Bitcoin hits $200
bitcoincharts.com
bitcoincharts.com
Also, is there any management of Bitcoin to prevent excessive currency fluctuations? Not having this would seem to be a flaw to me - you can't have an exchange-based economic system without some expected stability in the value of the exchange.
Bitcoin price was pretty stable during 2012. Some people used it as a "store of wealth". Now, you still can use it for the same purpose, but you have to bid up the price a little to take a piece of it.
http://silverprice.org/charts/history/silver_all_data_o_usd....
The USD money supply is around $3T or $10T, depending on whether you are counting money multiplied by leverage. The US GDP is $15T. If we presume that a currency then should be on the same order of magnitude of money supply as the GDP or transaction volume, it's not hard to project a $100B+ supply of bitcoin. With the supply currently at $2B, there is a lot of room to grow. I have no idea if this analysis is reasonable, but I suspect it is close to the "story" behind the bubble.
Of course all of this presumes that bitcoin will prevail as the leading crypto-currency, regulatory hurdles will be surmounted, and the currency remains secure. Those are not implausible ifs. In fact, I'm a big believer in the future of bitcoin, even if it is getting a little ahead of itself.
I anticipate a significant collapse at some point, regardless of the success of bitcoin. That crash may very well be from $1000 to $200 though.
So, 22M BTC valued at $1T USD comes to $45K USD/BTC.
I have invested less than two thousand dollars into BTC. I consider it an epic gamble, but honestly, not an enormous one.
On the other hand, if BTC does 'go long', I could very well be in 'good shape'.
Here's the other consideration: the more unstable other currencies are, the less people all over the world trust their central governments with their currencies, the more likely people will move their money to a currency with no central control at all.
BTC is indeed turning into the place you put your money when things are scary. And there's a lot of scared people right now. Whether that anxiety is well considered is a separate question, and one that hardly matters.
Asking the wrong questions is silly. When bitcoins are used, that is when they'll be a serious currency. A bitcoin enthusiast should be looking at the number of bitcoin transactions and hoping it rises.
The price of bitcoin is irrelevant to its value to consumers. On the contrary, the more stable the price, the better.
Merchants want the opposite. Merchants right now are pissed off because they just finished setting their prices at 1BTC per widget four months ago, but today they're only getting 0.1BTC per transaction.
Merchants are receiving less and less bitcoins everytime the price goes up. Merchants want BTC to go down, so that they can sell the same stock for more BTC.
Its like the whole thing that happened to the Japanese Yen between 2008 and today. As the Yen strengthened, Nintendo lost money. Even though the Wii was selling in record numbers, Nintendo lost revenue as the Yen grew stronger.
Similarly, a Merchant based on BTC today is making 10x less bitcoins per transaction. That is BAD for business. Furthermore, merchants are now forced to consider the highly fluctuating exchange rate as part of their business.
I can certainly tell you from a business perspective, $2B of money supply is A LOT more attractive than $200M.
The number of bitcoin transactions per day has remained roughly constant since February. The price of Bitcoins however, has risen by 1000%.
Do you have any evidence to suggest that people are actually using Bitcoins? Because the hard evidence I've got seems makes it seem like Bitcoins are getting traded like crazy, but not necessarily used.
http://www.dailydot.com/news/bitcoin-legal-sales-higher-ille...
Bitpay may be growing, but Bitcoins in general are not.
For someone who leans towards the second outcome, they see the recent rise as a 'correction towards the true value' rather than a bubble.
edit: How large volumes of selling bitcoins for USD/EUR/etc. is enough to have significant effect on the value of bitcoin? For example if I had VERY URGENT need to sell 100 000 bitcoins by tomorrow in exchange for USD.
Cashing out 100 000 USD however is a different story. It actually happened a few hours ago, you can see the impact for yourself[1].
All demand is not reflected in the order book. In fact, most demand is not. The more sophisticated a trader is, the more likely he is to use limit orders to manipulate the market instead of the rather stupid move of telegraphing demand.
If the market went down 10%, a flood of buy orders is not unlikely to appear.
It works in both directions, people who are speculating on Bitcoin will be easily spooked by a medium-term crash.
midnightsine is pulling his numbers from limit orders posted on MTGox. I'm saying that's not an accurate measure of what it would take to send Bitcoin to 0.
