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Is This Why Bitcoin Is Surging?

Tyler Durden's picture




 

Bitcoin, an online-only currency scarcely four years old, is breaking out to new highs this week and now sports a total value of $2.8 billion.  Just a few months ago, it looked like this economic experiment as the world’s first decentralized technology-based form of money would crash and burn.  Since then, ConvergEx's Nick Colas points out that the U.S. government has shut down a large drug website which accepted bitcoins and promised further scrutiny of its uses; and omputer science experts have warned that bitcoin is neither especially private – one of its notional values – or especially well constructed.  The market doesn't seem to care, with incremental demand from U.S. citizens (through Second Market) and Chinese nationals leading the path higher. Could bitcoin still fail? Sure.  But, as Colas notes, its success to date speaks to how much the world is changing...  Technology – properly packaged – can engender enough trust to develop a new asset class. 

Bitcoin will eventually have to develop a lot more infrastructure to be a useful global currency, to be sure.  But there’s close to $3 billion of real money to help back that transition.

Via ConvergEx's Nick Colas,

Bitcoin - The Lazarus Currency

Every great religion, or company, or country, or rock band has a dramatic ‘Creation myth’ – the story of its birth.  The Judeo-Christian tradition has the story of God creating the world in seven days.  Google has the grad-student thesis story.  American culture is still informed by the Revolutionary War.  And where would the Rolling Stones be if Keith hadn’t chatted up Mick on the train, just because he holding some new R&B albums from the States?

Bitcoin, the online-only stateless currency, has its own creation myth and it is purpose-made to appeal to exactly the kind of people who would find value in it.  The highlights are:

The original design for bitcoin comes from a 2008 paper published by a person named Satoshi Nakamoto.  Who, by the by, doesn’t actually exist.

 

Bitcoin’s basic architecture is decentralized – no one is “In control.”  People with fast computers and some coding skills compete to solve a puzzle created by the algorithm described in Satoshi’s paper.  Simultaneously, they track all the transactions in the bitcoin universe – people and businesses exchanging value for goods and services.  Every ten minutes, on average, some lucky coder – or group of coders – solves the puzzle, gets a few new bitcoins, and validates the transaction list.  Then the whole thing resets and everyone gets to work on the next puzzle.

 

In principle, this process leaves everyone exchanging or “mining” (cracking the code gets you 25 bitcoins currently) anonymously in the system.  Everything in bitcoin is identified with a nearly-impossible-to-crack coding of letters and numbers.  No names, phone numbers, or addresses needed.

Now, who do you think would find this creation story appealing?  A few candidates:

Tech savvy people, who by their nature and high-functioning professional skills tend to have a few shekels lying around? Yep – classic early adopters.

 

Then there might be independence-minded older white males in the U.S., ticked off by the Federal Reserve and government in general.  Yes, they like the story as well.

 

And then there are the criminals – drug dealers and so forth – who might not know a creation myth from crystal meth, but appreciate the potential for secrecy.

 

Offshore millionaires from essentially anywhere in the world, looking for classic diversification and a liquid investment.  All you need to access your bitcoins is that long alphanumeric key and a local bank account which links to a ‘Wallet’ – an online repository to hold the currency.  Deposit money in China, write down the key, fly to Monaco and go into an Internet café.  Easy-peasy.

The basic appeal of this “Genesis” creation story lit a fire under bitcoin, starting at the beginning of 2012 at around $5 and ending up in a spectacular bubble top at $240 in April 2013.  The cause of that peak – overwhelming tulip-bulbish demand for bitcoin – was its undoing.  Exchanges where people went to trade dollars or euros for bitcoin couldn’t keep up with the volume.  Accounts froze or moved very slowly, and confidence in the currency dropped, along with the price.  Just a few days after the $240 high, bitcoin was trading for less than $60.

Creation myths are great anchors for a belief system, but there have to be other parts to the narrative; bitcoin is safely into its own “Exodus” – the second book of the Old Testament.  That fall from the highs was just the beginning of its problems.

The U.S. government made it clear that they expect all currencies and their users to adhere to anti-money-laundering laws, including know-your-customer statutes which eliminate the notional secrecy of bitcoin.

 

The Feds also went after the druggies, shutting down Silk Road – a widely known website for the purchase of illicit substances.

 

In an odd twist of fate, the U.S. government now owns about 174,000 bitcoins, with a current value of $42 million thanks to the Silk Road bust and other actions.

If bitcoin were a company, the class action lawyers would be circling, fighting for air with the bankruptcy experts.  There is simply no way so much legal action, let alone several ongoing problems with security in the system, would have left Satoshi Nakamoto’s creation as anything but roadkill on the world’s economic superhighway.

But here’s the beauty part: bitcoin is making a new high this week, breaking through the spiky bubble levels of April in a pretty controlled and orderly manner.  What gives? A few points:

The biggest bitcoin exchange is now in China, displacing Japanese, American and European sources of demand.  That enterprise is called BTC China, and its CEO Bobby Lee hails from Yahoo! and Walmart China. Oh, and he graduated from Stanford with a degree in Computer Science.  In short, an apparently pretty clever fellow.

 

Our sources in the bitcoin community also agree that Second Market, the New York based business best known for trading pre-IPO company stock, has become a major player in demand for bitcoin.  Earlier this year they started the Bitcoin Investment Trust, an open ended product to buy and hold bitcoins.  There’s no way to know how much Second Market has purchased on behalf of its clients, but it must be a popular offering – the banner ad on their site for the trust occupied the top third of their front page.

 

It’s not all been roses for bitcoin, even in this recent run-up. Back in September computer science researchers from UC – San Diego showed that it was actually fairly easy to track individual transactions in the bitcoin transaction ledger.  Just this week, academics at Cornell proposed that bitcoin could eventually be coopted by a handful of “Miners” who could hijack the system.

So why is bitcoin seemingly minted on Teflon?  Limited supply, for one reason.  There will never be more than 21 million bitcoins, and there are only 12.0 million currently.  In the 4-ish minutes it has taken you to read this far, the most new bitcoins that might have been issued is 25, or $6,250.  In the same timeframe, the Federal Reserve has pushed another $7.8 million into the financial system with Quantitative Easing.  And then there is the undeniable creation-story appeal – a technology based sort-of-secret store of value.  If James Bond, Sergey Brin and Paul Volcker all got together and designed their ideal currency, it might look a lot like bitcoin.

At the same time, the story isn’t over yet.  If the “Exodus” analogy is to fit at all, then bitcoin is still in the wilderness.  It has clearly withstood many challenges, and there are probably more to come.  The end of the journey actually has little to do with how much bitcoin is worth, but what it might be good for.

That’s the piece some investors – many made quite wealthy by the incredible increase in bitcoin’s value – are working on now.  A few final thoughts here:

Bitcoin is a more efficient method of transferring money than the current global banking system.  The transaction ledger is essentially kept for free by the mining community.  Want to send $100 to someone in England and have them redeem British pounds? It will likely cost you $5 or more.  A bitcoin transfer is essentially free.

 

Merchants can accept bitcoin payments without paying the typical credit card fees of 1-5%.  That’s one reason for the growing acceptance of bitcoin in China – online merchants are starting to accept this online currency.

 

Bitcoin could become a country’s ‘Second currency’.  One of the more interesting conversations with one of our industry sources is the thought that one or more sovereign nations would entertain making bitcoin a parallel currency to their existing monetary system.  Keep in mind that our source owns a lot of bitcoin personally….  But it is an intriguing thought nonetheless. 

 

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Wed, 11/06/2013 - 19:19 | 4128733 lemonobrien
lemonobrien's picture

why in the fuck would i do this... program my computer all day to solve a puzzle for bitcoins? fuck you. i'll buy gold and let you program.

 

oh... and i love the "reset" "new puzzle" bullshit.

