This page has been archived and commenting is disabled.

BofAML Sees Bitcoin Fair Value At $1300

Tyler Durden's picture




 

Bitcoin could become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money-transfer providers, BofAML notes in a report today, adding that as a medium of exchange, Bitcoin has clear potential for growth, in our view. Despite Greenspan's inability to find "value", BofAML prefers not to call the crypto currency a bubble, and assigns a maximum fair-value of $1,300, but does warn that the 100 fold increase in Bitcoin prices this year is at risk of running ahead of its fundamentals.

Via BofAML's David Woo,

How to assess Bitcoin’s fair value?

The value of Bitcoin has risen 100 times over the past year, raising the question of whether it is a bubble. To answer this question, we need to be able to assess its intrinsic value. We don’t offer a forecast for Bitcoin, but below are our preliminary thoughts on how to approach the fair value question. Bitcoin’s is both a medium of exchange as well as a store of value. In our view, it is easier to think about fair value by treating these two purposes separately.

Value as a medium of exchange

As we have argued already, Bitcoin has some attractive attributes as a medium of exchange, especially for e-commerce. What could be the fair value of Bitcoin if it were to become a dominant medium of exchange for e-commerce that accounts for, let’s say, 10% of all the payments for B2C transactions? Let’s do the following exercise:

  • US personal consumption expenditures totaled $11trn in 2012
  • Household checking deposits and cash totaled $0.7trn in 2012
  • Dividing the former by the latter, we get 0.07 (which we will refer to as velocity from now on)
  • Velocity has been rising since 2008, likely reflecting cash hoarding behavior that is likely temporary. To smooth it, we take an average of the velocity of the past ten years to arrive at 0.04 -- we assume US households are holding 4 cents in their cash/near cash balances for every $1 spent over the course of the year
  • In 2012, total B2C e-commerce sales in the US totaled $224bn
  • If we were to assume that the velocity for on-line sales is the same as the velocity for all US household spending, then households would want to setaside $10bn for their on-line shopping
  • Given the assumption that Bitcoin will grow to account for the payment of 10% of all on-line shopping, this would suggest that US households would want to have a balance of $1bn worth of Bitcoins
  • What about for the whole world? US GDP is about 20% of World GDP. If we were to assume the same degrees of penetration of e-commerce for the rest of the world and that spending by households outside the US has the same velocity, we get to $5bn worth of Bitcoins for the total desired cash/noncash balance of global on-line shopping.

The above is a very rough calculation and we have made a lot of big assumptions. Moreover, B2C is only one dimension of total e-commerce and we cannot rule out that Bitcoin can become a dominant medium of exchange for B2B transactions. Nevertheless, the exercise shows that if Bitcoins remains only as a medium of exchange, there appears to be a clear upside limit for its value.

It has been argued that Bitcoin may become a popular means of payment for illicit trade. We don’t have an informed view on this subject but the fact that all Bitcoin transactions are publicly available (and therefore can be tracked in theory by law enforcement agencies) and that every Bitcoin is defined by its unique transaction history (making it difficult for criminals to cover their tracks6) may limit the growth of its use in the black market/underworld.

In addition to its role as a mean for payment for on-line commerce, Bitcoin can be used for transfer of money (e.g. immigrant worker in the US sending remittances back home). This can be done very cheaply and fast (online settlement in under 10min if the sender is trustworthy like family member or 50min settlement for strangers). How do we assign a maximum fair value to this role of Bitcoin?

Western Union, MoneyGram, and Euronet are the three top players in the money transfer industry (with about 20% of the total market share). Let’s assume that Bitcoin becomes one of the top three players in this industry. What does that mean for Bitcoin valuation? Given Bitcoin’s supply is fixed, when one buys a Bitcoin, one is acquiring not only a medium of exchange but also an investment in the enterprise value of Bitcoin. From this point of view, Bitcoin's market capitalization could be viewed, with a little leap of faith, as its enterprise value. With the average market capitalization of Western Union, MoneyGram and Euronet at about $4.5bn, we will add this number to the maximum market capitalization of Bitcoin’s role as a medium of exchange.

Bottom-line: maximum market capitalization for Bitcoin’s as a medium of exchange = $5bn (for B2C e-commerce) + 4.5bn (means for payments) = $9.5bn

Interestingly, our $9.5bn estimate is below the current actual market capitalization of Bitcoin at $13bn. This suggests that the current market value of Bitcoin assumes either that Bitcoin will account more than 10% of market share for ecommerce, will have more than 10% market share of the money transfer industry (Chart 7)., or will have significant value as a store of value.

Value as a store of value

The value of Bitcoin has been recently outstripping the growth of the nonspeculative transactions using it (Chart 8). This fact alone would suggest that the price appreciation has been more about Bitcoin as a store of value or investment than as a medium of exchange.

How can we assign a value to Bitcoin’s role as a store of value? This is a very difficult question. Given Bitcoin does not pay any interest and that there are no investment instruments (equities or bonds) that are denominated in Bitcoin, the value of its store of value role appears limited. From this point of view, as a store value, its closest cousins are probably precious metals or cash (Table 1), in our view.

Bitcoins and gold have three important common attributes: neither pays any interest, the supply of both is limited, and both are more difficult to trace than most financial assets (except cash). The current outstanding value of gold bar/coins/ETFs is about $1.3trn. Can Bitcoin reach the same market capitalization as gold? We are doubtful.

First of all, Bitcoins are much more volatile than gold, which makes Bitcoins a riskier asset to own. Over the past two years, the volatility of Bitcoin has been on average five times higher than that of gold (Chart 9). All else being equal, this means Bitcoins are five times riskier than gold. Unless Bitcoin volatility declines sharply or gold prices increases sharply, it is reasonable to think that it will be difficult for the market capitalization of Bitcoins to go above $300bn.

Furthermore, the reputation of gold as a unique and safe store of value has been growing for the past ten thousand years. It will take some time for Bitcoins to acquire that reputation. We don’t know how to quantify the value of gold’s reputation, but this reputation is probably the main reason that its value is 60 times that of silver. If we were to assume that Bitcoin were to eventually acquire the reputation of silver (which is an extremely ambitious assumption), this suggests that Bitcoin market capitalization for its role as a store of value could reach $5bn. By the way, $5bn is not too far from the current value of total US silver eagles minted (since 1986), in our view probably the most relevant comparison to Bitcoin, that is around $8bn (12k tons).

