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As Bitcoin Plunges 25% On Government Scrutiny, The First BTC "Fair Value" Reco Has A Stunning Price Target
It took literally minutes following our report from yesterday that in addition to the ECB and Fed, it was the Senate's turn to finally shine the spotlight on the most notorious electronic currency with a hearing titled "Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies" next Monday, for Bitcoin to tumble 25% from its all time high just shy of $400, to $290 within 12 hours, in large part answering our rhetorical question if "the one thing that can finally end the dream of Bitcoin holders arrive soon: when the government, and existing monetary authorities, start taking it seriously." They appear to be doing just that, which is why additional upside from here may be in the eye of the Cray supercomputer-armed NSA beholder.
So yes: Bitcoin is volatile. Very. That much is clear. But what is not so clear, and perhaps a key reason for this volatility, is just what the fundamental, or intrinsic value of BitCoins is when one strips away the pure euphoric momentum to the upside or downside.
To answer that question, we go to Raoul Pal, head of the Global Macro Investor, and his November 1st recommendation to "Buy Bitcoins"(when BTC was $210 so nearly a 100% return in 1 week) which among other things attempts to "value BTC using a macro framework" or, in other words, the first supply-demand driven fair value assessment of BTC.
His take, and price target, in a nutshell:
A fudge, but not a stupid one
Let’s use a broad guesstimate. One Bitcoin should theoretically be worth 700 ounces of gold or pretty close to $1,000,000, if we adjust existing supply of both to equal eachother.
One BTC is currently worth 0.14 ounces of gold.
That gives BTC an upside of 5000 times to equal the current price of gold, supply adjusted. Clearly, I and everyone else believes that Gold may well be much higher than here in the next 5 to 10 years, thus versus the US Dollar the upside for BTC could be multiples of that.
Now, before you shake your head, simply go back to the chart of Gold versus the US Dollar and just recognise that it has risen 8750% since the 1920s. And just remember that Microsoft rose 61,000% from its IPO to it’s peak.
Considering what we know about the world, I personally believe that Bitcoin may well explode in value as more and more people begin to use it.
If you stuck $5,000 into Bitcoins and each Bitcoin did go up to a gold equivalent of let’s say, only 100 ounces of gold (not the potential fair value of 700), then at current prices your Bitcoin stash would be worth $3.3m.
Now that’s what I call a tail-risk option. It’s either worth zero or it’s worth a truly outstanding amount of money.
I bet you never thought you’d see this in a macro publication. But I’m serious. This just might work.
Read on in the attached pdf below (link)
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Wow, just wow.
The only truth is that people seem to be the most stupid when it really counts. Is it just age? Upbringing? Conditioning to never accept anything outside the system? I suppose when BTC continues to dominate we'll have the answers to these questions, as all the people here foam at the mouth and fall over backwards saying "It ISN'T REAL MONEY" over and over.
Fucking idiots.
One question I do have for all you Bitcoin fanatics is this: you all seem to assume that Bitcoin is, and will always remain, "The One", the ONLY single cyber-currency.
But what happens when (not if) there arises an equally strong competitor to Bitcoin (I realize that there are others even today, but none as popular as Bitcoin) ... then another ... then ten .... then many? Will that not undercut the support and interest that you assume will always flow to Bitcoin, and Bitcoin only?
I suppose that one could argue that "the market will sort it all out", and that would be as it should be. But I fail to see why Bitcoin is unique, and why it will or should remain unique.
Traction.
Hey, I got a bright idea! We could just look at the total number of downloads for competing crypto-currencies. If we see any that seem to be popular we could review it's white papers and talk to the devs. If we like it we could buy it. If we don't like it we could avoid it.
Bitcoin is not real money. Nobody is saying that here on either side. Bitcoin is however a real currency.
Have transponder 8 send uplink code red to the Annunaki!
Fonestar has suffered a memory leak and is now mining Bitcoin instead! Suspect recent flash-player update....
You keep referencing the fact that the founder of Silk Road had his bitcoins seized and somehow this is evidence that bitcoin is a flawed system.
I know you LOVE gold (as do I)
Perhaps you've heard of this fellow named FDR...
Just because the government can steal something doesn't mean the asset is flawed. You can store bitcoin on a paper wallet (the phyzz you love) and hide it anywhere.
I just learned about a currency that exists almost entirely in electronic form, is not backed by gold or anything at all, and is used for thousands of times more illegal activities than Bitcoin...we better outlaw it. Oops it's called the USD.
Um oh er but I also heard about a technology that is the main way child pornography is distributed, we better outlaw that too. Oops it's called the internet.
I don't recall ever having said that. Please point out where I make that claim. Every technology is ultimately hackable, in one way or another. Cash can be duplicated. Gold can be faked. And online security can be breached.
But is it as trivial as some, you included, suggest? No, it isn't. Cracking SHA-256 is anything but a trivial matter - and it does not matter one iota how many downvotes I collect - the likelihood that the Feds got the password through a more conventional matter is almost infinitely higher than them breaking the algorithm in question. In fact, here's the guy facing a lifetime in jail, potentially receiving an "offer" for a cut-down sentence in return for the password.
Hey, after all, that's the argument usually used against BTC in the first place. So it should resonate with some of you.
Supposing DPR does not reveal his private keys to the feds, the feds have helped the value of Bitcoin by removing those from circulation thus increasing the scarcity of Bitcoin.
