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Thoughts on Bitcoin

blog.samaltman.com

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Re: Thoughts on Bitcoin

#151

Post by tpeng »

foobarqux wrote: post #141
tpeng wrote: post #115

Earlier quoted context omitted.

Price-implied expectations http://www.amazon.com/Expectations-Investing-Reading-Prices-...

I understand what you are saying now but I'm not convinced by the argument: It does not seem plausible that transaction volume will be affected by value of the medium of exchange. Can you show your reasoning applies to other conventional currencies? Specifically that the transaction volume changes in direct proportion to some numeraire, say USD? (That book is about DCF and bitcoin and other currencies don't give off…

We could debate what the velocity of bitcoin is/will be, but the relationship between velocity, money supply, and transaction volume is definitional.

http://en.wikipedia.org/wiki/Velocity_of_money

Re: Thoughts on Bitcoin

#152

Post by waps »

CamperBob2 wrote: post #65
ljd wrote: post #49

Earlier quoted context omitted.

I actually think the decentralized nature of bitcoin is what gives it all it's value. The fact that no bank can control it, inherently holds value. Currency manipulation is a really big problem right now, and knowing that you can buy a currency that won't be artificially controlled by it's issuer is an asset in itself. Having the currency centrally controlled again isn't special and it doesn't deviate enough from a c…

The fact that no bank can control it, inherently holds value. But the fact that anyone can roll their own competing currency inherently kills value, doesn't it?

It does not have value. Nobody is denominating services or goods in BTC. They denominate them in USD and BTC is simply a convenient way to spend USD, maybe even make some profit for the short time you're holding it. That's the value of BTC. Hard-to-trace, global (and local), decent-rate, unregulated money transmission. Decentralized and cheaper Western Union.

Makes you wonder if Satoshi isn't simply the NSA.

The more I think about this the more predictable this outcome becomes. BTC is making techies everywhere invest in what effectively amounts to USD.

Re: Thoughts on Bitcoin

#153

Post by waps »

rictic wrote: post #91
[deleted] wrote: post #83

Earlier quoted context omitted.

[deleted]

Emotionally it does matter. Economically there's no difference between having the $2000 cash and buying 100BTC at $20 versus having 100BTC at $20 and choosing not to sell it. I would strongly recommend rereading skwirl's post and introspecting on the ways that emotions rather than the hard calculus of the market may be at influence. I say this as someone who is long on BTC (and purchased right before the last great c…

There absolutely is. You can't effectively spend bitcoin, except on the exchanges. You can't use bitcoin to buy anything. The only thing you can do is use USD to buy bitcoin and transfer the bitcoin, and have it transferred back into USD by the merchant.

Re: Thoughts on Bitcoin

#154

Post by CamperBob2 »

waps wrote: post #152
CamperBob2 wrote: post #65

Earlier quoted context omitted.

The fact that no bank can control it, inherently holds value. But the fact that anyone can roll their own competing currency inherently kills value, doesn't it?

It does not have value. Nobody is denominating services or goods in BTC. They denominate them in USD and BTC is simply a convenient way to spend USD, maybe even make some profit for the short time you're holding it. That's the value of BTC. Hard-to-trace, global (and local), decent-rate, unregulated money transmission. Decentralized and cheaper Western Union. Makes you wonder if Satoshi isn't simply the NSA. The more…

Makes you wonder if Satoshi isn't simply the NSA.

Yeah, something's weird. BTC went up, not down, when Silk Road was busted. BTC went up, not down, when Congress started holding hearings on the subject.

Re: Thoughts on Bitcoin

#155

Post by XorNot »

CamperBob2 wrote: post #154
waps wrote: post #152

Earlier quoted context omitted.

It does not have value. Nobody is denominating services or goods in BTC. They denominate them in USD and BTC is simply a convenient way to spend USD, maybe even make some profit for the short time you're holding it. That's the value of BTC. Hard-to-trace, global (and local), decent-rate, unregulated money transmission. Decentralized and cheaper Western Union. Makes you wonder if Satoshi isn't simply the NSA. The more…

Makes you wonder if Satoshi isn't simply the NSA. Yeah, something's weird. BTC went up, not down, when Silk Road was busted. BTC went up, not down, when Congress started holding hearings on the subject.

Just for fun, plot BTC news relevancy from Google against the BTC value.

The two line up basically perfectly. Conclusion? BTC in the news means some portion of people hear about the great new BTC and how much it's going up in value, and some of them buy in.

Re: Thoughts on Bitcoin

#156

Post by thaumasiotes »

jforman wrote: post #12
jey wrote: post #2

Why distinguish between legal and illegal transactions? I guess the assumption is that value grounded in illegal transactions is inherently volatile due to the risk of it getting shut down?

