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Bitcoin Price Pressure

blog.samaltman.com

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Re: Bitcoin Price Pressure

#71

Post by Ologn »

> The other way to get enough buy pressure would be if many people started deciding they want to hold bitcoin as a hedge or a speculation. This spurs occasional bubbles, but we haven’t yet seen it work long term.

Bitcoin is doomed because it has no value.

Commodities have value. Modern trade began by people trading commodities for each other. Some commodities had attributes which made them good currencies - they were portable, fungible, divisible etc. Gold is an example of a commodity which makes a good currency, other precious metals like silver are good as well.

Bitcoins are worthless. They are hashes, that's it. Gold can be used to fill teeth, to conduct electricity and so forth. Bitcoins can do nothing.

It's funny to see his discussion of bubbles. If anything is a sign of a tech bubble, it's these worthless Bitcoins having a market cap of $5+ billion.

For people who are saying its value is that it is a currency, you have no understanding of the value of commodities and currencies. Bitcoin's inevitable collapse will be a sign of this. My argument is falsifiable - if Bitcoins retain value, I'm wrong (of course Keynes said markets seemed to remain irrational longer than he himself could remain solvent). The Bitcoin's advocates are making an argument that is not falsifiable. "It's worth something because it's worth something" or "it's worth something because people think it's worth something". So if it goes to zero, their theories for why it had value still hold. Scientific arguments are falsifiable (mine is), there's are not.

Also the rise of Dogecoin, Litecoin, Peercoin or whatnot point to the lack of value of Bitcoins. Anyone can create these valueless currencies - even joke ones like Dogecoin reach market caps in the tens of millions.

The only semi-rational argument for Bitcoin is the one that goes "1971 paper currencies like the dollar, yen etc. have not been backed by gold (or some other commodity) since 1971, so why can't Bitcoins have value"? That argument is a rather long thing to go into.

Also, not to make a big thing of it, but that posts like this questioning the value of Bitcoin are regularly downvoted on HN are instructive. I guess I'll have to live with losing some worthless HN karma to point out that Bitcoin hashes are ultimately even more worthless.

Re: Bitcoin Price Pressure

#72

Post by mrb »

"as far as I can tell, mining is currently unprofitable with any reasonable cost of electricity."

I have been mining for 3.5 years. This statement is utterly false. Current mining hardware, such as the KnC Jupiter, can mine at about 500 Ghash/s at less than 600 Watt at the wall. Over a month it mines:

500e9 (hash/sec) * 3600 (sec/hour) * 731 (hour/month) / (2^32 * 8.0e9 (current difficulty)) * 25 (btc/block) * 400 ($/btc) = $383

And assuming worldwide average electricity costs of $0.10/kWh, it costs less than $44 to run over a month:

.6 (kW) * 731 (hour/month) * .10 ($/kWh) = $44

Even assuming higher prices (eg. highest-tier electricity prices in SoCal of ~$0.30/kWh), and even adding overhead like cooling, etc, it is still clearly profitable to mine with the Jupiter.

(However difficulty is rising pretty quickly, so it will certainly not remain that profitable, if at all, in the near future.)

Re: Bitcoin Price Pressure

#73

Post by dublinben »

natrius wrote: post #30
jbondeson wrote: post #29

Earlier quoted context omitted.

Well technically if you're a bitcoin merchant you can just as easily convert to USD or any other currency that is more stable than the Argentine peso.

How? Few Argentines have USD bank accounts, so there's no electronic market where they can sell bitcoins for dollars. They can buy dollar bills with bitcoins on the street, but that's not really scalable.

If you have assets in BTC, you can easily cash them out for USD into an American bank account. Setting up a holding company in Delaware is cheap and easy.

Re: Bitcoin Price Pressure

#75

Post by Goronmon »

gnaritas wrote: post #56
IvyMike wrote: post #35

> Anecdotally, I hear from merchants who start taking bitcoin that after an initial spike they see almost no volume. To me, this is one of the biggest problems with adoption--bitcoin doesn't offer much benefit to the typical consumer for mundane transactions. I'm about to buy a coffee machine on Overstock.com. There's no practical reason that bitcoins are better than what I'm going to do which is put it on my masterc…

Keeping your credit card number out of their database where it can't be hacked is a practical reason to use bitcoin. It reduces your risk of merchant's getting hacked, which happens all the time.

So, a merchant gets hacked and your credit card info is stolen. You notice fraudulent charges, call your credit card company and they reverse the charges and send you a new card.

If someone gets access to your bitcoin wallet or whatever storage mechanism you are using fails, then that money is gone forever with no way to recover it.

If you are a regular user with no need to make a political statement with the use of a non-traditional currency, what exactly about the second scenario sounds safer?

Re: Bitcoin Price Pressure

#76

Post by battani »

sillysaurus3 wrote: post #33

In a moment of some depression, reflecting back on sinking so much money into Bitcoin at close to the peak of its price history, I made this: http://i.imgur.com/f3tIJwK.png It's important to understand that Bitcoin is dangerous to you, and you need to respect its danger if you decide to buy some. You need to be using a secure cold storage wallet. You need to not trust services like Coinbase to hold onto your coins fo…

Sam is making valid points. But bitcoin's survival is not a function of its price in USD, and its adoption rate is also not a function of its price in USD. If we want to think of bitcoin as a currency, we have to stop thinking of it as a store-of-value/investment asset and start thinking of it as an efficient means of exchange.

