Bitcoin HITS $400
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Or even better http://bitcoincharts.com/charts/mtgoxUSD#rg2zig15-minztgOzm1...
In any case, why not quote the highest volume exchange, BTCChina? It's usually Gox price or slightly higher.
I may be a reluctant Bitcoin user sometime in the future, but attempting to profit from its price movements is an inherently risky business, especially given the legal and tax grey area it entails in many parts of the world.
If I'd held on to the BTC I bought in 2011 it'd be worth £20k right now, but I'm still glad I didn't, for all these reasons
Edit:
>>> btc_count = Decimal("100") / Decimal("0.05")
>>> int(btc_count)
2000
>>> float(btc_count * Decimal("400"))
800000.0The easiest way back then was to try to figure out how to install the GPU miner and then just hope that the block difficulty did spike because everyone else was doing the same thing. When I wen't back to start selling bitcoins when it started going north of 50 bucks a coin, it was too easy, Mtgox did a direct wire to my bank account and I was limited to a certain amount per day or month (can't remember).
As for buying it now: Right now the bet is whether or not you think that bitcoin will survive governments worldwide trying to clamp down on it and whether or not you think it will scale to billions of transactions a day. I put the first one on about 10% chance of happening and the second one on about 30% chance of happening, so about 3% chance total. If it hits that 3% the maximum I think bitcoin could be worth is about ten million dollars a coin ($10k average purchasing power for a couple billion people). So I made my profit already (on my original bet that it would gain momentum, which it has) and now I'm riding a decently likely (given the payout) lottery ticket.
$10,000,000 x 21,000,000 = $210,000,000,000,000
Does the world even have that kind of wealth?
/edit Hint: You could always start accepting bitcoin payments. the long term trend seems to be up. There is still money to be made from speculating on this without selling your house for BTC.
Typical hater...
> Has there been any advance in finding flaws in Bitcoin already?
No. So far we just have people who only understand Cryptography, or only understand Game Theory, or only understand Economics, or even none of those, creating inflammatory blog posts on why Bitcoin is doomed and should die any minute. But the reality is... Bitcoin users not affected!
The bitcoin mining difficulty has ~doubled since October, when the price was ~$200. The price is currently pegged to the minimum profitable price for mining.
I think most money is created by private banks, not central banks.
Miners invest in mining in expectation of price rise. They could equally go to exchange and buy bitcoins in expectation of higher price in the future. Whether they are correct or not will be decided not by them, but by all other people who demand bitcoins and bid up the prices.
If there is no new demand for bitcoins, price will not grow because there won't be competition for buying them.
So actual users of bitcoin-the-currency don't really care what the price of a bitcoin is, as long as it is stable enough for them to complete a transaction. They don't need to buy 1 or 0.1 or 10 bitcoins, they need to buy exactly $100 or $10 or $1000 of bitcoins to complete their transaction, and the actual price per bitcoin doesn't matter.
In other words, growing price of a good in a fixed supply sends a signal of its bigger liquidity. Meaning it's even better medium of exchange for you to accept (even if you don't invest in it yourself).
Things don't need to be priced in Bitcoin for it to have value and to be used in exchange with this value. Things will be priced in the most stable, most liquid commodity and today it is fiat currency. Bitcoin needs to be spread to many more hands than it is today. This is what happens today and we are still at less than 0.1% of global population that is even aware that this technology exists.
Bitcoin miners affect the difficulty level directly, by mining or not.
Furthermore, there are a finite number of bitcoins to be mined. The higher the difficulty, the faster they are being mined. Therefore, the scarcity of each individual coin is going UP as they are mined. Let me say that another way: before a coin is mined, it is still available for anyone to get by mining. After it is mined, it is in a private wallet number, worth whatever the market says the owner should reasonably receive for it. As coins are mined, the supply of total available coins goes DOWN. As long as demand continues, price will go UP. BTC become more scarce with each coin mined, because there is one fewer to mine in the future, and every one to be mined after it will need to be done so at the new (assumedly higher) mining cost.
The difficulty level might be thought of as a direct index of the COST of mining a new coin. As that cost increases, supply for coins goes DOWN. Ceterus paribus, supply DECREASES, price INCREASES.
You are wrong. Coins are mined at a mostly fixed rate regardless of difficulty.
> BTC become more scarce with each coin mined
They are actually becoming less scarce since the total amount of coins in circulation increases every ~10 minutes (until there are ~21M coins in circulation). Believe it or not, supply is increasing but demand is increasing at a much faster rate, hence the price going up.
Mining difficulty on the other hand has pretty much no influence on price (although price does have an effect on mining difficulty).
Scarcity of coins to the market goes down w/ each new coin mined, you're right. BUT, because we know exactly how many coins there are available to mine, doesn't this make the total number of coins available to you via mining go DOWN? If all the world's gold was in a single, perfectly measurable and publically accessible vein, would someone moving it from that publically minable place to a private reserve make its scarcity go UP or DOWN? There is the risk of the blockchain failing drastically, but past that it can be assumed that you have THAT MANY FEWER COINS available to mine, in total, right?