Wed, 11/06/2013 - 19:28 | 4128770 DoChenRollingBearing
DoChenRollingBearing's picture

Zero Hedge member "One World Mafia" earlier today (sorry, I do not have the link) warned about "Bitcoins" that .gov might make or track.  I do not have the computer skills to properly comment, but it would seem to be a warning to be careful about putting too much FIAT$ into Bitcoin vs. gold.

I'll take the gold.

Wed, 11/06/2013 - 19:44 | 4128845 resurger
resurger's picture

bitchez

Wed, 11/06/2013 - 20:03 | 4128941 CH1
CH1's picture

Why is Bitcoin rising?

Umm... because more people want it?

Econ 101.

Wed, 11/06/2013 - 20:13 | 4129002 lickspitler
lickspitler's picture

Increment Bitchez

 

 

Wed, 11/06/2013 - 21:01 | 4129174 fonestar
fonestar's picture

Tyler seems to like to go on about supposed security problems with Bitcoin but never gets into them.  The "selfish miners" idea is being addressed.  Bitcoin is pseudo-anonymous.  If you have an IQ over 60 and wish to be anonymous that's pretty easy to do using VPN, TOR + disposable wallet.  Bitcoin does not have any security flaws and 40-50% retracements for a new, thinly traded currency are to be expected.  

Bitcoin is by far the world's most elegant, secure and advanced payment system and currency.

More FUD, just BTFBitD!!

Wed, 11/06/2013 - 22:42 | 4129492 Bunker Boy
Bunker Boy's picture

One reason it's surging, perhaps the main one, is bc it's used as the untraceable method of payment for ransomware across the globe. Essentially the hacker encrypt the targets data files with 2000 bit encryption- essentially breakable- and demand payment in bit coins for the encryption key.

Wed, 11/06/2013 - 22:45 | 4129500 Richard Chesler
Richard Chesler's picture

Bitcoins, Bozo bucks, what difference does it make?

Hard assets bitchez!

Wed, 11/06/2013 - 23:40 | 4129658 fonestar
fonestar's picture

I can't think of a harder asset than mathematics.

If you can't hold it, you can't seize it.

Wed, 11/06/2013 - 23:58 | 4129696 James_Cole
James_Cole's picture

Bitcoin was never in doubt bitchez, oh the days of arguing pms vs. BTC

BTFATH!

Thu, 11/07/2013 - 00:04 | 4129704 akak
akak's picture

I don't know about you, but I'll take bitcoins over PMS any day.

Thu, 11/07/2013 - 00:14 | 4129723 James_Cole
James_Cole's picture

but I'll take bitcoins over PMS any day

Lol

Thu, 11/07/2013 - 08:52 | 4130228 Gazooks
Gazooks's picture

...until grid blackout

 

no whining in the dark, please

Thu, 11/07/2013 - 04:33 | 4130021 Gief Gold Plox
Gief Gold Plox's picture

"Bitcoin does not have any security flaws"

I generally read all you posts and know that you're not stupid and a big fan of bitcoin, but claims like that will come back to byte you in the arse.

Wed, 11/06/2013 - 20:15 | 4129010 lickspitler
lickspitler's picture

Why is gold falling.

Umm... because less people want it?

Econ 101

 

Wed, 11/06/2013 - 22:38 | 4129483 TheTmfreak
TheTmfreak's picture

This is actually a really terrible comparison. Bitcoin's price is not "regulated" or controlled quite like the global commodities market is. There are no HFT and none of that bullshit. That is actually one good reason for having a crappy exchange infrastructure.

Wed, 11/06/2013 - 20:37 | 4129086 Sean7k
Sean7k's picture

There are a couple of interesting trojan horses stalking the world of currency: One, bitcoin, a digital currency that is making people very comfortable with the idea of a global currency and the elimination of cash- be very careful what you wish for. It does not have the attributes of money and it would be easy to hijack or replace with a statist model (Not to mention the bubblicious properties).

Two, the concentration of gold into a few nations hands, which could make all other gold worth little to nothing. Remember, current generations don't understand what money is nor how gold could function as a currency. If it all held by China, Russia and India, THEY will determine what it will be used for or all the other nations that no longer have it could outlaw it or marginalize it. 

In a world that has played fast and hard with debt and money, the power elites have strong hands, to forget this would be fatal.

Wed, 11/06/2013 - 21:07 | 4129191 nmewn
nmewn's picture

Ding...ding...ding!

Winner winner, chicken dinner!

"One, bitcoin, a digital currency that is making people very comfortable with the idea of a global currency and the elimination of cash- be very careful what you wish for. It does not have the attributes of money and it would be easy to hijack or replace with a statist model (Not to mention the bubblicious properties)."

Some youngun's seem to think an EBT or a credit card is "money" because it allows ACCESS TO money. Its the very same concept as calling a car "money" because you use it to drive to the bank to get money out.

Its ridiculous.

That said, using bitcoin as a transfer mechanism for money, away from the prying eyes of anyone is, a good thing IMO. Just as long as everyone understands its not money. 

The wino on the street corner or bushman or nomad will all agree, no internet-no money ;-)

Thu, 11/07/2013 - 10:47 | 4130702 Amagnonx
Amagnonx's picture

BTC IS MONEY - sheesh - surely on ZH people have been learning what money is and isn't?  Until something changes, and BTC can be proved to not be a store of value - then it is money and has all the properties of money in spades.  In all characteristics of money it surpasses gold, except for the very critical store of value (durability).  This is yet to be determined - and no doubt gold will continue to be superior to BTC, however BTC is no lightweight regarding durability - able to be copied multiple times - you can store the same BTC on flash dfrives in a dozen places, even on different continents - BTC is hard to kill.  Of course it requires the existence of the net, or something similar - still, losing the net is a fairly catastrophic scenario.

Thu, 11/07/2013 - 11:08 | 4130830 TheTmfreak
TheTmfreak's picture

Ding. Definitely. Triple book accounting. I mean it's quite ridiculous to call it "getting hijacked" and all these other ridiculous claims.  One property of money as you're stating is a store of value (surplus productivity saved so that it can be translated into something else when needed/desired). Bit coin's value is in its limited number based off of a mathematical formula. "Its backing" is triple book accounted, mesh networked, limited supply. The best part in my opinion about bitcoin is it DOESN"T HAVE TO BE USED BY EVERYONE. Its an alternative currency that doesn't have to BE "THE currency". Why in the hell do we keep expecting EVERY currency to be the ONLY currency in circulation?

My own state, hell even my own Parish (I live in Louisiana) should mint their own currencies. Or shit, fuck them, I would run my own currency. I don't give two shits who is going to replace the US currency. I've already been around the world and seen that people can operate with distributed and multiple currencies, and even find value in them EVEN IF THEY"RE FIAT. Still hold gold, still hold silver. Shit is heavy as hell and if shit hits the fan, try and walk across the border with gold.

Fri, 11/08/2013 - 10:52 | 4135156 Sean7k
Sean7k's picture

One, depends on the internet, which is in the hands of the government. Two, who was it created by? We don't know, it is assumed to be some wonderful, philantrophic netizen like ourselves ( how could that go wrong). Three, assumes the government is not involved and can't crack the code. Four, its' value is not derived from a natural resource or through production of goods. 

It is a faith based currency, which is not money. Yes, you can use it for money now, but that is not the true test of money. It must have value outside that faith and bitcoin doesn't. Faith in technology and individual supremacy in the face of thousands of years of Overlord control is dangerous and reckless. 

Good luck, I wish you the best, but prepare for the worst.

Wed, 11/06/2013 - 22:43 | 4129494 TheTmfreak
TheTmfreak's picture

Right, except that statist must control the increase of money. You couldn't be more wrong if you tried. Name one government that EVER sought to create less money (that would be the only control a government could have, to take bit coins out of the system, not create more).

I'm not saying bit coin is everything, but you're claiming its easy to hijack (its not, its decentralized nature makes this the opposite) and "bubblicious properties" is quite a stretch. If you looked around the globe you might see failing currencies, and locked down currency controls and out right trade restrictions (See gold in India). I'd say people diversifying in bitcoin or looking for a way to push their money into non-centralized controls and "in the cloud" is far from in a bubble.

