Correction: Bitcoin traders were looking for an excuse to buy a lot of Bitcoin. Your eyes are deceiving you. The way it works is, they buy in order to jump the price. Then other people buy and continue the momentum upwards. Then, in a few days, they sell, and thus capitalize on everyone else's belief.
This is how it's been for almost a year now.
Ask yourself: Why use Bitcoin? What is the value proposition for consumers apart from sending money to friends? That's valuable, but it's not multi-billions of dollars worth of valuable. Examine the fundamentals before you jump into a gambler's market.
> Why use Bitcoin? What is the value proposition for consumers apart from sending money to friends?
- Buying things that people would be unwilling to sell to you with existing payment methods due to fraud risks. One legal example: iPhone purchases shipped to Nigeria.
- Buying things electronically where the existing payment methods are too slow or expensive. For example, funding a stock trading account in seconds to an hour instead of 1-2 days or funding an online gambling account (legal for most non-US residents but slow and expensive with credit cards).
- Buying an expensive item from a trusted merchant at a discount commensurate with the reduced transaction cost and zero chargeback risk.
- Paying for contractors or crowd-sourcing efforts in any country in the world with ease.
That's a nice list of things most consumers won't be doing. That's not to say there's no value for people who do need it, but it does not suggest Bitcoin will become hugely valuable like Visa.
> - Buying things that people would be unwilling to sell to you with existing payment methods due to fraud risks. One legal example: iPhone purchases shipped to Nigeria.
Small global market share for legal uses.
> - Buying things electronically where the existing payment methods are too slow or expensive. For example, funding a stock trading account in seconds to an hour instead of 1-2 days or funding an online gambling account (legal for most non-US residents but slow and expensive with credit cards).
Most non-US residents can do bank transfers as fast as Bitcoin or will be able to Real Soon Now.
> - Buying an expensive item from a trusted merchant at a discount commensurate with the reduced transaction cost and zero chargeback risk.
So like 5%? Fringe, people who really care about a discount will buy something cheaper or haggle.
> - Paying for contractors or crowd-sourcing efforts in any country in the world with ease.
How do you know? It's currently small because it's currently impossible.
> Most non-US residents can do bank transfers as fast as Bitcoin or will be able to Real Soon Now.
I disagree, most non-US residents in the world don't even have bank accounts. Not to mention, the US and Canada are a huge market with a terrible banking system that refuses to modernize.
> So like 5%?
5% is the entire federal VAT in Canada. Would you really say no to saving $100 when buying a new MacBook? Would you just not bother claiming VAT-exempt status for your business because it's a measly 5%?
A fringe here and a fringe there and pretty soon you have a whole robe.
> How do you know? It's currently small because it's currently impossible.
I think the reason for my belief about iPhones-in-Nigeria being a small market is self-evident. As for other examples: people tend to buy things locally because local businesses are generally good at recognizing local demand, organizing import if necessary, and reaping the benefits of scale (shipping a container of phones). That this arrangement allows for localization of the product which further increases local demand is just icing on the cake.
> I disagree, most non-US residents in the world don't even have bank accounts.
Yes, but they are getting bank or quasibank accounts faster than they are getting Bitcoin wallets.
> Would you really say no to saving $100 when buying a new MacBook?
No - but as a price-sensitive customer I would buy a couple-months-old, gently-used Macbook and save $200 or more. As a price-sensitive business I would buy a Dell.
> A fringe here and a fringe there and pretty soon you have a whole robe.
Sure. But a robe still much smaller than a mainstream provider like Visa.
> No - but as a price-sensitive customer I would buy a couple-months-old, gently-used Macbook and save $200 or more. As a price-sensitive business I would buy a Dell.
Given the number of successful 1-2% cash-back credit cards, it would seem that even regular consumers care about saving tiny fractions on their spending.
Fiat currency is printed on the whim of governments, effectively defrauding the citizens of every country in the world through value dilution. Bitcoin is a technological innovation which allows for a constant and known rate of currency generation. I'd prefer to intrust my pension to maths than to a civil servant with an economics degree. This aspect shouldn't be overlooked or taken lighty because it disrupts the power, ergo the control that governments can wield over their citizens.