EscapeKey - you seem to be very knowledgeble in the technology behind BTC. Can you comment on
Bitcoin Is Broken, please?
http://sufiy.blogspot.co.uk/2013/11/bitcoin-site-is-hacked-with-1million-of.html#
Best!
dude left his bitcoin wallet's private key available for hackers to find and use it to open and clean out his bitcoin wallet. Basically he left his stuffed wallet on the dashboard of his car in a Wal Mart parking lot with the window down. Someone wandered along, spotted it and took it.
This has absolutely nothing to do with the bitcoin "system" itself, it was simply carelessness on his part that his passwords were so easy to find and use.
I have only 9 toes...
Then you should by all means sign up for the Free Toejam & Shit Army at your local Dept. of Health & Inhuman Services Eminently Hackable Website.
You can keep you nine fucking toes if you like them
your other 9 toes are worth more now since 1 of them is no longer in existence.
LMAO...1BTC worth 700 oz of gold? yes till the first black-out/hacker/gov.action makes them go back to ZERO =intrinsic value
His password was so secure and encrypted.. he had to write it down
"In the end only the high end and deep pocketed will be mining."
You mean like J.P. Morgan Chase and the FED?
...or the NSA.
Better off mining with this ...
http://s1296.photobucket.com/user/incompletefusion1/media/Picture297_zps...
LOL, I've used those... northeast of Sacramento, CA... got about 1gm of gold for a good days work!
That's better than your four-day haul of 0.00000461 BTC.
Yeah, but he didn't work for that Bircoin.
I'm assuming that he had to work to pay for the hardware and electric bill.
...and he paid for all those gold connection points in his proc and memory cards...
Even graphics cards won't cut it now. At the start of the year my GPU miner had about 1 gigahash/sec performance, and generated about 0.05 bitcoin a day. I now mine with 600 times that performance (600 GH/s) and get 0.5 bitcoin per day, so it's taken 60X the performance to just stay in the same place.
Mining isn't cost effective, you're far better off buying.
All ASIC these days.
I stopped mining back in July, despite getting free electricity. Despite a triple-7970 setup, there just wasn't any real return.
Who has the most powerful computers? DARPA, CIA, NSA, FBI...and other big govts. No wonder the Chinese govt gave a nod to it.
There's a huge difference between general purpose computing - or even GPGPU arrays - and ASICs.
Bitcoin mining these days is almost exclusively ASIC. And bitcoin-related ASIC SHA-256 hashrates have increased beyond that of TOP500.
The govt has the most powerful systems for cracking codes. The NSA invented SHA256.
Yes, the NSA invented SHA-256. No, all expert cryptographers don't work for the NSA.
As for your - unsubstantiated - claim they have the most powerful systems for cracking codes, that's certainly a possibility. And they kind of need them if they want to go through 2^256 combinations to reverse a hash.
In fact, current BTC hash rate (according to http://bitcoinwatch.com/) is [Network Hashrate Terahashs/s: 3862.57]. Rounded up to the nearest power of 2, that's 2^52. In other words, that's 2^(256-52) = 2^204 seconds remaning before ONE hash is broken.
Some researchers argue that you'd need to divide the 256 by 2. In which case we're talking 2^(128-52) = 2^76 seconds, or about 2,395,924,141,486,375 years at current hash rates.
Titan gets about 12 Thash/s and costs $97 mln. Currently the Bitcoin network has close to 5000 Thash/s.
The argument that the government has the secret technology to hack Bitcoin at any time is like saying the government has the secret technology to loacte any goldcoin in the country, buried or not. Such claims are outright stupid.
Hey, the government isn't even able to set up simple website.
"Hey, the government isn't even able to set up simple website."
The govt is a big Orwellian conglomerate that devotes its resources to spying. It doesn't give a dang about your health.
Why do you think there is something ASIC can do that DARPA, NSA, systems can't do?
What is the "huge" difference?
How do you know DARPA, NSA, etc don't have the capability to exceed ASIC?
"Exceed ASIC" - what the fuck are talking about?
ASIC = application specific integrated circuit, ie, hardware tailored specifically to do one job, and one job only. They're downright terrible for performing any other task.
Now, please explain to me how you "exceed ASIC" because I sure as fuck am all ears here. And don't give me more nonsense about phantom quantum computers.
You know for a fact they can't when we have govt insiders admitting they are near to having the ability to spy on all human generated information and hang onto it forever.
So ASIC circuitry performs one function well with less resources, but the govt has virtually unlimited resources with top secret advances in technology.
Oh ok; vague phantom technology. I suppose it makes a break from the usual unicorn quantum computers.
Oh btw, I have invented the quark PC. It is a quadrillion times faster than quantum pcs and consume no electricity. Posting this statement makes it fact, and no further proof of evidence is required.
I gave you a statement that speaks volumes to the govt's ability.
If the government has all these secret technologies, why they haven't done so many things yet? Why do they wait so long and waste time with Senate hearings on Bitcoin?
There would be no reason for top-secret clearances on technology if it was all public. How can people without inside info say the govt doesn't have systems that can mine better than systems available to the public?
I don't know what they are ultimately up to with the hearings.
"Why do they wait so long and waste time with Senate hearings on Bitcoin?"