Bottom-line: maximum market capitalization for Bitcoin’s as a store of value = $5bn

Bitcoin’s has one advantage over gold in that it is easier to transfer. That said, we don’t think this is a big advantage given the advent of gold ETFs and the ability to move such ETFs in-between accounts. We would not assign any additional value for Bitcoin in this respect.

Clearly, market perception of the Bitcoin’s fair value also depends importantly on the outlook for unconventional monetary policy. If Federal Reserve’s quantitative easing does not end over the next year, as is generally expected, the demand for safe haven assets (like gold and Bitcoins) would increase supporting their value. We expect Fed tapering to begin in Q1 next year and the USD to slowly regain its credibility as the world’s reserve currency, especially as the US continues to reduce its fiscal deficit that will likely fall below 4% of GDP next year. Bitcoin as a store of value likely will struggle to gain traction if our bullish USD view for 2014 turns out to be correct.

Final tally:

When we add our estimated maximum market capitalization for Bitcoins for its role as a medium exchange with that for its role as a store of value, we get a number that is somewhere around $15bn. Although this does not mean that Bitcoin price cannot rise further (as an object of speculation), we think the recent rise of Bitcoin price could soon run ahead of its fundamentals. Our current view implies a:

Maximum market capitalization for Bitcoin = $15bn

Maximum fair value of Bitcoin = 1300 USD

Conclusion

There is much speculation that Bitcoin may help avoid high taxes, capital controls, and confiscation. The correlation between CNY's share of volume of all Bitcoin exchanges and price of Bitcoin is rising. That said, the fact that all Bitcoin transactions are publically available and that every Bitcoin has a unique transaction history that cannot be altered may ultimately limit its use in the black market/underworld.

Bitcoin’s role as a store of value can compromise its viability as a medium of exchange. Its high volatility, a result of speculative activities, is hindering its general acceptance as a means of payments for on-line commerce.

Is Bitcoin a bubble? Assuming Bitcoin becomes (1) a major player in both ecommerce and money transfer and (2) a significant store of value with a reputation close to silver, our fair value analysis implies a maximum market capitalization of Bitcoin of $15bn (1BTC = 1300 USD). This suggests that the 100 fold increase in Bitcoin prices this year is at risk of running ahead of its fundamentals.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Thu, 12/05/2013 - 11:43 | 4217618 Jumbotron
Jumbotron's picture

LOL !!!!

Criminals setting "fair" value to the Magic the Gathering card version of currency.  That's fucking rich.

Thu, 12/05/2013 - 11:47 | 4217634 dryam
dryam's picture

An endorsement from a bank......sure, bitcoin is on the up and up.

Thu, 12/05/2013 - 11:51 | 4217654 tsx500
tsx500's picture

no fonestar appearance yet ... i'm getting a little worried ..... :>(

Thu, 12/05/2013 - 11:53 | 4217658 Pladizow
Pladizow's picture

BAC on BC - Something Smells Fishy!

Thu, 12/05/2013 - 11:54 | 4217664 Skateboarder
Skateboarder's picture

Gotta mine 'em all! Gotta mine 'em all! Bitcoinmon.

Thu, 12/05/2013 - 12:10 | 4217686 nope-1004
nope-1004's picture

Banksters embracing the anti-establishment currency?  LMFAO!!

I guess if the University of Cyprus accepting Bitcoin to pay their profs (government employees) wasn't the first clue, this might be the second clue.

Time to wake up about bitcoin and its merit.  It may live on, but it's not out of gov't grasp.

 

Thu, 12/05/2013 - 12:15 | 4217714 Stackers
Stackers's picture

The current outstanding value of gold bar/coins/ETFs is about $1.3trn. Can Bitcoin reach the same market capitalization as gold? We are doubtful.

I'm a hardcore stacker of metals, and I do not doubt that BTC market will eventually equal that of gold and it's related paper products.

That equals $1million BTC - Give it some time......

 

 

Flame away

Thu, 12/05/2013 - 12:20 | 4217740 fonestar
fonestar's picture

$1300 fair value my ass.  Bitcoin is going to seven figures and beyond.

Thu, 12/05/2013 - 12:29 | 4217786 prains
prains's picture

....you STILL can't see where this is going hey dongstar, you're being led out to sea my friend and there's going to be no paddlin back 

Thu, 12/05/2013 - 13:01 | 4217887 fonestar
fonestar's picture

You better believe I see where this is going.  I am a visionary!

Fully 'tarded.

Thu, 12/05/2013 - 13:03 | 4217917 jomama
jomama's picture

came to this thread to find fonestar trollin'.

was not disappointed.

Thu, 12/05/2013 - 13:08 | 4217945 dryam
dryam's picture

@fonestar

"$1300 fair value my ass.  Bitcoin is going to seven figures and beyond."

No, that does not sound like bubble mania at all.

Thu, 12/05/2013 - 13:11 | 4217956 fonestar
fonestar's picture

A bubble compared to what exactly?  The other crypto-currencies?

No, I don't think seven figure BTC would be a bubble by any definition.

Thu, 12/05/2013 - 13:22 | 4218003 12ToothAssassin
12ToothAssassin's picture

BTC $2750

Thu, 12/05/2013 - 13:24 | 4218008 fonestar
fonestar's picture

meh, I don't care about "dollar" values too much.

Thu, 12/05/2013 - 14:09 | 4218266 foodisgood
foodisgood's picture

NEW BITCION WALLET!!!

http://www.youtube.com/watch?v=r5_hFHHJhd4

Even Ron Paul can put it in his pocket

Thu, 12/05/2013 - 14:38 | 4218420 The Alarmist
The Alarmist's picture

So what they are saying is that you will soon be able to buy BoA with a single Bitcoin?

Thu, 12/05/2013 - 14:58 | 4218504 MillionDollarBogus_
MillionDollarBogus_'s picture

fonestar has me convinced.

Am putting all my eggs in the bitcoin basket..

Will put in the order for a new Fedship this weekend.

Wheeeeee............

Thu, 12/05/2013 - 17:10 | 4219025 MillionDollarBogus_
MillionDollarBogus_'s picture

On 2nd thought....