Because the value illegal actors find in Bitcoin isn't in its role as a currency, but rather in its role as an anonymous method to globally transfer wealth. Even if millions of people use Bitcoin for that use case, it doesn't mean Bitcoin will ever have staying power for the "reserve currency" use case.

The term for "a method to transfer wealth" is "currency". (And in fact, "currency" is used metaphorically to indicate methods of transferring anything at all.)

Re: Thoughts on Bitcoin

#157

Post by foobarqux »

tpeng wrote: post #151
foobarqux wrote: post #141

Earlier quoted context omitted.

I understand what you are saying now but I'm not convinced by the argument: It does not seem plausible that transaction volume will be affected by value of the medium of exchange. Can you show your reasoning applies to other conventional currencies? Specifically that the transaction volume changes in direct proportion to some numeraire, say USD? (That book is about DCF and bitcoin and other currencies don't give off…

We could debate what the velocity of bitcoin is/will be, but the relationship between velocity, money supply, and transaction volume is definitional. http://en.wikipedia.org/wiki/Velocity_of_money

The definition of velocity is not at issue, the relationship between "price" and transaction volume is. If tomorrow the US gov decreed that every $1 of USD will immediately be exchanged for $2 of USDX you wouldn't expect, in theory, for the USDX transaction volume, denominated in USD, to change.

Put another way, I fail to see how the BTC/USD exchange rate is related to BTC transaction volume except for tangential reasons like sentiment.

Re: Thoughts on Bitcoin

#158

Post by XorNot »

behold- wrote: post #150
vworldv wrote: post #148

Earlier quoted context omitted.

100x back in a few years? So the market cap will be >1T, and Satoshi will be the richest man (?) on earth? Don't think so. Maybe 10x, and the chance of this is probably not great enough to balance against a crash. Good call divesting some of your BTC in favor of physical assets.

IMHO China, Saudi Arabia, Japan, Abu-Dhabi, etc. can't be happy with US printing trillions of USD every year. They need a stable currency to keep their enourmous savings in, but the Fed monetary policy is eroding those savings. Bitcoins would be a perfect alternative. If governments start buying them, the total value can easily go > 1T. Plus are you implying that hackers, like Bill Gates, Larry Page and Satoshi, can'…

If any of those places were unhappy they would stop buying US treasuries. But they keep buying them.

There isn't a "can't be happy" feeling to a market - just what people actually do. At the scales and volumes involved, it is literally impossible for any of those countries to divest themselves of treasuries suddenly (for one thing, bonds don't work that way).

Moreover, governments only invest in real things. The productive output of the US is a real thing because all those places buy tons of US goods and services. Bitcoins are not real things. Perhaps moreover, why would any one of those places invest in a currency at a scale which would simply let them purchase the computing power to take it over permanently?

Re: Thoughts on Bitcoin

#159

Post by seanmcdirmid »

sliverstorm wrote: post #135
chad_oliver wrote: post #103

Earlier quoted context omitted.

You have a very good point, and I hadn't considered that aspect. However, if people defer their consumption, surely they'll also have less need to spend money, and thus less incentive to perform economically productive activities in order to earn money to spend? I'm sure people will be quite happy in the short term, but over longer periods (decades) there will be much less effort (not necessarily money) invested in e…

Yup, that's basically the problem with deflation. It stagnates the economy, and it is self-reinforcing. Called a deflationary spiral.

Deflation is the easiest way to turn a recession into a depression.

Re: Thoughts on Bitcoin

#160

Post by XorNot »

terhechte wrote: post #19
skizm wrote: post #9

Earlier quoted context omitted.

To be honest I think the bottom is going to be around $500. Pretty much everyone I know who is even the slightest bit interested in bitcoin is waiting for this crash to happen so they can jump in. Just a guess though.

Yes, I've been thinking this for a long time. How should it crash if everybody is just waiting to join. As soon as it goes below a certain margin (say $600) people will flock to it, and it will go up again. At some point it will probably stay level for a couple of months, just like it did at $70. This time maybe at $400 - $600 somewhere. Actually, we may just be seeing that just this moment.

You've just described a classic ponzi scheme - it's just decentralized.

The flock of people looking to buy in allow the last group to get out of Bitcoin. Eventually you dry up the well of people who'll be able to bankroll each successive generation of "investors".

There's no commerce going on with Bitcoin on any significant scale, which means it's hugely overvalued. It's just a question of how when the next group looking to buy in on a crash is significantly smaller then the people exiting due to it.

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