Wed, 11/06/2013 - 23:52 | 4129684 Sean7k
Sean7k's picture

Really? What about tier 1 assets? What is collateral? Who controls bitcoin redemption? And my personal favorite: the government can't break the code. We have no idea what the government can break or not, whether it is a government program from the start, hell, people actually thoght (some still do) that the government is a war against drugs. They believed 9/11 or Boston Marathon or any number of false flags. 

Bubblelicious? Did you read about tulipmania? If you want to invest in bitcoin or the S&P or gold, fine, because no one knows how this turns out. I would have never thought you could change the definition of money, but here we are. I like gold and silver, but the actions of the Illuminati/Zionists/etc are moving along as planned and NO ONE IS STANDING UP-WORLDWIDE. 

People still think China and Russia are enemies of the US. They still think there are real terrrorists, not manufactured mercenaries run by controllers. You really think money is an issue to these characters?  People trade their life's labor for paper. They believe governments are helpful and necessary. They believe in justice and freedom and America/Britain/France etc. People eat GMO food and like it. 

Humans are the stupidest creatures on the planet. At least every other creature is true to it's self, we are so arrogant, we are a genetically culled slave class with delusions of grandeur. Bitcoin? The toxins in your house are killing you and you keep living there. Hell, you buy a carcinogenic couch to sit on while smoking a carcinogenic cigarette because somebody convinced you its good for you because it releases water vapor! We are quietly watching nuclear catastrophe unleashed. We kill innocents with impunity. The police torture the citizens. The doctors drug the hell out of us and we drink toxic water so alcoa doesn't have to pay to dispose of waste. 

Sorry, if people want to believe in fairy tales, who am I to say differently? Will we all compare our "money" stashed in fema camps over our soylent green? Yeah, we''ll show those overlords, we'll sell our bitcoins in black markets for things we don't need and not pay sales tax! Or, Or in real markets, like Alibaba. Then we'll sing a chorus of "jimmy crack corn, but I don't care" and giggle about how the boss man is so stupid to not understand we be slammin' him!

 

Thu, 11/07/2013 - 01:21 | 4129830 aminorex
aminorex's picture

the definition of money is PQ=MV.  anything else is an ideological hobbyhorse.  and that is why BTC is going to 27,000 USD2013 by 2024.

Thu, 11/07/2013 - 04:56 | 4130035 Gief Gold Plox
Gief Gold Plox's picture

I agree that the .gov sector can only expand and grow. For this they absolutely love monetary inflation.

But that doesn't mean that bitcoin can't be hijacked. All that's needed is to allow the people to become comfortable with the idea of a digital only currency., than after a little while start screwing with the bitcoin network via the most-nodes-in-the-network attack method, which the .gov sector can easily afford. Once people are getting adequately inconvenienced trying to spend their bitcoins, introduce a .gov issued AltCoin that the government issues (does not have a 21mio limit) and requires for tax payment. They also allow a short timeframe and a "fair" exchange rate for bitcoin to GovCoin conversion. Float a few fake bitcoin "counterfeiting" stories, a few "old couple with ten adopted babies looses all their money due to a glitch" and it can be outlawed with minimal resistance from the sheep.

I do own some bitcoin, but tangible assets are what I stack for my grand-children's sake.

 

Wed, 11/06/2013 - 20:27 | 4129052 Radical Marijuana
Radical Marijuana's picture

http://au.finance.yahoo.com/news/researchers-bitcoin-broken-could-collapse-014448102.html

Researchers Say 'Bitcoin Is Broken' And Could Collapse

By Julie Bort, November 5, 2013.

The problem is with how people "mine" bitcoins. Mining is how bitcoins are created ... it is so difficult and time consuming for a computer to create new bitcoins that some miners have banded together in pools, using multiple computers that work together ... when too many miners gang together ... this can lead to a monopoly over the whole system. ... the problem is intrinsic to the entire way Bitcoin works ... a minority group of miners can obtain revenues in excess of their fair share, and grow in number until they reach a majority. When this point is reached, the Bitcoin ... the currency ... is no longer decentralized; the controlling entity can determine who participates in mining and which transactions are committed, and can even roll back transactions at will.

My macabre sense of humour was tickled by the IRONY of Bitcoin being destroyed by powerful monopolization! The only thing "new" is the apparent speed with which that process developed. The rise and fall of empires HFT version 2.222 ...

Wed, 11/06/2013 - 20:38 | 4129095 dark pools of soros
dark pools of soros's picture

yawn....

Thu, 11/07/2013 - 02:22 | 4129900 wintermute
wintermute's picture

If a minority group could take control of Bitcoin it would have done so. There is $3b sitting there - not enough for hackers? No, they can't break it - that's the real situation.

 

Thu, 11/07/2013 - 03:36 | 4129966 Radical Marijuana
Radical Marijuana's picture

That remains to be seen, wintermute.

I expect that eventually basic progress in computing power will surpass Bitcoin mining by orders of magnitude within a few more of Moore's law doubling times, IF civilization survives that long ... Possible breakthroughs in quantum computers, or whatever, may be able to break the encryption methods that are now relied upon ???

The article that I linked above was about the emerging accumulation of computing power, not already accomplished. Of course, I understand that Bitcoins are supposed to stop being made when there are 21 million of them, which means that there is a strange race taking place. The more that the value of Bitcoins goes up, the more than the miners are motivated to capture more control or dominance over the computing power that can make new coins.

I would expect that the difficulty of that mining will decease in the future, which may require a new generation of some kind of similar basic idea ???

Wed, 11/06/2013 - 20:49 | 4129131 Lets Buy The Dip
Lets Buy The Dip's picture

one world mafia haha +1. 

This market is never going down again. if it does it will go down faster than monica on bill clintons nutsack back in the day :=)

I have noticed a dislocation between the RUSSELL and SPX. The RUSSELL geting smashed and the SPX holding very well. SEE HERE => http://bit.ly/1aG34J2 Eventually you will see this stop, one of these is wrong and needs to catch up.

Wed, 11/06/2013 - 22:46 | 4129503 sgorem
sgorem's picture

too spooky for this dude. i'll just hunker down in my cave with my guns, my gold, my food, and of course lots of toilet paper.

Wed, 11/06/2013 - 22:53 | 4129517 sgorem
sgorem's picture

and BTW? what happens when the threshold of 21 million bitcoins is reached. also, if it was developed for the internet, it can, and will be corrupted sooner or later. way too much trust in this scene, ie., Chinese, .gov, NSA, fucking crooks.................

Thu, 11/07/2013 - 00:08 | 4129708 TheHound73
TheHound73's picture

Shall I roll a boulder over the mouth of your cave, help to increase your camoflage?

Thu, 11/07/2013 - 02:33 | 4129909 Idiocracy
Idiocracy's picture

bitcoin is already eminently trackable through the blockchain.  No need for Big Brother to reinvent the wheel there.  For the grunts at the NSA and the CIA to mine the data and associate a certain public bitcoin address to a person, for them should be relatively easy.  Bitcoin is not anonymous, it is pseudononymous (and the bitcoin community openly admits that).  The lack of total anonymity will not significantly devalue bitcoin in the long run.  It's virtues in other respects are groundbreaking and numerous

Wed, 11/06/2013 - 20:00 | 4128808 RmcAZ
RmcAZ's picture

My biggest question with Bitcoins is I would LOVE to know how much money and resources have gone into creating these Bitcoins... Including how much electricity (and cost of said electricity) to "mine" these things out of thin electrons. All seems like a waste to me. By the time all of them are "mined", if there was millions of dollars spent on computers, video cards, and electricity just to get them, will it have been useful? Will it have benefitted society in any way? At least with gold, silver, etc they are tangible objects, that have other real-world uses and unique properties. Bitcoins are just 1's and 0's at the expense of all the resources wasted to get them.