Yes. Nearly two years ago I wrote an essay with my thoughts on Bitcoin's potential for long-term appreciation at http://cs702.wordpress.com/2011/05/29/on-the-potential-adopt... and the essay is holding up pretty well so far, particularly given the recent reported spike in adoption by people in Spain[1] and Cyprus[2].
The TL;DR summary of my argument: the more people who adopt Bitcoin as a store of value or medium of exchange of last resort, the more demand there will be for it around the world. Supply being fixed, this growing demand will be reflected in a rising price. Should Bitcoin continue to work as intended, in the long run nothing prevents it from eventually gaining as much credibility as, say, gold.
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[1] http://www.wired.co.uk/news/archive/2013-03/20/bitcoin-spain...
[2] http://news.cnet.com/8301-1023_3-57576928-93/bitcoin-hits-re...
if they're buying to flip with a short horizon, it's a bubble. the first buyer to feel they might be the greatest fool walks away, and the bubble pops.
> speculation driven
speculation is a normal economic mechanism. taking risk in expectation of reward.
> you can't have an exchange-based economic system without some expected stability in the value of the exchange
yes you can. especially if the value of the currency is only going up. probably not if it's going down.
currently the ratio of stock to flow is rather high. since there is less flow available, and lots of fiat chasing it, the price rises. since the value of the currency rises, people who sell in that currency benefit (especially if they keep the difference in bitcoin).
money is a shared societal delusion. it's a giffen good, where rising price acts as a signal that more should be owned. misesian/mengerian theory requires only an initial direct barter exchange, the rest of it is bootstrapped by historical events (given certain basic properties, which bitcoin has in abundance[2]).
we are living those historical events today, thanks to the ECB & Cyprus.
at the moment bitcoin is a transient medium of exchange (usd->btc->silkroad) on both sides and a few risk-takers are betting on it holding value, where few is relative to world population. most merchants (at least thru bitpay etc) don't hold it either.
for the price to drop consistently, bitcoin-busters would have to take a large position, driving up the price, and then consistently sell enough to trigger other people's latent limit-sell orders. the problem is that naked shorting is not possible, so on the way to building large positions, they will send out the rising-price signal, which will make downward price-pressure quite hard later (aka high prices will be sticky since people's expectations have been reset). [1]
when the price gets high enough, the realization will sink in that the only way to accumulate bitcoin is to participate in the economy with one's labor (ie, sell things for bitcoin).
that's the ultimate win for bitcoin.
[1] oddly, one of the criticisms of btc, namely that Satoshi holds a significant amount, will provide downward stickiness as long as that large cache isn't sold. [2] bitcoin has a lot more properties than most other monies, principally anonymity & distance-agnosticism, and also invisibility via the use of darknets/tor
http://www.bitcoinbeginner.com
If you (or anyone else) would like a free copy, just email me: john@bitcoinbeginner.com
We all know about the world finance industry. We all know how corrupt it is and how fucked-up things really are. Yet discounting Occupy - which was violently suppressed anyhow - I don't see people in on the streets demanding to burn down Wall Street to ashes.
This is the same thing by the same people is my suspicion.
My theory: it's the Mayflowers.
Millions is pocket change to those who deal with figures in the hundreds of billions.
Or $200,000 in yesterday's terms. Doesn't seem so hard to influence anymore.
Right now I expect a lot of speculation rather than manipulation for crashing. It will end up crashing bitcoin when speculators start selling, but the end goal of the croad is probably to make a quick buck rather than crash it.
But it's really interesting to watch the value ratchet up, and easy to see how you can do this - if people will only ever sell a bitcoin for (say) 1% more than they bought it for, and people buying things with bitcoins don't care if the things they're buying with it are priced 1% higher than they might, theoretically have been, then the price of bitcoins can keep increasing indefinitely.
Until, that is, some people decide that they want to get rid of a lot of bitcoins, and thus are willing to accept less than that, to shift them quickly. Then the price drops. And then more people might also decide to sell, so as to convert the bitcoins they have at the value they're now worth.
It's classic sentiment pricing - but without any of the value "stickiness" that you get when there's some utility to be gained from the objects you're trading.