Maybe they want to know more about it so they can invest in it before they destroy the dollar
I gave you a statement from a govt insider that speaks volumes to the govt's ability.
"Exceed ASIC"
as in between a DARPA or NSA's mining success and ASIC Bitcoin mining success.
I don't believe you can say DARPA can't beat it unless you have top-secret clearance and know their systems.
What you're saying is it's either ASIC or quantum with nothing in between capable.
---
"In fact, current BTC hash rate (according to http://bitcoinwatch.com/) is [Network Hashrate Terahashs/s: 3862.57]. Rounded up to the nearest power of 2, that's 2^52. In other words, that's 2^(256-52) = 2^204 seconds remaning before ONE hash is broken."
It depends on the power of the system doing the processing. Do you know the combined power of resources the govt would be able to devote to it? Do you really believe this govt would invent SHA256 and give it up for public use if it couldn't crack it? THIS GOVT?
You know, I could carry on this debate, but there's no point. You don't know the first thing about technology, but yet, that doesn't stop you from parading your expert opinion about in public.
My time is better spent elsewhere. Enjoy your pointless debate from your corner in the village.
SHA256 most likely can't be cracked.
But you know what? Satoshi Nakamoto was a paranoid one. He presumed it might be. That's why bitcoin is based on the SHA256 hash being run twice, with the input of the second hash coming from the first. So the "break" (as in not brute forcing) bitcoin, you hve to run both hashes in reverse, and if you know much about how hash functions work, you'll know while breaking one is a remote theoretical possibility, breaking two with their input/output connected is an impossibility.
Good try escape key, but explaining Bitcoin to these people is like explaining to cavemen that a jet plane will fly, even though it doesn't have feathers or a beak.
They just seem incapable of learning anything new, and applying logic to it.
You need ASIC bitcoin mining gear to make any sense at this point... unless you get free power from some place. Then you can slam some high end video cards in a PC and profit. The exception is if you have 1000s of zombie PCs infected with virusses you can execute mining code on all of them at once. :)
Does this mean I can't expect any results from my Raspberry Pi? Darn!
So these are created out of thin air? Ok, created by energy, labor, and equipment. (Sounds like the Fed's fiat).
Once upon a time some guy named Adolph decided that the value of his country's currency would be directly linked to his country's labor output. That was a better idea, but the competition wasn't too happy with it.
You lack understanding of bitcoin. There is a fixed maximum number of bitcoins that can be "mined" , then there will be no more created. It also gets harder and harder to mine them as time goes on.
SafelyGraze pointed out the line in bitcoin.h yesterday, showing the monetary supply to be limited to 21M(?) x COIN. That 21M can be 42M, or 84M, or 6.02M x 10^23.
So?
Do you know the difference between source code and deployed executables?
Ie, I worked on a project which was released a few years ago. I can go back and chance the source code, but it won't make all the millions of active users suddenly experience new behaviour.
I'll remember that when they start cranking the Tucker Telephone.
I write all levels of software and design hardware for a living, so yes.
Of course you can't change rolled out executables... I'm thinking about this in the term of a few years of development, EscapeKey. Okay, we have a few million copies of this stuff out, but out comes big bro sploogle or someone or the other and ups the baseline computation speed three or more orders of magnitude.
I'm not aware of the ownership aspect of Bitcoin, so you will have to answer my question, "can corporations own Bitcoin?"
You know what that question entails.
I like your moxy, but if you think that corporate financiers would dabble in emergent technologies that have shown exponential volatility, and piss off Uncle Sam as he struggles to fix prices on raw materials, energy, and commodities so that said financiers are insulated from real volatility and can conduct business under reasonable conditions, while Uncle Sam passes out credit to keep consumers consuming, you should know that I don't share your optimism in that.
Ownership of bitcoins is not the same as ownership of the bitcoin system. Anybody can own bitcoins. But who owns the bitcoin system?
I could say that nobody owns the bitcoin system, but that would not be quite correct. It would be more correct to say that the people who control the blockchain owns the bitcoin system, although that too is not quite correct. That is a majority of the miners processing power.
So let us see what happens if you try to change the constant in the code that says the maximum number of bitcoins is 21 million to for example 42 million: Would such a change be accepted by the bitcoin users, and in particular the miners, as it needed for your new code to be deployed?
Please note that anybody could do this change and start mining with the new code. But the new blocks found by this miner would be rejected by all other miners, as the reward is larger than what all the other miners agreed on to be the right award. So all the other miners would outpace the miner trying this.
But what you persuade a majority of the processing power the miners have to use your new code? This is not easy, as they would fear that the increased money printing this essential is would make the market no longer trust bitcoin, thus probably making the price of bitcoin fall more then the increased money printing. But for the sake of argument, let us say you can get your new code out to a majority of the miners, then the blockchain generated with your new code would be longer.
But how would the owners of bitcoins and the other miners react to this? They would say that the longer blockchain generated with your new code is fake because it does not respect the rules set in the code when bitcoin was originally started, and the remaining miners would continue to mine according to the original rules.
In effect you would just have created a new digital currency where the existing "bitcoins" would have the same owners as the real bitcoins. And your new "bitcoin" currency would not be accepted because people would find it inflationary because the new rules would allow more "bitcoins" to be created, and they fear that the rules could be changed again.
Owning the majority of existing, tradable bitcoins is more important than anything else about bitcoin besides its computability problem limiting the total out there.
