Bitcoin falls below $300, lowest in 11 months | Hacker News Reader

Bitcoin falls below $300, lowest in 11 months

bitcoinwisdom.com

117 pointssillysaurus3104 comments

Bitcoin should have been the petty cash of the Internet. People should be buying music tracks, in-game items, and junk food from vending machines with Bitcoins. But, as discussed in a previous topic, it doesn't do small or quick transactions very well.

That may not necessarily be a bad thing. Enthusiasm for micropayments, which predates the Internet (look up Ted Nelson and Xanadu) comes from the people who want to collect them. There's no vast consumer demand for the ability to send $0.10 over the Internet. Even the big players couldn't make that happen. Beenz, Microsoft Points, and Facebook Credits were all failures.

The big run-up from $100 to $1100 last year was because, for a while, it was possible to easily and legally bypass China's exchange controls by buying Bitcoins with yuan and selling them for dollars or euros. Then the People's Bank of China cracked down, and that bubble popped. We're still in the aftermath of that event.

As a speculation, Bitcoin is zero-sum. There's no productive activity, and no profits. All gains by winners come from losses by losers. Much effort is spent by the Bitcoin community recruiting more losers.

Was part of the rise last year due to MtGox's increasingly desperate market manipulation? I remember reading the theories, but don't know if a better picture has developed since then.

Yes it was. There was an Mt. Gox bot which was consistently buying bitcoin over a long period of time. The reason we know it was an Mt. Gox bot is because when Gox's API went down, the bot was still able to execute trades on Gox even though no one else could.

Of course, Karpeles will never stand for his crimes, because they weren't crimes. This is just what happens in an unregulated market, and everyone who buys into it is along for the ride.

Here's the rub: A price fluctuation at one exchange will always affect every other exchange. If Bitstamp drops by $50, someone is going to buy at Bitstamp and then sell at some other exchange in order to take advantage of that. That means any exchange that manipulates the market will literally be manipulating the entire Bitcoin market. There's no way for outsiders to know the difference between an artificial, manipulated price spike and a true increase in value. So if you see bitcoin rising sometime in the future, beware buying into it: you may be buying into a manipulation.

I don't know whether this problem is solvable. Even if America enforces regulations for American bitcoin exchanges, the rest of the world won't be playing by the same rules, and it only takes one dishonest exchange to mess with the global price. I'd like to know how the regular stock market deals with this. Are all stock exchanges regulated worldwide? Is there such a thing as a dishonest stock exchange? If so, how is that dealt with?

> I'd like to know how the regular stock market deals with this. Are all stock exchanges regulated worldwide? Is there such a thing as a dishonest stock exchange? If so, how is that dealt with?

Holding a stock certificate entitles you to a percentage of the profits of that company (via dividends / buybacks). So when Facebook lists on the NASDAQ, only those who have shares recognized by NASDAQ & FB have any claim to the profits of the company.

There are shitty foreign exchanges full of speculation and manipulation and you can trade "Facebook" there, but if you own a share of "Facebook" on some third-tier Armenian exchange, you have zero claim to Facebook's profits. Your arrangement in that situation is with the exchange or the counterparties on that exchange to swap the shares back and forth, not actually with the company in question -- so they have no way of impacting the 'real' stock price.

The regular stock market deals with this by separation of functions. The NYSE doesn't own stocks; it's just a matching service. Mt. Gox performed the functions of an exchange, a broker, a custodian, a transfer agent, and a depository institution. In the real world, those are usually separated.

>Is there such a thing as a dishonest stock exchange? If so, how is that dealt with?

I'm not sure there is such a thing as a dishonest stock exchange but there are unethical players trading on most exchanges. The reputation for honesty of the traders varies a bit from exchange to excange, for example the reputation of the NYSE is generally good and of the Vancouver exchange generally bad. There are quite a variety of different scams and ways of dealing with them. The Mt Gox manipulation worked out as something like a ponzi scheme where players selling at a profit were bought out by Mt Gox's bot using money coming in from new players. To avoid that in the stock market I would recommend only buying shares backed by assets and earnings and avoid buying things with no intrinsic value because they are going up. So it's a bit buyer beware at the end of the day.

>As a speculation, Bitcoin is zero-sum.

Only if you assume bitcoins end up worthless so the guy who got a bitcoin for nothing and sold it for $500 is up $500 and the guy who bought it is down $500. That's quite possible but not inevitable. They could maintain value because people like them in the way similar to the way that art works do.

The easier it gets to buy Bitcoin, and accept Bitcoin, the worse it will be. Even if you wanted to spend Bitcoin, you had to think ahead. Now Circle lets you buy within minutes (in most cases) of setting up your account. On the other side of things, Bitpay and Coinbase let merchants convert back to USD (or other currency) right away. So it's possible to do "just in time Bitcoin": Bitcoin is merely the payment protocol.