(I'm not trying to talk Bitcoin down here, I find the whole thing fascinating. Just thinking out loud.)
I'm not sure I would have been able to purchase 100k worth of Bitcoin easily, and what would've happened to the price if I had attempted that. If I had been able to, perhaps it would've worked out in my favor.
But then people don't seem to be making transfers that large, last I checked.
With the current mining rate of 150 bitcoin per hour, a bitcoin price of $100,000 implies around 100GW of power consumption for bitcoin mining (for comparison, a large thermal power station has around 1GW of output). That's a lot of energy to throw out the window...
More to the point, even if gold's industrial, cosmetic and personal uses completely disappeared, it would probably continue to be quite valuable because people would probably continue to use it as a place in which to "park" some of their savings.
Which is a lot of utility. Consider that in the US we still write physical checks, and paying by credit card costs the vendor a few percent every time.
However that utility is not limited to bitcoin. You can set up a similar algorithm using a slightly difference hash, and voila you have bitcoin2. Some people are worried that bitcoin is deflationary; I'd be more worried about alternatives popping up and inflating the whole supply. Especially since current bitcoin favors those who started mining early (and are now millionaires?) - why adopt a currency that makes other people rich when you can just mine your own new currency?
In the end, it depends what the crowd decides to do with it. The value of fiat money is always subjective (although at least USD is backed by the fact you can use it to pay your taxes.)
"Mine your own new currency" -- pre-mining coins before releasing your coin to general public is considered very improper act.
No one can even explain formally why this is happening. Lack of liquidity? Penny stock behavior? Are there sharks driving the prices to make a spectacular exit?
Why isn't mining regulating the prices? Is it too costly?
My personal and completely uninformed opinion is that bitcoin is doomed.
A better way to state it is: "More people are willing to buy at the seller's asking price, than are willing to sell at the buyer's bid."
I suspect pump & dump. Just wait, it will plummet soon when the puppet masters sell their bitcoins.
It is a consensus that mining don't affect the price of bitcoin. However, mining is certainly affected by the price of bitcoin.
Also, concluding that bitcoin is doomed because too many people want them seems backwards.
There was an (anonymous) article a while back from someone who ran an [I believe a small] exchange, whereby he could manipulate the buy/sell prices to his advantage (driving up BTC price) - and I can see that happening very easily; I don't know what sort of algorithms Mt Gox (or any exchange) runs for it's immediate buy/sell spot price, but a simple variation of the weighted average over the past hour * 1.05 would easily provide a price that is always rising, unless a user manually gives a lower buy / sell price - and even then that would have to be beat the current price by 5% to make any impact on the spot price. Hell, you could just inflate the prices you show to users by a certain % to create that sort of meteoric rise, even if they do place lower/higher bids - those bids are somewhat based on what the value they see in that moment.
Is this a bubble? We just don't know. Currently there are people who are willing to part quite a lot of money for a scarce virtual currency, so by all accounts if there's a demand - the value will rise, especially if supply is limited (not just now, but there will only ever be a finite amount of BTC).
Even with the hiccups (0.8 vs 0.7 double spending, Mt Gox crashes) - and a price crash in it's history - surely anyone would think twice before putting down $200 per BTC, especially when it was worth only $15 three months ago.
What's convincing these folks to invest, I just don't know. Maybe they see something I don't, but at the moment I just see a very overvalued bubble just waiting to pop. A part of me fears that it's being overrun by folks who don't trust private financial institutions to hide their (illegitimate) wealth, as I don't think the average Cypriot has the wealth, nor there are enough Cypriots (or average / middle/working-class Europeans) altogether to create the demand which would push the price where it is now. Maybe someone can run the numbers; average salary, savings, investments, total # of folks who are tech savy enough to buy BTC, compare that with the uptake in Mt Gox (or other exchanges) signups, volume, traffic etc and put together a more substantial assessment.
BTC is something the world needs badly, and over the next decade I can see it becoming incredibly prominent. But the sort of rise we've seen in the past 3 months should've taken at least 3 years; and even then it's an incredible run for what's nothing more than a digital, limited commodity.
EDIT: Link's down, it was $203 at 12.06 GMT.
edit: unless the market is controlled by someone willing to lose money to keep it stable.. so no, it won't happen.