"This vendor found a bug in the system and stole 5,400 BTC [about $5 million]—your money, our provisions, all was stolen," reads the message posted on the now-shuttered site's homepage. "We were trying to resolve this problem, but we were not successful."

That should help raise the price of the legit bitcoin.........go, baby, go.......to the moon...!!!!!!!!!!

Thu, 12/05/2013 - 19:12 | 4219513 The Alarmist
The Alarmist's picture

Easy come, easy go ... could just as easily have been a hedger's account at MF Global.

Tue, 12/24/2013 - 18:18 | 4274101 TruthHammer
TruthHammer's picture

well, moo-nstar wouldnt reply in the other threads, so i'll repeat myself one more time.

other than that, merry christmas to all, even those shilling :)

Cheers

--------------------

@fonestar

while shilling for Bitcoin takes a lot of time, I can't help but ask why you continue to apparently believe the fallacy that

"crypto-currency" or "virtual currency"  EQUALS Bitcoin.

Bitcoin is AN example of those things, they are not it.  You straw man the idea that virtual/crypto-currencies are here to stay, which is true, and then fallaciously follow up with Bitcoin is here to stay.

 

The single claim I have seen you or anyone make as to why this should be the case, is "first adopter" status, and that is a VERY weak reason to not turn paper profits into real ones by cashing out.  If the powers that be, (as you supposedly think you are opposing with BTC), choose to create an officially sanctioned, properly supported, fully-convertible "crypto-currency" that is equivalent to legal tender, their USCoin would wipe BTC out in a day.

Don't fool yourself to think privacy, anonymity, fighting fiat, or any other nonsesnse would stop it.  What people are chasing with BTC is easy money, that's why shoeshine boys are telling me about how their buddy set up a mining rig, and why LTC et al see growth as people chase the next e-Coin with a lower entry margin.

BTC is 50% penny stock, and 50% commodity (virtual commodity) and 0% currency.  It can and will be vaporized, either by a far more convertible official alternative, or by advancing technology leading to its undoing.  It will never reach "a million dollars" and it is completely driven by speculators and controlled by the 20%ers.

Feel free to shill some FUD in response, I'm all ears, and you've just been....refer to ID-name ;)

Thu, 12/05/2013 - 19:32 | 4219606 thisandthat
thisandthat's picture

Add that to that chinese exchange that vanished with millions from its customers. And counting...

Thu, 12/05/2013 - 13:08 | 4217948 fonestar
fonestar's picture

Even Gartman the perennial flip-flopper sees that Bitcoin is a "danger".  More than I can say for most of you.

Thu, 12/05/2013 - 13:17 | 4217981 prains
prains's picture

SHITcoin is the currency version of sticky paper hung from the ceiling, replete with the sweet smell of success to attract the bugs.......

 

 

and then it gets ripped down, LOL !......two caps to the back of the head style

Thu, 12/05/2013 - 13:20 | 4217993 fonestar
fonestar's picture

Well I've been in this game for two years now and I'm feeling pretty bold.  Watching you and your (actual toilet paper) hyperinflate from my side of the virtual fence.  What should cause me to change my opinions?  You and your governments are powerless.  Your dreams worthless.  Your society a flaming bag of dog shit.

Thu, 12/05/2013 - 13:46 | 4218128 SAT 800
SAT 800's picture

two years is an eye-blink in the lifetime of any useful currency. Or less. Much less. There's a lot to be said for being financially conservative.

Thu, 12/05/2013 - 14:53 | 4218490 digi
digi's picture

WTF are you talking about, the average lifespan of a fiat currency is about 30 years.

Sat, 12/07/2013 - 11:36 | 4224328 NidStyles
NidStyles's picture

Notice he said currency, not fiat currency.

Thu, 12/05/2013 - 13:12 | 4217964 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

You better believe I see where this is going.  I am a visionary!

Fully 'tarded.

Bitcoinstipated.

Thu, 12/05/2013 - 16:36 | 4218914 Oldballplayer
Oldballplayer's picture

I up vote you for persistence.

I own BTC. But I just like making money.

Thu, 12/05/2013 - 13:44 | 4218102 Buckaroo Banzai
Buckaroo Banzai's picture

"Bitcoin’s has one advantage over gold in that it is easier to transfer. That said, we don’t think this is a big advantage given the advent of gold ETFs and the ability to move such ETFs in-between accounts. We would not assign any additional value for Bitcoin in this respect."

Hmmm. Comparing gold ETFs to physical gold is foolhardy. One is a paper product, easily manipulated and naked shorted. The other is actual, physical gold in one's possession.

So the problem remains: how does one transfer one's gold electronically, while avoiding the paper gold manipulators? It seems to me that BitCoin could be the vehicle to do this. Like gold, BitCoins are scarce, and cannot be naked shorted, so they match up well in that regard. The only thing that is missing is a local network of dealers who could exchange BitCoins for gold. Something like, well, a neighborhood coin shop.

EUREKA!

Thu, 12/05/2013 - 14:01 | 4218222 Citxmech
Citxmech's picture

This.  

The day dealers and the exchanges start price crypto-currencies in Au (and they therefore usable to trade major commodities like oil) is the day that they will stabilize and be actually useful as a true currancy. 

Thu, 12/05/2013 - 14:56 | 4218498 digi
Thu, 12/05/2013 - 16:02 | 4218779 Citxmech
Citxmech's picture

I don't see where they accept crypto-currency - but I do love the "Consumerism" and "Cannabis" rounds.  Pretty funny stuff.

Thu, 12/05/2013 - 16:24 | 4218846 digi
digi's picture

It's an option at checkout and you can see the bitcoin logo at the bottom of the page next to all the other payment processors. I haven't used them personally but I have heard good things and will probably be making some christmas purchases.

Thu, 12/05/2013 - 12:30 | 4217789 Gene Parmesan
Gene Parmesan's picture

How much is a gallon of gasoline in your 7-figure bitcoin world?

Thu, 12/05/2013 - 13:33 | 4218049 fonestar
fonestar's picture

I already saw my BTC supposedly go to $0 when MtGox suffered it's security breach.  I was watching and thought, "yeah whatever man" and back off to the races the next day hahahahahahahahahaha.......