When Bitcoin becomes a pure cash equivalent, no one will care about the price. I believe that once the price becomes irrelevant, it'll trend downward. I think it'll take something serious to move the price upward, like a serious event creating major doubt in USD.

Most of the bulls are quick to conflate the advantages of the protocol, as if that magically makes it more valuable as a traded commodity. Bitcoin is simultaneously a currency and a protocol. I believe when it was hard to obtain, the use of a store of value held the most potential, and early risk takers had an opportunity for reward. It's entirely possible, as the protocol becomes more or more utilized, those days of risk and reward are well behind us.

> like a serious event creating major doubt in USD.

I think you are way overestimating Bitcoin's (current) significance. If something major happens to the USD -- i.e. something major happens to the US economy -- Bitcoin will be the last thing people think about, and there are quite a few other currencies (with much better track records) that people will prefer before betting their money on Bitcoin.

> It's entirely possible, as the protocol becomes more or more utilized, those days of risk and reward are well behind us.

If you have any evidence that Bitcoin is becoming more and more utilized, I'd love to hear. And I mean actual transactions, not services supporting the protocol (which could be publicity stunt, very cheap bets for something that just might take off one day, or simply wishful thinking).

> there are quite a few other currencies (with much better track records) that people will prefer before betting their money on Bitcoin.

So I'm in the US. Assuming hyperinflation starts tomorrow, the only money I have, or anyone else will accept broadly enough to keep me able to exchange in the market, is bitcoin. Nobody has Euros, nobody takes them, nobody takes Canadian dollars on the boarder, and nobody would accept or buy the equipment to measure weights of gold or platinum.

Of course, the market would probably broadly move (more due to ignorance than any real justifiable reason not to) towards another states fiat in the event of a gradual loss of faith in USD. You would not have a situation where you woke up tomorrow and suddenly your dollars are worthless, at least if you are paying attention.

> If you have any evidence that Bitcoin is becoming more and more utilized, I'd love to hear. And I mean actual transactions, not services supporting the protocol

Overstock is apparently making like 2% of revenue from bitcoin sales. I know the Subway nearby that takes bitcoin is making money when I spend btc there. I'm exclusively buying computer hardware for customers through tigerdirect / newegg in bitcoin, though they have not released statements on how much revenue is generated through it yet.

If you're in the US and hyperinflation starts tomorrow who is going to be buying your hyperinflating USD for bitcoin?

>Nobody has Euros, nobody takes them, nobody takes Canadian dollars on the boarder

That is because they don't have to USD is fairly stable if it starts to go into hyperinflation that will change quickly. Also as a Canadian that travels to the US a lot. There are large swaths of the US where CAD is accepted.

>Overstock is apparently making like 2% of revenue from bitcoin sales.

At last disclosure Overstock had done $2.6m in bitcoin revenue in 9 months. They are far from 2% of revenue. Their CEO keeps throwing out random numbers about what they plan to do by the end of the year that don't make sense(He still claims $10-20m by year end regularly) to cover the fact that their bitcoin revenue has been dropping from day one.

Assuming this Glen Beckian Armageddon, I doubt you'll be able to use Bitcoin much at all, as it requires internet access and electricity, both could experience disruptions in the chaos that will surely ensue when world's leading economy collapses (remember, nobody (seriously) lost faith in the USD even during the 2008 meltdown, so nothing short of a '29-like collapse will do it). If that world-changing catastrophe happens, people will start taking Euros, Pounds, Yens, or Yuans long before BTC.

In retrospect, it seems that 2008 was the same order of magnitude as 1929. Sure, the safety net was there to prevent bread lines, but the economic damage was pretty close. Europe's lack of recovery is especially alarming.

Which only reinforces your point, we've gone through one of the worst recession/depressions of all time, and USD survived. I really can't imagine what would change it other than insanely reckless monetary & fiscal policy - which is absolutely not happening right now.

There are only three scenarios that would alter the USD reserve status: 1) gradual erosion over decades, via the rise of the yuan for example; 2) if the QE / stimulus era explodes and the globe sinks into an even more protracted recession (ie if the Keynesians were wrong), in which case the US government will print incredible sums; 3) if the US initiates a war against the major European powers or China, that could open a fault-line in the global economy (this is another hyper unlikely scenario)

"the only money I have, or anyone else will accept broadly enough to keep me able to exchange in the market, is bitcoin"

Virtually nobody really "takes" bitcoin, it just seems like they do because they are using a 3rd party service which abstracts those transactions into USD for them. How long this sort of acceptance would last if the USD tanked is left as an exercise for the reader.

As goofy as I think it is that people speculate in gold as a good "collapse" currency, at least if a US Dollar destroying event takes place gold will still be shiny, whereas good luck trading bitcoin when the power and wired networking infrastructure is no more.

> when the power and wired networking infrastructure is no more.

There is a plethora of point to point networking protocols, and solar panels exist. If it looked like there was a chance of USD collapse, I'd go buy some, and move somewhere without anyone around to riot and destroy my stuff and stab me. Preferably somewhere that is not the US, if I could get away with it at that point.