@Skateboarder
Lets take a real-life example, eh? Lets say everyone in your neighborhood smokes a certain type of pot. Well, you don't like this, because your friend won't get a cut if they don't buy his weed. So you go door-to-door, convincing everyone to buy his purple kush because they should.
You're happy, your friend is happy, and everyone gets along.
Now take that as applied to bitcoin. You want to push your own rules on the network, to expand the supply of bitcoins to say 420Million. So, you have to convince EVERY PERSON ON THE NETWORK to upgrade to your client.
If this were just 100 people, sure, why not.
But if it is global, with millions... that kind of thing isn't going to happen. And that's just the raw numbers, and people being convinced your change is good. If they hate the idea, it isn't going to happen.
That's why pointing out static values in code and saying you can change it easily is really a stupid thing to say in context of how the network works.
pretty sure that was not Adolph. Pretty sure he felt real value came from gold which is why he raided as much as he could across Europe while taking control of the territories.
This is why bitcoins are a fundamentally flawed concept.
You generate bitcoins by using expensive computer hardware to burn electricity running some pointless computation processes that do nothing practical except generate imaginary "bitcoins". Early "miners" could get coins running any crap computer. But as time passes it requires ever more expensive and dedicated machinery.
Instead it could have been setup where bitcoin generation would be a byproduct of practical distributed research projects. That way each bitcoin would at least have some kind of base value in "research units" or "processing blocks".
As it is now the clever geeky crew that set up the whole scam got in early and generated "bitcoins" when it was easy and are now going to become fabulously rich because suckers will buy into anything that sounds good. Bitcoin and Twitter are both examples of what can happen when human stupidity collides with human greed.
Aww, it's not fair! One of the problems in the world that Bitcoin does not set out to solve is fairness so it can't be knocked for failing to make things fair. Don't be naive. However, as a 100% reserve currency it should make things a bit more accountable going forward.
It's not like the geeky crew were keeping things a big secret. They were publicly describing what they were doing and offering to help others get started. This is a grass roots technology without big media available to feed the message to the sheep. You were just cruising along on ZH when you could have been looking into this as an early adopter. They took the risk and will be rewarded for it. How could it be any other way?
+1
but TWTR is the thing for idiots.
Actually using twitter is highly useful for high-speed reporting. Make a report of some sort, video, picture, etc., and the twitter 140 char line is for your headline. Or a shorter headline with lots of @references for related parties or of course those #hashtags.
Works great when reporting #fraud about @federalreserve or #treason by @whitehouse
give a little love to litecoin
https://litecoin.org/
and peercoin
http://ppcoin.org/
each of which is *also* worth $7000 or $70,000
as are the yet-to-be released
alphacoin and betacoin and gammacoin and deltacoin
that is the great thing about digital currency
every time you introduce a new one, it can be worth as much as any of the other ones
what comes after omegacoin? that one is probably the last digital currency that could ever be deployed.
no thanks... I'm waiting for the iCoin from Apple
( Then after that, the iG00Gcoin! )
Microsoft will not be denied.
ZoonCoin
What we need is asset-backed digital currency. Here are a couple of ideas:
Titcoin -- redeemable with prostitutes the world over for sexual favors. Very stable value, easily converted to fiat currencies (just look up the current exchange rate on BackPage.)
Potcoin -- issued by the state of Colorado and redeemable in Denver for one ounce of Rocky Mountain High.
There ya go!
Potcoin is backed by a commodity!
High time something is!
Lol at Potcoin. Best coin concept yet!!
There's always arablelandcoin and watersourcecoin for the Luddites.
To make this work, you have to corner the asset backing the currency? You know what asset-backed means in practice?
I was going to go with "a fudge, but not a stupid one" and price Bitcoins in hash brownies.
Or the author is assuming that most people are idiots and don't know what the word "collateral" means or what the fuck "fiat" even means.
If there were no govt I'd be all in
Yeah, just keep obeying Leviathan. It'll work out just fine.
Neither is any of the fiat.
Looks like they'll have to raise the price of gold prematurely.
The Chinese are the ones who are buying heavily. And it's back up to $293 as I type this.
What have your shiny pet rocks been up to lately?
You're almost there Spyker as ZH's best gold troll.
Well done kid. That's rarified air.
Remaining shiny & invulnerable to EMP, to faith, to belief, to paper games, losing no mass, retaining all their physical properties.
Next week when your btc are down to $200 and then $100 what will your story be? My gold doesn't do that, its value is not measured only in paper.
btc value is measured ONLY in fiat paper exchange price, no one is using them for purchasing, they are far too unstable.
Yes, yes, bit coin "should" be worth x
There is a term for this kid of thinking it's called "Mental Masturbation".
Worth pondering, US could make it illegal and anyone caught dealing, mining, using would be subjected to 20 to life in prison and there you go. I mean if they can do it to people who like pot why not bitcoin?
Just sayin...
Personally, I think that would be bullish for bitcoin in the short term, and bullish for human freedom in the long term. Just sayin...
I never figured ZHers to be a bunch of green-paper-huggers, but damn, its like every single one of them has a hard-on for Bernanke.
Maybe he wears an aftershave that they can't resist.
If they could possibly stop howling about Gold for a second (Bitcoin works well with it, if you bothered to try), maybe they'd realize that the best offensive to the existing financial system is being built right before their eyes.