Wed, 11/06/2013 - 20:03 | 4128937 Bangin7GramRocks
Bangin7GramRocks's picture

If a Bitcoin is $280 and I want to buy a $10 movie, do they "break it for change"? So you then have virtual glass jars of Bitcoin bits? Food for thought!

Wed, 11/06/2013 - 20:05 | 4128949 CH1
CH1's picture

Food for thought???

It "breaks" to eight decimal places!

Wed, 11/06/2013 - 20:17 | 4129018 Bangin7GramRocks
Bangin7GramRocks's picture

Just bustin' balls. I just find it silly. It's a neat little fad investment like beanie babies and baseball cards. Good for everyone who makes real money playing that game, but I'll pass.

Wed, 11/06/2013 - 20:39 | 4129100 dark pools of soros
dark pools of soros's picture

So you're part of Team Fed?

Wed, 11/06/2013 - 21:07 | 4129184 StacksOnStacks
StacksOnStacks's picture

There is so much hate for Bitcoin on ZH... why is that?  Isn't ZH about learning, finding ways to not use the Government, and ways to protect ourselves against the Government?  I DO own BTC AND Silver (way more in Silver... Physical Bitchez) because I want to make sure I have a way out of this mess.  Why not discuss instead of just trash?  OR gtfo of here.

Wed, 11/06/2013 - 21:15 | 4129220 ebworthen
ebworthen's picture

Discussion is fine, learning is good.

I love the idea of Bitcoin, love it. 

Problem being, it is intangible and over the Internet.

Wed, 11/06/2013 - 22:41 | 4129490 TheHound73
TheHound73's picture

Also one of its main selling points. For physical you have gold and other commodities, why would you want another competitor in the physical realm?  But how do you transfer that physical money cheaply and quickly to somebody on the other side of the planet?  Say for some silly reason you read books.  You wish to read the works of an author who lives in Tasmania.  This author refuses to play with the big publishing houses but will sell you his book directly for silver or bitcoin.  Which payment method would you choose?

Thu, 11/07/2013 - 00:36 | 4129758 Urban Roman
Urban Roman's picture

Increasingly true of the dollar these days.

...

Or any other 'asset' you would care to mention.

Wed, 11/06/2013 - 22:21 | 4129434 mccoyspace
mccoyspace's picture

that was zerohedge from two years ago, not today.

Thu, 11/07/2013 - 02:58 | 4129924 fockewulf190
fockewulf190's picture

I just have a hard time trusting bitcoins.  The Feds will be waging war against it eventually, especially now that another Silk Road has popped up.  Next you are going to hear about terrorists using them to finance operations. 

Wed, 11/06/2013 - 20:06 | 4128954 One And Only
One And Only's picture

Why bother getting onto a device that requires 1's and 0's to come to the internet that requires 1's and 0's to type a message that relies on 1's and 0's to talked about the lack of utility in 1's and 0's?

Wed, 11/06/2013 - 21:09 | 4129198 TheHound73
TheHound73's picture

Why bother with Google, Apple, Microsoft, IBM, and Oracle when we could all just sit around a campfire and sing Kumbaiya while polishing the tarnish off our silver.

Wed, 11/06/2013 - 20:35 | 4129007 New World Chaos
New World Chaos's picture

BitCoin helps the little people to evade all kinds of legal ripoffs including capital controls, inflation, taxes, bank fees, Cyprusing, Corzining, civil forfeiture, etc.  The benefit to society is well worth the few hundred thousand dollars per day spent on power.  Just watching TPTB crap their pants will be worth it.

Wed, 11/06/2013 - 20:51 | 4129108 RmcAZ
RmcAZ's picture

Downvote all you want... to add, I just came across this site:

http://blockchain.info/stats

This site states there have been 4,150 bitcoins "mined" in the last 24 hours. At current market value this is $1,103,900.

Lower on the page it states 65,771 megawatt hours were used in the last 24 hours, which they estimate is $9,865,775.88 at $0.15/kwh. This is a deficit of $8,761,875.88 from the value of the 4,150 bitcoins that were mined. Or in other words, a deficit of 58,352 megawatt hours of electricity has been wasted just in the last 24 hours.

http://www.pge.com/myhome/edusafety/systemworks/dcpp/about/

This power plant near me, Diablo Canyon nuclear facility, creates 18,000 Gigawatt hours of electricity per year. This is equivalent to 18,000,000 megawatt hours per year, or 49,315 megawatt hours per day. Comparing to the numbers above, just the DEFICIT of electricity spent to mine bitcoins is wasting more than the power output of a full scale nuclear power plant. Bitcoin is literally converting energy back into a currency (from which currency was already spent to make the energy in the first place) and it does so at an incredibly inefficient pace, to the tune of -58,352 megawatt hours per day.

This is completely shocking to me... How does this make any sense?

Please feel free to correct me if my calculations are off or if the data from this web site is invalid. I may be a complete dumbass.

Wed, 11/06/2013 - 21:00 | 4129172 seek
seek's picture

My mining equipment (which is 65nm ASICs, not the most efficient) sucks 3.6 KW and with the latest difficulty adjustment, produces ~0.5 bitcoins a day now. That's 86 KWh a day (24 * 3.6) or about $13 in electricity. If all miners were at the same efficiency, 4150 bitcoins would need 713,800 KWh -- so 714 MWh to be produced. That's a fraction of the 58,352 you're showing.

My guess is their calculator is using power estimates from old GPU mining rigs.

 

Wed, 11/06/2013 - 21:07 | 4129192 RmcAZ
RmcAZ's picture

Interesting, thanks for your reply. I wonder were that site pulls their numbers from.

Wed, 11/06/2013 - 21:12 | 4129213 TraitorsHang
TraitorsHang's picture

The power figures are assumptions based on the predominant hardware's efficiency. Given this, most of the figures on that site that use that assumption as a factor are incorrect. The site has no way of accounting for the present state-of-the-art.

Watts-per-gigahash is the new metric.

Wed, 11/06/2013 - 21:16 | 4129230 TheHound73
TheHound73's picture

The coins granted during the mining process are just a reward.  The main purpose of mining is to secure the network against fraud.  Gold mining is in no way shape or form a clean or cheap process.  Yes there is industrial demand for Gold, perhaps commanding a $200/oz price, the rest is consensus valuation based on gold's properties.  Bitcoin has properties that some people seem to value.  These are: decentralization, fungible, divisible, portable, recognizable and scarce.  Sound familiar?

Wed, 11/06/2013 - 21:20 | 4129245 seek
seek's picture

I'm pretty sure they're just using old estimates for power needed per bitcoin. In the past year we've had a block adjustment (cut the number of bitcoins rewarded for mining in half), and the mining hashrate from 20,000 GH/s to 4.1 million GH/s, while watts per GH has gone from about 300 W/GH to 6 W/GH and moving to 1 W/GH.

This time next year energy and workload will be a lot more predictable, but too much is moving right now to track well.

Wed, 11/06/2013 - 21:07 | 4129186 SunRise
SunRise's picture

O.K. Two Corrections and one observation.

#1)  The value of a bitcoin or anything else is not determined by the input cost.  Input cost is simply one determinant of whether an item can be made at all or sold for a profit.  The value of bitcoins are determined by what traders want to trade for them.

#2)  Large portions of those 49,315 megawatt hours per day are "wasted", because the electricity is produced and consumed by the transmission wires or not consumed at all.  Consider what happens when you run a home generator all night.  That generator is consuming fuel whether the juice it's producing is used or not.  To conclude that the use of electricity for mining bitcoins is "wasteful" does not follow - for another reason, because the miners believe it's worth it to pay for the electricity to mine bitcoins.