Thu, 12/05/2013 - 13:45 | 4218117 SAT 800
SAT 800's picture

You're very brave. I hope you don't get your heros medal in a financially posthumous state.

Thu, 12/05/2013 - 13:51 | 4218152 Matt
Matt's picture

50 satoshis

Thu, 12/05/2013 - 12:36 | 4217809 ebworthen
ebworthen's picture

You're jumping the shark.

Thu, 12/05/2013 - 13:09 | 4217952 Drifter
Drifter's picture

BTC will be $1 million when dollars are worthless.

Empty victory.

Thu, 12/05/2013 - 13:12 | 4217965 fonestar
fonestar's picture

BTC will still facilitate transfer of payment when dollars are worthless.

Priceless.

Thu, 12/05/2013 - 22:27 | 4220119 Drifter
Drifter's picture

Transferring worthless dollars. 

Pointless.  Idiocy.

Thu, 12/05/2013 - 14:28 | 4218359 long-shorty
long-shorty's picture

The reason Bitcoin will fail as a currency is that Fonestar is kind of right; were BTC to become remotely widely adopted, it would need to trade to 7 figures and beyond. The # of available bitcoins is too scarce. There's no way late adopters of Bitcoin are going to support such a valuation, as way too much value would have to accrue to the early adopters. Bitcoin will never become widely adopted; it is simply yet another penny stock that will fly as far as the speculators will carry it, until it is abandoned and the hangers-on are left with a mess of losses.

Thu, 12/05/2013 - 14:34 | 4218404 fonestar
fonestar's picture

A penny stock? Man I thought the people on CNBC blog were dumb!  Bitcoin is a currency and it is gaining massive adoption in case you weren't paying attention.

Thu, 12/05/2013 - 15:02 | 4218526 digi
digi's picture

I assure you the wealth distribution of bitcoin is much better than any presently used currency. And it only stands to be more dispersed as the other currencies become more concentrated. As a wealthy bitcoin holder you spend your coins to increase their adoption and therefore their value. As a wealthy fiat holder you print more money for yourself and your circle of friends.

Thu, 12/05/2013 - 15:30 | 4218658 Saro
Saro's picture

"The # of available bitcoins is too scarce."

There will eventually be 21 million bitcoins, each divisible to 8 decimal places.

Is 2.1 quadrillion discrete currency units not enough?

Thu, 12/05/2013 - 12:23 | 4217741 nope-1004
nope-1004's picture

You could be correct, no one knows the future for sure.  The hilarity here though is that the bank now all of the sudden sees fair value some 20% higher than the 900% run it just had....   That's like me predicting in February that January WAS cold.

So this isn't about offering market advice by the bank on BTC, it's about controlling its advance, because if it gets away on them, they lose.

BofA just released a personal desperation piece, that's all.  And its feckin' hilarious.

 

Thu, 12/05/2013 - 12:32 | 4217782 Stackers
Stackers's picture

I dont even see it as "fair value" anymore. Hate to admit it but I'm kind of in Hugh Hendry's boat. Fundamentals just dont matter in a world of $5+ trillion per year in new money creation going on. That will not stop (for very long) until the whole system goes into a hyperinflation shit storm (and thats what I stack metal for)

 

Gold should already be tear assing off into outerspace, but TPTB learned their lesson about letting that happen 30 years ago.

Thu, 12/05/2013 - 13:07 | 4217937 nope-1004
nope-1004's picture

I agree completely.  Fundamentals do not matter, that's been clear since 2009.  I remember posting on here how absurd valuations were back then, and how insane market behavior was.  So trust me.... I know fundamentals mean shit.

The only problem though is that this can't go on forever.  Reality has to return at some point and when it does, that point will not be a slow unwind, it will be an immediate flush.

 

Thu, 12/05/2013 - 13:51 | 4218153 Buckaroo Banzai
Buckaroo Banzai's picture

There is an excellent reason why fundamentals don't matter: we have a global financial system that is collapsing due to a breakdown in the rule of law, and corruption of the vilest sort.

In this environment, since 2008, wealthy people have been desperately trying to discover ways to preserve value. That is why the art and collectibles markets have been going crazy.

But as the breakdown continues, capital controls are preventing people from freely transmitting their wealth. Swiss banks have been suborned. International wire transfers are being restricted. Governments are teaming up to strangle capital. So now people of means not only have to worry about preserving wealth, they are also forced to find a more reliable medium of exchange.

Hence, BitCoin.

Fri, 12/06/2013 - 01:53 | 4220564 TheHound73
TheHound73's picture

Why BofAML only compute USA e-commerce into "fair value" figure?

This baby is global.

Thu, 12/05/2013 - 13:42 | 4218094 SAT 800
SAT 800's picture

I believe a lot of this new money has been sort of "swept under the rug"; and when it starts "leaking"; things will look a little different to a lot of people. It's a lot easier to trust a refiner and a scale than a politician, I would say.

Thu, 12/05/2013 - 12:55 | 4217868 Cacete de Ouro
Cacete de Ouro's picture

This BoAmL so-called price target has been blatantly reverse engineered by whoever told the research guys to write the note. This is pure BS and hilarious. Why didn't they release this note 3-4 weeks ago or last year?
It's a holding pattern. Not that the price won't fall sharply or rise sharply. No one knows, certainly not some tight ass know nothings on an analyst or associate program or their asshole manager

Thu, 12/05/2013 - 13:37 | 4218066 Citxmech
Citxmech's picture

"Fundimentals" are supposed to identify a market participant's relationship to reality.  While printing suppresses reality temporarily - Reality always wins.

While a market may remain irrational longer than I can remain solvent, Reality's accounting maintains its integrity longer than any market can stay irrational.

Long shelter; water; farming; security; PMs; and community. 

Thu, 12/05/2013 - 12:22 | 4217744 Richard Chesler
Richard Chesler's picture

Bank of Americlowns. As credible as the lying sack-of-shit-in-chief.

Thu, 12/05/2013 - 12:30 | 4217791 derek_vineyard
derek_vineyard's picture

so, i can trade an ounce of gold for 1 bitcoin???

this world has become totally insane to me.  two flew over the cuckoo's nest.