I may be thinking about this in the wrong way entirely, appreciate the comment.
On the other hand, if difficulty would shoot 10 times now, it wouldn't affect the price much, because most of the cost of mining would already be sunk in. Miners would sell their bitcoins even with a loss.
Besides that, look at the chart: https://bitcointalk.org/index.php?topic=7427.0
If anything, it seems that difficulty follows the price (Dec 2010, Feb-March 2011) on the above chart.
And here: http://bitcoin.sipa.be/ You'll see that difficulty was raising constantly during the past year, while the price stood still for quite a long time, and fluctuated wildly at other times.
Especially this graph: http://bitcoin.sipa.be/speed.png Can you show me, from this graph alone, when price increases were due?
The question you raise about the direction for the arrow of causation in the correlation between price and mining difficulty is interesting. While it seems intuitively obvious to me that difficulty is leading price, "intuitively obvious" is not evidence.
One test might be the upcoming increase in mining difficulty, which is currently only projected to be +11% (compared to the previous difficulty increases of 30-50%): http://bitcoindifficulty.com/ . I would predict that the price of BTC should increase ~11% after that increase (the price following the difficulty).
I have a few bitcoin and I believe it is a legitimate currency, but I'm feeling uneasy with the 'this time it's different' reasoning which is supposed to justify its current runup.
Amazon reviews aren't being particularly helpful; there isn't a book that stands out in my searches so far. I'll probably order 'Manias, Panics and Crashes' by Kindleberger & Aliber ( http://www.amazon.com/Manias-Panics-Crashes-History-Financia... )
EDIT: Thank you all for your excellent suggestions!
http://www.amazon.com/Devil-Take-Hindmost-Financial-Speculat...
http://www.gutenberg.org/browse/authors/m#a516
Good chapters on tulip mania, the original South Sea bubble, Mississippi company, the introduction of paper money and hyperinflation in the French ancien regime.
Bonus fun on "Influence of Politics and Religion on the Hair and Beard", duelling, and "Popular Follies of Great Cities" (which were basically memes long before the internet).
Fiat Money Inflation in France is an interesting short outline of a currency which goes horribly wrong due to being debased (opposite problem to bitcoin):
White describes a disillusioned public who, under the influence of increasingly self-serving public officials and orators, accepted more and more assignat printings even though the perils of such printings had been documented throughout history...
Bitcoin is interesting because it has this hard limit, which means in theory it will reach a point where no more currency is made, and thus it is relatively stable in value. Until them though the value of it will ramp up in relation to real goods and other currencies (deflation). It's a really interesting experiment, though it does heavily reward the initial investors and skews it towards being an investment (and a bubbly one at that) rather than a currency, at least till the hard limit is reached.
I do find the question of whether the public could be persuaded to just up the limit and print more bitcoin interesting - I suspect if we had bitcoin as a world or national currency, just like assignats or other currencies, people could be persuaded to print more or otherwise bend the rules for the good of the nation/world/economy.
Bitcoin as a protocol and technology proved itself to be rock-solid. People are already using it all around the worlds for many different purposes, from storing their wealth to buying subs in Subway. On the other hand, there are some Bitcoin services that are can be used to store your Bitcoin that are not exactly very secure or trustworthy. Most people advise against storing your Bitcoins in such services, as it has risks of either service operator or hackers to take your coins from their servers. Still, some people decide against these advices and still use these online wallets. You can't blame Bitcoin itself for that.
There are more secure ways to store your Bitcoins, from printing your private keys on as a paper wallet and store it in a safe place where no one can reach it, to storing it on your computer, protected with a long, unique pass phase, to storing it in a web wallet like blockchain.info which doesn't store your coins directly, but encrypts the private key with your password before storing it on their servers.
Except there's no such thing, so there are no such reports.
You can store BTC on your own computer, or even offline on a sheet of paper.
The problem is: In order to for transactions to work fine you'd need to run the bitcoind client on your machine. So you have to secure your machine and need to run the client.
This is quite difficult for some people so a lot of web services offer you an online wallet. There the private and public key is on their server. These services get hacked quite often. You basically trusting a stranger with all your money.
The exchanges also provide you with a wallet. A lot of people are lazy and keep their Bitcoins and their money in the exchange. But some exchanges store the money they don't actively use in so called "cold storage" i.e. on a computer that is not connected to the network and webserver of the exchange. In that case you can hope that your money get's refunded.
If you store your Bitcoins in an offline wallet and only use exchanges for buying or selling the Bitcoins and withdraw your coins or money after the transaction you can minimize the risk.
If you take the proper measures bitcoins are very hard to steal. You can create wallets and transactions even from an offline computer and never expose your savings to the internet. You can even print to a paper your wallet info and never again use it within a computer. You just need to trust the wallet generator enviroment.
Still, keeping BTC safe for the average user is really hard, even tech savy people made costly mistakes. Hardware solutions will be needed to solve this problem, but the tech is in itself safe(tm).
