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The Bitcoin Report 2 [pdf]

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Re: The Bitcoin Report 2 [pdf]

#41

Post by anologwintermut »

Aqueous wrote: post #13
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…

This describes what happens in the short term, probably repeatedly. But what happens in the long term? Traders learn; they adjust with respect to risk. People will become acquainted with the volatility of the BitCoin currency and adjust their buying and selling practices as a result. People will hold onto the currency longer because they've seen it crash before and recover. The curve will flatten and become a slope.…

Long term someone takes the core technical advances and detaches it from the libertarian economic* ideals and creates bitcoin ++ with a fixedish rate inflationary money supply and maybe some limits on trade volumes to limit volatility. Oh, and you don't use a fucking magic card exchange as the primary way people get into or out of your currency.

*you may or may not agree with those ideals but it probably wasn't the best idea to try a new technical solution to currency and a economic philosophy about currency/central banks at the same time)

Re: The Bitcoin Report 2 [pdf]

#42

Post by polshaw »

surrealize wrote: post #24
klochner wrote: post #6

Earlier quoted context omitted.

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.

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 If you expect the value of bitcoins to keep going up, why would you only hold them for short periods of time? You're suggesting that people would wait until the last possible moment to change their dollars into bitcoins. But by doing that, they're losing money if the value o…

Because most people are risk averse (and past performance is not an indicator of future results), 'lazy' and dislike complexity.

If I were European and wanted to buy some stuff from China later in the year, the rational thing to do (given an expected Euro fall) would be to change to Yuan today. If you take this to it's logical end (extreme) then I would be changing all my money, and become a currency trader.

To me, the dual functions of BTC as an asset and a transfer mechanism are almost unconnected, often with opposing interests. I often hear how much BTC would be worth if it were used for X% of trade; it's rubbish, that only applies IF people hold BTC for any significant amount of time, which is at least not a necessary part of the equation.

Re: The Bitcoin Report 2 [pdf]

#43

Post by tquai »

The market is capitalized at $2.5 billion, but what does that mean in an economy with no production?

Does the author define "production" as manufacturing where the exclusive currency used (for raw materials, wages, utility bills, etc.) is bitcoin? If so then I'm not sure of the relevance.

One could make all sorts of clever but offtopic points about a fiat paper currency when viewed through the lens of a P2P currency like bitcoin. "The Canadian dollar is supposedly worth more than the USD today, but what does that mean when the Canadian network has zero nodes?" The wrongness of such a statement leaps out since fiat currencies are familiar to us. In contrast, bitcoin doesn't need a manufacturing base, but this is less obvious since P2P currency is a new idea that people (myself included) don't well understand.

Re: The Bitcoin Report 2 [pdf]

#44

Post by el_senor_duerpo »

Aqueous wrote: post #13
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…

This describes what happens in the short term, probably repeatedly. But what happens in the long term? Traders learn; they adjust with respect to risk. People will become acquainted with the volatility of the BitCoin currency and adjust their buying and selling practices as a result. People will hold onto the currency longer because they've seen it crash before and recover. The curve will flatten and become a slope.…

Here's the problem. You're talking about traders, but where is the capital? You can't have a financial market purely based on currency speculation. If we're going to talk about bitcoins as though it were an asset (store of value), rather than a money supple (unit of account or medium of exchange), then we need to verify which properties of an asset it possesses.

Do bitcoins provide a consumption utility stream? Do they yield dividends. What sorts of productive risk-taking do they represent? When I buy a stock, it will perform well if the risks it takes in providing mutually beneficial exchange with business and households are successful. For bitcoins, there is no systematic market risk, because there is no capital stock. Why? The same reason as always. Deflation increases the burden of debt which decreases investment, even though the economy is awash in savings.

Our national economies do not possess cycles as you describe them. Here's a good article about macroeconomic business cycles: http://noahpinionblog.blogspot.com/2013/02/is-business-cycle.... While the level of inflation fluctuates in our economy, it does so on a much smaller scale: http://en.wikipedia.org/wiki/File:US_Historical_Inflation_An.... What really jumps out from that graph is how the best economic prosperity the world has ever seen coincides with fiat currency ending the threat of deflation.

Re: The Bitcoin Report 2 [pdf]

#45

Post by el_senor_duerpo »

anologwintermut wrote: post #41
Aqueous wrote: post #13

Earlier quoted context omitted.

This describes what happens in the short term, probably repeatedly. But what happens in the long term? Traders learn; they adjust with respect to risk. People will become acquainted with the volatility of the BitCoin currency and adjust their buying and selling practices as a result. People will hold onto the currency longer because they've seen it crash before and recover. The curve will flatten and become a slope.…

Long term someone takes the core technical advances and detaches it from the libertarian economic* ideals and creates bitcoin ++ with a fixedish rate inflationary money supply and maybe some limits on trade volumes to limit volatility. Oh, and you don't use a fucking magic card exchange as the primary way people get into or out of your currency. *you may or may not agree with those ideals but it probably wasn't the b…

Two quick remarks. First, there already are many virtual/digital currencies, some of which simply peg their currencies to the dollar. But nobody really cares. Why? Well, what's the point? It's just a slightly less convenient form of a dollar.