>I disagree, most non-US residents in the world don't even have bank accounts. Not to mention, the US and Canada are a huge market with a terrible banking system that refuses to modernize.
Didn't Nigeria, specifically, just issue national ID cards which are implicitly tied to being Mastercard direct debit cards as well?
I wonder how many merchants are able to accept Mastercard in Nigeria. More likely people are using them simply to deposit or withdraw cash. Remember, before square and stripe it was an expensive bureaucratic nightmare to accept payment cards even in Canada or the US.
Besides this, in person payments are much easier with a bitcoin app scanning a barcode from a screen that embeds the price and transaction info than swiping a card and entering numbers you need to remember, and one less thing to carry around.
'What is the value proposition for consumers apart from sending money to friends? That's valuable, but it's not multi-billions of dollars worth of valuable'
It isn't? Western Union makes $5 billion in revenue every year. PayPal - and a reference to sending money to friends is literally the name of the company - also makes $5 billion in revenue every year.
Exactly, it is mostly a solved problem. The question is, what value does Bitcoin add (for the average customer not interested to buy narcotics on Silk Road) and what is the price for this, for example unsolved security issues and large price fluctuations during the early adoption phase?
Transportation was a solved problem when horse carriages were invented. Every solved problem can be solved even better. Isn't that what most startups are about?
Why the obsession with "the average person"? Remember, that average changes over time. The automobile didn't improve the situation for the average person within the first decade of its invention.
Let's be more general. Set A = stuff you can buy with USD. Set B = stuff you can buy with BTC. Set W = all stuff. Set A will always be a subset of set W, and is getting to be a smaller subset every day. Set B will in the future be an exact match for Set W. Which unit of account would you choose? A or B?
Assuming you meant set B with set C - what makes you believe set B will match set W one day? Especially right now set B is incredible tiny compared to set A and there is not much incentive to switch to B which in turn makes it unlikely that set B will quickly converge to set W.
Most people don't yet understand how infungible the USD is becoming. Argentenians and Venezuelans understand the infungibility of their national currencies much better than Americans do theirs. Wealthy Americans and the wealthy of other nationalities who travel understand it better than those with little savings who are largely bound to their own states. Only big players and those on the fringes of society notice the problems with the USD right now.
As more people leave the official economy every day, the fringes grow larger. The more the US clamps down on foreign banks holding USD, the less attractive the USD will be as a store of wealth.
Except Bitcoin makes it free to send money to friends. One way I could see this being financially viable to build a company around is if lots of people are storing money in the company's webwallet. Then the company could invest customers' money, like a bank. But if you are using a webwallet like Coinbase, then you are asking to get screwed out of your money, since there are no FDIC protections.
Its free if you have bitcoin and your friend wants bitcoin. Once you bring other currencies into the mix it is often more expensive to comparable services and just as slow if not slower.
Agreed. Bitcoin is not competitive for small transactions. Given the average transaction confirmation time of 7 minutes (which will never go down) it clearly was not meant to be.
This has been a bear market for bitcoin for months—many of the bears have been rooted out. It's not a conspiracy that bulls are coming in and pushing the price up. It's expected. Not every bull will close their position immediately. That's too simple of a view of how markets work.
There is massive value in bitcoin. Payments, asset tracking, international remittances, etc. Take just one of those markets, and just one company—say Western Union and international remittances. That's $8.7B worth of market cap that bitcoin obsoletes.
> That's $8.7B worth of market cap that bitcoin obsoletes.
That logic doesn't really follow. It takes over all those things even if its market cap is only $1 billion. Bitcoin's market cap not related to the industries it replaces.
If it takes over rare metals, though, as an investment, it might end up worth something close to the market cap of Gold.
You're correct. I'm simply replying to his statement that there's no value proposition in bitcoin to consumers. My response is that it can easily replace a company worth $8.7B, thus showing it has consumer value, not that bitcoin will be worth $8.7B if it replaces Western Union.
Bitcoin doesn't render Western Union obsolete until the day remote Burkinabe villages can walk to their local store and pick up the US-resident cousin's salary earned in CFA Franc banknotes. A highly volatile intermediary currency is hardly an advantage there.
