Hacker News Reader

Comment by Fuzzwah | Hacker News Reader

All those new ASIC miners coming online?

The difficulty jump over the last month is intense: http://bitcoindifficulty.com

edit: This is a pretty good quick wrap up of what I think is going on here: http://chralash.wordpress.com/2013/09/17/the-new-pseudo-bubb...

View on HN

I personally think critical mass has been reached, and unless someone actually cracks the protocol (which I seriously doubt) and brings down the txn network, BTC is here to stay.

Quibbling about the current valuation misses the point. The secure transfer mechanism is the real value, and is not getting shoved back in the bag. Bet long on BTC and I doubt very highly you'll regret it, even if you get in at 200US and lose over the next few months.

That's what the btc crowd has said every time it bubbles

How about you guys go 12 months without losing 25%+ of value in a single day before you start talking about being "here to stay".

Again if you're looking at BTC as e-gold you're missing the point.

The value is the txn network and that isn't going away. Price volatility is irrelevant to the long term value of it as a transaction vector of last resort for a huge number of applications.

I would not have so much confidence in a system that, in your own words, is a last resort.

Last resort on a global scale is still a gigantic market.

I'd say it is here to stay:

http://bitcoincharts.com/charts/mtgoxUSD#rg360ztgTzm1g10zm2g...

That looks very similar to this one: http://www.ecotao.com/holism/add/enron/Enron_whole.jpg

If you look at it up to about end-of-year 2000.

The difference though is that Enron insiders were engaging in immoral and illegal activities. Bitcoin on the other hand is provably not a scam; it is an existing and backed commodity.

Market manipulation as an insider is impossible, as there are no insiders; manipulation is only possible by attacking infrastructure or accumulating enough BTC.

Future bubbles and crashes are likely, but I predict it's going to continue to bounce back pretty much forever. Only if many major governments began to criminalize it, or if some new somehow "better" cryptocurrency came out, would it be in risk of complete deflation.

Really? What happens when the founders who mined hundreds of thousands of coins in the early days cash out?

Because the people who were prescient enough to figure out that there was immense unrealised demand for such a system are surely anxious to offload their now increasingly valuable stake in that system, right?

I sure am, back when I was mining and buying at around the 1$ mark I thought to myself; self, you know this is all just games and popcorn, but there'll always be a bigger sucker out there and some day they'll come along and buy all this stuff you're now building, so suck it up and tolerate the jet engine whine of the fans, you'll be rich in the long run.

Not really, though.

Go look at the top 250 addresses, a _majority_ of them have never been spent from. There isn't any conclusive proof that the #1 address (111,111 BTC) belongs to DPR, but it is clearly linked to SR in one way or another. I'd be willing to bet a solid amount of my own holdings that those coins are effectively "dead" (private key lost) along with a good portion of the rest of the addresses that haven't been touched since 2011, or have flat out never been spent from.

Everyone is touting the 12 million number for total coins in circulation right now and 21 million as the maximum amount. In practice both of those numbers are going to be significantly lower.

> There isn't any conclusive proof that the #1 address (111,111 BTC) belongs to DPR, but it is clearly linked to SR in one way or another.

It's been linked to Ross/altoid's Bitcointalk posts, and has a sum consistent with the first year of SR commissions. That's all as conclusive evidence as anyone needs for it.

So what happens when you remove 1% of the currency from the market in a single day?

"I apologize, Goldfinger. It's an inspired deal!"

It hasn't been removed yet. The DPR story has just started - the password-crackers could turn in success any day, or Ross could decide that he'd like to cut a decade off his near life sentence. All we can say is that it's currently not on the market, which is exactly what we could say before the SR bust.

Your fears are unfounded.

2 million coins were sold in the last 30 days: http://bitcoinity.org/markets/list?currency=ALL&span=30d and yet the price rose from $130 to $200... So a few extra "hundreds of thousands" of coins being sold would not have been able to significantly decrease the exchange rate.

It's not backed[1], and it's not a commodity. It's a collection of bytes that has value because a small minority of them are being accepted in exchange for real products, and at present a much larger number of speculators are willing to bet on more people wanting them in future. And as you've pointed out yourself, there are two very obvious and likely future scenarios in which it would become very difficult to buy anything with BTC.