Second, we all already do use digital currency. Actual, physical currency (and deposits at the Fed) are called the monetary base or "high powered money". However, most people transact goods using debit cards, which is called "inside money". These are privately created dollars, and they change hands digitally. So, we're already there. (I'm avoiding credit cards since those are technically loans, not money).

Re: The Bitcoin Report 2 [pdf]

#46

Post by johndevor »

el_senor_duerpo wrote: post #35
carmaa wrote: post #25

A "report" not covering the greatest current use case for the currency - namely anonymously buying weed through the Internet tubes? Not saying it is a good thing, just that there's actual value creating going on. Right now.

Hi there. Actually, I did cover value of Bitcoin in use as a medium of exchange in footnote 2. Because there is no production in the bitcoin economy, or very little to be entirely accurate, the real exchange rate should basically be one. Why? Because most users of bitcoin live within very large production economies. Why would buyers pay more or sellers accept less, if they would be better of transacting in the domest…

money laundering or black market trade

Moving money across borders is an use for Bitcoin as well. If you're living in Iran (or North Korea or Syria or Palestine) Bitcoin could very well solve your liquidity problem, in the same way the TOR network helps to solve a government-imposed-firewall issue.

Re: The Bitcoin Report 2 [pdf]

#47

Post by maxerickson »

polshaw wrote: post #33

The value of BTC just doubled from 60 to 120 in 40 minutes.. wtf is going on there? (looking at btce/USD) (disclaimer: i'm not trying to hype, I expect it will come back down again shortly, it just seems weird to change that much that quickly) Edit: yup.. back down to 80 20mins later.. can anyone tell what kind of volumes were traded in this period? ..I wonder if anyone was able to double a serious amount of money in…

Mt Gox went back online about 80 minutes ago. So about 40 minutes before your timestamp.

Re: The Bitcoin Report 2 [pdf]

#48

Post by el_senor_duerpo »

rhizome wrote: post #10
ctbeiser wrote: post #9

Earlier quoted context omitted.

"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.

I am an economist, and I have no idea what that means. Sounds to me like confusion over two things: (i) the difference between "supply and demand" and the "quantity supplied" or "quantity demanded" and (ii) equilibrium. The circular logic is a tell tale sign. Price goes up, so people demand less, so price goes down, so people demand more... That's the whole point of equilibrium. Where does all of that net out.

Re: The Bitcoin Report 2 [pdf]

#49

Post by agilescale »

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.

``Reddit'' is worthy of bashing in many ways, but you are bashing it for the wrong reasons; the reason why the article was downvoted there most surely wasn't because of the lack of image macros, but rather that it ran against the locals (he probably posted it in a pro-Bitcoin subreddit) religious fervor.

You still see them swearing allegiance to Bitcoin and deriding those who sold during the crash, all the while holding on to their, at least temporarily, worthless Bitcoins.

Re: The Bitcoin Report 2 [pdf]

#50

Post by anologwintermut »

el_senor_duerpo wrote: post #45
anologwintermut wrote: post #41

Earlier quoted context omitted.

Long term someone takes the core technical advances and detaches it from the libertarian economic* ideals and creates bitcoin ++ with a fixedish rate inflationary money supply and maybe some limits on trade volumes to limit volatility. Oh, and you don't use a fucking magic card exchange as the primary way people get into or out of your currency. *you may or may not agree with those ideals but it probably wasn't the b…

Two quick remarks. First, there already are many virtual/digital currencies, some of which simply peg their currencies to the dollar. But nobody really cares. Why? Well, what's the point? It's just a slightly less convenient form of a dollar. Second, we all already do use digital currency. Actual, physical currency (and deposits at the Fed) are called the monetary base or "high powered money". However, most people tr…

Im general I agree with you and I'm not sure bitcoin++ will work either. But I think it has to happen and fail before the idea is really and truely dead.

I think no one cares for a large number of reasons but one of them is because you'd need to trust the people who run most of those currencies(i'm ignoring the bitcoin clones) and if you are going to trust someone, might as well trust a regulated entity like a bank.

Just look at how paypal screws people? Why trust someone else even more sketchy. However, precisely because pay pall screws people it might end up being the case that there is some market for a non centralized online payment system. But it certainly can't be deflationary and it ought to avoid rampant speculation.

I wonder what would happen if every 30 minutes the currency inflated by 100% percent. It would make sure no one ever held inflatcoin. You'd just use it as a transaction medium.

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