Comment by indubitable | Hacker News Reader

Comment by indubitable | Hacker News Reader

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I think the explanation is really simple. A couple of months back numerous non-technical acquaintances began expressing interest in Bitcoin with a number of them going on to purchase it -- completely independent of one another. I doubt my anecdote is particularly unique. There seems to have been a huge influx of "dumb money" on the heels of an exponential increase in media coverage.

There is the possibility that I'm reversing causality here. In other words that the media coverage increased following the increases in bitcoin, rather than the opposite as I'm suggesting. But Google Trends along with the price graph seem to support my suggested causality:

https://trends.google.com/trends/explore?q=bitcoin

https://www.coindesk.com/price/

This just seems to be a huge influx of dumb money. If this is true, it's going to lead to some interesting near future volatility. These sort of investors are going to be more inclined to jump ship at what would normally be the tail end of swings. They will see it as 'the crash', race to get out, and create a self fulfilling prophecy. Perhaps offering a great time for investment for anybody who can accurately determine when the double dip decline is bottoming out before a return to normalcy.

Pretty much all of the money in Bitcoin was dumb from the get-go. These weren't economists figuring out that something was under-valued or the system could be gamed. It was people gambling back then and that's what's continuing to happen.

Like you, I noticed an increasing amount of fairly oblivious people talking about Bitcoin a while ago in our office and that's the most certain marker of an impending crash, but in terms of there being smart money outside of huge investors in the earlier days of Bitcoin I disagree. Developers that like to gamble are not smart investors.

> It was people gambling back then and that's what's continuing to happen.

Not exactly true. Bitcoin was extensively used as a money laundering tool to facilitate illegal trade online. The money being used on those bkack-market deals dumped some liquidity into the mix and each money laundering transaction helped back bitcoins with real cash. As bitcoin's adoption as a key part of black market payment systems kept increasing, the increase in demand started driving the price.

The phenomenon was very similar to the one where drug pushers started using Tide detergent as currency, except Tide has real world value and there are no shills pumping its value saying it's the future.

> economists

Economists are the worst predictors in this space and the ones that are constantly wrong about Bitcoin being dead.

I think there's major inherent value in Bitcoin. Or at least was. I enjoy traveling and it's quite the pain with traditional banking. It ranges from the small things like facing account locks (even after informing the bank you'll be traveling) which take days to clear up, to getting absolutely gouged on access to your money. If you want quick access to your own money then you'll be facing artificially weakened exchange rates, fees on said exchange rate, and then fees on top of fees because fees. To get reasonable access you need to wire money which comes with annoying hassles, paperwork, delays, and then you better hope you're not trying to get access to your money during the weekend or a bank holiday.

And then the banks themselves also face countless rules and regulations which result in more hassles to consumers. Happen to keep depositing just below $x for whatever reason? Welcome to a suspicious activity report (for fear you may be trying to dodge financial accounting reporting regulations) and having all deposited funds confiscated until you spend tens of thousands of dollars proving yourself innocent, because in finance innocent until proven guilty apparently doesn't fly. And that's of course just one example among countless.

The current monetary system is pretty much awful. I thought (and think) Bitcoin is the start of a change to this. In other words that it has inherent value. The limits of that value are now being shown as transactional fees get crazy, but the point of this is that I don't view Bitcoin as an arbitrary commodity. It is a decentralized financial service.

I think there is major inherent value in a decentralized currency and I think the technology is neat. There will be more practical value in Bitcoin after the crash when the speculative value has stopped being a factor.

What would you value a technology that aims to separate money and state? Does it have no value?

It has practical value once it's crashed and a real, stable monetary value can be established. A currency you shouldn't be spending because it can double in value in the next week is not a practically valuable currency. There are great ideas in blockchains and the whole decentralized financial system, but the current situation is not practical. It's useful only for its speculative qualities.

I don’t exactly disagree. But, until recently, the people I knew who were investing were techies with political bents. They appreciated the technology, wanted to support it, and invested small amounts that they could afford to lose. Would call this ‘dumb money?’

...this changed over the summer/fall, of course.

Supporting something because you like the idea of it is not smart, no. It's honorable and a great thing to do, but in terms of investments it's certainly not smart. I didn't mean "dumb money" as in all the people who invested in Bitcoin are dumb, but rather that these were not well thought out investments with sound rationales.

OK. Thanks for clarifying. You mean to say it’s not smart investing. You are judging intelligence based on purely selfish outcomes. I understand now.

"smart" and "dumb" money are technical terms in investment. It's just a label placed on a class of investments when talking about the market. You can call them whatever you want and they aren't intended to be anything more than a purely functional way to differentiate two classes of things.

Noted. Thanks for sharing this comprehension.

Intelligent people can be stupid investors. I'm not judging anyone's intelligence at all. An investment made with no sound rationale by a Nobel prize winner is effectively dumb money.

I am suggesting there are some rationales for investing in cryptocurrency besides investor profit. I am not arguing for their popularity, but that they do exist. They seem to ascribe different value systems that you might not be considering. In the current market situation, they are probably fairly irrelevant or undermined, but maybe not so in past terms.

Yes, I've recently exited a large position, while an alarming number of acquaintances who have limited or no investment experience are getting each other into Bitcoin off of Facebook hype, in some cases ridiculing each other for "missing out".

This won't and well.

Invest experience doesn't matter here and I think you exited too soon. Your friends however are still early adopters. The FOMO we see now is nothing compared to what will happen once real mass adoption starts. Everyone talks about Bitcoin but very few actually buy. This will change.

> I think the explanation is really simple. A couple of months back numerous non-technical acquaintances began expressing interest in Bitcoin with a number of them going on to purchase it -- completely independent of one another. I doubt my anecdote is particularly unique. There seems to have been a huge influx of "dumb money" on the heels of an exponential increase in media coverage.

That's the "pump" part of a pump-and-dump scheme.

Any thoughts on why this unprecedented appreciation this week ? I believe bitcoin has increased by 2K $ per day.

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