Observation:  Bitcoins are often touted as "worthless bits", but what are bitcoins?  Bitcoins are a place you can store your labor, just like dollar bills or gold or bread or tootsie rolls or gasoline are places you can store your labor.  Generally, you go to work and they pay you in dollars.  Since the Gov. has it's own printing press, it can fake you out and buy stuff with dollars they created out of thin air that puport to represent production just like your labor does, BUT those printing press dollars are fake, i.e. they have no productive labor behind them, so your labor goes to support two people:  You and the printing press owner.  Since the actual number of bitcoins will be strictly limited, they may prove to be a far safer place to store the purchasing power of your labor versus dollars.

Wed, 11/06/2013 - 21:21 | 4129252 RmcAZ
RmcAZ's picture

#1 - Point taken, this is a good observation.

#2 - I'm not sure where that site that I linked to above calculates their numbers, but i'm thinking it isn't taking electricity loss during transfer into consideration. And point taken on the miners feeling as its worth it to mine. I wonder as the difficulty rises, if the market price does not follow for some reason, will people give up mining?

Wed, 11/06/2013 - 21:10 | 4129201 TraitorsHang
TraitorsHang's picture

What is having a financial system worth to you?

If you consider how much electricity it costs to power all the infrastructure of the gangrenous system of finance that we have today, would that number be lower or higher than the aggregate power usage in the bitcoin community engaged in mining?

Keeping the lights on at your local Wells Fargo branch is not free either.

Wed, 11/06/2013 - 21:33 | 4129298 dark pools of soros
dark pools of soros's picture

you could load your Tesla with miners and plug in for free in city charge spots..

Wed, 11/06/2013 - 21:12 | 4129211 Big Brother
Big Brother's picture

This will probably sounds crazy, it would seem to me that this a is gamble where the present losses are huge, but the potential payoff is much, much greater.  Right now, the USD/BTC is trading at $270, and as you've cited, today's mined value is $1.1 million with a loss of $8.8 million in "extraction costs".  I would theorize that those who accepted present-value loss, view the future potential per-BTC value to be greater.  Based on my napkin calculation (8.8 - 1.1) x 106 / 4150 BTC requires a rise to $1855 USD/BTC or a 687% rise in value just to break even.

Someone with more brains than I needs to calculate the theoretical energy requirement to mine the final BTC.  I wonder if it'd be measured in solar output.

Wed, 11/06/2013 - 21:25 | 4129267 RmcAZ
RmcAZ's picture

I did think about this as well... as the difficulty increases, the market price must follow otherwise people will just quit mining. My two biggest fears for holding bitcoins are government intervention, and competing (newer, "better") online currencies. In theory, one day people could just bail from Bitcoins and buy some other currency, leaving them worthless. Or even on a more gradual scale. In either case, this could affect the desire to continue mining.

Wed, 11/06/2013 - 21:35 | 4129306 dark pools of soros
dark pools of soros's picture

and anyone else could of made a new/better auction site....   sometimes first mover does win the day  (and by first mover I mean first to grab hold of the mainstream, not just some crafty guy being first and it dying in his garage)

Wed, 11/06/2013 - 22:25 | 4129454 mccoyspace
mccoyspace's picture

The miners and the power they consume vaidate each bitcoin transaction. You would need to compare the economoic value of the total volume of bitcoin transactions vs the amount of power used during that same time to do an accurate comparison. 

(these stats are available. I cant get to them right now).

Thu, 11/07/2013 - 02:15 | 4129889 Exponere Mendaces
Exponere Mendaces's picture

And yet no comparisons of how much power the Federal Reserve wastes, all of its assorted branches, and all of the Too-Big-To-Fail-Banks as well. There's a lot of electricity and gas being used up to support the idea of paper token money, but hell, everyone is FINE with that.

The Bitcoin network is doing useful work, even though you think otherwise. Obviously someone "gets it", because we're approaching $300 on a USD/CNY basis rather rapidly. This is just the beginning.

Stack BTC and PMs, because that's the only way you're going to make it out of this coming economic implosion.

 

Wed, 11/06/2013 - 21:31 | 4129292 bunzbunzbunz
bunzbunzbunz's picture

The reasons any currency has value is that someone has to put something in to get it and they can get something out for it.

Last time I bothered to calculate, bitcoin had settled at about $100 and the kW hrs required to produce the average bitcoin cost about $100. This is logical since the average person would only produce a few bitcoins after quite some time. They would then have very little reason to sell them for less than the electricity it took to make them.

And given the fact that bitcoin has been driving the sales of multi-threaded video cards (I wouldn't doubt if ATI/AMD were behind some if the initial marketing of bitcoin) as well as FPGA development, and ASIC prototyping by small business - yes, I would say all the input has had some benefit to society. Maybe not a lot, but definately something.

What people should be thinking about is the fact that the average person with bitcoins has them stored on their Windows PC, which also just so happens to very likely have a trojan/virus (or hundreds) installed on it. Sorry, running anti-virus doesn't catch 'em all. So he/she/it/they who controls the botnet may at some point control your bitcoins. Go long bitcoin start-ups that promise to keep your bitcoins safe :) 

Also, don't forget there are people chillin with a hundred-thousand bitcoins, just waiting to decide it's time to retire. And it's a lot easier to retire with diversified cash than bitcoins.

Wed, 11/06/2013 - 20:53 | 4129148 fonestar
fonestar's picture

Spoken like a true blue ignoramus.

Wed, 11/06/2013 - 21:12 | 4129210 RmcAZ
RmcAZ's picture

Thanks for your thought provoking response.

Wed, 11/06/2013 - 21:01 | 4129177 hankwil74
hankwil74's picture

If you would have spent the last 18 months mining bitcoins, you'd have a lot more money to show for it than the pile of gold that's gone down 20% in value over the same time period.

 

/truth

Wed, 11/06/2013 - 21:15 | 4129224 RmcAZ
RmcAZ's picture

Aside from my concern about energy usage, Bitcoins have much more volatile price action than gold and silver. They are also susceptible to being seized by .gov (what if they shut down all the conversion/exchange sites tomorrow?). They are also susceptible to competition from other online currencies. Based on all of these risks, Bitcoin isn't somewhere where I would want to store any value.

I'm not in support of $ either as it is on a path straight down, but i'll stick with tangible goods with lower risks.

Wed, 11/06/2013 - 22:49 | 4129506 mccoyspace
mccoyspace's picture

To own bitcoins you need to have an address and its corresponding password/key. These can be simply written on a piece of paper and require no computer. Once coins are transfered to that address they require no further maintenance beyond preserving the password/key.  If that is properly safeguarded, the coins are very secure.

Bitcoins are often traded face-to-face for cash and other goods and were for a long time before the advent of exchanges. And shutting down all exchanges would require simultaneous coordination between many different nations.

As for competition, there are already a lot of spin-off virtual currencies (the bitcoin code is open source. people have copied it, tweeked it and launched their own versions). These other currencies have not yet threatened bitcoin. There could be efforts to create new, centralized government/corporate virtual currencies, but these wouldn't have many of the benefits of bitcoin.

 

Thu, 11/07/2013 - 17:49 | 4132610 ich1baN
ich1baN's picture

I don't own bitcoin and I was going to put 1000$ in it after I first learned about it in 2012. 

The price of bitcoin then was $10 a coin. The only reason I did not buy was because my friend talked me out of it. I still do not own bitcoin but I am immensely intrigued by it and I think currencies that help to get us away from fiat (Yuan, EUR, USD, etc) are actually done in the favor of growing the pie in terms of getting people to own gold and silver as well. I am sure many bitcoin players also own gold and silver and probably found themselves before saying that they would never own gold or silver.

Wed, 11/06/2013 - 19:25 | 4128755 Xibalba
Xibalba's picture

"there’s close to $3 billion of real money" <---  $$'$ are not 'real money'  ... just sayin

Wed, 11/06/2013 - 19:27 | 4128767 SgtShaftoe
SgtShaftoe's picture

You are certainly correct. They're not money, they are currency, kinda like diamonds, except easier to carry around covertly.

Wed, 11/06/2013 - 19:35 | 4128800 Xibalba
Xibalba's picture

3billion$$$$ is what the Fed 'created' today...    

