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> The whole price of Bitcoin is an illusion that they use to get people to keep buying. It's the result of a bidding war.

The price of everything is an illusion according to the Subjective Theory of Value [1].

[1] http://en.wikipedia.org/wiki/Subjective_theory_of_value

> But the fact that early adopters are psychotically rich for doing nothing is... one of the many signs of a flawed system.

No they risked their money with a speculation that had almost 0% chance of getting any return in the future. They took a huge risk, without this, bitcoin would not exist. And that's why they are rewarded: Taking a risk that almost no one would have taken to create something big.

> Basically if everyone started selling the market would destabilize because supply/demand curve would change & I'm pretty sure the value of what they're selling would plummet before they can unload most of their stack.

Bitcoin had already 2 big crashes (one time from $30 to $1-2 and one time from 200+$ to under 100$) and still recovered afterwards because there's people like me who see the potential in bitcoin.

And please tell me what your "real value" exactly is, because in my opinion their is only a perceived value for everything in the world.

Isn't bitcoin easily manipulated? Let's say I have 1% of all bitcoins. I sell half of them, wait for the price to fall, and buy back to have 1.1% of all bitcoins.

Repeat each few weeks, and let's say there's 20 people that realized this and have enough bitcoins for this to be feasible.

End result = currency that's mostly owned by a few people. And when everybody realize this - bubble collapses.

At least that was my train of thought when I first learnt about bitcoin and now I hate myself for being too risk averse :)

yeah but people shouldn't be getting involved with a currency just because it's so scammable.

I commend you for not getting involved. I think Bitcoin speculators are immoral. Someone is going to end up footing the bill and it will ruin many lives.

Don't invest what you cannot afford to loose.

You might working with an oversimplified model of the market. If you have 1% of all bitcoins, you're not going to be able to sell them all at the highest standing offer-to-buy (OTB).

If the highest standing offer to buy is at $700, it's not going to be an offer to buy all 120,000 of your BTC. It might be an offer to buy 100BTC. So you sell 30BTC at $700 and then move on to the next lowest OTB, which might be 20BTC@$699.95. You walk down a line of highest OTBs and the new market price is the highest OTB that you didn't manage to exhaust. The price is lowering as you sell out.

Similarly, you're not going to be able to buy in with your entire pot at the lowest standing offer-to-sell (market price). You'll exhaust the lowest offer-to-sell, then move on to the next highest offer-to-sell, etc. The price is rising as you buy in.

Assuming that the market is efficient, the decrease in price as you sell out and the increase in price as you buy in will be perfectly balanced against each other, and any extraneous gain or loss will reflect changes in market information that occurred while you were executing. Of course the market is not in practice perfectly efficient, but that applies to any other traded commodity.

heh so then how come when Bitcoiners are quoting the price of the ecosystem they always take the number of BTC * the highest standing OTB...

i know thats kindof a tangent but.... seriously, i'm curious

That is how every commodity market in the world works....

How do you think an exchange rate between say USD->EUROS is decided? By the last trade price....

Yeah but nobody insists

last trade price multiplied by number of units in circulation = total value of ecosystem

Bitcoiners do this CONSTANTLY

No, this is what everyone does for all equities. It is called the market capitalization, you probably hear it called market cap usually though.

http://en.wikipedia.org/wiki/Market_capitalization

a proxy for the public opinion of a company's net worth

vs.

current trading price of something with no intrinsic value

Ok, this was a weird segue. I thought we were talking about market capitalization and whether or not people use it outside of bitcoins, which they all do for basically everything.

However, non-voting common stock equities that do not grant dividends basically have no "intrinsic value" either I guess. It is just a proxy for the public opinion of the net worth of the underlying asset, similar to bitcoins.

I think this kind of "intrinsic value" line of reasoning isn't a very strong argument in general though because mostly the value of commodities is essentially based on the value people assign it via free market and psychological principles.

You sort of don't seem like you know much about econ/finance so I think it is strange that you are so outspoken about bitcoins.

BTC could still collapse, and it very well may. Even if we put the potential innovative benefits of btc aside though, things like this are more like cults vs religions. A cult is a cult until it has enough followers at which point it becomes a religion.

Cults and religions have a similar scam potential which is what it seems like you are feeling, however at this point I would say btc is reaching or possibly above Scientology levels of belief/followers. In fact the market cap of btc is possibly more than the market cap of Scientology right now. If btc is going to fall apart as a pyramid scheme it will likely be the largest to ever fall.

