I think that's the trick with Bitcoin. The price is pretty much solely based on consumer interest. People get mad when I call it a scheme (they claim to be all hyped on tech & I'm not). Look the tech is fine (digital currency) but the way they set it up all pump-and-dump with diminishing returns is messy. That whole "deflationary" scheme or whatever they call it to make it sound like an economist would approve of it really just turns the whole thing into "Bitcoin is great as long as you can find a sucker to buy it when it's time to dump it". Terrible as a currency and even if you gain it will be at someone else's loss.
This guy's numbers aren't perfect but the article shows some key points about how the Bitcoin ecosystems numbers are kinda made up and the ecosystem is flawed as a trading platform (which is all it really is now). http://falkvinge.net/2013/09/13/bitcoins-vast-overvaluation-...
1) Regarding volatility, I compare Bitcoin to what would happen if a small startup were publicly traded - of course it's going to be volatile. Over time the bubbles will get less bubbly and the price will smooth out. This is already happening, even if it doesn't seem like it.
2) Bitcoin is not just a currency, it's a distributed ledger which can be used to track ownership of any virtual or even physical property, including other currencies. There are a number of people working on these layers on top of Bitcoin already. Eventually you'll be able to get some of the advantages of Bitcoin-the-distributed-ledger without being exposed to Bitcoin-the-currency (expect perhaps for transaction fees).
With a perfectly deflationary currency, this is false. And the yearly average Bitcoin exchange rate has shown to be perfectly deflationary, so far. And this can go on forever as long as the gross product of the Bitcoin economy grows (even slightly) year after year.
In other words: if everyone who bought bitcoins averaged their buys over one year, and held them for at least one year, they would have made money:
- the average price of a Bitcoin in 2010 was $0.05 (order of magnitude)
- the average price of a bitcoin in 2011 was $5 (order of magnitude)
- the average price of a bitcoin in 2012 was $10 (order of magnitude)
- the average price of a bitcoin in 2013 was $100 (order of magnitude)
if bitcoin were such a great currency mofos like u wouldn't have to constantly compare it to USD just to figure out how much it's supposedly worth. If i sold you a magic rock and told you it's value would be multiplied by 10 every year you'd fk me with a splintered baseball bat.
yet this is bitcoin, so people believe because... well because they've wasted so much damn time and money setting up server rigs to solve contrived hash equations. real currencies don't have to incentivize/trick their user-base in order to grow
To answer your ramblings: you are wrong, currencies have to be compared to other currencies to estimate their worth. The Euro is compared to the US dollar. The Japanese Yen is compared to the British Pound. Etc. So it is normal to compare Bitcoin to other currencies.
The "contrived hash equations" are necessary to make it decentralized, which is the greatest property that Bitcoin has over other currencies. If you don't understand why decentralization is important, I suggest reading: http://bitcoinmagazine.com/7798/decentralization-key-to-bitc...
Mofo isn't really an insult to be fair, it's an incredibly mild insult if it is one. Besides telling people to watch their mouth on the internet is pretty weird.
I'm not really interested in your retort. I just feel like something needs to be said. Quite a bit of HN has been turning onto bitcoin lately. They'll defend you and they're losing sight of reason.
i think it's similar to Multi-Level Marketing schemes. People have put hopes and dreams into it now that they think it's a vehicle to get rich, plus significant investment costs to build the infrastructure.
They need to keep a straight face and create an army of believers in order to succeed with their profiteering.
> losing sight of reason
That's precisely my issue. If you go to /r/bitcoin the conversation is often more focused on "How do we get past these annoying speculators to actually realize the dream of a cryptocurrency?". I respect that. But 90% of the people involved at this point are NOT that.
As a side note yes I thought "mofo" was totally mild too and the whining led me to post much harsher comments lol. I hate cultures that try to silence they're detractors. Good news for me is HN karma is pretty low on my list of priorities.
i hope the next bitcoin scammer who tries to change my mind doesn't send me to "Bitcoin Magazine". That's like Amway convincing you they're legit by sending you to the company site. Plus I have no issue with the decentralized aspect & some of the finer points of digital currency. It's just that this wild value swing is absolutely not a sign of Bitcoin's success. It's utter failure.
>To answer your ramblings: you are wrong, currencies have to be compared to other currencies to estimate their worth. The Euro is compared to the US dollar. The Japanese Yen is compared to the British Pound. Etc. So it is normal to compare Bitcoin to other currencies.
No it's not. As a user of a currency, you should have to compare it to other currencies to know how much it's worth. You know how much it's worth by what goods and services it buys you. Don't believe me? Next time ask someone on the street how many Japanese Yen a USD is worth. Unless they frequent Japan or trade currencies, they will have no clue.
The fact that a value of bitcoin has to be derived from an exchange rate means it's not a good currency yet, it's just a speculative financial investment.
Yes it is. Ask any forex trader how they evaluate the worth of a currency. Exchange rates. This idea that Bitcoin's exchange rate should not be looked at to evaluate its worth is ludicrous.
(What you can buy with a currency is merely an indirect derivative of exchange rates, in a modern economy running on global trade.)
another way i've thought about this -- say i tell you a bicycle is worth $1,000. you would laugh and say "hell no" but then if the next day you saw someone buying a bicycle for $1,200 then later that week 3,000 you might think "god damn i gotta get me on of them bicycles. the darn things multiply their value all the time". then you look out your window & realize..... nobody is riding bicycles, it's just the big price stickers at the stores are changing so much that people BELIEVE there is a demand when they can see with their own eyes that bicycles have not taken the commuter world by storm. they are just sitting in people's garages and occasionally some are bought/sold because now they're considered value stores. but when are they ever gonna get used as bicycles...
and since bitcoiners say "but you can use it as moneyyyy" let's add in that "some stores start accepting bicycles as payment for things like food, assuming that they in turn can later sell those bicycles since obviously they will never depreciate in value, right?"
o and let's not forget like half the bicycle supply is sitting in warehouses owned by the bicycle manufacturers, who buy and sell them to themselves to create the illusion of greater transaction volume :)
AHAHAHHAHA I just read the article you linked to!!!!
And it's not even math or programming theory or really... anything!! It's just pseudo-intellectual libertarian propaganda written by some 14 yr old girl.
lololololololololololololololol talking smack to you greedy bitcoiners is gonna get me kicked off this site for sure. it's too irresistible and i don't feel guilty for it in the least
do you wear a suit when you press the power button on your "mine" so you can feel like a real grown-up intellectual? repeated "bad" arguments are just a sign that the techno-crowd is tired of greedy college dropouts acting like buying 100 bitcoin makes them the underground equivalent of Economics PhD candidates
you're right tho it's a waste of time. have a nice life down in the mines lol
yea well of course... the early adopters want to convince the whole world to buy bitcoin, they just have to make that dare seem convincing. Hope for his sake he takes his money out before the bitcoin apocalypse hits
yea man there is certainly money to be made in it i'm not denying that (though i DO believe the value may crash soon... the recent upswing is a simple bidding war because of new markets & publicity).
personally i won't buy any because i think it's immoral but if you don't have qualms like that sure go for it just PLEASE PLEASE PLEASE don't spend significant time/energy on it & pretend to everyone that you are some sort of economist because you read the lit on "bitcoinhypesite.com". learn guitar instead, and don't play acoustic at parties. play electric, in your basement & unleash it when you're a demon at it
This guy's numbers aren't perfect but the article shows some key points about how the Bitcoin ecosystems numbers are kinda made up and the ecosystem is flawed as a trading platform (which is all it really is now). http://falkvinge.net/2013/09/13/bitcoins-vast-overvaluation-...