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BTC bubbles

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Re: BTC bubbles

#21

Post by dragontamer »

steven777400 wrote: post #10

Having not heard of this model before, I'm very surprised how tightly the curve fits, to the point of being sceptical (it's even got the "little" ups and downs" it seems). Traditionally, the idea with a bubble is that everyone (well, almost everyone) knows it's a bubble, but no one seems to know when it will pop or how far it will fall. Would this same model have fit the 2008 stock market collapse? Would it have accu…

The issue with the 2008 bubble is that it was in Mortgaged Backed securities (and related derivatives). The Stock Market crashed because when the MBSes crashed, big banks were unable to give loans out to businesses. Without loans, many businesses were unable to pay their employees, etc. etc.

The bubble was specifically in Credit Default Swaps, a derivative of the bond market. The problem here is that CDSes were untracked and unregulated. No one knew there was a bubble because there was no way to see the "fair price" of a CDS. Companies were making deals on CDSes in their backrooms, away from exchanges.

When all of the companies involved in CDSes failed (because people failed to pay their subprime mortgage loans), it killed the banking industry... even those unrelated to the bubble. When your business partner goes bankrupt, you're also in danger. Again: there were lots of factories who couldn't get a loan to pay their workers... because the bank they relied on died in the whole crisis.

This leads to factory closings, lots of people losing their job, and then a general Stock market crash.

But again, Stocks weren't the bubble in 2008. The Credit Default Swaps in the bond market was the problem.

Re: BTC bubbles

#22

Post by [deleted] »

dragontamer wrote: post #4

When a worthwhile Futures market hits, then BTC will really stabilize. He's right. Without shorting, options, and future contracts... it becomes impossible for BTC to stabilize in the wake of media exposure. Add on to the fact that the majority of BTC users seem to be idiots (ie: they look at the price as some sort of indicator of BTC penetration, as opposed to more useful statistics), and you've definitely got a sit…

[deleted]

Re: BTC bubbles

#23

Post by danielweber »

shawabawa3 wrote: post #19
leoedin wrote: post #12

Earlier quoted context omitted.

But bitcoins do have a use. There's at least a few million dollars a month of value moving through Silk Road. However, it's not in the interest of users of BTC to use a wildly unstable currency. My prediction is that bitcoin will be replaced at some point by another crypto currency which fixes some of its major flaws - particularly its deflationary nature.

> particularly its deflationary nature. As far as I can tell, there's no real reason it has to stay deflationary. At some point there could be a consensus that inflation would be good for bitcoin and they could patch the client to start increasing the new bitcoins per block. tbh I don't know why it isn't inflationary, if it was you could remove/reduce transaction fees as miners would always have an incentive

At some point there could be a consensus

In theory there could.

In practice, the vast majority of the bitcoin users are speculators, and will fight tooth-and-nail against changing away from being deflationary.

Re: BTC bubbles

#24

Post by DennisP »

stephencanon wrote: post #7
Nursie wrote: post #3

Earlier quoted context omitted.

I'd almost be surprised if it doesn't hit that within a few weeks. Not necessarily as a stable value, but in the last few days it's bounced around madly between about 50 and 100 dollars. I think at this point it's fair to say that nobody has any idea of the real 'value' of a bitcoin, and mad speculation is still the order of the day.

> I think at this point it's fair to say that nobody has any idea of the real 'value' of a bitcoin. Nonsense. They have no use, not even as a status symbol or as a practical unit of exchange. The “real value of a bitcoin” is zero, and the fact that this isn’t obvious to everyone is, frankly, astonishing.

Given that they are used to buy things in the real world, I'd say their total value is the value of the goods exchanged, divided by the bitcoin velocity of money. Varying expectations of future value screw with the price though.

Re: BTC bubbles

#25

Post by legutierr »

stephencanon wrote: post #7
Nursie wrote: post #3

Earlier quoted context omitted.

I'd almost be surprised if it doesn't hit that within a few weeks. Not necessarily as a stable value, but in the last few days it's bounced around madly between about 50 and 100 dollars. I think at this point it's fair to say that nobody has any idea of the real 'value' of a bitcoin, and mad speculation is still the order of the day.