Or, they'll keep howling and throwing feces at the cage walls. Either way.
BIt coins are the "new" tulip.
I got it!
I should start a new crypto-koin(tm) and call it eTulip!
You're a genius.
Bitcoin wild price action shows real hunger for the FIAT Currencies alternatives, it will end up in a Bubble like everything does, but it shows the treand and revolt agains the FIAT based system. The problem here is that people will corrupt everything they can control...
Mike Maloney: The Biggest Scam In The History Of Mankind - Hidden Secrets of Money 4
Finally, in this episode everything comes together and Mike Maloney presents The Federal Reserve System in all its glory. With over 1 million views only on this YouTube channel the information is going out now. Mike Maloney has made the great job - everything is explained in crystal clear terms and now you can start move forward and understand why FED is as "Federal" as Federal Express and who owns it, why there is ongoing manipulation of Gold and Silver and nobody can be held accountable for it and what will happen next with QE and Taper. http://sufiy.blogspot.co.uk/2013/11/mike-maloney-biggest-scam-in-history-of.html#
China, India, Turkey and Thailand Buying Record Amount of Gold - What Do They Know The Others Don't? GLD, MUX, TNR.v, GDX
One US dollar "should be" worth about $00.02.
Part of a dollar should be worth the whole? What's 0x1?
I know! I know!
0x1 is hexadecimal representation of decimal 1
Therefore 0x1 = 1
Do I win anything ????
Should be? It is, do an inflation calculation from 1913.
Bitcoin is inferior to gold as a store of value. It's just far more vulnerable, and reliant upon countless other factors.
War, natural disater, cyberattack, system bug, 51% attack, electric grid goes down, etc. you have no access to them, and can't send them to anyone. Physical gold can survive all of those events.
I'm not here to promote bitcoin, but you can store bitcoin on a disk or even on a coin now. Physical gold can be plated, fake, etc. Seems to me that on a purely technological standpoint, bitcoin gives up very little to gold while, at the same time, adding a number of conveniences.
But you need access to electricity and internet to send or receive them -- otherwise, they are useless. A government could also attack the bitcoin network and corrupt it somehow, making all of them worthless.
You don't need to depend on any man, any network, or any technology for gold to maintain value. This makes gold a superior store of value, imo.
This is a false, stupid Either/Or argument.
"Superior" is all fine and good but my gold has been losing value while my BTC has been gaining in value. The power went out here last spring and for some reason my BTC lost no value. If the power goes out and stays out, gold will probably reverse the trend but I do not think that situation is likely. In the meantime I'm willing to take some risk and allocate more into BTC. As more people worldwide become aware of bitcoin it will increase in value.
gold has not been losing value. Fiat paper prices have been highly unstable for almost everything, one such thing is gold. In bartering gold for goods directly, in the valuing of gold for its atomic properties, electrical, etc., nothing has changed. No loss.
As for fiat pricing of gold or btc gold has never lost 25% to 50% repeatedly in a single day, multiple times per year. BTC does.
Completely unsuitable & unstable. Just imagine saving up for a car in btc only to see btc drop 50% in a minute and the car is now DOUBLE the price.
no one but NO ONE will cut the price in half to suit your loss. You're gonna get bent over with a razor-dildo on that one.
Well, I think holding both is smart. Precious metals are defense and bitcoins are offense. Mostly precious metals since they have a longer track record but it can't hurt to have a few bitcoins.
I personally think that bitcoin could be a black swan that starts an earthquake.
understood, but if it doesn't have utilitarian value then that bitcoin and that disk-full of them only have value if you can find someone else who believes that it does.
sure, my credit card or PayPal etc are no different except that their use is collateralized by fiat.
it relys on the bigger idiot principle, and as a medium of exchange it's no different than fiat, and there's no assurance that more won't be "printed".
what exactly gives them value other than faith and the crypto utility? a paperbag filled with the Fed's fiat can be crypto too. (And if you think that what you do with your bitcoins and with whom you do it is untraceable then I have some swampland for sale).
Sometime in 2015 (if not sooner) you'll find 'bitcoin' right alongside tulips and Madoff (and then eventually FRN's)
"...but if it doesn't have utilitarian value then that bitcoin and that disk-full of them only have value if you can find someone else who believes that it does."
Exactly...that's what I don't "get" about the whole thing. From my admittedly layman's perspective, I don't see how it's any better than any other fiat currency - because it's only worth something if someone is willing to trade/barter something they have for it...like all fiat currencies.
To me (again, a layman...to say the least), it seems like currencies should at least backed by/convertible into a SET/UNCHANGING amount of something that is inherently useful to "everyone" (idk...maybe oil? energy? ammo? Twinkies?).
I'm sure a system like that would have some issues...but at least it wouldn't be the ponzi-pyramid-scheme cluster#!*& we have now.
Indeed. Bitcoin is no better than fiat (except that it is deflationary, where most fiat currencies are inflationary).
For bitcoin to have value (except for speculative bubbles) it needs to be useful and accepted for the payments you want to make. This is where bitcoin really shines, as you can immediately pay in bitcoin worldwide, with no bank fees or capital controls - provided the receiver accepts bitcoin.
Of course this is only possible if you can communicate your transaction to the miners, and the miners can make new blocks they find public. (Bitcoin needs this communications, but it's protocol is not directly tied to the internet.)