But honestly, that won't happen, at least any time soon to even fathom worrying about it. The US economy is too entrenched in global politics and economics to just fall over because of bad fiscal policy. I mean, we have already had bad fiscal policy for forty years! What is another few decades?

If it becomes more utilized and popular, assuming people use it as currency and not as exchange medium, then inherently the price has to go up because demand for bitcoins goes up, and the supply barely changes and does so with algorithmic inputs and constant loss due to lost wallets.

I like to think of bitcoin as cryptogold. The inevitable outcome assuming continued success of the bitcoin protocol is that as more people want it and supply cannot change it becomes a lot like gold, in that it is traded as a resource backing currency. You could still use it for transactions, but a money that is long run appreciating in value is not very conductive of exchange. Something like dogecoin, peercoin, or any cryptocurrency implemented that algorithmically adjusts generation rates to maintain consistent monetary velocity would be much better suited as a day to day exchange commodity.

Also, one of the most prominent uses of bitcoin is in international exchange, in which case yeah, it acts as an intermediary between local fiats, but there is substantial pressure to just use the bitcoin outright rather than constantly converting it back.

The price right now isn't based on actual demand for usage. It's over priced due to speculation.

But some of these methods of using bitcoin greatly increase the velocity of bitcoin. If demand rises 10x but velocity increases 20x, the price would fall.

Also, if bitcoin is basically abstracted from the user, there is risk that the middle men will switch a newer protocol. Coinbase and bitpay could easily switch. All the people speculating in bitcoin price would be left holding the bag.

> When Bitcoin becomes a pure cash equivalent, no one will care about the price. I believe that once the price becomes irrelevant, it'll trend downward

Assuming world wide adoption scenario, that's mathematically impossible. People generally have some amount of wealth (most of us have it in a bank). If you have, let's say, 100 million people (a small fraction of the world really) using bitcoin instead of fiat, and, let's say, they have $2,000 worth of bitcoin on average (which is much lower than the current US average), it would mean that 1 bitcoin = $2,000 * 100M / 21M = $9523.8.

The idea is that rather than hold your wealth in Bitcoin, you would continue to hold it in your local fiat, and only use Bitcoin for the payment protocol.

Imagine if Paypal operated in "PPBUX" instead of local currency. Because of the large volume and high speed of transactions, PPBUX <-> USD would not be a very important number. You would only hold PPBUX for the few minutes required to make the transaction, during which it's pretty unlikely to move against you.

You missed the premise: "When Bitcoin becomes a pure cash equivalent".

That's not true at all. The need to convert to dollars is present only most assets are denominated in dollars, taxes are paid in dollars, and our basic needs are paid for in dollars. What happens when vendor adoption expands to the point where you can buy enough from vendors - food, clothing, housing - with BitCoin that it is no longer absolutely necessary to convert to dollars, because you can subsist entirely on BitCoin?

You're still paid in dollars.

Some people already aren't paid in fiat. I'm not one of those people - because I realize BitCoin still has a ways to go before I start to put more than the money I can afford to lose into it.

> Some people already aren't paid in fiat

(This is not directed at you. You just provided a convenient place to fork from)

I think the way many people in Bitcoin circles use the term "fiat" can be a bit misleading. Most people outside of Bitcoin circles use "fiat" as part of a dichotomy. In this dichotomy, a currency is either a fiat currency or a commodity-backed currency.

With Bitcoin, we have a trichotomy: government-backed fiat currency, commodity-backed currency, and non-government backed non-commodity-backed currency.

If Bitcoin has to be placed in the fiat/commodity-backed dichotomy, it is a lot closer to fiat than commodity-backed. Bitcoin is essentially a non-government fiat currency.

By using "fiat" as part of a different dichotomy, fiat vs. Bitcoin, Bitcoin people are risking inadvertently misleading people who use non-fiat to mean not commodity-backed. I'm pretty sure I've seen "gold bug" types misunderstand Bitcoin because of this. The "mining" terminology probably doesn't help here, either...

and non-government backed non-commodity-backed currency

I think hashing power is a commodity, just like electricity or bandwidth.

Hashing power may be a commodity, but does it back Bitcoin? Hashing is used to create a new Bitcoin, but that seems more like a resource consumed as part of production, not something that is backing the currency.

When a currency is backed by a commodity, such as a currency backed by gold, you can exchange the currency for the commodity at a fixed rate. The currency is a proxy for the commodity. When you hold a unit of a commodity backed currency, the appropriate amount of that commodity is being held for you somewhere.

When you hold a Bitcoin, there is not someone holding a fixed amount of hashing power in reserve for you somewhere. The Bitcoin represents not hashing power available but rather hashing power that has been expended. In terms of gold coins, hashing power in Bitcoin is like the labor of mining the gold. I don't think that there is anything in Bitcoin corresponding to the gold.

