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The Bitcoin Bubble

timothyblee.com

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Re: The Bitcoin Bubble

#31

Post by stonemetal »

mbesto wrote: post #22
stonemetal wrote: post #19

Earlier quoted context omitted.

There were bubbles long before government got involved in the market, in fact such bubbles are why the government is involved in the market now. The primary problem with bitcoins as it stands now is that there is no oversight so any sort of price manipulation possible is legal.

Re: Bubbles - Such as? Let me be more specific. If I shall quote wikipedia - "It could also be described as a trade in products or assets with inflated values" Doesn't Bitcoin set to eliminate inflated values? With no central authority controlling the amount of currency available or loaned at certain rates then valuation becomes absolute, no? Re: Manipulation - I'm not sure I understand how the value of the currency…

If the value is directly set by the end user then it's impossible to manipulate. Only if it is impossible to manipulate the end user. Aka there is nothing in the system to prevent fraud or any other pump and dump scheme you can come up with. So no, with no fraud controls in place Bitcoin does nothing to eliminate inflated values, and really can't unless they have come up with a technological solution to lying.

An example of a bubble before the SEC was created, and in fact lead to its creation. http://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929 The rising share prices encouraged more people to invest; people hoped the share prices would rise further. Speculation thus fueled further rises and created an economic bubble.

Re: The Bitcoin Bubble

#33

Post by kd0amg »

mbesto wrote: post #9

Two out of the three words of the title contain buzz words (CHECK!) Ok but seriously I don't see the "bubble" here. If this is a "bubble" what are the implications of it popping? The value is set by the people who exchange it and not by a governing authority or even, groups of people. As I understand it, that means the value can never be manipulated. Also, don't bubbles imply that there is some sort of governing body…

I don't see Bitcoin itself as "irrational exuberance" at all, in fact quite the opposite. It's attempting to solve a real world problem.

A lot of people I've heard promoting Bitcoin (n.b. these are not analysts) gloss over or outright ignore the more pressing real world problem of being able to spend it on the things you want/need. The solution I hear most often is "convert it to USD."

It looks like we're left with two possible outcomes. Either adoption grows large enough soon enough that converting to USD (or another currency) is no longer a necessary step in using BTC for most transaction, or people get bored/tired of waiting for that time to come and decide to cash out. The latter is the proposed bubble pop scenario, where people decide that they would much rather have some currency other than BTC, and are progressively willing to trade their BTC for less and less other currency. As for its implications, I'm not too worried. I'd expect the worst thing that could come out of it would be increased difficulty in getting similar projects to succeed in the future.

Re: The Bitcoin Bubble

#34

Post by prodigal_erik »

gojomo wrote: post #21

Anyone know the current ratio... (USD price of cloud computing power to generate 1 BTC) / (USD offering bid for 1 BTC) ...?

Allegedly, using a GPGPU to mine bitcoins is still modestly profitable, though a CPU is probably too slow for its earnings to cover the power to run it.

Re: The Bitcoin Bubble

#35

Post by pkulak »

mbreese wrote: post #10
pkulak wrote: post #4

Bitcoin doesn't have to replace the dollar, it just has to replace Paypal and some credit card business.

But Paypal and credit cards are based on the USD, or whatever the local currency is. So, in effect, it does have to beat the dollar. Bitcoin must be advantageous enough so that people will want to use that over the standard local currency (e.g. USD). Because, you're assuming that you'd have to convert USD to Bitcoin and then spend the Bitcoins. If you received Bitcoins, you'd need to then convert them back out as dol…

If Amazon took bitcoin, and I could use it to pay people on Craigslist, and maybe some other little things like that, I would probably just keep a bitcoin account around with a useable balance. If it got low I'd fill it with USD, and if I needed some funds out of it I'd take some USD out. But I don't think I'd need to do a USD conversion for every single little transaction.

Think about if the NYT decided to charge a half a penny to read an article? There's no way for them to collect that right now (it's too small), but bitcoin would work for that, and I sure wouldn't be converting half a cent USD every time I read an article.

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