> I think at this point it's fair to say that nobody has any idea of the real 'value' of a bitcoin. Nonsense. They have no use, not even as a status symbol or as a practical unit of exchange. The “real value of a bitcoin” is zero, and the fact that this isn’t obvious to everyone is, frankly, astonishing.

What's the real value of anything?

Re: BTC bubbles

#26

Post by jvm »

dragontamer wrote: post #4

When a worthwhile Futures market hits, then BTC will really stabilize. He's right. Without shorting, options, and future contracts... it becomes impossible for BTC to stabilize in the wake of media exposure. Add on to the fact that the majority of BTC users seem to be idiots (ie: they look at the price as some sort of indicator of BTC penetration, as opposed to more useful statistics), and you've definitely got a sit…

> When a worthwhile Futures market hits, then BTC will really stabilize.

I agree that a futures market would be a stabilizing force, but other volatile commodities are still highly volatile even with futures markets.

The reason most currencies aren't volatile is that they have a central bank behind them actively manipulating their supply to make sure they are stable relative to some other asset or basket of goods. In the case of the USD, the dollar is roughly pegged to CPI. Unbacked commodities that aren't pegged by a central authority tend to be on a highly volatile random walk, with or without futures markets.

EDIT: Looks like I mistyped, maybe it looked like I was saying the opposite.

Re: BTC bubbles

#27

Post by rrrrtttt »

dragontamer wrote: post #18
Nursie wrote: post #14

Earlier quoted context omitted.

Have you ventured over to bitcointalk? The speculators aren't in any danger of disappearing, no sir, this is just an opportunity to buy 'cheap' bitcoin and increase their holdings. Because obviously squirrelling away as much of it as possible will help it become a viable currency...

Indeed. But with a futures market, they will be able to speculate in both directions. Futhermore, businessmen who rely on the BTC USD price will be able to buy futures, and be able to settle down on a future spot price on BTC. IE: A business expects to get say 10 BTC in 30 days... but wants the money in USD. So he wants to buy a contract to sell 10 BTC 30 days from now. It can even be in the form of call / put option…

Could you say a bit more about how a futures market can reduce volatility in the underlying asset? This is an honest question, not being cynical. To me it seems that assets that have futures markets can be very volatile (say gold or oil), but I guess causation goes the other way?

Re: BTC bubbles

#28

Post by omellet »

jvm wrote: post #26
dragontamer wrote: post #4

When a worthwhile Futures market hits, then BTC will really stabilize. He's right. Without shorting, options, and future contracts... it becomes impossible for BTC to stabilize in the wake of media exposure. Add on to the fact that the majority of BTC users seem to be idiots (ie: they look at the price as some sort of indicator of BTC penetration, as opposed to more useful statistics), and you've definitely got a sit…

> When a worthwhile Futures market hits, then BTC will really stabilize. I agree that a futures market would be a stabilizing force, but other volatile commodities are still highly volatile even with futures markets. The reason most currencies aren't volatile is that they have a central bank behind them actively manipulating their supply to make sure they are stable relative to some other asset or basket of goods. In…

Other commodities are volatile for different reasons. Natural gas is volatile because it's literally volatile, so storing and shipping it is expensive. Grains are volatile because of variable growing seasons. Onions are volatile because US Congress banned futures markets for onions. Even so, none of these are nearly as volatile as BTC has been.

Re: BTC bubbles

#29

Post by vrotaru »

lmgftp wrote: post #20
mikeash wrote: post #15

Earlier quoted context omitted.

There's no such thing as the "real value" of anything, only what people will pay. And that is pretty obviously not zero.

Willingness to pay is someone's valuation. That's not the real value. That's not the inherent value. The inherent value of BTC is nill, except as a speculative commodity. I won't further comment on BTC since both sides are staunchly rooted in their positions.

> That's not the inherent value.

Show me your inherent-value-meter, or shut up. Simple, eh?

Re: BTC bubbles

#30

Post by Nursie »

legutierr wrote: post #25
stephencanon wrote: post #7

Earlier quoted context omitted.

> I think at this point it's fair to say that nobody has any idea of the real 'value' of a bitcoin. Nonsense. They have no use, not even as a status symbol or as a practical unit of exchange. The “real value of a bitcoin” is zero, and the fact that this isn’t obvious to everyone is, frankly, astonishing.

What's the real value of anything?

Five.
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