However btc is more than a pyramid scheme because it does offer some real benefits over the existing financial systems. The online blackmarket does require a currency similar to btc to operate. Right now sending money across borders is difficult and expensive. Right now buying things over the internet basically must be done with credit cards which has a lot of fees attached. Right now there is no real way to quickly send large sums of money to people without similar fees and specific hours of operation. You also have to go to a bank and deal with a lot of bullshit.

Whether btc will be the solution to these problems I am not sure, but it is a very big deal that it already has so many users/followers. That is the hardest part of changing things, getting large scale adoption.

Yeah I hear you pfisch you are definitely one of the more reasonable people I have come across in these arguments. But what I'm saying is this -- I'm certainly not an econ expert it's true but I've analyzed enough of the econ involved in Bitcoin to conclude that it's really not a viable currency and most involved are speculators or black market traders as you point out. And I firmly believe the exchange rates are totally artificial, since BTC are essentially not really transacted the way one would imagine a currency to be used. It makes more sense to say they are "traded". Speculator to speculator or consumer to business straight to 3rd party processor.

It solves a real problem, yes, but not so much so that every Bitcoin should quadruple in value every 6 months, this is a bit ridiculous. After all, one could implement a BTC alternative (Litecoin for example) and achieve the same needs.

So essentially yes I see Bitcoin as a cult of naive investors who think that because of its theoretical underpinnings it will save us all. The truth is, huge stores of it are owned by black market operations and early adopters who had an exponential advantage in the ease of getting these things. Its basically like a free money machine for anyone who had change left in their pocket after spending their first crop of BTC.

If the system were ever to go down via cashout or crash or whatever, these people have as good a shot at grabbing the exit cash as anyone else, plus they can trivially buy a ton of real-world goods now through stores that accept Bitcoin, who themselves essentially send 3rd party processors the bill since presumably the processors are the ones storing Bitcoins while paying out the current exchange rate (or maybe they put them on an exchange soon after). The processors are assuming the risk because they want a foothold in the emerging shadow Wall St landscape. These are people who are putting their blood/sweat/tears into building the infrastructure that is essentially just magnifying the wealth of the founders / online gambling institutions / black market ops.

If instead all the rational people were to abandon the cult & quietly cash out, all that baggage could be left behind. The online casinos could instead foot the bill, and we could begin again with a new more stable cryptocurrency that has more utility as an actual currency. Market volatility adds some lure into the intrigue of the system but it's really just a vehicle for wealth redistribution to those who are prepared to take advantage of a flawed system.

Btw telling me it's gaining traction as a cult is not really endearing me to the ecosystem. I'm just not a big cult-lover. :P

I'm no expert in these fields.

But I guess it wouldn't work because if you sell a lot of bitcoins you couldn't sell all at the same price.

Eg. you want to sell 10k Bitcoins. The price is 750$ and the first 50 Bitcoins you can sell for 750$. Now after that there are not enough limit orders anymore available for that price category. So you would sell a lot of bitcoins for much less than the price was originally when you started selling.

And vice versa if you buy them. So I would doubt that you make a profit (because you can't sell/buy at price x and then afterwards the market price reacts. The market price reacts already while buying/selling in large quantities).

As I see it it's the same principle as if you own a large part of a stock, there you could argue the same.

There are actually common market manipulation trading tricks (will get you busted immediately in the stock market) that people use regularly in Bitcoin.

Read the section in this article titled Enter the tape-painting “Shark Squad”. I've seen a few similar articles that document how simple it is to do market manipulations in Bitcoin that would get you immediately cuffed on Wall St. And it doesn't even take that many parties to pull them off! Because Bitcoin is actually transacted sooooo little.

I can't say for sure though. There are a lot of debates about transactional volume but impossible to tell because some of the big money Bitcoin holders just buy/sell to heighten the perception of its popularity.

http://falkvinge.net/2013/09/13/bitcoins-vast-overvaluation-...

To see how absurd this logic is, start with buying bitcoins first:

1. Buy 1% of bitcoins

2. Price increases

3. Sell your bitcoins for more than you bought them

4. Goto 1

> But the fact that early adopters are psychotically rich for doing nothing is... one of the many signs of a flawed system

This is also the case with rich families. It doesn't make the system unusable.