A better question would by why would anyone store anything of value with a website they do not trust?
[1]:http://www.npr.org/blogs/parallels/2013/10/28/234587002/for-...
What's the deal with the volatility?
This is a revolution. This is total free market. The rules are new and might not be near similar to any other trading.
They go up and then no one wants to sell. If you check out certain areas on localbitcoins you'll find the sellers have disappeared. It's not good for liquidity.
Imagine if it was doing a spike down and there were no buyers? Markets are two way streets.
As a store of value, gaining value exponentially is a sign of danger, because it is clearly unsustainable, even in the short term. While it gains though it seems a one way bet and lots of people will take it, as they did during the south sea bubble, the railway bubble, the dotcom bubble, housing bubbles, tulips etc. Each time it was different, and we'd achieved a new paradigm where old rules no longer applied (and in some sense in each case this was true, but people got carried away).
As a currency, volatility over hours, days and months is deadly - who wants to transact in a currency when you can't tell what the value of what you hold will be tomorrow or later today?
As a currency, gaining value rapidly all the time is also difficult - who wants to transact in such a currency instead of just holding on to it and spending other currencies or bartering? It becomes more an investment than a currency (see gold when paper money is available).
Still it's an interesting currency and I certainly wouldn't discount it (though it has not taken over the world just yet!) - just wary of irrational explanations for its huge rise in value over the last few months.
> As a currency, gaining value rapidly all the time is also difficult - who wants to transact in such a currency instead of just holding on to it and spending other currencies or bartering?
That's another argument that keeps popping up and doesn't make sense, it's basically a myth. Economists and opinionologists dread this imaginary situation where people will starve before spending their deflationary coins. Hint: The world did just fine for thousands of years using gold. And no one starved to death with Bitcoin either yet.
If you have other currencies to spend or stuff to sell, you could have used them to buy more Bitcoin, and use Bitcoin to buy whatever you need at whatever price it is at the moment, so not spending Bitcoin and spending other things instead doesn't make any sense either.
So simply put when there are less people that want to sell than people that want to buy [3], the prices rises.
Also, as other person here suggested, Bitcoin mining difficulty has risen dramatically in past few months [2] thanks to new specialized hardware (ASICs) finally arriving to its buyers. This, while does not affect the price directly, shows that there is much faith put in the system by miners, which in turn encourages people to buy even more.
It's also worth noting that the $400 price is only on MtGox, which is not considered as market leader anymore. What's more, the withdrawals from MtGox are counted in weeks or even months , so it's not a viable trading platform. If you want a reliable Bitcoin price, head over to BitcoinAverage [1] which does what the name implies - averages (and takes volume into consideration) the price over all major exchanges. They even have a button to exclude MtGox price from the calculations, as MtGox is always 10-20% higher than the rest.
As of writing this post, the average price including MtGox is $380.
[1] https://bitcoinaverage.com/
[2] http://bitcoin.sipa.be/speed-lin.png (network hashrate now approaching 5 Terahash per second)
[3] http://blockchained.com/depth_mtgox_15d.png (on bottom chart: orange line is sum of all offers from people wanting to sell, green one is for people wanting to buy)
But you can break bitcoins down into smaller increments than just 1. That must be significant in some way.
1 BTC = 100,000,000 Satoshis 1 BTC = 1000 mBTC (millibitcoin) 1 mBTC = 100,000 Satoshis 1 μBTC (microbitcoin) = 100 Satoshis
So if you think of it like this, it can be divided far more than 21million times.
http://martinfowler.com/eaaCatalog/money.html
Besides, what's your point? If you break down any amount of money in two, each part is worth half what the whole thing was worth. Many people get confused by this, and I honestly don't know why.
Private parties can certainly agree to prices that are a fraction of a penny (but they instead tend to deal in lots at those price points).
Being infinitely divisible is significant in that it renders subdivisions like cents etc meaningless and makes deflation acceptable without causing problems with transactions, but I can't see any significance for the price.
Furthermore, bitcoin holds the prospect of being deflationary - and this leads to a deflationary spiral right now.
All Bitcoins are worth in the region of $4.5bn: http://blockchain.info/charts/market-cap
Twitter is currently worth in the region of $23bn: http://uk.finance.yahoo.com/q?s=TWTR
(As a side point, this either makes Twitter look ridiculously over priced or Bitcoin ridiculously under priced...)
Smaller valued assets are generally more sensitive to exterior influences.
Bitcoin really is venturing into the unknown as well which means the news around Bitcoin can in itself be more volatile (you can have some very bullish news followed by some very bearish news on the same day).
A lot of speculators in Bitcoin are amateurs as well (me included!). This lends itself to higher volatility as well as the owners of Bitcoin are more susceptible to act emotionally and induce a panic sell or greed driven buying frenzies.
It's a nervous market that isn't worth a huge amount yet. Once more is known about it and once it reaches higher valuations it will bring more stability.