I suppose you could argue that Bitcoins themselves are the commodity, but that seems to me like calling USD a commodity-based currency based on its physical paper and ink. We don't count that because the commodity is essentially worthless compared to the value of the currency. The currency doesn't derive its value from the commodity.

I think the 'gold' would be the hash collisions that the mining process discovers - this is like gold in the sense that these hash collisions are mathematically scarce and of finite supply, and very difficult to discover/extract. They are unlike gold in that they are not very useful by themselves, whereas gold is used as a material in many things.

That world is several years away, if it ever exists. Even then, it's a cash equivalent unless they do business with vendors that stop denominating in USD or hold BTC long-term.

The price can't be irrelevant, miners are going to change their activity based on it.

It also doesn't make so much sense that companies helping people complete transactions in situations where traditional methods are expensive/slow/regulated will successfully continue to avoid regulation or bother to give miners a share.

But that regulation would have to happen globally then no?

The thing I find interesting is how thin the order book is: https://www.bitstamp.net/market/order_book/

It shows that you don't need to sell a particularly large block of btc to substantially move the price in either direction. If one big buyer jumped into the market it could easily move the price $50+. This shows that bitcoin is still immature and in its infancy. The more the liquidity of bitcoin grows, the less this kind of volatility will plague the market.

Couldn't there be automated traders waiting to jump in if the price changes, rather than having orders on the books? (I know they exist, I just don't know whether they would appear in the order book)

At the current levels of volatility it's probably not a good idea to keep a lot of open orders - unless you can watch the markets 24/7. Automated traders would likely wait for a significant price change and then execute a market order or just place an order on very short notice.

Ok here is my 2 cents. The reason I feel Bitcoin has lost so much over the last couple of months is because in some ways its a victim of its own success. The more merchants that come online and support BitCoin payments the faster its going to drop in value. The reason is simple, supply & demand and bitcoin payment/exchange gateways. When merchants say they are accepting Bitcoin as payment they aren't really, they are simply using Bitcoin as a conduit to process the payment from you the customer with Bitcoin. When a merchant uses a Bitcoin payment gateway, upon receiving Bitcoin payment, the gateway immediately turns it into a fiat currency by hitting the buy side of an exchange. They are putting more bitcoins back into circulation, in other words increasing the SUPPLY of Bitcoin. Its Economics 101 increase the Supply of any commodity, and the price goes down. On the other side of the equation, the investors who are buying and holding Bitcoin, with the expectation of it going higher, are seeing it plunge, so what they are doing is buying more goods and services instead of holding, a way to get 'out' of their position if you will, and that further drives the price down, its a vicious cycle. When will the price of Bitcoin start going back up? Who knows, for me I feel the indicator will be similar to observe the relative strengths of the fiat currencies, in times of peace or economic uncertainty ( not now ) they tend to show weakness, and traditionally speculators will find safe haven in gold, I think some may try to weather the storm in Bitcoin as well. Unfortunately that is not the case at the moment, both US and Canadian economies seem to be doing well, partially because of the 'war' the US is currently waging. So for me I think I'm going to sit on the sidelines and wait.

> The more merchants that come online and support BitCoin payments the faster its going to drop in value

I don't know enough to say it definitively, but this may be pure fantasy. Merchants "accepting Bitcoin" seems, to me at least, like a publicity stunt to attract the young, techno-hipster crowd, which is valuable for marketing. I wonder if "accepting Bitcoin" translates to actual high-volume transactions. I think this drop is just business as usual for Bitcoin, which tends to rise and fall according to the publicity it gets. Also, its trading volume is still sparse enough for random noise (or deliberate manipulation) to change the price significantly.

From my light experience of watching this Bitcoin thing for the last year, yes, you're right on target. Merchant "adoption" of Bitcoin for purchase is mostly hype. If I recall correctly Overstock.com does about only 10% of their sales in Bitcoin.

Last time Bitcoin fell significantly, BitPay announced three days later they were partnering with PayPal. BitPay has a lot of Bitcoins floating in their accounts (since they need to exchange USD <--> BitCoin). They also could predict that announcing a partnership with PayPal would spike the price of BitCoin.

It makes me wonder if some of these price drops could be market manipulation by insiders who have a big announcement on the way.

There's always insider manipulation, but people cannot prove it either way.

It's like saying that there is insider manipulation behind every price dip and price rise on wallstreet.

Maybe it's true. Maybe it's not. You cannot prove either way. So it's just noise.

That's not how PayPal's "bitcoin integration" works. All it is is a partnership with bitpay, where if you're a paypal digital merchant (doesn't sell physical things), and you also have a bitpay account, you can link them.

So someone buys something from you, sends bitcoin to bitpay, bitpay sends actual money to paypal, paypal takes a cut, and gives it to you.

Before you would just use your bitpay account to get actual money, and paypal wouldn't get a cut.

The PayPal partnership is silly.