Hah rich families are usually rich because they spear-headed a manufacturing industry or rose to political power. Yes, their CHILDREN may not deserve the wealth, but they earned it.

Bitcoiners are getting rich for designing a pump-and-dump scam & passing it along. It's called a pyramid scheme. You make a pitch that sounds convincing and then shop it out through "Multi-Level Marketing" strategies.

Why do Bitcoiners believe so much in a currency that allowed the originator to pull so much wealth out of thin air?

Say we estimate conservatively and say the Bitcoin ecosystem is only worth what was put into it. Well, now the founders own like 1/4 of all that money, for doing nothing but coming up with a convincing sounding scheme ("ummm... call it deflationary people will think that sounds intellectual"). A currency is not a currency if it is so distorted that it is radically reorganizing the wealth of those who convert to it.

What about old old money? I'm talking about people that have money because their ancestors were royalty of some sort. Can you really say that they earned it? How much of that could be being in the right place at the right time? E.g.

  You helped out the king and he granted you a lot
  of land. Several generations later, your descendents
  are ridiculously wealthy because you got in on the
  'ground floor' of what would later become the world
  economy we have today.

Heh I agree with your concept a bit, I was thinking about that myself. But here's the counter -- WHO REALLY WANTS TO RELIVE THE DARK AGES?!!

Great headline: "Crypto-Currency of the Future Promises a Return to Medieval Economics via Anonymous Self-Proclaimed King"

Even in those systems, people had to WORK to get that $$. We're kindof seeing that now with those setting up the Bitcoin infrastructure, but early adopters are richer than they at this point -- just by trading for a couple magic beans before the masses decided they HAVE TO HAVE THEM!!!

I think the coolest thing would be if cryptocurrency folks set up the Bitcoin ecosystem decided there was a BETTER digital currency, and just utilized that same tech stack with the better product. F--k Bitcoin it was an experiment and it can rot

I don't understand, they made a very risky bet and it paid off. Would you have considered compensating them if the value went to 0?

Was leaving your computer (or your work computer) on over night a few years ago really such a huge risk?

eXACTLY! ughhhhhhh 100x yes. i'm always given this "risk" argument and I think "what's the risk in investing pocketchange & leaving on your pc.... it's not like you founded a start-up out-of-pocket".

It's just a more ingenious version of Amway, because rather than pushing products around & trying to have to prod people into trying their hand at sales, they are being sold THE IDEA OF MONEY! And if people decide to buy that money, the value of the originator's money increases. And to make them feel as if they are equals he says "Oh well if you want you can work on these hash equations and free money will appear" but as long as it's propelling the greed for this "money" it will never hurt the value of his stash.

Sad stuff. and the greatest beneficiaries are probably the criminal organizations who use it. Half the reason i wanna see it crash is because it will wipe a lot of bank accounts used by gambling organizations etc. who prey on misery to begin with.

The risk is that if the startup/technology (Bitcoin) failed, you just wasted your time/effort in setting up something useless. There must be thousands of these proposals that you will face in your life.

Bitcoin is the risk I knowingly didn't take, because I didn't think it would amount to anything in the future.

"What about old old money? I'm talking about people that have money because their ancestors were royalty of some sort."

They would fall under the rubric of what the parent comment said about "rose to political power." The old nobility got that way because they supported the king in military campaigns in exchange for titles, land, and protected agricultural or mercantile monopolies and warrants. (Incidentally, the origin of the word "entitled" dates back to the titling of the nobility by royal authority. A title is, in essence, the exclusive right to something. In many cases, that right was to specific regions or lands. When we say that someone is "entitled to" something, or "has a sense of entitlement," we are figuratively harkening back to an age when an "entitlement" was something very literal.)

For what it's worth, the fluidity of the nobility is vastly underreported in popular conception. Noble families rose, fell, were made, were broken, etc., about as often as in Game of Thrones. Today's "old old money" descends from the old old noble houses who, by some combination of luck and savvy, ended up on the right side of countless civil wars, uprisings, wars of succession, and dynastic transitions.

Did these families "earn" their fortunes? I'd say no more and no less than any of today's political elites. We're kidding ourselves if we believe the political patronage system in the US is all that different from the political patronage system of the Tudor dynasty, or that of Louis XIV. The mechanics of government are different; the rules of the "Game" are entirely unchanged. (Replace "King" with "Presidential Administration.")