Thu, 12/05/2013 - 13:39 | 4218074 SAT 800
SAT 800's picture

Yeah; well, that's my reaction. but then I'm old; maybe I just don't like new things so much. The other part of being old is I've been there when the govt. changed the money over the week-end, (Mexico); and I had a grandfather that immigrated from Germany; who was very wise and did just fine as a working man here; but he had some very interesting things to tell me about money that I've never seen fit to question.

Thu, 12/05/2013 - 13:42 | 4218081 Citxmech
Citxmech's picture

The spot price for an oz of gold is going to be tough for BC to surpass IMHO as BC has been more or less designed as an electronic version of Au.  Assuming BC doesn't just blow through $1,300.00, it'll be interesting is if BC just stagnates at that level - or if it can actually drag gold higher.

Thu, 12/05/2013 - 13:48 | 4218130 fonestar
fonestar's picture

Good for your IMHO.  BTC is going to slice through gold like a hot knife cutting through your soggy soy dildo dollars.

Thu, 12/05/2013 - 13:55 | 4218168 Citxmech
Citxmech's picture

We will see.  

Regarding "my" dollars.  My relationship with FRNs consists of me earning them through work (no better option yet), and then exchanging them for tangible items of real value ASA-Fucking-P.  I have absolutely ZERO faith in FRNs as anything other than a short-term means to that end.

Regarding BC - In a perfect world, I could see using BC as a alternate means of exchange in lieu of PMs - but with the same strategy.  Hold a core position in PMs, and exchange and use crypto-currency for on-line transactions. 

I still want to see why BC version 1.0 will hold some special place over versions 1.1, 1.2, 1.3. . . etc. ad nausium.

 

Thu, 12/05/2013 - 15:09 | 4218560 digi
digi's picture

"I still want to see why BC version 1.0 will hold some special place over versions 1.1, 1.2, 1.3. . . etc. ad nausium."

It won't, but that's fine because bitcoin 1.3 is still bitcoin. We are still using TCP/IP from 1973 to have this discussion, it may be new and improved but it's still good 'ole TCP/IP. 

Thu, 12/05/2013 - 16:06 | 4218800 Citxmech
Citxmech's picture

I completely accept that an independant, uncorruptable monetary alternative to fiat is a great and necessary idea - it's just that currently they are wanting in establishing a stable valuation.   

Thu, 12/05/2013 - 16:30 | 4218880 digi
digi's picture

These are early days and as it stands bitcoin might be more suitable as just a means of transfer than a full fledged currency for a large economy to be using as it's sole unit of account. But as I have said before I'd much rather be holding onto something that's been on a voluntary uptrend than something like a fiat currency that has been going down in value since its forced inception.

Thu, 12/05/2013 - 21:06 | 4219920 thisandthat
thisandthat's picture

That's where you get it wrong: btc can't be extendable (ortherwise it would be just like dollar) - that's the whole claim of bitmaniacs; you just can't have more and more of it and keep it scarce. Any btc 1.x, 2.x, will just drive 1.0 down if not out of the market and add inflation to it, by reducing scarcity.

Thu, 12/05/2013 - 21:15 | 4219954 StychoKiller
StychoKiller's picture

There's room on the radio frequency spectrum for lots of channels.  So long as the price (amplitude of the RF wave) of a digital currency is > 0, the signal (your transaction) modulated on top of the RF wave (digital currency) can be received.  This is also true for FIAT currencies, but their price can, and probably will, go to zero.

Prices are information about just how much your labor/time is worth in a given currency.

Thu, 12/05/2013 - 12:29 | 4217788 BLOTTO
BLOTTO's picture

lol @ $1,300 for a 'bitcoin'

.

How is this 'price' good for the people of the world that just want some truth, honesty - and affordability?

How is $1,300 'winning' for the good people?

Thu, 12/05/2013 - 12:49 | 4217844 Dick Buttkiss
Dick Buttkiss's picture

BTC is divisible to eight decimal points and could be used to buy a pack of gum at a million-dollaar valuation.

Is that winning enough for the good people?

Thu, 12/05/2013 - 12:49 | 4217846 derek_vineyard
derek_vineyard's picture

bring me your sack of gold.    ive got a few spare bitcoins laying around to buy it.  i know,  im a nice guy to take that cumbersome yellow crap off your hands.

Thu, 12/05/2013 - 13:01 | 4217904 MieleBauknecht
MieleBauknecht's picture

gold? wasn't that that old analog bitcoin?

Thu, 12/05/2013 - 13:14 | 4217931 fonestar
fonestar's picture

Yes, and they miss the warm "tangible" feeling it provided their rectums in times of fear.

Thu, 12/05/2013 - 13:37 | 4218064 SAT 800
SAT 800's picture

Notice they mentioned the 60 to one gold price to Silver price ratio? (1200$/$20). Is that normal? No. What's likely to happen next? Did you know you can still buy American 90%Silver coins from various companies that advertise on line? I believe Monex in California usually has some; but I'm sure you can find them. they sell dimes or quarters in bags. Sometimes the price is actually less than the melt value of the bag; a negative premium as it were. Makes an excellent savings account.

Thu, 12/05/2013 - 11:54 | 4217662 Winston Churchill
Winston Churchill's picture

Mommy forgot to set his alarm and .its dark in the basement.

Thu, 12/05/2013 - 12:06 | 4217688 dryam
dryam's picture

He's a little distracted at the moment. Apparently some of his bitcoins went missing last night in cyberspace. He's frantically searching the area trying to get them back.

Thu, 12/05/2013 - 11:58 | 4217674 Sudden Debt
Sudden Debt's picture

He just figured out he actually didn't buy a 1100$ bitcoin with his visa....

the downside is... he's still doesn't has any money on his visa...

Thu, 12/05/2013 - 12:17 | 4217731 firstdivision
firstdivision's picture

 Last I heard, he has been frantically trying to find someone that will buy his BTC's at 50% spot and still no one to sell to.  Glad there's plenty of liquidity in the BTC market.

Thu, 12/05/2013 - 12:22 | 4217745 fonestar
fonestar's picture

I'm here.

Thu, 12/05/2013 - 14:14 | 4218287 tocointhephrase
tocointhephrase's picture

No no no we need you in the lobby

Thu, 12/05/2013 - 12:24 | 4217757 rlouis
rlouis's picture

Even the reputation of Max Headroom over on RT could be in jeopardy

Thu, 12/05/2013 - 13:49 | 4218143 fonestar
fonestar's picture

Max made me the virtual man I am today.

