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The Bitcoin Report 2 [pdf]

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Re: The Bitcoin Report 2 [pdf]

#11

Post by ricardobeat »

vyrotek wrote: post #7

"There is no capital nor wealth creation to speak of; only as much money as was put in. While somebody may buy a bitcoin for $1 and then sell it for $200, no value was added in this process, so it is simply a transfer of wealth. The people who profit will do so by taking from those who lose. As the deflationary feedback amplifies the desire to hoard, the exchanges will become illiquid. Eventually, buyers will give up…

> The exchange rate will fall faster than orders can be fulfilled

Is that possible? In the event of a crash all buy orders will be fulfilled, ordered by price/time. The exchange rate can't move if there are no orders being executed.

Re: The Bitcoin Report 2 [pdf]

#13

Post by Aqueous »

vyrotek wrote: post #7

"There is no capital nor wealth creation to speak of; only as much money as was put in. While somebody may buy a bitcoin for $1 and then sell it for $200, no value was added in this process, so it is simply a transfer of wealth. The people who profit will do so by taking from those who lose. As the deflationary feedback amplifies the desire to hoard, the exchanges will become illiquid. Eventually, buyers will give up…

This describes what happens in the short term, probably repeatedly. But what happens in the long term? Traders learn; they adjust with respect to risk. People will become acquainted with the volatility of the BitCoin currency and adjust their buying and selling practices as a result. People will hold onto the currency longer because they've seen it crash before and recover. The curve will flatten and become a slope. As the rate of deflation steadies and shrinks transactions will begin again. As more and more users flow into the BitCoin economy mass-sellings will have less and less effect because most people who hold the currency will not be responding to short term blips in the price - i.e., day trading. As the volume goes up the chance that a small number of people can destabilize the currency will shrink. There will still be bubbles but they will become cyclic on a longer period, happening on intervals of years as opposed to hours and days, much like in national economies.

Re: The Bitcoin Report 2 [pdf]

#14

Post by zdrummond »

calciphus wrote: post #2

Background - despite the absurd name, a friend of my posted this (relatively anonymously) to Reddit last night. Unfortunately, it got downvoted into oblivion for not possessing enough cute memes. The data shows what happens to a currency like this is very predictable, and the behaviors we're seeing (deflation, currency hoarding, stagnation of real bitcoin output) are great predictors of crashes like this.

This seems spot on to me. Now the question is; is there a way to make money on the coming collapse?

Re: The Bitcoin Report 2 [pdf]

#15

Post by smosher »

calciphus wrote: post #2

Background - despite the absurd name, a friend of my posted this (relatively anonymously) to Reddit last night. Unfortunately, it got downvoted into oblivion for not possessing enough cute memes. The data shows what happens to a currency like this is very predictable, and the behaviors we're seeing (deflation, currency hoarding, stagnation of real bitcoin output) are great predictors of crashes like this.

That's too bad, it's very convincing. It's important for interested parties to pay attention to this stuff. Ignoring it is just being ignorant in the connotative sense.

It's not absolutely convincing though... I can't succinctly describe all my objections but I will say this though: the correspondence to tulip mania just doesn't hold for me, as the the tonic that drives up the price of BTC is the same tonic that gives them any value at all (simply because it has two attractors, zero and, as the link points out, something huge.) I am of the belief that tonic will remain modulo biases against, so unless that reaches critical mass the push will still be greatly upward.

So the data looks similar in places and for similar reasons in most of those places, but the foundations work differently in many ways. None of what I've said above applies to the tulip situation, and all of it has to do with how it is valued. Consider the attractor(s) for the price of tulip bulbs. When it's going up it's open-ended, where BTC has a closed end. (How well that closed end approximates infinity is a cause for concern of course.)

Re: The Bitcoin Report 2 [pdf]

#16

Post by ricardobeat »

Does it even make sense to consider Bitcoin as a separate economy containing "no real value"? I see it more as an alternative banking system, the money it contains comes from real-world value and gets converted back into real-word products; it's not a virtual currency.

