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The Bitcoin Report 2 [pdf]

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Re: The Bitcoin Report 2 [pdf]

#2

Post by calciphus »

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.

Re: The Bitcoin Report 2 [pdf]

#3

Post by tdicola »

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.

Nice article--I like that it's concise and sticks to the data to make its point. This article last week from Forbes makes the same point with Paul Krugman's babysitter's co-op column: http://www.forbes.com/sites/pascalemmanuelgobry/2013/04/05/k...

Re: The Bitcoin Report 2 [pdf]

#6

Post by klochner »

tdicola wrote: post #3
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.

Nice article--I like that it's concise and sticks to the data to make its point. This article last week from Forbes makes the same point with Paul Krugman's babysitter's co-op column: http://www.forbes.com/sites/pascalemmanuelgobry/2013/04/05/k...

The deflationary aspect is only important for currencies backing an economy - if you just use bitcoin for quick anonymous transactions, say dollar-->bitcoin-->purchase, then you don't care what the value is doing over time.

It is interesting to consider alternatives though - bitcoin could be the Friendster of crypto-currencies.

Re: The Bitcoin Report 2 [pdf]

#7

Post by vyrotek »

"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 while waiting in absurdly long queues, and demand will loosen. Soon after, things will turn pear-shaped as the world's fastest liquidation occurs. The exchange rate will fall faster than orders can be fulfilled, so that less than $2.5 billion is recovered. After all, it was never really there anyway."

Nailed it.

Re: The Bitcoin Report 2 [pdf]

#8

Post by pfraze »

klochner wrote: post #6
tdicola wrote: post #3

Earlier quoted context omitted.

Nice article--I like that it's concise and sticks to the data to make its point. This article last week from Forbes makes the same point with Paul Krugman's babysitter's co-op column: http://www.forbes.com/sites/pascalemmanuelgobry/2013/04/05/k...

The deflationary aspect is only important for currencies backing an economy - if you just use bitcoin for quick anonymous transactions, say dollar-->bitcoin-->purchase, then you don't care what the value is doing over time. It is interesting to consider alternatives though - bitcoin could be the Friendster of crypto-currencies.

As an anonymizer and common middle currency for different economies, with that process, I can see the value. It could be particularly useful for making online purchases without giving buyer credentials.

Re: The Bitcoin Report 2 [pdf]

#9

Post by ctbeiser »

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?

Re: The Bitcoin Report 2 [pdf]

#10

Post by rhizome »

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?

market forces will drive prices up, and people will sell as a result, fulfilling demand?

I'm no economist, but I'm pretty sure this state of affairs is not guaranteed.

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