That's completely true, but it's also true that if that day comes and Bitcoin is so entreched in the global marketplace so you can exchange it in Burkinabe villages, then it will be worth 100x today's price (especially when taking bubble effects into consideration). For some people in some situations that can be a rational bet to make.
Yes, it has a long way to go, but it's off to a good start. I doubt a significant portion of Western Union transactions are to ultra-remote locations, but I could be wrong.
Heard that before. The question to answer is, "Why now?" What's different now? Nothing. Not yet. This will change someday, but I don't think that's today.
The day Bitcoin gets FDIC protections is the day it can go mainstream.
The point of bitcoin is that you don't need FDIC protection. You need FDIC protection with a bank because the bank isn't required to hold enough reserve to cover its deposits. If there's a run on the bank, and everyone wants to pull their deposits out, and the bank is insolvent, then the government guarantees to protect consumers by printing more money (inflation) to fulfill the bank's reserve requirements.
With bitcoin, you either have it or you don't. You can run your own bank, as long as you know how to safely store a private key.
Yes, you're right. The point is, with bitcoin, there's really no need for banks.
It's easier (and safer) for me to hold a million dollars in bitcoin than a million dollars in cash. If I had a million dollars in cash, I'd be constantly worried that someone will find it and steal it. Hence the need for a bank. I feel much more capable hiding a private key, which is just information, than I do hiding 10,000 pieces of paper, which is physical.
The point is that bitcoin holders don't need MtGox to hold their money. They would've been safer by far storing it in a 2-of-3 wallet, with one key held by a third party which does passphrase authentication (or similar) before they'll sign a transaction, one held on your computer, and a third stored somewhere hidden as a backup in case one of the other keys cannot be accessed.
Two of these already exist: BitGo[0] and GreenAddress[1]. Try doing that with physical money, and you understand why we have banks. With Bitcoin, you can have any level of security you like, and somebody only has to implement it once.
Except you're susceptible to physical robbery unless you store your money in a bank with FDIC protection. This is one reason Satoshi chooses to remain anonymous.
We're in agreement. Since USD is a physical store of value, it suffers from problems like robbery. Hence the need for banks.
With bitcoin, you don't need a bank. I have a 24-word passphrase in my head that can be converted to my private key—a "brainwallet". I know it, and my parents do. It's not written down or stored anywhere. It simply isn't physical.
With those 24 words, you can unlock all of the value I have stored in bitcoin.
Bitcoin is silly in lots of ways, but what something like it could potentially do is revolutionary. PayPal is worth billions; retail banking is a 12-figure yearly revenue industry. That's a whole lot of money on the table.
Buying steroids, drugs, porn, donating to Wikileaks -- anonymously / bypassing any Visa/Mastercard "embargoes". Fiat makes this quite difficult, Bitcoin solves this problem. Have you ever done an international wire transfer? It can take days. When I pay people with Bitcoin it takes at most minutes. If you actually start using it you'll probably stop asking this question. It is extremely useful at this point in time to many people.
> The way it works is, they buy in order to jump the price. Then other people buy and continue the momentum upwards. Then, in a few days, they sell, and thus capitalize on everyone else's belief.
Funny I also trade equities and what you're describing perfectly fits what happens there.
It provides a bigger picture because the current situation is not representative at all. Admittedly everybody who cares about Bitcoin is aware of that but it may still be a valuable information for the random reader without much Bitcoin background.
Perhaps you don't understand the meaning of the phrase "on this news."
Perhaps you do understand, but it makes you feel good to say something nasty about bitcoin. And that feeling is more important to you than honest discussion.
The given context was "on this news," explicitly referring to the single period of time since this information was made public. In that time and that time alone, bitcoin has come up a few dollars.
Nobody is denying the fact that bitcoin is still down from last week - or even last month, but the context in question is the past 4ish hours.
Context would be good if it were done without any kind of emotional undertones (which are often used to win arguments through emotional intimidation) or any kind of logical leaps (which are often used to squeeze in emotional understones).
So e.g. "It's worth keeping in mind, though, that bitcoin is down X% in the last month."
This is how it's been for almost a year now.
Ask yourself: Why use Bitcoin? What is the value proposition for consumers apart from sending money to friends? That's valuable, but it's not multi-billions of dollars worth of valuable. Examine the fundamentals before you jump into a gambler's market.