Re: The Bitcoin Report 2 [pdf]

#17

Post by zenocon »

vyrotek wrote: post #7

"There is no capital nor wealth creation to speak of; only as much money as was put in. While somebody may buy a bitcoin for $1 and then sell it for $200, no value was added in this process, so it is simply a transfer of wealth. The people who profit will do so by taking from those who lose. As the deflationary feedback amplifies the desire to hoard, the exchanges will become illiquid. Eventually, buyers will give up…

Did he? Time will tell. Every article that portends doom via deflationary measures trots out the same 'ol tired arguments and examples (great depression, hoarders, etc.) You have to admit this is new ground. There are a lot of new ideas here (i.e. divisible to 8 decimal places, de-centralized, etc.) The charts were interesting, but the headline is pure bunk. No one knows -- but one thing is for sure: this is disruptive technology. Bitcoin may not survive, but finance won't be the same hereafter.

Re: The Bitcoin Report 2 [pdf]

#18

Post by dragonwriter »

zenocon wrote: post #17
vyrotek wrote: post #7

"There is no capital nor wealth creation to speak of; only as much money as was put in. While somebody may buy a bitcoin for $1 and then sell it for $200, no value was added in this process, so it is simply a transfer of wealth. The people who profit will do so by taking from those who lose. As the deflationary feedback amplifies the desire to hoard, the exchanges will become illiquid. Eventually, buyers will give up…

Did he? Time will tell. Every article that portends doom via deflationary measures trots out the same 'ol tired arguments and examples (great depression, hoarders, etc.) You have to admit this is new ground. There are a lot of new ideas here (i.e. divisible to 8 decimal places, de-centralized, etc.) The charts were interesting, but the headline is pure bunk. No one knows -- but one thing is for sure: this is disrupti…

> Every article that portends doom via deflationary measures trots out the same 'ol tired arguments and examples (great depression, hoarders, etc.) You have to admit this is new ground.

In what relevant sense to deflation and its effects is it new?

> There are a lot of new ideas here (i.e. divisible to 8 decimal places, de-centralized, etc.)

How are any of these relevant to the incentives created by deflation?

Re: The Bitcoin Report 2 [pdf]

#19

Post by surrealize »

ctbeiser wrote: post #9
vyrotek wrote: post #7

"There is no capital nor wealth creation to speak of; only as much money as was put in. While somebody may buy a bitcoin for $1 and then sell it for $200, no value was added in this process, so it is simply a transfer of wealth. The people who profit will do so by taking from those who lose. As the deflationary feedback amplifies the desire to hoard, the exchanges will become illiquid. Eventually, buyers will give up…

"As the deflationary feedback amplifies the desire to hoard, the exchanges will become illiquid." The rest of it makes perfect sense, but why would we think this, rather than that market forces will drive prices up, and people will sell as a result, fulfilling demand?

If you see it going up, why would you sell? In the deflationary spiral scenario, it'll just keep on going up, so it's in your interest to hold on.

Re: The Bitcoin Report 2 [pdf]

#20

Post by Goopplesoft »

zenocon wrote: post #17
vyrotek wrote: post #7

"There is no capital nor wealth creation to speak of; only as much money as was put in. While somebody may buy a bitcoin for $1 and then sell it for $200, no value was added in this process, so it is simply a transfer of wealth. The people who profit will do so by taking from those who lose. As the deflationary feedback amplifies the desire to hoard, the exchanges will become illiquid. Eventually, buyers will give up…

Did he? Time will tell. Every article that portends doom via deflationary measures trots out the same 'ol tired arguments and examples (great depression, hoarders, etc.) You have to admit this is new ground. There are a lot of new ideas here (i.e. divisible to 8 decimal places, de-centralized, etc.) The charts were interesting, but the headline is pure bunk. No one knows -- but one thing is for sure: this is disrupti…

Looks like the title has been changed. For anyone curious it was something along the lines of "Why bitcoins will fail"
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