The properties I value about bitcoin are these:
Scarcity - only 21 million coins will ever be created
Decentralized - no Central Bank, it's peer-to-peer so no good target to attack a la Liberty Dollar
Fungible and Divisible - each bitcoin looks like any other bitcoin can be divided down to millionths of a penny.
Recognizable - counterfeiting of Bitcoin is not possible, this is the "Crypto" part.
Processing fees extremely low and speed of transaction high.
I define the level of anonymity I wish to transact with and nobody can say who I can and cannot do business with.
And they are intangible... trivial to conceal and carry.
Only tangible money has value to me.
That means bitcoin is worthless to me.
I need money that has weight, volume, physical substance, and its atoms can be used directly for a non-monetary purpose while SIMULTANEOUSLY being money.
If it can't do that it's not money and I don't want it.
Unlike bitcoin you can't destroy gold completely.
And plated can be melted back down or otherwise stripped to get the pure gold back out.
Gold atoms can always be brought back together as needed.
EMP, magnetically wiped, etc., bitcoins are gone forever.
On a purely technological level bitcoin loses the most powerful qualities of money: atomic existence. No atomic nucleus = useless as money.
Things can not have value unless there is demand for them, and if the thing is a niche thing and not really a thing in the first place, it can not have a reasonable expectation to have true value. Without true value there will be little to no demand, so the circle of worthlessness is constantly present to things that are not really things and are merely a part of a niche market.
What I am saying is that Bitcoin will not stay this high, it's purely speculation fueled by inflation.
What you just said is exactly what people were saying when Bitcoin was $4.
Read Carl Menger's theory on the origin of money. Gold and silver do not have a monopoly on the qualities that make a good money anymore. Sorry.
Bury a capsule containing 100 ounces of gold and an equivalent value of BTC on a disk. And if both were found in a thousand years, which would be more likely to still be valuable? Now why is that?
Game over.
What something will be worth 1000 years from now has no value to me whatsoever. fuck why did i just respond to this?
Because you're a moron. You misread the question.
Long after you are dead and others who are vitally alive & able to spend money, what money will they be able to spend? Not bitcoin. The networks, computers, algorithms will be gone, forgotten, long outdated tulip-mania fads.
Gold will be as ever a useful money, 100, 1000, 5000 years from now.
Compared to bitcoin, they can never lose those qualities. Ever.
Physical atoms, can't be copied. That's teh core of good money along with various other useful abilities. Atomic qualities are money qualities. Anything having no atomic qualities is no good to me as money. Ever. for any reason. Period.
I converted some of my bitcoins to silver when they were at $390.00 (right after reading tyler's post) .. I'm still bullish bitcoin long term but with metals recently battered and bitcoin popping, conditions seemed good to me to trade some.
Don't get me wrong, I like the idea of bitcoin and I believe that it (or something like it) has a viable future but this article is a joke.
Very smart move
Does anybody find just a tad bit suspicious that all of our favorite anti-establishment nexuses are the very ones promoting a digital currency.
Also, what's to keep new bitcoin competitors from diluting the base of the new money. Just read a very interesting article by somebody who is absolutely convinced that, despite all of the skeptics, digitial currencies will be one of the greatest bubbles in history... his reasoning is that what better way to massage the masses into acceptance of digital money than to have edgey fringe elements promote it to self-styled cyber rebels. The first bitcoin magazine featured a picture of the famous 'anonymous' mask. He recommends going long the stuff for these purely cynnical reasons.
All of this could be wrong, it's just a thought. From an economics standpoint, what's to keep competitors from coming in and essentially offering the same service, thereby diluting the float and market cap. There's already litecoin out there.
With all of this said, this is certainly one of the most interesting innovations in recent history. It's nice to have some of this knowledge at the ground floor. I'm sure I'm not the only one that wishes they had bought some bitcoins back in 2010 when he/she learned about it.
Basically, early developers of altcoins (ie bitcoin) have a huge advantage due to what Milton Friedman described as the 'network efffect' -- ie, the more people using a particular thing, the more valuable it becomes, and it only has value because everyone else is using it.
A new coin could still come along to make bitcoin obsolete, but it would have a lot to overcome.
"...a lot to overcome"?
What barriers to entry are there to saying "Presto"? (pls recall your HS Latin and the definition of fiat)
The biggest barrier will likely be too many folks remembering the adage "fool me once, shame on me...."
FUCK TPTB and their fiat,. But Fiat 2.0 is hardly the answer. It instead plays on the emotions of everyone who echoes what I said in the previous sentence.
The main barriers are these: $4 billion nominal market cap already invested in Bitcoin along with name recognition/existing user base. More important perhaps is the 3,831,745 GH/s of computing power being thrown at bitcoin to secure it in return for a trickle of newly created bitcoins. This is man's largest computing endeavor by far. If another coin comes along that is superior to Bitcoin, either the miners will switch their power to start acquiring the new currency or Bitcoin will adapt to add the new features. It is a free market after all, competition is good.
Does anybody find just a tad bit suspicious that all of our favorite anti-establishment nexuses are the very ones promoting a digital currency.
Ummm.....
Maybe because it's an anti-establishment currency?
HELLO???
Suspicion is a nasty religion.