I think the reasoning for a spike isn't anything to do with the actual details of the implementation. The spike in demand is caused by an existing legit payment company that is widely known and used saying: "We think Bitcoin is important and interesting enough to do something with.". This implicit endorsement draws in new buyers, gets more speculators buying, etc.

Did you manage to rebound the price by a few pips with this suggestion? ;0)

I'd say you theory is pretty on-point, and I agree. Someone will probably profit from this, and it's an artificial fall of BitCoin value.

Bitpay only does Bitcoin -> USD/etc so they really shouldn't have many bitcoins floating around in their accounts unless they are having difficulty finding buyers for them. With a downtrend the longer it takes them to sell the more then lose.

December - Just a small market correction after bubble, soon we go up uP UP!

February - Price dropped because Mark Karpeles is a incompetent thief, now that Goxy is closed we go up uP UP!

May - China dropped the price, now all Chinese is priced in, we go up uP UP!

August - Wall Street dropping the price because they want to enter cheap. HODL and we go up uP UP!

October - THE B3ARWHAL3 DROPPED THE PRICE, CHEAP COINS!!1 up uP UP!

http://www.reddit.com/r/Buttcoin/comments/2idb3s/looks_reall...

Maybe as the last big wave of people flocking to BTC figured out there's not a lot to do with it and lose interest?

Because we've got to have moved past the point where it's all currency enthusiasts, and if you're not enthusiastic about alt. currency in general, is there any reason yet to prefer it?

bitcoin will be on your mind the next time you want to send/receive money oversees, i guarantee you that.

I'd be crazy to bet on such a volatile asset even for 30 minutes (BTC value changes often far exceed transfer fees), so every simple transfer turns into a bet, which I'm willing to pay to avoid. Not to mention that Bitcoin isn't liquid in many currencies.

This is true for 0.02 % of the world's population, at best. (This is more than the estimated number of people owning Bitcoins, like it or not.)

25 years ago, the same could be said of international phone calls.

The world is getting smaller and smaller, there will be a point in the future where getting goods/services from someone across the ocean is as common as sending an email.

And I can already pay for this with my credit card today.

That is a horrible counter-argument. What about the people on the other side of the transaction who (today) might not even have access to a bank account, let alone an international credit card?

Also, tell me how do you hire someone working in a country with strong capital controls (e.g, Argentina). What good is your credit card if a contractor says "sorry, to use PayPal/Visa/Mastercard/Amex there is a 40-50% surcharge"?

These people who don't have bank accounts and credit cards have internet and computers though (and the knowledge to harden these computers against attack)? Is there a problem that Bitcoin solves that isn't better solved by M-Pesa?

M-Pesa depends on the mobile carriers obtaining special licenses to operate as banking agents. AFAIK, very few countries in the developed world allow this.

> don't have bank accounts and credit cards have internet and computers though.

Yes. Think of "nigerian scammers". Think how easy it is to get prepaid cell phones in most of the world, etc, etc...

Most of the 'Nigerian Scammers' use public computers in cafes / lounges. Would you expect people to use public computers for BTC business? How could they possibly secure these computers against Keyloggers and other means of 'hacking'?

Oh, man...

Short answer: By not storing wallets in computers at all.

Long, technical-focused answer: Paper wallets. Hardware wallets. USB drives that boot into a read-only operating system with your keys and a BTC client. Old cell phones that can be repurposed to run btc client software... you don't need to have a computer of your own to keep a wallet. And I haven't even mentioned hosted services! There is nothing (besides government regulation) stopping shop owners who work with M-Pesa to also offer "BTC vault services": using multi-sig, any BTC deposited in an account needs to be authorized by the vault.

Longer, human-focused answer: stop thinking that the problem in underdeveloped countries is lack of access to material things. The problem with underdeveloped countries is the lack of consolidated, stable, sound institutions. The technicalities of how to use BTC (or any cryptocurrency) is not the problem, they can adapt by themselves to a new gadget. What they can't do - by themselves - is to create these institutions that the people in the developed world take for granted.

A farmer will have access to Internet (just not so fast/ubiquitous/cheap), the thing they don't have is a bank to give them decent insurance in case their crops go bad, or any one to give them credit so that s/he can finance the purchase of supplies. They will have access to smartphones (not your "premium" iPhone, but that is only 2-3 years away by Moore's Law) and they will have cell phone access. What they don't have is a government that is stable enough to guarantee the money sent directly to him is as good as the money sent through some corrupt bureaucrat, or taxed away, or inflated away.

The cool thing about BTC is how it completely disrupts the finance/banking industry. It turns a socio-economic-political problem into a technological one. It allows people who live in poor institutions to completely bypass them.

---

So, to summarize: if you are an American whose only concern is to keep your money and the convenience that it is only possible due to the stable institutions that your country provides, by all means stay out of any crypto-currency. But if you'd like to live in a world where the barriers are down, with free flow of people and services and goods, then by all means take a look at BTC - not as way to get rich quickly, but as a way to make the world freer.