Thu, 12/05/2013 - 11:50 | 4217656 A is A
A is A's picture

These assholes are just a parasite on the system. If the dollar goes, so do they. They are just trying to put a ceiling on BTC to save their own ass.

Thu, 12/05/2013 - 12:09 | 4217699 VD
VD's picture

Is a Chinese ban bad news for Bitcoin?

Thu, 12/05/2013 - 13:46 | 4218125 piceridu
piceridu's picture

All the reasons the Chinese authorities cite are the reasons BitCoin is flourishing. I guess Bitcoin is a real threat to the fiat, fractional reserve status quo system. The governments of the world or better yet the central authorities will colude to ban Bitcoin using bogus anti money laundering and patriot act laws.  I'm guessing Bitcoin is here to stay one way or another. As an underground means of exchange or as an anonymous means of executing a transaction. The more I read about Bitcoin, the more I see it as a threat to the status quo and it will be treated as such. The central authorities will throw anything and everything at BC to undermine it or to co-opt it. As soon as you see ETF's and other derivatives in Bitcoin, the beauty of it will be lost. 

http://www.cio.com/article/744239/China_Bans_Banks_From_Trading_in_Bitcoin

Thu, 12/05/2013 - 13:57 | 4218178 Matt
Matt's picture

Wow, Chinese exchanges will have to meet basic AML rules and only allow accounts for individuals, like all the rest of the major exchanges. Looks like bitcoin is down 20% as a result so far.

Thu, 12/05/2013 - 12:22 | 4217752 fonestar
fonestar's picture

A bank acknowledges that Bitcoin exists?  Oh no, there's another conspiracy for you.

Discuss.

Thu, 12/05/2013 - 13:40 | 4218073 malek
malek's picture

A bank jumps on another fad to make money off the fools?

Thu, 12/05/2013 - 21:19 | 4219967 StychoKiller
StychoKiller's picture

Not to dispute your statement, but once a large freight train gets rolling, it takes a lot of energy to get it to stop!

Thu, 12/05/2013 - 12:49 | 4217848 Nothing but the...
Nothing but the truth.'s picture

Banks cannot even run their own operations properly without getting bailed out, now suddenly they are recommending a ponzi scheme digital, encrypted currency and we must all be convinced . WTF ?

Thu, 12/05/2013 - 22:18 | 4220107 StychoKiller
StychoKiller's picture

Sorry, but ponzi schemes rely on x^nth and there are no limits on n.  Bitcoin does have a built-in limit of 21million bitcoins (* 10^8), which is a finite number; therefore, your statement is false.

Thu, 12/05/2013 - 11:48 | 4217636 Winston Churchill
Winston Churchill's picture

Its official; SELL NOW.

Thu, 12/05/2013 - 12:18 | 4217729 tmosley
tmosley's picture

But you never bought.

Thu, 12/05/2013 - 12:33 | 4217795 Winston Churchill
Winston Churchill's picture

I did, but not BTC.

Thanks for the distraction. I ,and my cheap gold thank you.

Thu, 12/05/2013 - 11:48 | 4217641 Max Damage
Max Damage's picture

Did they factor in what hapens if everyone stops accepting it, because it keeps being robed every five minutes by hackers

Thu, 12/05/2013 - 11:52 | 4217660 kridkrid
kridkrid's picture

Excuse me, may I have a word with you?

Thu, 12/05/2013 - 12:04 | 4217684 Max Damage
Max Damage's picture

Lols

Thu, 12/05/2013 - 11:57 | 4217671 dryam
dryam's picture

What's the worst that can happen when a huge portion of your savings is lost in cyberspace? Poof!!....and it's gone!

Thu, 12/05/2013 - 12:30 | 4217790 fonestar
fonestar's picture

You have to be a real idiot to lose something in cyberspace.

Thu, 12/05/2013 - 13:36 | 4218061 TeMpTeK
TeMpTeK's picture

Fonestar ?.. So the holder of 96,000 bitcoins worth an estimated $100 million USD who prolly had security measures in place is just an idiot who could have prevented the hack?

http://www.businessinsider.com/a-thief-is-attempting-to-hide-100-million...

Thu, 12/05/2013 - 13:40 | 4218082 fonestar
fonestar's picture

Pretty much.  If I had 96,000 BTC I would not be storing them online.  Encrypted offline storage.

Thu, 12/05/2013 - 13:58 | 4218192 Matt
Matt's picture

Looks like Sheep Market ( a market for sheep to use to buy illegal things, a knock-off of Silk Road) had all its money sitting in an online hot wallet. Big surprise, a criminal enterprise that could only succeed once its competitor was arrested and shutdown, was inept. 

Thu, 12/05/2013 - 21:16 | 4219955 thisandthat
thisandthat's picture

No, it looks like the whole exchange was a scam and they just disappeared with their customer's funds...

Thu, 12/05/2013 - 15:37 | 4218681 Saro
Saro's picture

It's been an accepted standard in the Bitcoin industry for quite a while now for major players to only store a portion of all their bitcoins in a "hot" wallet, and to keep the vast bulk of them in an offline, "cold" wallet, away from hackers and software glitches.  So yes, the owner of the site was an idiot.

When you send someone bitcoins, you're basically sending them an envelope stuffed with cash.  Be sure of who you're dealing with or you're going to get burned by idiots like this guy.

Thu, 12/05/2013 - 22:22 | 4220113 StychoKiller
StychoKiller's picture

Bank robberies, by thieves (and banksters [but I repeat myself!]) haven't stopped people from using FIAT and banks; therefore, your statement is misleading.

Thu, 12/05/2013 - 12:02 | 4217647 hedgeless_horseman
hedgeless_horseman's picture

 

 

As we have argued already, Bitcoin has some attractive attributes as a medium of exchange, especially for e-commerce.

 

...the fact that all Bitcoin transactions are publically available and that every Bitcoin has a unique transaction history that cannot be altered may ultimately limit its use in the black market/underworld.

Revelation 13:16-18

16 And he causes all, the small and the great, and the rich and the poor, and the free men and the slaves, to be given a mark on their right hand or on their forehead, 17 and he provides that no one will be able to buy or to sell, except the one who has the mark, either the name of the beast or the number of his name. 18 Here is wisdom. Let him who has understanding calculate the number of the beast, for the number is that of a man; and his number is six hundred and sixty-six.

