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The Bitcoin Report 2 [pdf]

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Re: The Bitcoin Report 2 [pdf]

#51

Post by maxerickson »

johndevor wrote: post #46
el_senor_duerpo wrote: post #35

Earlier quoted context omitted.

Hi there. Actually, I did cover value of Bitcoin in use as a medium of exchange in footnote 2. Because there is no production in the bitcoin economy, or very little to be entirely accurate, the real exchange rate should basically be one. Why? Because most users of bitcoin live within very large production economies. Why would buyers pay more or sellers accept less, if they would be better of transacting in the domest…

money laundering or black market trade Moving money across borders is an use for Bitcoin as well. If you're living in Iran (or North Korea or Syria or Palestine) Bitcoin could very well solve your liquidity problem, in the same way the TOR network helps to solve a government-imposed-firewall issue.

How many ways are there for the people accepting the currency in country to get their hands on bitcoins?

I guess they could also act as an intermediary for people that want to send money in. Might need some deep currency reserves to play at that though.

Re: The Bitcoin Report 2 [pdf]

#52

Post by bitcoinmind »

What a bunch of nonsense. The report makes extreme predictions without any backup or weighting of arguments. There is no reason to believe that the network should crash.

The author has no clue about economics, so please.... (not that Ben Bernanke or Mario Draghi have, but anyway).

There will always be a use for Bitcoins. Think about other countries than you yourself are living in. Think about people who have to pay 20% for cross-border transactions.

Re: The Bitcoin Report 2 [pdf]

#53

Post by bitcoinmind »

el_senor_duerpo wrote: post #37
hisabness wrote: post #12

looks like a high school homework assignment to me.

Would you prefer I write in in LaTex and using fancy graphs from Matlab, R, or Matplotlib? Or are you just being mean?

Please, at least attempt to prove some of the wild predictions you are making. Science is about proofs, facts, etc. ... not just assertions.

Re: The Bitcoin Report 2 [pdf]

#54

Post by mrb »

polshaw wrote: post #33

The value of BTC just doubled from 60 to 120 in 40 minutes.. wtf is going on there? (looking at btce/USD) (disclaimer: i'm not trying to hype, I expect it will come back down again shortly, it just seems weird to change that much that quickly) Edit: yup.. back down to 80 20mins later.. can anyone tell what kind of volumes were traded in this period? ..I wonder if anyone was able to double a serious amount of money in…

The volatility is there because people are panicking, don't know what to do: buy or sell. Some think the bubble is imploding. Some believe in the long term and are buying coins on the cheap. And in between you have traders like me: I sold at $190 2 days ago. Re-bought at $70. Re-sold at $120. We are making money hand over fist... I love the volatility.

Re: The Bitcoin Report 2 [pdf]

#55

Post by hotpockets »

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…

I don't get this argument. Bitcoin lets you do things you can't do without it. That's not zero sum, that's creating value that wasn't there before. And we are only at the beginning. Pretty much no one understands what can be done with it in the future. Smart property, oracles, etc.

Re: The Bitcoin Report 2 [pdf]

#56

Post by mortehu »

> [...], sudden and large increases in the user base cause dramatic increases in the nominal exchange rate. This is because the money supply is exogenously fixed by the mining algorithm.

I think the reasoning here is too specific. Most currencies are only inflationary long term. If during a 10 day window a trillion euros flood into the US dollar market, I doubt the Fed will be able to respond fast enough to keep the prices fixed.

Re: The Bitcoin Report 2 [pdf]

#57

Post by Aqueous »

InclinedPlane wrote: post #31
Aqueous wrote: post #13

Earlier quoted context omitted.

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.…

Long term? People stop using bitcoin. You theorize that the boom/bust swings will diminish in intensity until eventually bitcoin becomes stable. Others theorize that the boom/bust cycles will grow in severity until eventually everyone just gives up on bitcoin. So far there's very little evidence for the stability option and a lot of evidence (and economic theory) for the speculative bubble theory. Do you have any evi…

I've very rarely seen something with a > 1 Billion market cap and millions of users simply disappear. (To use an unrelated example, even MySpace still exists :)

Very simply, the more users are in Bitcoin the more vendors there will be who accept BitCoin. The more goods and services can be bought in Bitcoin during the relatively smooth periods the greater the proportion of people who like to have the currency for currency purposes, because it can be used to buy goods and services. There will be 'induced traffic', a network effect - more roads into Bitcoin will pop up because there's an incentive to start an exchange (you make money off of each transaction, after all!). More roads = greater demand for more BitCoin. It is the fact that some buying power of BitCoin still exists even given the boom/bust cycles that will support the currency in the long run, and that this buying power will on average be higher on every contraction than the previous contraction. The fact that an anonymous, decentralized currency that prevents double-spending is desirable (i.e. has inherent value) to a lot of people will also support this buying power, and support the currency in the long run.

Re: The Bitcoin Report 2 [pdf]

#58

Post by matthew-wegner »

ricardobeat wrote: post #16

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.

I think this is a hugely important distinction. The linked-to analysis seems to assume that BTC are bought with USD, sit around in a wallet, and then come back out as USD.

When in fact, BTC's usefulness is its frictionless-but-secure, anonymous transactional nature. Its anonymity is even stronger if you mine coins yourself (or acquire coins directly from a miner for favors or whatever).

You can probably make the case that BTC must be deflationary, in order to draw in traders/investors, who actually provide necessary market liquidity to proxy BTC as USD, backing the worth of BTC-for-goods transactions...

Re: The Bitcoin Report 2 [pdf]

#59

Post by plaxis »

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.

Your friend goes to columbia? It's pretty good. Not perfect, but what is. Great Job!

Re: The Bitcoin Report 2 [pdf]

#60

Post by rms »

polshaw wrote: post #33

The value of BTC just doubled from 60 to 120 in 40 minutes.. wtf is going on there? (looking at btce/USD) (disclaimer: i'm not trying to hype, I expect it will come back down again shortly, it just seems weird to change that much that quickly) Edit: yup.. back down to 80 20mins later.. can anyone tell what kind of volumes were traded in this period? ..I wonder if anyone was able to double a serious amount of money in…

It's really low volume. Check out the crazy spreads on https://tradehill.com/

I think we'll stabilize around 100 over the next 48 hours but with crazy degrees of volatility.

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