They sell goods across the ocean but are unable to have a bank account? And why should the same surcharge not apply when paying with Bitcoins?

Yes, it is MUCH easier to get internet access than to get a bank account.

> And why should the same surcharge not apply when paying with Bitcoins?

Suppose you buy services from someone in Argentina and you pay USD 100. Paypal/Banks will give the recipient the "official rate" of the USD to Peso (as of today: ARS 8.45/USD)

Now, suppose that you send the equivalent amount of USD, but uses BTC. The receiver will sell the BTC (if so desires) at the rate established at the local market, which is mostly pegged to the Blue ("unofficial") Dollar. Exchange rate: ARS14,50/USD.

25 years ago, billions of people could place international phone calls.

I know, and that is kind of my point. I am not saying that money remittance is impossible without BTC. I am saying that it makes it so much easier and accessible that it's impossible to ignore.

Sending money overseas today is possible, but comparing Paypal/Western Union with BTC is the same as comparing AT&T (the original one) with Skype.

I send money internationally a couple times a month and have known about bitcoin for a long time and its never even a consideration. Even though I have access to exchanges where the fees are low the time effort in first sending my money to an exchange then buying then sending it to the other side then having them sell on an exchange and then transfer the funds out is so much more painful than the existing "Open wire transfer, receive funds next day" unless your time is worth $0 it costs more too. There are now a few "instant" exchanges but unfortunately all instant methods at them are still marked up a fair bit.

Add in the fact that if you don't have access to a good exchange and you're using LBC or an ATM you're probably paying more than wire fees for any non-negligible amount even without considering the time.

The price difference between BTCAUD and BTCUSD is very close to the cost of transferring money from an Australian bank to a US bank.

I regularly send money to Indonesia, and found that Ria is simpler and less expensive than BTC. End to end (including the margin on the USD/IDR conversion) the transaction costs for RIA around 2%. BTC for this transaction works out to around 3.5%, and it's harder to use to boot.

BTC isn't useless, but your post is typical of BTC proponents. It sounds plausible, but it's actually bullshit.

True, it will.

I'm not sure it will win, I have a pretty good/cheap service I used for this in the past already. But I'll at least look at it I guess.

It'll take a lot of time and it'll probably show up in places where we didn't really expect it. I believe 10 years down the road BTC will be pretty big in Africa.

I think it'll be popular in the same way that myspace will be a popular social network, and that webcrawler will be a game-changing search engine.

Some of the best ideas will be adopted by something much, much better.

So to even buy bitcoin you have to do with money what you would do on any site to buy anything else. Why would you ever turn your money into bitcoins to do that? It's easy to say now, "oh bitcoin will never work" because it's tanking, but can anyone explain any practical use whatsoever for this monopoly money? Do people really expect companies to start paying people in marbles and tops cards or is this as straightforward as it seems?

Escrowed transactions are far easier cheaper than in USD.

I'm not an expert on it by any means, but from what I understand just the technology behind the blockchain (essentially how the entire network works) is what is really valuable with Bitcoin. Bitcoin does have some practical uses - I've heard of people transferring money between countries/across the world with little to no fees as an example. It's basically a way to get around banks being difficult/charging ridiculous amounts of money for transfers. The point is not to store all your cash in the form of bitcoin, but rather transfer it to bitcoin when you need to buy something. There's some people who put their savings into bitcoin which is really dumb.

What are the major reasons to be bullish on bitcoin right now?

Not sarcasm, totally serious.

I've owned a small amount of bitcoin for a while and have followed the market from a far. This observation is highly anecdotal, but I just haven't seen many signs of serious traction over the last six or nine months (i.e. post a ton of the initial retailers partnering to accept bitcoin, Coinbase raising their monster round, etc.)

There are lots of reasons to be interested in and somewhat optimistic about cryptocurrency in general. But I think there are enough arguable flaws in Bitcoin's specific implementation that its first mover advantage ultimately won't count for much.

Well said. My thoughts exactly regarding bitcoin vs. the overall crypto market 10 years from now.

I'm interested to hear what those flaws are and how they will prevent the success of bitcoin.

I agree that Bitcoin has some flaws. I posted about it on Reddit after the last slide in price. Link here for anyone interested:

http://www.reddit.com/r/BitcoinMarkets/comments/2fvknj/daily...

Reasons to be bullish on the concept? Bitcoin is a secure public registry backed by a decentralized 300k THash/s computing network (and fast growing). That alone is insanely valuable, and not just as a vector of monetary transactions. It's one building block of our decentralized future.

Reasons to be bullish on the BTC/USD exchange price? That would be pure speculation. BTC seems to be now at low levels enough that it wouldn't be insane to buy some for short-term speculation, but it of course it would still be very risky.

The network is single-purpose and costs real electricity to run. If the mining cost stays above the value of the coins mined for long enough people will start turning off their miners.