Right but most anti-FED people are scared of a one-world digital currency. Bitcoin is clearly a step in that direction. Therefore, inconsistency, no? The rebels seem to be promoting the same thing that the robberbarons are supposedly privately planning for... would they really care if a few bitcoin millionaires are minted en route to completing their long term goals? Not really sure why my point was hard to understand there but I'll take for granted the ease with which people are inclined to become condescending when sitting behind the safety of their computer screen.
anti-FED people are scared of a one-world digital currency. Bitcoin is clearly a step in that direction. Therefore, inconsistency, no?
NO!
Bitcoin is controlled by NO ONE. There is no center to control.
Furthermore, Bitcoin neither involves nor permits any sort of monopoly. It CANNOT impose itself on anyone.
THERE IS NO COERCION INVOLVED WITH BITCOIN. This is the opposite of a one-world currency.
Yeah, there are certainly characteristics of it that are counter to a one world currency. From a purely technical standpoint, I think that it is a quantum leap advancement. It's gold with convenience. If the original bitcoins go into the stratosphere, my understanding is that it is divisible into millionths. NWO types would not want the portable, stand-alone attributes that bit-coin has. My intention was more to be a devil's advocate than trash bitcoin... I'm a huge supporter of gold but I purely believe that, based 100% on its intrinsic technological merits, it would be superior to gold in a perfect world. The reality is that we don't live in a perfect world. There is still one advantage that gold will always have... there is much more counterparty risk to bitcoin than gold assuming that you are sure that your gold is pure. Even if I hold my bitcoins in a standalone computer, CD, or hologram coin, what if somebody hacks into their computer and places a bug that says that my bitcoins have already been spent... I grant you that you may know much more about computers that I do but this seems a potential problem.
Overall, there is one thing I am confident of... if we were ever to come into contact with a much more highly evolved form of life that had the technology to make it to Earth from light years away, I'm pretty sure that they wouldn't be hauling around bars of gold in order to transact business... even more sure than that is that they wouldn't be using the fiat garbage that our government fraudsters peddle to us.
far as we can tell there's no reason for gold to be more common or less useful elsewhere in the universe.
So if they intend to trade resources rather than finished-product technologies or how-to's then yes, I would 100% expect them to bring gold or other highly rare & useful resources.
I would absolutely, so I can't imagine why you wouldn't.
only if there are other bitcoin clones.
If a world government produced & purchased a majority of bitcoins they'd control them in the market, period. Unstoppable outcome.
Any world-wide digital currency of any sort for any reason is a bad negative, a harmful act to humanity, and should be stopped, avoided, worked around.
Why invest in Bitcoin when the Treasury has come up with a great new program just for ZH'ers?!
http://www.marketwatch.com/story/for-retirement-are-r-bonds-right-for-you-2013-11-09
LOL. It's sadder & sadder every day this stuff is not actually sourced at the Onion, isn't it?
Gonna put them comedians outta work, they are.
I'm getting mixed up here - help me a little guys.
Many people seem to notice that Bitcoin is not backed by anything.... though you can convert it easily to the Dollar or Euro... which is - at least kind of - backed. Furthermore Bitcoin finds more and more acceptance... Bitcoin therefore is backed indirectly... or am i wrong here?
You're wrong here.
The Zimbabwe dollar is converted easily to the US or Euro as well. That doesn't mean it's backed, as the exchange rate floats.
You are correct tht bitcoin is finding more acceptance though, and with that comes a stronger price floor.
Everything is backed by the same thing, demand. Anything can have demand, and therefore value, (pet rocks are a good example of this) but some things have a deeper seeded demand than others due to history, broad acceptance etc...
Bitcoin, at the moment, is a fad. Few people understand it (reletively), and fewer use it. While bitcoin serves a real function, thus demand, it is a very niche market. This will change (but maybe not as the persona of bitcoin) but we are bleeding edge here which is why we have these violent price swings.
BINGO!
Tulips were backed by demand as well.
The people also demanded that Obama become president.
What people miss is that it is entirely plausible that a rival bitcoin can be created and another and then another.
"The people demanded that Obama become president"
HAHAHAHAHAHAHAHAHAHAHAHA
The suckers definitely did or have you forgotten the euphoria of his first election.?
But now we can definitely say HAHAHHAHAHA!
The suckers definitely did or have you forgotten the euphoria of his first election.?
But now we can definitely say HAHAHHAHAHA!
what people miss is that bitcoin is backed by NOTHING at all. it is the ultimate ponzi. you paid in X fiat paper to somebody in the hope that somebody else will pay you more fiat paper. better hope to get out before it goes to zero. sure - somebody on this thread mentioned about how people were using it to move around illegal gains. great idea. but at some point governments will catch up to that. even if it is cia and holder and goldmine shacks moving money around.
i own a bit coin. what is the worth? can i physically exchange with somebody for a pound of potatos? nope. not worth anything. even the shiny objects - not even gold, maybe even pretty beads, because he has potatos and his girl likes shiny objects. not bit coins.
I will sell you a pound of potatoes for one bitcoin.
I might have a bit of a profit margin, if I can then sell the bitcoin for over $100 :)
Bitcoin started from scratch without government backing. It is unrealistic to think it should just pop into every store over night as a payment option. However, this is what is happening slowly merchant by merchant. How could it happen any other way?
