-to-jamie-dimon-de89d417cb80
All it needs now is for ordinary people to get nervous and start trying to realise their gains all at once for prices to plummet once again.
https://motherboard.vice.com/en_us/article/ywbbpm/bitcoin-mi...
Bitcoin - The new coal
Damned if you do, damned if you don't.
But there is a strong potential future for btc, and in spite of all the fear mongering, BTC has so far come back from every crash. You're not just throwing away money if you spend a couple hundred of your otherwise disposable income on some btc. Buying at any point in the past would have yielded a payoff today.
"But a crash!" is not an argument alone. Every single other investment instrument I'm aware of has had a crash.
I keep encountering more and more everyday people who are investing serious money in Bitcoin. Uber drivers, barbers, baristas.
At the moment we refer to BTC as being worth $xUSD, but without another currency to compare it to, is it worth anything? Or is it just not designed to be used in isolation?
Bitcoin just hit 7000 dollars.
Even with modest ASIC in a pool, you'll get very little.
1. Don't keep your BTC in any exchange account for very long, and check the popular forums for people complaining about transactions being held up before transferring BTC into your account. Lots of people got screwed by MtGox, and it can happen on any exchange.
2. Don't spend any money other than money you would be willing to give away for free (totally discretionary money). The bottom has fallen out of markets before, and BTC is not immune. BTC has a lot of similarities to tulips, houses, Beanie Babies, and .com stocks in the late 90's.
I would think maybe a comparison to other forms of currency would be a better metaphor - i.e. gold or something. Inherently value-less (gold is pretty and historically been used for currency, that's about it - it's not traded as a commodity for its usefulness as a raw good like Oil or whatever) but still valued.
To tulips and beanie babies: There were direct substitutes (other flowers and other stuffed animals) in terms of the actual utility, but tulip prices shot up in 1637- even investors bought tulip contracts not because they needed them, but because they were speculating on the value. Eventually demand leveled out, and the prices stopped going up. When the prices stopped going up, the speculators got out, and prices went down fast. The premium status of being the preferred flower or the preferred toy didn't help any more. How could this be like BTC? There are cryptocurrencies that are direct substitutes like LTC, but BTC is preferred and has a lot of investors purely for speculation. Once demand levels off (it must, there are a max of 7 billion people that can buy it), the speculators will get out, and prices will come down. Why hasn't it happened yet? BTC is artificially scarce due to block difficulty increases and fixed BTC being added for each block. The limited supply is maintaining price support for now, but like I said, once demand levels off, the fixed supply won't be as big of a price driver.
Similar to houses and .com stocks: Houses have real utility (you can use it for shelter). Stocks have real utility (you own a piece of a profit making entity). BTC has some real utility (you can transfer wealth outside of the regulation of governments and banks). However, these bubbles happened because instead of trading on a firm foundation value, people started expecting profits. The castle in the sky theory does work, but only if enough people believe in it. Once confidence faltered (either that people would continue to buy houses or that .com stocks would continue to print money), the castles in the sky fell, and prices fell back to their firm foundation value (a house in Las Vegas that I looked at went from $400k down to $100k- basically the price of raw materials and cheap labor). BTC's price right now is WAY over it's firm foundation utility of being a wealth transfer vehicle. It does have some value, but if enough people decide that a couple other cryptocoins can do the job with less risk than BTC, then prices for BTC will go down to it's intrinsic value- mostly related to the price of energy. It's hard to tell where this will settle, because ASICs are getting more efficient, and the block difficulty changes. But I guarantee you it will be way under $6k.
So these things aren't exactly the same, but there are lots of similarities with previous bubbles in the past. I'm not saying to stay away from BTC, but you had better be willing to lose your investment. There are a lot of people in the market that are only looking for a quick buck, and if they get out before you do then you are going to lose most of your investment. If you aren't desperate to make money off your investment, you will be happy with closing a position early instead of riding the crash into the ground. Closing early makes you the person with the quick buck and makes someone else the fool that lost their shirt.