Thu, 12/05/2013 - 12:12 | 4217696 NidStyles
NidStyles's picture

I will leave the religious stuff to you whom are more capable, but seriously the whole value of the BTC is that it has potential future value.

How can anyone base an economy on that? It's not possible to predict anything or make educated estimates at future costs of production using that currency, it's the same exact reason that the USD is failing. It's like these muppets never learn... Chasing yield because the USD is not bringing much to the table, so they go with a far riskier asset with no future documented potential but has great promises if only more people will buy into it.

 

That is literally what is going on here, and it's sad that all of those muppets are about to get wiped off the floor when the big boys enter that trade and make that price move up $1oo's of USD a day up or down. Sure it's been volatile so far, but it will be thousands of times worse in the future when the money starts getting interested in creating yield with no effort.Which in the end makes that yield become valueless.

I think BTC is what will kill the USD, but not the way the BTC supporters think. I think it will kill it by writ of Gresham's law and simply being the worst currency that is available.

 

 

 

Thu, 12/05/2013 - 12:36 | 4217800 fonestar
fonestar's picture

"It's not possible to predict anything or make educated estimates at future costs of production using that currency.."

 

Which is why you need trail blazers like fonestar to boldly go where no virtual man has gone before.

Thu, 12/05/2013 - 12:46 | 4217841 prains
prains's picture

you'll never see it coming but the day will be there nonetheless;

 

two caps to the back of the head "suicide", The CB's are in control, when you bet against them even when they're out of control....you will lose it all. and if the CB's lose total control there'll be no switch left to turn ShitCoin back on....

 

you lose in ALL iterations

Thu, 12/05/2013 - 14:17 | 4218308 dracos_ghost
dracos_ghost's picture

Did you just refer to yourself in the third person?

Thu, 12/05/2013 - 15:07 | 4218350 fonestar
fonestar's picture

fonestar is a virtualized character.  How do you think he holds Bitcoin?

Thu, 12/05/2013 - 12:10 | 4217705 sleigher
sleigher's picture

Difficulty: 78508

Pattern: 1666

Address: 16667zyHKbtL3ZMw8CHBb46BVeRXvbUSEj

Privkey: 5KUnwivdLAvpafxramJmV2pxi5bQYnWG2kKaawxW2rckh8CR7MU

Thu, 12/05/2013 - 12:21 | 4217720 hedgeless_horseman
hedgeless_horseman's picture

 

 

I don't understand how any of that addresses.... 

...the fact that all Bitcoin transactions are publically available and that every Bitcoin has a unique transaction history that cannot be altered

I do understand this:  How to Melt Gold

Things You'll Need

  1.     Gold
  2.     oxy-Acetylene or oxy-propane torch
  3.     crucible tongs
  4.     crucible

Thu, 12/05/2013 - 12:22 | 4217749 Kirk2NCC1701
Kirk2NCC1701's picture

And is that "Crucible" not made of [drumroll]... PLATINUM?

Thu, 12/05/2013 - 12:50 | 4217849 ParkAveFlasher
ParkAveFlasher's picture

I have a stone pistle at home that I grind cumin in, would that work as well?

Thu, 12/05/2013 - 13:46 | 4217913 hedgeless_horseman
Thu, 12/05/2013 - 14:01 | 4218207 Kirk2NCC1701
Kirk2NCC1701's picture

It's not so much a question of what "works", but of "purity", i.e. keeping the gold from getting contaminated with impurities from the crucible.

Professional sources use Platinum for this very reason.  Amateurs... well, it may not matter if you're using it for jewelry, which is well below Investment Grade (0.995) purity.

Thu, 12/05/2013 - 12:22 | 4217753 ParkAveFlasher
ParkAveFlasher's picture

Junior High School pictogram explaining why gold beats diamonds.

Thu, 12/05/2013 - 12:27 | 4217776 hedgeless_horseman
hedgeless_horseman's picture

 

 

Junior High School pictogram

Difficulty: 7th grade

Pattern: circles on color spectrum

Address: http://www.wikihow.com/Image:Melt-Gold-Step-3.jpg

Privkey: NA

Thu, 12/05/2013 - 12:40 | 4217817 ParkAveFlasher
ParkAveFlasher's picture

lmao...I was only guessing. 

Thu, 12/05/2013 - 12:18 | 4217723 fonzannoon
fonzannoon's picture

Lloyd Dobler: I don't want to sell anything, buy anything, or process anything as a career. I don't want to sell anything bought or processed, or buy anything sold or processed, or process anything sold, bought, or processed, or repair anything sold, bought, or processed. You know, as a career, I don't want to do that.

Thu, 12/05/2013 - 12:21 | 4217748 ParkAveFlasher
ParkAveFlasher's picture

I'm incarcerated, Lloyd!!

Thu, 12/05/2013 - 12:18 | 4217728 TwoCats
TwoCats's picture

I would like to point out the rule in that prophecy would have been impossible to enforce prior to the advent of computers.

Thu, 12/05/2013 - 16:00 | 4218754 my_nym
my_nym's picture

16 And he causes all, the small and the great, and the rich and the poor, and the free men and the slaves, to be given a mark on their right hand or on their forehead, 17 and he provides that no one will be able to buy or to sell, except the one who has the mark..

Yeah, yeah... so why are you incorporating yourself in the internet, given that it's the technology by which everyone will be incorporated in the New World Order Inc.?  If not by the Luciferian bankers on 33rd Liberty Street, then by a transhumanist or whatever in the future.  All technology is heading in the direction of False Profits Inc. due to human nature... but what do we do in the meantime? 

Check out Revelation 9:11 as long as you have the ramblings of an ancient "cave man" out.  Apparently the Lord of the abyss/chaos ("order out of chaos") is the owner of the egregore/group mind of Masonic/Talmudic dupes.  It's written in their 33 solar years is when the son died symbolism.  And it's probably why the "dude looks like a lady" Statue of Liberty" in the forbidden fruit of the Big Apple might as well be Apollo/Lucifer, the light bearer.  Americans can't so much as set up a cross on public property, yet they can have the resourcs of the nation conscripted to build huge pentagrams on the ground in DC or build huge statues as monuments to the ignorance of the base and the secret knowledge of the illuminated elite.  Etc.