Wed, 11/06/2013 - 19:48 | 4128864 Zero Point
Zero Point's picture

$ are like diamonds? My wife would disagree. As would my local mechanic. If I offered him a diamond I reckon he'd punch my face off.

Wed, 11/06/2013 - 19:25 | 4128757 SgtShaftoe
SgtShaftoe's picture

I'm guessing the Treasury and BIS have control of Silk road's "liberated" bitcoins. I'm sure they're playing with various scenarios to try to panic the BTC exchange market at some point to paint the tape.

Bitcoin doesn't seem to be being very manipulated as of yet, but it will be!

Still it seems like a good method for diversification of assets.

Wed, 11/06/2013 - 19:36 | 4128809 putaipan
putaipan's picture

silkroad 2.0... check. invention of 'dark wallet" ... check. at this point bitcoin seems unstoppable because people want it.

Wed, 11/06/2013 - 20:07 | 4128965 CH1
CH1's picture

silkroad 2.0... check. invention of 'dark wallet" ... check....

Thousands of intelligent, motivated young people... CHECK AND MATE!

Wed, 11/06/2013 - 21:08 | 4129194 ParkAveFlasher
ParkAveFlasher's picture

Wait, are we talking about iPhones here?

There was a time when "full faith and credit" was a universally accepted truth, accepted by an entire society who knew nothing but prosperity. Claims of infallibility should bear the evidence of history. Whatever a man can make, a man can unmake.  It's more than a fad.  

I debate a family member over btc vs au.  I showed him a krugerrand.  He asked if it was real. I asked him the same of his btc balance.

Thu, 11/07/2013 - 02:17 | 4129894 Exponere Mendaces
Exponere Mendaces's picture

He then showed you a cell phone, but you fell over backward as demon voices came as if from nowhere. Stunned and frightened, you cowered under the harpsichord until your manservant said the coast was clear.

Where does ZH get these people, the ones who can't deal with the abstract?

Thu, 11/07/2013 - 06:54 | 4130101 ParkAveFlasher
ParkAveFlasher's picture

Good luck with your bitcoins.  Let me know when beta testing is complete.

Wed, 11/06/2013 - 19:38 | 4128818 willwork4food
willwork4food's picture

That's a good question. We know how they got to shut down Silk Road, but how did they confiscate everyone's bitcoins if the owners only had the keys?

When BC began I mined for a while and got a few coins, but lost the key. What happens to those coins? Are they lost forever?

Anyone in BC know the answers?

Wed, 11/06/2013 - 19:43 | 4128839 SgtShaftoe
SgtShaftoe's picture

From what I've read, it seems they only got the Dread Pirate's BTCs. Probably because he used shitty OPSEC in storing them on his system. A forensic team probably broke his key because it was stored using back-door installed encryption.

I don't know about your lost coins.

Wed, 11/06/2013 - 19:50 | 4128871 willwork4food
willwork4food's picture

I'm assuming Dread Pirate was a vendor? Thanks for the info Sarge!

Wed, 11/06/2013 - 19:55 | 4128898 SgtShaftoe
SgtShaftoe's picture

Yes, the Dread Pirate Roberts was a pseudonym for the guy who ran Silk Road. He did some stupid shit and got nailed by the FBI, then they seized his computers, and now they'll crucify him.

Glad I could help.

Wed, 11/06/2013 - 22:55 | 4129529 mccoyspace
mccoyspace's picture

The Feds found and seized the server. Forensics uncovered the key for the 'day to day' bitcoins stored on that machine. (like a store's daily cash receipts). They later got a hold of a bigger collection of coins, either through finding the key stored on other computers of his that they seized, or through questioning him (maybe he gave them up as an exchange....).

 

If someone looses the key to the address that holds their bitcoins then they are irretrievable forever. The ultimate boating accident.

That is testament to the cryptography that makes up the system.

Thu, 11/07/2013 - 01:27 | 4129837 aminorex
aminorex's picture

wrong.  they got the hot wallet, yes, but the other coins were from vendors, not from DPR.  I seriously doubt that Ulbricht was DPR.  this much is known:  the vast bulk of DPRs booty is still out there.

Wed, 11/06/2013 - 20:01 | 4128929 miro1a
miro1a's picture

Coins lost due to lost passphrases are lost forever.  Kind of like burning a wad of cash.  Unless, of course, the passphrase can be cracked one day in which case your coins would be worth nothing at that point anyway.

Wed, 11/06/2013 - 20:24 | 4129043 Bangin7GramRocks
Bangin7GramRocks's picture

Why can't the NSA crank up the super computers that would ass fuck Watson and mine the living shit out of bitcoin and flood the "market". We are taking about less than $3 billion in the world! There is $3 billion in Friday's gift cards laying in drawers. It's a laughable amount. Dot.Gov can control it anytime it wants.

Wed, 11/06/2013 - 20:41 | 4129107 dark pools of soros
dark pools of soros's picture

ohhh I'm scared so everyone else should be scared!!!   they control us allLLL!!!

 

Wed, 11/06/2013 - 20:42 | 4129109 seek
seek's picture

In order to place bitcoins into the ledger, you have to validate the transaction via the mining process. It's a collaborative effort -- and the more computation power applied, the more difficult mining is, as it automatically adjusts to additional computing power.

So anyone can through as much compute power as they wish at bitcoin, and all it results is the same amount of bitcoin as was mined before the compute power showed up. It's really a beautiful architecture.

Wed, 11/06/2013 - 20:49 | 4129129 Bangin7GramRocks
Bangin7GramRocks's picture

OK. So they run 5,000 Dells. Are you fucking serious! You are so naive to think it is untouchable. Good luck.

Wed, 11/06/2013 - 21:06 | 4129190 seek
seek's picture

I'm currently running ASIC mining rigs that compute as much as 50,000 PCs do.

You really need to read up on bitcoin and how the protocol is implemented. Simply throwing compute power at bitcoin won't break it -- the harder you push on it, the harder it pushes back.

Wed, 11/06/2013 - 21:23 | 4129256 TheHound73
TheHound73's picture

Bitcoin is currently rocking a Distributed Hash Rate of 3,825,155 GH/s, or the equivalent of about 4000 supercomputers of which only a few dozen exist around the world.

Wed, 11/06/2013 - 21:41 | 4129326 dark pools of soros
dark pools of soros's picture

its been swinging over 4Ph since the diff change

Network total 4604.543 Thash/s

 

Wed, 11/06/2013 - 20:55 | 4129159 AgentZeroM
AgentZeroM's picture

The protocol implements a feedback loop that throttles the creation of new money. If bitcoins are created faster than what is dictated by the protocol (currently 25 xbt per 10 minutes), then the problem of solving the arbitrary puzzle is made more difficult. If hash power is removed from the network (like the exchange rate drops below a threshold that makes it profitable), then the protocol recognizes that they are not being created fast enough and the problem of solving the arbitrary puzzles is made more easy. This feedback loop corrects itself every 2016 blocks (or about 2 weeks based on the 10 minute block time). Additionally, the reward for solving these blocks gets divided in half every 210,000 blocks (or 4 years based on the 10 minute block time) - and this is what mathematically ensures no more than 2.1 quadrillion monetary units will ever be created.

Wed, 11/06/2013 - 21:19 | 4129241 ParkAveFlasher
ParkAveFlasher's picture

Thanks for that informative comment.  Would you say that the price of bitcoin is now fluctuating because money printing is happen8ng at a faster rate btc creation?  Do you think it is used as some kind of an arbitrage play?

Wed, 11/06/2013 - 21:29 | 4129284 TheHound73
TheHound73's picture

When you say fluctuating you mean doubling in price over a month?  Well, very few people have heard about Bitcoin but when they do, some of them go out and acquire them.  This demand finds equilibrium with the supply of bitcoins already owned at a price their owners are willing to part with them.  I think much of the price increase is just new exposure.  Bitcoins are very scarce and of known supply, and they perform monetary functions beautifully.

