Bitcoins featured in Forbes | Hacker News Reader

Bitcoins featured in Forbes

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38 pointsDiabloD325 comments

Bitcoin is a fascinating model of how to run a distributed, internet based boiler room. Unregulated + ultra thin market + appeals to inexperienced investors == pump and dump dream.

http://www.bitcoincharts.com/charts/bcLRUSD#permalinkbox

April 7th: 0.60 BTC/LRUSD

April 22nd: 1.37 BTC/LRUSD

Goooood luck getting out on the right side of this trade...

Can we also consider the possibility that Bitcoins are precisely what they claim to be - A decentralized crypto currency?

I think the real story become more clear as the Vendor Infrastructure continues to grow.

If the touts actually wanted the currency to be used for commerce your focus would be on stability - clearly you won't have any kind of substantial trade in BTC (for actual objects or other items that aren't just currency pair trades) until the value can be predicted over short/medium time frames. The amount of hype, hype, hype that goes on by submitting these endless articles to places like HN, slashdot and I'm sure plenty of other places and soliciting articles like this one in forbes makes it very clear what the community intentions are: speculation.

You may personally not be involved in that, or not understand that's what you're doing. But it's very clear that the market is being run by those that are.

I think you are wrong, thinking that exchanges are unimportant part of attracting traders. To attract sellers, bitcoin market needs high volume trades on exchanges (because currently most costs for sellers are in USD and they need to hedge that costs on exchange).

Spreading awareness is the most right thing to achieve this.

In one post you're predicting/hyping $5-$10 BTC/USD and in another you're discussing what should happen to encourage commerce? Is it a case of you not realizing how diametrically opposed those two goals are, or simply one where you assume readers won't note the contradiction?

I don't see the contradiction.

Let's say you are selling some good, 95% of which you are buying with USD, 5% is your profit. When someone purchase this good from you in bitcoins, you need to instantly convert 95% of the cost to USD. For this to happen you need to have a liquid exchange.

And because the number of bitcoins is limited, and the number of traders are going up, we see a steep increase of exchange rate.

Well, what you're describing is merely a difficult to use stand-in for the USD with fees on both ends.

Reasons you need stable value in a currency for it to be good for commerce:

Pricing hell: If you're a merchant you probably need to be changing your prices in BTC several times a day at this point. In such a thin market, what trades do you believe for quoted value?

No buyers: People holding a currency that is deflating are unlikely to buy - why spend your money now when it could be worth twice as much in two weeks? Those alpaca socks won't be worth twice as much.

Inability to hedge: With no instruments available to hedge BTC trades a merchant's exposure to wild currency swings is almost infinite.

Thin markets + no safety in holding BTC means that merchants who feel the need to setlle out of BTC several times a day or after every transaction will 100% be at the mercy of the markets. Last trade was 1.37 LRUSD/BTC - what you based your sale price on? Sorry, our buyers have thinned, if you want to settle 150BTC you're going to have to take an average of 1.10 LRUSD/BTC.

I could go on of course. But you'd do yourself better by picking up an econ 101 textbook.

I don't see another way to bootstrap a new currency. BTW currently the whole bitcoin economy is 1/30 the size of e-gold reserves in 2007. So to be at least like e-gold it has to rise 30 times current price.

If people hold the currency to get twice next week, than this logic apply to dollars too. Why spend dollars today, if you can convert them to bitcoins and spend twice the amount next week? Either this logic works both for bitcoins and dollars, or don't work at all.

You can hedge BTC value on exchange instantly via exchanges API, i think i explained that in the previous post. That is the reason we need a high volume exchanges (currently mtgox have around $10000-$50000 volume per day). Merchants do it automatically, not by hand. I think we'll see a bitcoin billing soon, that will help to do this without programming knowledge.

Of course there are a lot of difficulties now, but how will you explain, that amount of traders is rising despite all this difficulties? Compare this page https://en.bitcoin.it/wiki/Trade from the February and now.

There's no contradiction. The prices in BTC for services/goods are lowered until people want to pay. With speculation, the trick is that eventually the currency has to land in the pockets of someone who will trade it for services/goods. If no one wants to do that, you basically have an infinite loop for currency speculation going on and eventually there's no point in grabbing the currency when no one wants to give it up unless it's for USD.

In September, when i first heard about bitcoins (unsurprisingly from hacker news comments), they were 0.05 USD/BTC.

I won't be surprised by $5-$10 by the end of the year, it seems that they are getting traction.

I think that you are conflating optimistic speculative activity for traction.

I think we will be able to tell if it's only speculations 1-2 years from now.

And yet, almost no one knows of them. What will be interesting, is if/when the average person is aware of them. As it is a border-less currency, that's a lot of average people.

IMO, the great thing is, we will get to find out what happens. This is an interesting experiment.

The whole drugs thing is just hype. Bitcoins are surely much harder to launder than shiny metal, because they're so unusual. You can't just wash $10,000,000 of bitcoins through a casino or whatever without someone asking questions.

If they become widely accepted this will obviously change.

How can you define it as "hype" when there already exist people selling controlled substances for bitcoins through a Tor secret service? (n.b. it could have been fake and I certainly did not order any to try and find out given I have no interest in either drugs or bitcoins)

USA government will crack down on anonymous money schemes [0], especially 'conspiracy to operate an unlicensed money-transmitting business'[1].

http://www.wired.com/threatlevel/2009/06/e-gold/ [0]

https://secure.wikimedia.org/wikipedia/en/wiki/Egold [1]

Against whom?

It is anonymous, is it not?

Presumably against anyone who runs a service that exchanges bitcoins for regular currency.

That isn't going to matter, those laws are only good inside the US.

Anyone recommend an exchange for buying and selling bitcoins with Paypal? Thinness of the market doesn't particularly matter - I'm not interested in speculation or arbitrage but rather adding bitcoin support to my site.

There is a http://coinpal.ndrix.com/ for buying but they have a very low limits due to paypal fraud, and http://coincard.ndrix.com/ for converting to paypal.

thanks.

<fun> Is it just me or the guy in the photo looks like Mr. Spock :-)? </fun>

Hivemind. I told Gavin he looks like a Vulcan in that photo, he hangs out on #bitcoin-dev frequently.

OK, guys & gals, I got it - no jokes on HN (even specifically marked with a <fun> tag...) - you can stop downvoting now - I wish I could delete my own comments, but HN doesn't let me do that.

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