Anyway... as far as religion goes, it's probably all merely symbolic.  Except when it isn't.  It's sort of like money in that way. 

Fri, 12/06/2013 - 10:15 | 4221108 itchy166
itchy166's picture

My Bitcoin wallet address has three sixes in it - I can buy and sell!! Yay!!

Thu, 12/05/2013 - 11:52 | 4217659 SAT 800
SAT 800's picture

Professional Financial Fools commenting on the antics of Amateur financial fools. Everyone seems to have lost their mind.

Thu, 12/05/2013 - 12:16 | 4217722 nope-1004
nope-1004's picture

Gotta keep the amateurs interested, or there is no one to fleece.

 

Thu, 12/05/2013 - 11:54 | 4217663 Sudden Debt
Sudden Debt's picture

AND IT ALREADY HAS FUNDAMENTALS!!! WHOEHAHAHAHAHAHAHAHAHA!!

Thu, 12/05/2013 - 11:59 | 4217675 SAT 800
SAT 800's picture

It really is screamingly funny. don't words mean anything anymore? what is a fundamental? What's fundamental about a string of binary digits?

Thu, 12/05/2013 - 12:19 | 4217732 No Euros please...
No Euros please we're British's picture

Well I really don't understand this article. If bitcoin was valued on fundementals, surely it's value would be precisely zero? But like a rare token or badge in some pretend online game, it's worth what some sucker will pay for it.

Thu, 12/05/2013 - 13:39 | 4218076 Drifter
Drifter's picture

Bitcoin IS an online game.

Thu, 12/05/2013 - 16:02 | 4218776 my_nym
my_nym's picture

Don't underestimate the value of online games...

Thu, 12/05/2013 - 14:08 | 4218255 Matt
Matt's picture

"If bitcoin was valued on fundementals, surely it's value would be precisely zero?"

So, you feel that Western Union, Mastercard, VISA, et al have a fundemental value of $0?

Thu, 12/05/2013 - 15:50 | 4218731 Citxmech
Citxmech's picture

Exactly - BCs marginal utility is in it's ability to function as a medium of exchange. In a sense - it acts like a hedge against the evils of fiat.

As long as it behaves like a speculative investment - it's utility as a medium of exchange will not be fully realized.

The biggest question is what to measure its stability against?  Certainly not any fiat currency.

Gold?  Oil?

Thu, 12/05/2013 - 15:42 | 4218697 Saro
Saro's picture

Things are valued (subjectively) by people for their expected utility.  Bitcoins have expected utility to some people as a means of exchange\store of value\unit of account outside the current banking system, and therefore those people place value in it.

If you buy gold or silver and you aren't planning on using it in an industrial context, you're doing the same with precious metals.

Thu, 12/05/2013 - 14:01 | 4218202 DosZap
DosZap's picture

Sorry guys this REEKS of .Goober involvement.No fricking way that the FED, is in any form, or fashion, much less the IRS and the Gov,gonna let any transactions happen that they cannnot get a cut of,or CONTROL, and know 100% where,how,and who is using  non US legal means for transactions.They may for a while, but with their penchant for counting pubes, this stinks.

Thu, 12/05/2013 - 14:17 | 4218309 Exponere Mendaces
Exponere Mendaces's picture

Love how the usual fools show up - JumboMoron and the others.

Yep, any time Bitcoin gets  any kind of good press, from a Bank, a leading hedge fund manager, they're instantly "full of shit" - but up to that point, Hugh Hendry was a swell fellow, enough for ZH to splatter his name over a few articles about interviews.

What wonderfully bifurcated life you all lead, when at one moment things are "good" and in the next they're "bad" just "because".

You all should get into politics, I hear they pay really well for someone who can rationalize anything, regardless of any true data.

Thu, 12/05/2013 - 19:29 | 4219588 xxxxx
xxxxx's picture

I bought a real physical bitcoin today. I has a secret message locked inside, a key to unlimited riches. I won't dare crack it open until it's worth at least a zillion bucks.

Thu, 12/05/2013 - 11:43 | 4217619 jcaz
jcaz's picture

Woo- who?

Comical.....

Thu, 12/05/2013 - 12:14 | 4217715 frankTHE COIN
frankTHE COIN's picture

Def; Woo... 1) As to Woo you
2) As to Sweet talk you
3) As to Fuck you

Thu, 12/05/2013 - 11:44 | 4217622 orangegeek
orangegeek's picture

just another product to trade

Thu, 12/05/2013 - 11:47 | 4217631 TeamDepends
TeamDepends's picture

Just another product to manipulate, you mean?

Thu, 12/05/2013 - 11:44 | 4217624 Wolferl
Wolferl's picture

Got some bitcoins. And i know there fair value is close to zero.

Thu, 12/05/2013 - 11:48 | 4217637 A is A
A is A's picture

No worries. I'll just buy each of those from you for $0. Thanks.

Thu, 12/05/2013 - 19:34 | 4219613 xxxxx
xxxxx's picture

I have a stash of beanie babies I want to trade for bitcoins... any takers.

Thu, 12/05/2013 - 12:02 | 4217681 Sudden Debt
Sudden Debt's picture

Don't listen to A is A Wolferl!!!

There's still some idiots willing to give real money for them! There's still time to dump them!

Thu, 12/05/2013 - 12:05 | 4217691 Wolferl
Wolferl's picture

I know. But you don´t need to worry if you bought a bitcoin for 3 Euro.

Thu, 12/05/2013 - 16:03 | 4218784 my_nym
my_nym's picture

Real money... like dollars?

Thu, 12/05/2013 - 12:27 | 4217777 ebworthen
ebworthen's picture

Say "their" fair value and they will be worth twice as much ;-)

They will be worth something as long as the Internet and Electricity monitored and provided by TPTB allow it; it may be $1,300 or $1 or .01.

Thu, 12/05/2013 - 11:46 | 4217629 TuesdayBen
TuesdayBen's picture

What is their assessment of tulip bulb values?

Thu, 12/05/2013 - 11:46 | 4217635 achmachat
achmachat's picture

you do realize that tulip bulbs are actually real and cost around 1€ each?

Do NOT follow this link or you will be banned from the site!