Wed, 11/06/2013 - 22:58 | 4129540 mccoyspace
mccoyspace's picture

The price is following an exponential adoption curve like other technologies we've seen this century: telephones, internet, email, etc.

Thu, 11/07/2013 - 00:52 | 4129786 Urban Roman
Urban Roman's picture

The price is still increasing because of more people hearing about / discovering / getting interested in it.

I was pretty sure it had reached saturation at about $120 or so, earlier in the year, but it obviously has not. Every time a story breaks in the popular media (Silk Road Dude Arrested), more people hear about it, more people who are worried about the dollar and the destruction of their savings, and more people jump in. I got a few around $20, but continue to be amazed by the rate of ascent.

Thu, 11/07/2013 - 01:29 | 4129839 aminorex
aminorex's picture

PQ=MV.  as long as PQ keeps going up, the value of BTC goes up proportionately.  when the whole black market is in BTC, it will be at least 27,000 USD2013 per BTC

Thu, 11/07/2013 - 01:34 | 4129845 Urban Roman
Urban Roman's picture

Wish I had been like that Norwegian dude, and bought $150 worth when they were at 0.001 or so, and then forgotten about them until now.

Thu, 11/07/2013 - 02:13 | 4129887 putaipan
putaipan's picture

i wish i'd sold the pizza .

Wed, 11/06/2013 - 23:45 | 4129669 digi
digi's picture

They confiscated what is called a hot wallet. These were the bitcoins that were currently in transaction at the time of the shutdown. On a poorly designed server you might just have the key sitting on the server that facilitates all the transactions taking place as this would be the easiest way to do it and this is probably what happened. All of the customers of silkroad gave up their bitcoins to silkroad in order to use them there. Imagine going into a shop and the shop owner requesting your funds upfront for him to hold while you browse around and he will return what you don't spend once you leave. It's a silly premise but this is how the site operated. There's no need for it to have been this way and all funds could have been sent to the customers personal wallet immediately but as can't be stressed enough this is new technology for everyone involved and there will be many improvements in both the protocol itself and the understanding of it's users going forward.

As for your forgotten coins they are lost forever. You basically just equally donated to all bitcoin holdings by reducing the supply by the amount of coins you burned.

Wed, 11/06/2013 - 20:00 | 4128918 Deathrips
Deathrips's picture

From 10/23-10/25 144k bitcoins for a total of about 29 M USD were sold to dump the price.

Guess how much they seized from DPRs harddrive and announced it on the 26th of Oct?

144k bitcoins valued at 29M.

 

No way to confirm..but seems like an idiotic govt thing to do, to sell with no stop.

 

RIPS

Wed, 11/06/2013 - 21:28 | 4129274 Alpha Monkey
Alpha Monkey's picture

Actually there is a way to confirm this... Here is the address of the seized wallet with the balance shown to still be 29K btc

http://blockchain.info/address/1F1tAaz5x1HUXrCNLbtMDqcw6o5GNn4xqX

For some humor, read the sotashi's donated to the FBI to get a chance to send them a message attached to it.

Wed, 11/06/2013 - 21:47 | 4129341 RaceToTheBottom
RaceToTheBottom's picture

No fractional bitcoining for the gov.  That was a test, 

With gold the gov have lots more tools (fractional golding, Leasing fake ownership, ETF paper gold, etc.)

The gov will regroup and formulate a new plan

Wed, 11/06/2013 - 23:10 | 4129546 mccoyspace
mccoyspace's picture

That is an interesting idea and worth thinking about. A lot of the standard tricks won't really work with bitcoin. They will have to think of some new ones and it won't be easy. no naked shorts.

Wed, 11/06/2013 - 20:39 | 4129097 seek
seek's picture

It's inherently difficult to manipulate bitcoins because they can't manufacture in volume to sell at will.

Two aspects of bitcoin -- the guaranteed supply limitations and the transparancy of the public ledger -- have to be giving them fits. Unlike fiat, COMEX gold, etc, they can't just whip up their own ledger to sell naked shorts; to sell bitcoin means to transfer it on the ledger, and to make that transfer you actually need to have bitcoin in the ledger.

They can definitely cause some one-off crashes dumping the silk road coins or whatever, but the sustained manipulation we see in so many other markets is essentially impossible, and moreover, any manipulation can be detected almost immediately in the blockchain.

I expect almost all the manipulation to be on the regulatory and currency exchange side, since bitcoin itself is virtually untouchable to them. I am positive there will be glitches and traps set, but this is a completely different animal than previous markets due to the rigid enforcement of the protocol.

Wed, 11/06/2013 - 20:44 | 4129114 dark pools of soros
dark pools of soros's picture

and all the Dont Tread on Me people are completely missing the exact boat they always wanted but it just aint what they dreamed so they sit stuck on their pile of manipulated gold

Wed, 11/06/2013 - 20:54 | 4129154 seek
seek's picture

I am genuinely surprised by the anti-bitcoin crowd here. It offers a lot of the things a traditional goldbug would want.

All I can offer up to skeptics is for them to imagine the Fed, COMEX, NYSE, GLD, etc all having an online real-time audit web portal open to everyone to examine any account and any time and track any transaction ever made in their entire history, and that any transaction that was "naked" without a 1:1 backing would be rejected by every single participant in the market. The world would be a very different place than the opaque manipulation of today.

Bitcoin is the entity that supports this level of auditing and transparency. That's why they'll have to attack it in ways we haven't seen before, because the usual sneaky manipulation either isn't possible or would fail miserably.

Wed, 11/06/2013 - 21:18 | 4129237 Tinky
Tinky's picture

Being a patient sort, I have absolutely no regrets about owning gold. However, your (obviously trenchant) insights into Bitcoin are much appreciated.

Wed, 11/06/2013 - 19:26 | 4128758 DaddyO
DaddyO's picture

So if the CB's can have their basket of currencies, why can't the anti-CB's do the same?

Let me be clear, I'm not in the bitcoin camp, but no matter how crooked the pot, there's always a lid to fit...

DaddyO

Wed, 11/06/2013 - 20:09 | 4128981 CH1
CH1's picture

So if the CB's can have their basket of currencies, why can't the anti-CB's do the same?

They can!

If you're interested, look up "Open Transactions."

Wed, 11/06/2013 - 19:26 | 4128759 fonzannoon
fonzannoon's picture

I think I'm going to throw a few bucks at this bitcoin. Fuck it.

Who gives a shit anymore? I want anything except dollars.

Wed, 11/06/2013 - 19:31 | 4128785 DoChenRollingBearing
DoChenRollingBearing's picture

The new $100s are pretty though, and surprisingly hard to get.  Maybe next time I go to Peru that will give me a premium when I exchange them (harder to counterfeit).

Wed, 11/06/2013 - 19:33 | 4128790 fonzannoon
fonzannoon's picture

My russian barber held one up the other day and said out loud to his shop full of customers "look at this piece of shit....this is not money....it's shit paper".

Wed, 11/06/2013 - 19:35 | 4128802 sessinpo
sessinpo's picture

DoChenRollingBearing      The new $100s are pretty though, and surprisingly hard to get.

 

I see the new $100s every day. Not hard to get. What is interesting is the first batch of 100s are dates series 2009 and then are just being released now.

Wed, 11/06/2013 - 19:40 | 4128828 DoChenRollingBearing
DoChenRollingBearing's picture

"Series 2009 -- Timothy Geithner"

Sometime soon the Jack Lew's will be coming out, probably 2013s.

Thu, 11/07/2013 - 01:49 | 4129794 Urban Roman
Urban Roman's picture

Oooo, Mister Squiggles. I can hardly wait

(I didn't red-arrow you, by the way)

Wed, 11/06/2013 - 19:42 | 4128837 putaipan
putaipan's picture

mr. do chen- for a long long time (3 reprints ago) i have seen reports that for 100's & 20's it is the old ones you want outside of the u.s. especially the pre-gietner ones. if i travelled as much as you- i would be taking 9999$ of those out with you everytime. come the big reset- they are suppossed to stay in use outside the states at near their old value, devalued inside the border and not allowed back in. conspiranoid speculation, but i'd say greenbacks outside of the u.s. are a very good store of value.