[1]The "mining" is a clever hack against crashes in that it makes speculators reluctant to divest their BTC holdings for less than they've spent acquiring the BTC. But if you can't reliably convert the BTC back to GPU time (assuming you actually wanted it) it's still intrinsically worthless.

Bitcoins bought with US dollars last year buy over 40x more than if the dollars had been saved. Bitcoin is here to stay for as long as the internet is.

If I had a Bitcoin for every dotcom company that saw a >40x YoY increase in market cap that hasn't stayed around as long as the internet...

And yet I doubt any of these saw 40x YoY increases topping out at a $2.5 billion valuation.

Webvan got to something like $1.5b Broadcast.com sold to Yahoo for $5.7b

> Broadcast.com sold to Yahoo for $5.7b

Smells like success, not failure.

Not really. Basically everything that was Broadcast.com was shutdown within 8 years. So they basically paid $5b+ to run a service that lost money every year for a few years until they finally just quietly dissolved it.

I mean, the broadcast.com guys made out like bandits, the buyers, not so much.

That's what he's saying. This is the new con and the cons are going to make out like bandits.

The significant rise of the value of Bitcoin despite its volatility, for the last 4 years, has proven that the market doesn't care that much about volatility. Bitcoin is being adopted and growing regardless.

If anything that should drive down prices.

Why? It's now harder and harder for the average person to get hold of a bitcoin. That fewer, richer people are now spending money to get more bitcoins isn't going to reduce the price if those players aren't liquidating their bitcoins.

For "average" users, mining has been prohibitively difficult for a while now. CPU mining has been worthless for years. GPU mining has also been mostly worthless, unless you picked (or happened to already have) one of the few cards that perform well.

So anyway, I think we're at a point where the mining difficulty has little impact on the price. Newcomers are going to buy coins, not mine them.

What I always find very interesting is that we had a difficulty jump of ~40% in the last few days, closely followed by a (so far) ~40% increase in price.

Is it crazy to think that BTC are largely supply-bound, and BTC miners have just upped the price to the new barely-profitable level?

You can't just 'up' a price.

You can most certainly up your price. The only question is how the market responds.

Miners have zero incentive to sell their bitcoins for less than the cost of producing them. Left to themselves, the price should approach the minimum cost of producing bitcoins (since they do have incentive to undercut each other as much as possible).

Speculators could respond to a price increase by miners by dumping their inventory on the market somewhere between the old break-even mining price and the new break-even mining price, undercutting the miners and lowering the price. This would go on until either the speculators exhausted their supply of cheap bitcoins, or the miners were all driven out of business.

The real question is how the supply of the miners compares to the supply of the (active) speculators. If the miners are the principal supply of new bitcoins, and speculators are by and large just holding their bitcoins until some future time when the price is even higher, then the miners could totally up the global price by upping their own prices.

Miners have zero incentive to sell their bitcoins for less than the cost of producing them.

Unless bills are due and the credit card is already maxed out.

I think the parent meant that miners have zero incentive to produce bitcoins if they can't sell them for at least the production costs. Even if they sunk a big pile of money into their mining rigs, if they can't sell the coins for the marginal cost of producing them, continuing to mine is just throwing good money after bad.

Yeah, the word for businessmen who sell goods at less than the cost to produce them is "bankrupt". I don't doubt more than a few miners have lost quite a bit of money selling below cost -- probably most without realizing it -- but I have to assume they have all been weeded out by now, given the notorious fierceness of the mining world. Selling BTC below cost might help stave off bankruptcy for one billing cycle, but on the next you'll be deeper in the hole than you were before.

If selling under cost makes the difference between being $10000 in debt and $1000 in debt then it matters. The latter is much easier to deal with on a personal level, because individuals tend to have support networks / savings.

I'm guessing here, but I think mining is currently on the level of individuals and not corporations.

I was talking more about depreciation of capex than marginal cost. Almost all ASIC owners are facing losses and some of them are inventing rationalizations like the idea that they can force the price up by not selling (even though the price cannot affect the mine vs. buy tradeoff).

Reply on news.ycombinator.com