> Why do Bitcoiners believe so much in a currency that allowed the originator to pull so much wealth out of thin air?

Even if you don't believe in bitcoin, the problem with fiat currencies is that they are insecure.

> Baaaaaw Bitcoiners' wealth are disproportionate to their merit

Just like in fiat currency, in Bitcoin, lots of people who don't "deserve" anything are rich. Deal with it or go back to your imaginary universe that gives economical advantages to people based on "merit". Notice how I'm using quotes around the words that have no objective definition.

> A currency is not a currency if it is so distorted that it is radically reorganizing the wealth of those who convert to it.

What is your definition of currency?

greed-monger!

Currency is something relatively stable, it's not a trading platform. I spoke about it in this way the other day --

One should not have to consult an exchange rate to figure out how much their currency is worth. They should know what it's worth by how much it costs for a dozen eggs. If that number changes rapidly (dozen eggs costs 1 BTC Monday, 3 on Friday, .5 next month, 100 in the future, .002 after that) well.... you don't have a currency, you have a speculative commodity.

The only reason Bitcoin users don't complain is because they're mostly hoarders/traders & the general trend is up.

Again, you speak of a con of Bitcoin, but I don't see how any other system solves what you complain about.

Please explain to me (or refer me to material explaining) how USD can possibly be stable when used by billions of people. Just because it's been stable from my point of view, doesn't mean it's stable for everyone. If your explanation relies on trusting a single person or organization, you see why I favor Bitcoin.

> The only reason Bitcoin users don't complain is because they're mostly hoarders/traders & the general trend is up.

The only reason fiat users don't complain is because from their perspective it looks like it's working.

USD is more stable because gov/banks/etc. are all staring at it all day, as well as their country's population. Not saying I trust them but I'd rather have a bill backed by the US gov than by Satoshi Nakamoto.

He's the single person YOU rely on -- the one who designed the mining system, currency caps, etc. Ridiculous.

USD is more distributed than Bitcoin just because people are always watching theorizing monitoring USD. Bitcoin is at the mercy of market manipulators and there are no legal protections provided against even basic tricks.

You provided no proof that USD is stable, just a bunch of handwaving.

> He's the single person YOU rely on.

For security, no. The protocol is public. So I assume you mean only by market manipulation. But how so? Is this the same way I rely on Bill Gates not to trade all his money to a foreign currency?

> You provided no proof that USD is stable

Inflation figures for USD are readily available. That it is more stable when considered against most goods and services than bitcoin is not something about which there is any room for serious dispute.

Actually the CPI proves exactly that it is stable. http://www.bls.gov/cpi/

This is not the observation of one person or perspective. It's the actual purchasing power of USD.

> but I'd rather have a bill backed by the US gov

I am assuming that you are fine with 90% loss in purchasing power of the US dollar in the last 100 years.

"One should not have to consult an exchange rate to figure out how much their currency is worth. They should know what it's worth by how much it costs for a dozen eggs. If that number changes rapidly (dozen eggs costs 1 BTC Monday, 3 on Friday, .5 next month, 100 in the future, .002 after that) well.... you don't have a currency, you have a speculative commodity."

This is just not true for many currencies that have undergone hyper-inflation and hyper-deflation. You are only comparing btc to the most dominant currencies in the world right now, and btc obviously is not one of the most dominant currencies.

>This is just not true for many currencies that have undergone hyper-inflation and hyper-deflation.

This is true. But generally speaking, people go quite a bit out of their way to use currencies that are perceived to have a predictable future value.

This is why the dollar (and the Euro) is so popular the world over; it's value is pretty predictable, compared to most other commodities.

> This is just not true for many currencies that have undergone hyper-inflation and hyper-deflation.

When that happens, people tend to abandon them as currencies (though a currency undergoing hyperdeflation would be hoarded as a store of value).

Actually they often do not really abandon the currency, they just issue a new dollar that removes a bunch of orders of magnitude from the dollars.

http://en.wikipedia.org/wiki/Hyper_inflation#Currency

Users (not issuers) abandon the currency as a currency until the measures are taken to assure that some measure of value stability will be restored.

Doing what amounts to a a "reverse split" on the currency is a measure issuers take to get the unit value of currency to a usable value.

Maybe one way to look at it is to compare it to owning some land. Some people are rich because their ancestors claimed a large piece a long long time ago. One could argue that they pulled out a lot of money out of thin air.