There is no such thing as "buy pressure" or "sell pressure" in liquid markets (BTCUSD is liquid enough to qualify). Buying and selling are two sides of the same coin. There are scenarios that push people to sell (as mentioned in the article, miners selling to pay for electricity), but the volume of such trade orders is just a fraction of the volume built up by speculation, and speculation goes both ways.

I would argue that bitcoin's default "price pressure" is up because there is no easy way to short it (for the average trader) and early adopters (who own a large amount of bitcoin) are extremely evangelistic holders and buyers.

The argument that bitcoin may not survive is a valid one. Not because it's not being adopted by merchants (merchants couldn't care less about bitcoin, they receive fiat currency), but because consumers are not using it to make purchases or transfer money. Consumer adoption is the real measure of how much the ecosystem is evolving. Merchant adoption is just pure marketing at this point, and I believe that companies such as Coinbase and BitPay that are pursuing merchant adoption aggressively are in the wrong business.

I feel nobody here likes to hear it and I feel like a lot of people in SV are tuning this out, but bitcoin is really, really struggling to find a relevant use case, especially with consumers. Regular consumers have absolutely no reason to use bitcoin. The "1-click" payment and 1% price discount are not appealing enough to the average Joe who already gets 1-2% cash back, airline miles, and consumer protection on his credit card (and 1-click checkouts on many e-commerce platforms). And more regulation isn't helping the "crypto-anarchist" decentralization angle either.

Bitcoin is great, for MERCHANTS.

But payments is a two-sided market. A winning product must appeal to both sides, the buyer and the seller. Bitcoin appeals to the seller at the expense of the buyer. Even if the blockchain technology overcomes all of its flaws, we would have bootstrapped a value exchange system that does not offer greater benefit to the one that exists today.

Many are making the flawed and simplistic analogy of comparing bitcoin/blockchain technology to the early days of the Internet... That analogy is not valid. When it comes to money, consumers actually want a central authority. They want to be insured and cuddled and protected and not run the risk (however small) of being criminally liable for transactions and have someone to speak with if they make an erroneous transaction or have their card stolen. And they can already do all that, which makes it tremendously difficult to compel them to change the habits they've had in forever to adopt a system that does not provide them with significant advantages.

I've been in bitcoin since 2011 and used to be a big believer, but I don't see bitcoin or blockchain technology gaining traction with consumers, because it simply doesn't solve a problem for them.

It could be destined to eternally remain a store of value (like gold) or find targeted applications (like machine-to-machine payments). The underlying blockchain technology could be of more use if adopted by the banking system, for example, but that is still far in the future.

Re: Bitcoin Price Pressure

#77

Post by dublinben »

VMG wrote: post #68
dublinben wrote: post #60

Earlier quoted context omitted.

How does Bitcoin provide you any "freedom from financial and fiscal paternalism"?

Most alternatives for storing wealth have many restrictions attached to them when it comes to transferring ownership. Whether you agree with those restrictions or not, Bitcoin does not have them.

If you actually had enough money to worry about this kind of thing, I doubt you would be using Bitcoin for your assets.

Re: Bitcoin Price Pressure

#78

Post by sillysaurus3 »

jnbiche wrote: post #44
sillysaurus3 wrote: post #33

In a moment of some depression, reflecting back on sinking so much money into Bitcoin at close to the peak of its price history, I made this: http://i.imgur.com/f3tIJwK.png It's important to understand that Bitcoin is dangerous to you, and you need to respect its danger if you decide to buy some. You need to be using a secure cold storage wallet. You need to not trust services like Coinbase to hold onto your coins fo…

For many of us, Bitcoin represents far more than an opportunity to gain or lose money. For us, the freedom from financial and fiscal paternalism is worth the risk.

Agreed. That was actually one of the reasons I originally got into it: I wanted to try to be a part of this movement and help it grow. Even if it was just taking a gamble, I still felt like I was helping it grow into what it will ultimately become (as long as it doesn't fail). Never in the history of the world have people been able to manage a substantial amount of personal wealth without having to trust anyone else. Something like that, regardless of your feelings about Bitcoin, is fundamental and deserves to have its shot at happening.

So I just want to clarify that my comments aren't designed to steer people away from Bitcoin. They're to remind people to be smart about getting into Bitcoin. It's still in the early prototype stage. You have to respect its dangers, or else there's this huge chance you'll lose whatever you decided to risk by getting into Bitcoin in the first place.

Re: Bitcoin Price Pressure

#79

Post by gnaritas »

tethis wrote: post #46

But if the currency is deflationary with a coin limit, over the long term the only way more people can enter the market / make use the currency is for, as an example, $1 USD to be represented by smaller and smaller subdivisions of BTC. This necessarily increases the value of 1 BTC. Why is there ever any incentive to do anything with BTC besides hoarding?

Hoarding creates the value necessary per unit to make large funds transfers possible. Hoarding is good.

Re: Bitcoin Price Pressure

#80

Post by sktrdie »

VMG wrote: post #18

> And even if bitcoin itself fails, I think the blockchain will be one of key technical innovations of this time period. A blockchain is only useful if it is heavily secured by hashing power. This is only the case if there is significant mining equipment devoted to validating blocks. That in turn only happens if there is a reward for validating a block. Long story short, it's currently very difficult to use a secure…

Actually Ripple's consensus algorithm can be used for a variety of different applications, the ones you would think to build using Bitcoin's blockchain. Because Ripple solves the double-spending problem without the need of mining [1].

The main thing that Bitcoin adds is of course the democratic distribution of coins based on hashing power. But if you don't intend to use "blockchain technology" as a currency, then Ripple may very well serve your needs.

1. http://bitcoin.stackexchange.com/questions/7550/how-does-rip...

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