Incorrect. Demand is an output function not an input driver. it is a function of intrinsic value. That which has no intrinsic value will have little demand. With a special exception: tulip-mania. Then anything can get temporary demand but like virtual pairs of particles & anti-particles that come into creation they will self-annihilate and in the end those precious nothings will be worth nothing.
Like anything it is backed by confidence... in this case it is almost certainly increasingly backed by greed rather than the "alternative currency screw fiat" group.
My buddy rational minded - said he wanted to get into bitcoins "just out of curiousity" and even tried making calculations to see how long he would need to mine in order to pay off building his new computer... you know "just on the side" while "he goes to work" and doesn't take any effort to leave his computer on.
When you see price spikes and massive cliffs you really need to wonder who is causing it.
"Like anything it is backed by confidence... "
I can't disagree more. Some things are backed by confidence. (Confidence of the sort that I think you are referring to). Those things are fiat.
I don't need confidence that my plateful of bacon & eggs will provide some nutrition. I can trade my labor or my comic books or my whatever to the gal that provided them, (and she need have no confidence in them because she already knows their worth to her) but conveniently she also accepts this paper stuff I have in my pocket.
BitCoin is a currency with a limited quantity. Since it is not a major currency the value of BitCoin is often made in reference to other currencies. Products online have prices that adjust in BitCoin depending on how much BitCoin is worth in other currencies.
The one thing that has made BitCoin a monetary revolution is that it is the first time in history that a truely unique item with a limited supply could be used as currency. Gold is atomically unique but doesn't have an entirely limited quantity.
What has made it enticing for Banks, Politicians, CIA, drug dealers and Eric Holder is its use as an instant untraceable money transfer. Such people do not need to be concerned with illicit funding opportunities as with dollars. For example if HSBC would not have laundered the Mexican and Afghanistan drug cartels money and instead used BitCoin Eric Holder would not have had to exempt banks from criminal prosecution.
From a geek and libertarian perspective BitCoin offers all the benefits of a gold standard with an unprecedented increase in usage.
What makes it of value to the Chinese, Germans and Canadians is that the more it is used the less power Western Central Bankers have over forcing acceptance of financial FRAUD. The first nation to adopt BitCoin as their currency will quickly rise in GDP output and overall prosperity and become the next super power..
BitCoin is a win win for all participants.
nope. Bitcoin will be legally adopted by a country for one reason only: they bought them all and will let you use only the portion they PERMIT you to use. Once they hold them you can't until they give permission. They will hold them. issuing fiat now means endless, infinite purchasing power of all goods & services INCLUDING bitcoin.
That's why we need the reliability of physical gold because it's 100% off-grid from tracking.
They can never know if they ever control "all" or "majority" of the gold. Ever.
We know the supply is finite & can't be duplicated but no one knows how much there really is.
You're not wrong but you're 2 steps short of the final conclusion. Conclusion: #1 control of bitcoin is 100% controlled by fiat exchanges therefore by fiat issuers, the central banks, until these fiat exchanges cease to exist. #2 the "backing" is highly unstable having fluctuations exceeding 2x multiplying or dividing per year which is utter insanity. No currency can be used which has this trait. Ever.
to bad but I still won't buy them.
We talk about fiat... and bitcoin is the solution?
really?
nah... I keep stacking.
Bitcoin is still a limited supply and a better place to put some money than in cash. It has the brand ownership currently.. its the gold standard of digital currencies. Others will come on the market, probably google will have their own... but why trust google? I certainly wouldn't.
I am going to keep a percent of bitcoins (maybe even 5-10%), its a good bet as far as i'm concerned... at least for the next few years.
but who commands the bitcoin?
nobody knows.
So who'll command the next 5000 types of bitcoin?
I reminds me to much of Ebay auctions where one coin goes for 30 bucks and the same one also goes for 500 bucks.
nah... it's just to much of a biddingwar that sets the price of bitcoins.
That only shows how unstable it is.
And that's exactly what sound money should be. it should be a stable source of value. And bitcoin just shows that it's a very overhyped gadget.
What if I copied bitcoin software and launched the exact kind of tokens?
why would you buy bitcoins for 300 bucks and let's say 1 buck for mine?
Because of the name? :)
A logo on a software proggy that creates virtual tokens...
Nah... sorry. it's to idiotic.
mt.gox (now 2nd largest BC exchange) spent $25 million on US compliance.
Where the hell did they get that kind of money and even if it was their own cash... wow - they have massive interest.
doesn't that sound the alarm bells in your head? :)
It just sounds like the biggest pyramid scheme in he world.
But off course... people always think... that because they own a part... it legit and won't happen to them....
fraud only happens in fairy tales and on television...
Nobody commands bitcoin, but in a way anybody who runs a Bitcoin client and participates in the network commands bitcoin. It is a decentralized peer-to-peer based system where each client is verifying the whole transaction history. Weird concept? Yeah and probably over-kill as far as computation and network bandwith goes. However, with this system no user trusts or should be asked to trust any other user in the system. That's just part of what makes Bitcoin nifty. It's been around for 3 years and is growing as more people find out about it. Anybody can create a clone of Bitcoin, competition is good, and the free market will settle on a single crypto-currency or a variety of them. So what, let the market work that out. You are free to make your own financial decisions which includes, perhaps, sticking with old familiar PMs. Just don't say a couple years from now nobody told you about bitcoin.
"but who commands the bitcoin?
nobody knows."
This just proves that you've spent literally zero time researching Bitcoin.