That's impossible. The only low stable price is $0 which is useless as a currency. Only when its user base is no longer growing and there is enough value to satisfy the entire user base will it stabilize. My expectation is that unless it dies entirely it will continue to grow until it has more or less total global coverage. With the limited supply of BTC, it has to be worth much more than $200 apiece.
A crash just causes problems but if you want to use it as a currency I think what you really want to move the decimal, which is purely a representation issue: it's ~$2/centiBTC.
http://en.wikipedia.org/wiki/Deflation
"deflation is a decrease in the general price level of goods and services"
Prices of real goods are rapidly decreasing for Bitcoin, but you are correcting that the exchange rate is ballooning or "inflating" in that sense.
All it takes is one headline on CNN like "Joe Blow selling Anthrax and Cyanide on Silkroad/Craigslist for Bitcoins" for the general public go to fucking apeshit and cause some real 3 letter organizations to shutter most bitcoin exchanges with secret subpoenas and such.
Realistically, there is so much dependency on mtgox, once it went down I believe the price of bitcoins would likely be 10x less than it is currently.
What could threaten bitcoin is a major flaw in its algorithm, which seems unlikely in the near future, and the hacking of the primary exchange - MTGox. In fact, I keep my Bitcoin at MTGox with the knowledge that if they lose my Bitcoin, the value will plumet to nearly nothing regardless of whether my coins are there or not.
Why would any TLA need a headline to get engaged? They tend to create their own.
The wide perception of Butterfly Lab's ASIC solution as being a scam has resulted in wide interest in alternatives, which are legitimized by seemingly functional and deliverable ASIC solutions by companies like Avalon. At over 6,000 Mh/S per module, they exceed the best GPU/FPGA solutions for mining almost by a almost a hundred fold (after factoring power consumption), which has produced a tangible market of bitcoin hardware.
Regardless of whether specialized Bitcoin ASIC hardware is cost effective, the production serves to legitimize the currency/producing market as a whole (as well as reinforcing the hype/gold rush mentality for miners and speculators).
I'm still not sure how/whether the currency will eventually settle, but it is very interesting to follow.
The past couple of weeks has shown how easily the bitcoin market can be manipulated. People used to do this with shares. Buy up all the shares to push the price up. Then get out with a profit crashing the value of the share.
I don't think this is any different. I wouldn't be surprised if a handful of parties were responsible for the explosion in bitcoin value.
You could point to the Cyprus banking crisis perhaps as a reason for an increase in value but realistically Bitcoin is just one major hack away from being worthless again... Its like keeping your gold on a wooden shelf above a lava pit.. why anyone would put long term savings into Bitcoin right now is beyond me.
And perhaps, the dot-com style bust at the end that puts things back in perspective and paves the way for real growth and adoption...
I take it the plan for transaction fees is carefully worked out to make it still be attractive to miners and merchants vs charges for visa etc or have I got the wrong end of the stick?
Currently: Bitcoin Pizza Index = $2,091,789.81
Are their any platforms/startups that allow short selling this currency?
Of course, I'm not saying that you are wrong, just that the market can stay irrational longer than you solvent.
100% agree
Whoever is driving this big buys to drive up the price is doing it at very predictable, very specific price points, across multiple currencies.
On mtgox GBP, for instance, it plateaus and peaks at very predictable values - £125, £130.
Frankly, I think that what's going on is there are a few traders (actual traders, not BTC speculators) who are driving the entire market. Hell, you can push the GBP price around just by buying or selling a few dozen BTC, the volumes are so low.
Guess what I'm getting at is that there's a hidden force behind this, and they're not dumb - but most of the speculators apparently are.
Anyway, it is trading over $200 now, so it's a moot point.
I'd be more inclined to suspect bandwagon speculation than manipulation.
If you look at any "real" market, prices rarely adhere to nice round sticking points, because people are at least trying to second guess what the other guys are doing, rather than just acting as though they're the sole person in the market.
"real" markets also have computers and algorithms behind alot of what they are doing. Bitcoin does as well.
I'm sure hitting 200 was either someone setting buy/sells at a point of pride because they wanted too, or a coincidence, or people who don't care because they are long-haul investing.
Wow.