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Comment by minimaxir | Hacker News Reader

Unless you can include the complete irrationality of the users fueling the crypto bubble to get rich into the statistical model, any statistical analysis of those prices will be misleading.

Traditional historical trend analyses of stock prices assume the market is somewhat rational. (but not 100% efficient, which is where money can be made)

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It's not irrational. It's an asset whose price is rising. If you want to make money, it's a good asset to trade. Just avoid hodling the bag when the music stops...

> Just avoid hodling the bag when the music stops...

and how do you know exactly when the music has stopped?

a lot more people sell than buy cryptocurrency

How would that work? Any coin that is bought is also sold, so you're saying that the buys come from a few people buying big amounts? But all those sellers were buyers at some point...

buyers are willing to trade USD for more bitcoins. the price might never go to zero, but it will approach it.

It's easy to tell when the music has stopped. The hard part is anticipating the stopping.

What do you think of the "buy low, sell high" strategy? ;-)

Is it that easy? The Nasdaq bubble took roughly 6 years to inflate and 3 years to "pop". The real estate bubble took about 11 years to inflate and 6 years to fully deflate. Even Enron took the better part of a year to fully deflate.

Maybe balloon is a better word than bubble.

People who can't tell it has popped are the ones keeping it on life support for years. :-)

When you’re broke.

I've told people to buy at $3,800, $5,900, and $14,000 and got shouted down each time. All of these were after major crashes, so of course the price was about to bounce back.

Even if you know when the music hasn't stopped yet, it's very hard to get anyone to listen.

Oh boy... I told my dad to buy at $8, $27, $200, $2000, $3000, $6000, and $12000. None of these times has he actually taken any action. :(

If only I turned 18 a couple years earlier...

Your dad is a wise man!

On the other hand, if he had put in $8 at $8, he'd have $16,000 today.

Buying at $8 would be easy. Not selling at $200 would be hard. Not selling at $2000 would be even harder.

It's easy to see in retrospect that the beginning of bitcoin would've been a good place to throw in some meaningless quantities of cash, but I think once you divide by the number of small, potential investments you could make that wouldn't have made you money, and subtract the amount of time commitment to keep track of those investments, the outcome is less appealing.

(Obviously, some people knew it was about explode, but I'm looking at everything you hear your kid, or a co-worker giving you hot tips about, which was the boat I was in and it sounds like this kid's dad was in).

For what is worth, I also thought that ~5500 dip in mid november was a good time as well. I wish I had money in the exchange that weekend because it quickly recovered days afterward.

The recent dip was scarier though and time will tell whether we are still on the rise or just a temporary recovery.

A friend and I used to joke that a crash was a sale. Stock up while supplies last!

It crashes during scandals like Mt Gox, and the big crash will come when a major nation-state decides to crack down on it.

Full disclosure: I don't own any Bitcoin, but I own other cryptocurrencies.

Good question. Many thought the music had stopped in 2014, when the price crashed from $1200 to less than $200. (Previously in 2011-2012 it crashed from $35 to less than $2, which was pre-ASICs, so you really couldn't mine at a profit)

If the assumption is that the price will crash, then every dollar made by someone on bitcoin is a dollar lost by someone on bitcoin, since the underlying asset had no intrinsic value at all. Given that there are a lot of people who have more resources than me, and can do better research and better market manipulation, I am pretty sure I have a better chance of being in the group that loses the money.

Long-term it is hard to justify a conclusion that cryptocurrencies will fail as a technology. It's too big of a leap forward in too many industries. Short term, bitcoin might move too slowly and be surpassed by a competitor, or big money might manipulate the market and take advantage of people who have no idea what they're doing. I see these as issues that will diminish and fade over time as the technology matures. The solution is to stay attentive, invest with caution and hold on through the booms and busts. Not hard to do, all said and done, though I understand why many fear it.

Cryptocurrencies generically, sure. Permissioned blockchains are going to be huge. Medium to long term, decentralized validation mechanisms are going to get hit hard by double spends, and decentralized currencies will fall drastically when that happens.

Considering banks have taken to use ripple, crypto obviously has it’s place. Bitcoin doesn’t really seem like it’ll have much of a future though.

Well unless people keep pretending the naked emperor has clothes, which they might.

Are you sure it's complete?

if Gold can be irrational for 2k years, I don't see why not bitcoin can't, the only think gold has going for "longer history", yet HN folk love to say "past performance are not an...bla bla", yes it also has the 5% - 10% industrial use, but bitcoin has that too by being able to transfer it without third party, so will also not go to zero because will be useful as transfer of value.

Aren't 'miners' the third party?

Gold has a price floor because it has some industrial utility and is useful for making jewelry.

All that has to happen to destroy bitcoin is a flaw in the implementation.

Seriously, look at OpenSSL and tell me the same issues aren’t possible in bitcoin.

When did we get so trusting of software that we decided it’d be a good idea to base currency on a distributed algorithm?

The project can always fork if major issues are found.

Bitcoin is very very far from a perfect solution, but it is a solution to many problems currencies have.

Given how hard it is for the community to do something as simple as increase the block size a tiny bit, I'm not confident that a fork could fix such a problem.

making jewelry is in the store of value spectrum, with only industrial use, would be at 5% - 10% of current price.

Well ~78% of gold is used for jewelry and only ~19% is used as a store of value:

https://goldprice.com/facts-about-gold

Jewelry and "store of value" are not mutually exclusive uses. Lots of people would buy "store of value" gold in the form of a nice necklace rather than a lump of metal.

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