Thoughts on Bitcoin

Markets are based on expectations about the future, which is tangentially related to present reality. Present reality is that many smart, well-funded people are working on merchant adoption.

By the time legitimate transaction volume ramps up the price will have baked it in months ahead of time.

Not saying today's price is unsustainable, but I would recommend buying as many bitcoins as you would bet on black at the roulette table during a weekend in Vegas. If you're not a betting person, get off HN and go read Reader's Digest or something.

This article reiterates 2 of my favorites points --

1. the lack of real-world transactions, coupled with

2. the fact that these transactions are usually done via 3rd party processor or immediate conversion back to USD. If vendors had faith in it as an actually currency, they wouldn't feel the need to do so. This is not true adoption, this is simply an attempt at expanding one's market by accepting a tradable item.

Glad to see some more sobering articles emerging as I've been wondering why no one has coherently written these things. Most of the negative BTC articles on HN are poorly written and used as a straw man.

cs702 had a fantastic comment a few days ago in another thread [1]:

    Bitcoin befuddles experts who analyze it from a narrow perspective,
    because  it is not just a new medium of exchange or a new store of
    value: it is also a new kind of point-of-sale payment system (one
    that doesn't require payment processors), a new kind of global
    financial transfer system (one that doesn't require financial
    institutions), a new kind of time-stamping certification system
    (one that doesn't require notaries or county clerks), a new kind of
    contract-enforcing mechanism (one that doesn't require lawyers), etc.

    With rising global adoption, many new kinds of applications are likely
    to be created to take advantage of the Bitcoin network, the design of
    which even specifies a built-in script for defining and executing new
    types of transactions involving any arbitrary number of parties.

    In short, Bitcoin is a technology platform -- one that is benefiting
    from network effects.

    It may fail as "money" (in a narrow sense) and still succeed as a
    global platform.

The one takeaway he offers in closing is spot on though: "Just as it’d be stupid to convert all your dollars to bitcoin, it’d be stupid to not pay attention."

[1] https://news.ycombinator.com/item?id=6810839

Some of us don't want the help of a government. The revolutionary thing about Bitcoin is that it is a (nearly) zero trust method of transacting. The value is in the fact that there is no central bank to be afraid of. Most of the wealth my parents have lost in their savings was due to inflation and debt backed asset bubbles. Both of which are symptoms of a debt-prone central banking system. There might be arguments that these central banks stabilize the economy for the betterment of everyone, but that is irrelevant when it comes time to choose a currency. Do you want inflation, meddling, and regulation? Serious question. The uninformed should say "yes" and the informed might want to say "no".

As for whether or not people are right about Bitcoin being a bubble, I think that bitcoin has a highger likelihood of 20 year success than Twitter and a lower market capitalization. It's a bubble when the baby boomers get involved with their dumb money. When there are ETFs that get traded on the exchanges that are backed on Bitcoin. Then it can be a bubble. Right now, its just an inelastic supply curve and a couple million dollars.