They actually did. Much of the western US was "homesteaded" through the federal government. Basically, head out west and settle, plant your flag and you can have that land for free.

yea but that involves work in a sense. You have to tend to this land and develop communities or the land is worthless. I'm sure the value grew over time as the residents were able to make it into a nicer place.

They didn't just buy a few bytes of data & see the value appreciate by 9billion% just for sitting on their fat asses.

And that's the other issue. Land is an ACTUALLY limited resource. We don't know how to pull it out of thin air. The Bitcoin currency is artificially limited just to force a supply/demand situation. People can make other competing currencies just by forking the code.

What about everyone who bought a .com domain early....

Or really anyone who buys a stock early for a company that becomes huge.

I mean, if you buy bitcoins right now you are speculating that it will become a stable currency at some point. It offers a bunch of interesting and disruptive features that cut out a lot of middle men.

eh I hear what you're saying but i just don't believe this one.

.com addresses appreciated in value because they are an actual good -- an address on the web that only 1 person can own. Bitcoin is a currency that isn't serving its purpose yet and whose function can be easily mimicked. All it is is an open source codebase & some infrastructure. If another coin (Litecoin, for example) were to take off, they would just add support for that too no big deal.

Point being, it isn't the sole implementation of this concept. .com addresses are by nature unique.

> Point being, it isn't the sole implementation of this concept. .com addresses are by nature unique.

There are alt DNS systems as well.

IMO, the best analogy for Bitcoin is gold. Gold is valued way beyond its intrinsic value and yet, few people claim that gold is a pyramid scheme.

hah sure there are alternate DNS systems but there's only one that matters... the one recognized by the major ISPs.

I don't want to get into the other thing. There are a ton of things that distinguish gold from BTC. For one, it has an intrinsic value. As in, "worst case scenario I have to sell this gold to a metalworker/scientist/jeweler/whoever who worse with gold".

If Bitcoin doomsday hits who is gonna pay a cent for one more file on their system. Useless bytes of data are not a commodity.

> Why do Bitcoiners believe so much in a currency that allowed the originator to pull so much wealth out of thin air?

All markets get created out of thin air. Everything you use now at one point had someone looking at it thinking, "what the hell is that ever going to be good for?"

Falkvinge thinks they will be worth 100k-1000k in the future. If we accept that (which I don't btw) is it so weird that people want to spend 700 today for something that might be worth 100k in a few years?

I think it's naive because NO investment offers that kind of return. People looked like absolute fools for trusting Madoff to give 5 or 10% or whatever it was, now theyre expecting 1000% just because this is "computers.... the future!!!"

It's not weird. The problem is that at some point bitcoins must acquire an unambiguous intrinsic value which is not related so much to their possible future value. If they don't, that's the definition of a bubble--prices that are considerably higher than intrinsic value.

Consider tulip mania from the 1600s. Speculation drove up prices of tulip bulbs to the point where the only people buying tulips were other speculators who were willing to pay the high prices because they thought they could sell it for more later on--the exact reasoning you just posted. Speculators were just trading tulips--or worse, tulip futures--amongst themselves. When the time came to sell the tulips to people who wanted them for decoration, it was discovered that none of them actually valued tulips that much, and the bubble popped.

There are arguments for a bitcoin having an intrinsic value of $100k. If bitcoin were ever used for, say, something as large as the real estate market, it would be hard to imagine the price being any lower than that. But bitcoin is extremely far from being used as the dominant currency in any market that large.

+1 Thanks for being a voice of reason and speak of this pyramid scheme.

This!! A rumor is all its going to take to tank the price.

I think you're wrong about that.

51% attack publication didn't kill it.

Silk road bust didn't kill it.

Selfish miner attack publication didn't kill it.

I'm not saying that a flood of sellers won't lower the price dramatically. But to say a rumour is "all it will take" is to ignore recent history.

> 51% attack publication didn't kill it.

Are you talking about some new attack? The "51% attack" is a security property that fell out from the design of bitcoin: A cooperating group of people needs "51%" of the computing power to break bitcoin.

No, I'm saying that when people realised that there is a hypothetical attack that undermines bitcoin, if you have 51% of the power, that realisation didn't kill bitcoin.

Hah a big rumor or simpler: sound economic logic/truth...

either one should do the trick, but right now greed is leading