The mining self-balances; if enough miners shut off their rigs, the difficulty goes down, and it becomes profitable (or break-even) to mine again. (Mining was heavily over-invested, and it's in the ugly process of rebalancing now.) It's possible that Bitcoin will be relegated to a fringe of techno-libertarians, but it is unlikely that the network will ever disappear.

Also, the network is "single-purpose" in the sense that an ethernet cable is single-purpose: while it only accomplishes one thing, it is a building block that can be leveraged in lots of interesting ways (smart contracts, proof-of-extistence, sidechains, colored coins, etc.)

Wishful thinking. Bitcoin does - at least right now - not solve any interesting problem with the way we currently handle our financial transaction. In consequence there is no incentive to mass adopt Bitcoin which in turn keeps the capitalization low which keeps the price fluctuations high which decreases incentives to adopt Bitcoin even further because now you have to buy Bitcoins for real money, transfer them and sell them quickly in order to protect you against this price fluctuations.

Personally, I think there's still more (potentially much more) downside in the short-term, but it's hard to catch a falling knife. As an investment vehicle, it's highly speculative and there's still a many existential threats that could cause Bitcoin value could completely collapse (something is fundamentally broken with the protocol that can't be rolled back/forked/or patched, instability/attacks on the mining network that make mining untenable, aggressive governmental illegalization/prosecution of crypto-currencies).

However, I'm pretty bullish about Bitcoin mid-term, and here's why:

* The blockchain is pretty revolutionary technology that allows transactions between untrusted decentralized parties. There's almost no end of interesting decentralized architecture/applications that can be built on it. Blockchains are secured by computation - the Bitcoin network is by far (magnitudes) the most secure network and security (mining difficulty/hashrate) continues to grow[1]. While there are some interesting altcoins being developed (Ethereum is probably the most promising), it seems like Bitcoin will be the best blockchain to use if you have something you want to build anytime soon. There's a lot of interesting developments (side chains, tree chains, etc that will let devs use the network more easily)

* Even comparing to a year ago, the amount of infrastructure: exchanges, wallets, storage, payment processors, ATMs, being built has been staggering. I think w/ the way Coinbase, BitPay, and Circle are working we're just getting to a point where a regular consumer might even consider using the Bitcoin (think the net in '94/'95). There's still a lot of basic infrastructural improvements that need to happen.

* Along with that, I think that cdixon's post on "native Bitcoin apps"[2] is right on. International microfinance (as an extension/evolution of international remittance) and decentralized marketplaces can be do things that have traditionally been too hard/expensive to be worthwhile (again, the parallels to the story of the Internet). These are billion dollar opportunities.

* To some degree, this shuffle of weak hands/speculators/early adopters cashing out is probably a better thing in the long term. You're seeing some big players doing some major market manipulation (this drop was primarily driven by a 30K BTC sell wall) - still, overall volatility continues to decline[3] and Bitcoin's suitability as a transactional instrument is improving. Personally, I consider the early-adopter/"dark matter" coins as one of the most problematic aspects (and existential threats) to Bitcoin. Last year, Risto Pietilä ran some analysis on the leaked Gox data and extrapolated estimates that basically 1-10K people own 50% of all Bitcoins. The day that Satoshi's coins start moving and the sky doesn't fall I'll feel better, but there are enough of these dark matter coins that Bitcoin may never get out from under the threat of extreme manipulation. Once crypto-currency infrastructure gets hammered out, I think there will probably be a mass migration to something that doesn't end up making a handful of crazy people trillionaires, but maybe people won't care (or prices become irrelevant as BTC is used primarily as a payment rail/tx processor; the floor will be based on money velocity and mining cost). I continue to be surprised as I've started following Bitcoin more closely.

So, you probably don't want to put your life savings in, but it's probably worth investing some time at least to pay attention to what's popping out of the crypto-currency world.

[1] https://blockchain.info/charts/hash-rate

[2] http://cdixon.org/2014/10/04/some-ideas-for-native-bitcoin-a...

[3] http://btcvol.info/

[4] https://bitcointalk.org/index.php?topic=316297.0

It's all about the roll-out, not the price. The price should naturally follow, and then to imagine scenarios you may not be familiar with, but are still real. Here are a few:

* More efficient inter and intra-organizational business systems. I am unsure of how involved academia and consulting have been with bitcoin and cryptos, but JIT payments seem like a very attractive proposition, especially with trusted partners, and especially in corporate contexts. Does your local bank have an API that allows easy funds transfers? Perhaps bitcoin can simplify the accounting function. There has to be benefits and cost-savings. CEOs may ask the question.. "we can get bitcoins, but then what?"

* As mentioned elsewhere in the thread. Adoption in Africa or some other nation: the Orkut phenomenon. It's not about doubt in the USD (also mentioned in the thread) but rather doubt in one's own currency from inflation (or some other unreliability.) This is Draper's view. I think the key is to combine bitcoin with a fiat note (or some newer crypto down the line) and reduce reliance on banks. That's the sweet spot.