Wed, 11/06/2013 - 20:05 | 4128955 DoChenRollingBearing
DoChenRollingBearing's picture

+ 1

Already been doin' some of that, putaipan, thanks!

Thu, 11/07/2013 - 00:00 | 4129698 digi
digi's picture

I often wonder if this might be the last new $100. Or perhpas maybe we start getting new $1000's instead, lol.

Wed, 11/06/2013 - 19:40 | 4128819 Tinky
Tinky's picture

Hang tight, Fonz, you're first going to need to employ a Back-Propagation Network coupled with a Bayes Decision Rule in order to develop an accurate Coppock Curve. 

Then, using Kelly's Law, identify the MACD peak, and use the result as a basis for a nascent Seasonal Autocorrelation.

Finally, having consulted the Stochastics Oscillator, you'll be in a position to find the ideal entry point.

Don't mention it – just here to help.

Tink

Wed, 11/06/2013 - 19:50 | 4128874 Zero Point
Zero Point's picture

Can't hurt mr fonz. I'd wait till the next scandal. Shouldn't take more than a week or two.

Thu, 11/07/2013 - 04:08 | 4130000 terryfuckwit
terryfuckwit's picture

listen you can check my history i have been pro bitcoin all the way very pro zh and pro the metals..dont bet your shirt. I have doubled my ag stack thanks to btc.. and am still got bout 4 to 1 metal to btc

Wed, 11/06/2013 - 19:29 | 4128768 Citium
Citium's picture

At what point could the government arguably step in and buy a shitload of BTC only to have control over the market and cause subsequent price smashes?

They could always pull a gold and silver and start offering BLD next year or BTCLD so you can buy paper bitcoins. 

Wed, 11/06/2013 - 19:33 | 4128783 SgtShaftoe
SgtShaftoe's picture

Like I said, at some point they'll definitely try. I'm sure they're simulating those very scenarios as we type to come up with the best bang for their Bitcoin. However they risk having it backfire, so they'll probably do some test raids first.

They'll also have to quietly accumulate a ton of Bitcoin from thousands of various accounts, otherwise the blockchain could just void the government intervention out of the system.

Wed, 11/06/2013 - 19:34 | 4128794 Duke Dog
Duke Dog's picture

Sir, what do you think they've done?

Wed, 11/06/2013 - 19:38 | 4128817 SgtShaftoe
SgtShaftoe's picture

We won't know until they try to really crash it. I would guess they've already started the accumulation phase. It would be foolish however for them to pound the exchange with the silk road BTCs. Everybody would know exactly what happened and why.

Have they done test crashes already? I honestly don't know. Maybe Nanex will start studying BTC flows.

Wed, 11/06/2013 - 19:42 | 4128835 DoChenRollingBearing
DoChenRollingBearing's picture

Nanex!  That would be a great new project for them.

Thu, 11/07/2013 - 01:33 | 4129842 aminorex
aminorex's picture

the fbi is statutorily required to auction the seized coins once they no longer have evidentiary use.  i expect them to be sold to second market or the winklevoss fund

Wed, 11/06/2013 - 19:43 | 4128841 fonzannoon
fonzannoon's picture

Who gives a shit anymore? I mean that. I'm not even kidding. Who gives a shit? There is no point in saving money anymore for anything. Buy some stocks. Buy some gold. Buy some bitcoin. Buy some alcohol. Laugh at your fidelity rep who is telling you to follow the green line. Whether this goes on for 1 year or 15 years it is clear that every promise will be broken and you will only have yourself to rely on and those close to you. Have a beer. Laugh it up. Enjoy what you can.

Wed, 11/06/2013 - 19:48 | 4128863 Bay of Pigs
Bay of Pigs's picture

Time to hit the Islands, walk the beach and hammer a couple of Mai Tais. Maybe this old vet will even smoke some weed.

Fuck it all. Nice call fonz.

Wed, 11/06/2013 - 20:09 | 4128976 DoChenRollingBearing
DoChenRollingBearing's picture

fonz & Bay

You guys are beginning to sound like old friends...

***

Take care, both of you, though it sounds like you are already there.   :)

Wed, 11/06/2013 - 19:59 | 4128914 NOTaREALmerican
NOTaREALmerican's picture

Re:  Buy some stocks. Buy some gold. Buy some bitcoin. Buy some alcohol.

Yeah,   agree 100%,  it's all just insanity at this point.  The only thing I like about gold is that it's not an investment at all.   It's almost surely going to go down in "value".   

All it is, is insurance.    You'll probably be able to  "Have a beer. Laugh it up. Enjoy what you can"  a bit longer with some gold in hand, but beyond that the sociopaths win.

Wed, 11/06/2013 - 19:28 | 4128773 Tasty Sandwich
Tasty Sandwich's picture

Is there any way to know if someone with a direct line to the Federal Reserve isn't just using a bunch of free printed dollars to run up the price and then crash it?

It's a novel idea, but it threatens the status quo.  Why wouldn't they just bid up the price and then crash it to destroy its credibility?

Wed, 11/06/2013 - 19:36 | 4128804 Duke Dog
Duke Dog's picture

Exactly!

Wed, 11/06/2013 - 20:34 | 4129076 MisterMousePotato
MisterMousePotato's picture

Why ... that's diabolical!

Wed, 11/06/2013 - 22:31 | 4129463 tsx500
tsx500's picture

uuhhh...wait...they would never do anything like that ... right ? ? !

Wed, 11/06/2013 - 19:32 | 4128787 Duke Dog
Duke Dog's picture

I think it is a central planning operation. When appropriate, just like the other digital bullshit, they will crush it. They are simply trying to get the bigger FOOLs onboard, and make you never, ever think about putting your faith in anything but your Nanny.

Wed, 11/06/2013 - 21:58 | 4129379 dark pools of soros
dark pools of soros's picture

you sheep here are very well trained!!!  why do you come to this site??

battered stacker syndrome

Wed, 11/06/2013 - 19:33 | 4128792 Boondocker
Boondocker's picture

Bitcoin is still based upon faith in its value.....just a cool form of fiat.

Wed, 11/06/2013 - 19:40 | 4128826 sessinpo
sessinpo's picture

Any form of money is based upon faith, even precious metals. The use of some measure such as gold, bitcoins or fiat is an attempt to standardize the measurement of said faith of value. The problem becomes in the manipulation of that measure which we have seen in fiat.

Wed, 11/06/2013 - 20:55 | 4129161 Sean7k
Sean7k's picture

You have no idea what money is. Commodity monies have values that NEVER go to zero- that is why they are NOT faith based.

Wed, 11/06/2013 - 22:00 | 4129384 dark pools of soros
dark pools of soros's picture

yes, I always can get me chain mail, buckler and broad sword for 10 gold pieces in any barter town in the land!!

Wed, 11/06/2013 - 22:52 | 4129512 ForTheWorld
ForTheWorld's picture

Values that never go to zero what? Dollars? Euros? Yen? Number of people who accept your particular commodity of choice?

Wed, 11/06/2013 - 19:41 | 4128834 resurger
resurger's picture

plus one

Wed, 11/06/2013 - 19:46 | 4128851 RmcAZ
RmcAZ's picture

The biggest threat to Bitcoins besides government intervention? Another Bitcoin. What happens when someone makes a "better" online currency? Everyone bails and Bitcoin is worth $0.

Wed, 11/06/2013 - 22:02 | 4129392 dark pools of soros
dark pools of soros's picture

eBay so worried about other auction sites.....   try again

Wed, 11/06/2013 - 21:38 | 4129318 TheHound73
TheHound73's picture

Bitcoin is stateless, voluntary, known-supply currency.  The opposite of fiat.

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