* To avoid bank confiscations, eg Cyprus. Having some money is better than having money that's been largely confiscated. Bitcoin makes any nasties in government and corporations think twice. It's wealth insurance. And if/when confiscations occur, the price could rise higher than what you paid for them (but until then, it might seem like a loss.)

* I suppose bitcoin could become a type of digital backbone currency, due to it being the first (but not the last) Cc. It really depends on the roll out, which has a number of imperatives driving it. It's worth looking at various business and use cases of bitcoins, and once these start reaching larger audiences, the usage should expand.

* Online activities needing anonymity: use your imagination.

* The currency could be faster to use, but it's usable enough for above things.

My working hypothesis is that this is the market impact of the liquidation of Hal Finney's bitcoin estate. If true, due to the thinness of the market and the large size of Hal's holdings, the price has a long way to go.

(Full disclosure: this is pure rumor mongering.)

The exchange rates of normal currencies are primarily interesting as tools to look at trade deficits &c. I can't think of an analogy with Bitcoin.

I think the only reason this is interesting is because so many people treated as an investment. Using it as a store of wealth is clearly silly -- much too volatile. But Bitcoin as investment seems very common.

It's hard to emphasize how bizarre that choice is, but suffice it to say, there are people who make a living speculating on currency, and (almost certainly) you aren't one of them.

Why is it bizarre to use it as an investment choice? If you have a sense for what makes a technology prevail and think that bitcoin will, it isn't a big leap to look at the value that can be transferred through bitcoin and say "in the success scenarios, it will have to grow to be many times larger." Like any investment, you have to be prepared to be wrong, though.

That's remarkably similar to saying: 'If you have a sense for what makes a trade deficit occur and think that one will, it isn't a big leap to look at the value that can be transferred through international trade and say 'in the scenarios where I am right, it will have to grow many times larger''.

The analysis above is completely correct... and also available to precisely everyone, and is how the price is set globally. You aren't buying at a nerds-only price. So what you are really saying is that you are a more accurate speculator on currencies than people who do it for a living and have large trading and research apparatuses at their disposal. Could be true, but if you haven't attempted to speculate on currency before, there's no way for you to know that (and the prior probability is low).

Bitcoin is more than a currency, so reducing opinions about it solely to "speculating on currency" is disingenuous.

Bitcoin is a technology. I've made my career by picking winning open source technologies and betting my career on them. If you think some people who spend their lives predicting day-to-day price movements are better at making technology predictions than I am, I question your assumption. There's a reason I don't speculate in international currency, but that I am willing to express my fiscal-opinion on bitcoin.

I also question your assumption that these groups are anywhere near representing the primary driving forces in the thinly traded bitcoin market at this point.

There is no such thing as a nerds-only price for any investment in so much as you believe a given market is efficient. Fundamentally, what I would argue about investing in bitcoin is that small differences in the estimate of the success scenario produce wide differences in fair value estimates of this asset (because the outcomes possibilities are asymmetrical), so if you have a strong opinion on the different weighting of the possibilities it is no more unreasonable than buying an individual stock, and in fact may be the more rational choice.

You know what, I have a number of disagreements with BTC as it currently is instantiated - the limited number, rewards skewed to a few early folks etc etc.

But I agree, the tech is really interesting.

That's what happens to a market driven entirely by speculation and adding tools like shorting in addition to the lack of interest from the general population. Prof. Bitcorn might be right, just not right about the date, I guess. We saw that outside of a short-live spike, even the PayPal announcement couldn't help it. I won't be surprised if the Chinese oligarchs already moved their funds outside of China via Bitcoin and now there's not enough demand to fuel the increasing price like before.

I've always dismissed people complaining about volatility, as it's not really a huge problem for currencies... But I've never seen a real-time track of Bitcoin!

There is volatility, and there are currencies that change each second the same that the normal "volatile" currencies change a week. Bitcoin seems to be the latter, and that's a qualitatively different problem from mere volatility.

As of right now there's a 28k sell wall on bitstamp which might be forcing prices down a tad. Looks like someone's trying to buy some coins on the cheap, but I'm no expert in these things.

http://i.imgur.com/lmcu15f.png

What is preventing the Federal Reserve or any other central banks with endless supplies of liquidity, from collapsing the value of bitcoins or any other convertible currency, virtual or otherwise?

For the Fed to collapse the value of bitcoins they would have to sell lots of bitcoins. They can't do that because they don't have bitcoins to sell. The can print USD but not bitcoins.

If the Federal Reserve can print USD, and USD can buy Bitcoins... am I missing something?

Yeah they can buy them but that won't make their price fall.

"For the Fed to collapse the value of bitcoins they would have to sell lots of bitcoins." tim333

Apparently the sole reason bitcoin goes for 300 now is that one guy is dumping 30k btc at 300$. Apparently he just needs 9mil $ in few days.

I fear that just as bitcoin arrived suddenly it will go just as quickly. It's based on fundamentals that is not well understood, at least by people who buy it (because its gonna go up!).

Ok this is

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