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Thoughts on Bitcoin

blog.samaltman.com

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Re: Thoughts on Bitcoin

#71

Post by fragsworth »

crististm wrote: post #44
pinarsezer wrote: post #26

Earlier quoted context omitted.

> The fact that the few merchants willing to accept bitcoin generally convert to dollars right away suggest an underlying lack of faith in bitcoin—or at least a problem with the volatility. Few merchants accept gold either. Yet gold reserves in the world amount to US $8.2 trillion in value. Edit: removed part on volatility

Given the choice I think they will not have a problem in picking gold instead of bitcoins. Gold has some history behind it, and compared to bitcoins is more liquid and less volatile. (volatile for about 3000 years - do you mean available?)

> Gold has some history behind it

"It has history behind it" really seems like a fallacy to me. Many things had histories and were replaced, or changed dramatically, due to new technologies. Horses, swords, aluminum, newspapers...

I see Bitcoin being a very realistic threat to the high price of gold.

Re: Thoughts on Bitcoin

#72

Post by teawithcarl »

Sam - 你忘记了中国的影响。

The price is bitcoin is proportional to the "hot money" flowing out of China. Doesn't matter if that's an illicit market, it's still the most significant factor.

Whether or not one believes that hot money is going to stop/slow should strongly influence your estimate of the price of bitcoin.

That said, it's top heavy at $900-$1100, and reasonable people should be selling a portion of their holdings.

Re: Thoughts on Bitcoin

#73

Post by pbreit »

doki_pen wrote: post #23

I don't know why it is required that it is used in legitimate purchases. No one questions the value of gold, yet not many people use it to make purchases. I suspect bitcoins value will follow the same pattern as gold, once it is stable. When the world is full of uncertainty, it's value will rise. When things are steady, it's value will fall.

I agree. I think it just need a a sizable niche like illegitimate txns, tax avoidance or cross border txns to stick around in some capacity.

Re: Thoughts on Bitcoin

#74

Post by smilliken »

michael_nielsen wrote: post #25
dustyleary wrote: post #20

Earlier quoted context omitted.

The graph is log10-scale, so it's difficult to see a 50% or 100% increase in volume. It's definitely not a 5x or 10x increase though.

You can remove the log scale: https://blockchain.info/charts/estimated-transaction-volume?... I used the log scale to make the point that transaction volume is relatively slow-moving on a log scale. That is certainly not the case for the exchange rate!: https://blockchain.info/charts/market-price?showDataPoints=f... Incidentally, the volume graph has a notable spike in December 2011. I've Googled and asked around a b…

Since this is just volume measured by number of bitcoins exchanged, wouldn't it be more accurate to scale it by the exchange rate of your primary currency (ie. the product of the two graphs)? That seems like it would more closely represent the value being exchanged.

Edit:

Looks like they have this graph as well: https://blockchain.info/charts/estimated-transaction-volume-... (log scale).

This seems to support the conclusion that transaction volume (in USD) is growing significantly, although the trend is confounded by large price movements.

Re: Thoughts on Bitcoin

#75

Post by behold- »

CamperBob2 wrote: post #63
Udo wrote: post #51

Earlier quoted context omitted.

> Though it seems to be recovering somewhat. Ow. As with most investments, you need to think medium and long term. Barring some kind of final(!) crash, there isn't anywhere to go for BTC but up. Mainstream media and ordinary people are just now starting to talk about it. Stay with your investment, and don't sell before it at least doubled. If it crashes temporarily, that's fine too: chaos is a ladder. Within reasonab…

While it wasn't the biggest money mistake of my life, it's certainly a whopper in retrospect. Don't be like me ;) I have a problem classifying random things like this as a mistake. You didn't have enough information at the time to predict that BTC would exceed $1000, and you don't have enough information now to predict what it will do, either. It's just a game of musical chairs. The only "mistake" is to play. Some mi…

IMHO it would be a huge mistake not to invest a few days worth of income in bitcoins . Most likely you'll loose them, but there's a reasonable chance you'll get 100x back in a few years. I invested $2500 in the summer of 2012 and just last week cached a small part to buy a Citroen C5 saloon.

Re: Thoughts on Bitcoin

#78

Post by muyuu »

sjtgraham wrote: post #8

I think this is spot on. All sorts of people I rarely speak with have been coming out of the woodwork to ask about Bitcoin. These people are invariably regular folks that have heard about this thing that has been appreciating at an unbelievable clip. This is extremely alarming for me.

It is. However it has nothing to do with the protocol, it's just a fact that a lot of people are extremely money driven.

This can happen to housing, precious metals, bitcoin or anything else. Doesn't mean that the concepts of housing, precious metals or bitcoin are flawed. It's just people that are flawed, but we carry on with that reality.

Re: Thoughts on Bitcoin

#79

Post by tpeng »

The way I value bitcoin is to take the fully diluted market cap (21 million * $850 ~= $18 billion) and apply a money velocity which I assumed to be similar to US M2 velocity of 1.6 ($18 billion * 1.6 ~= $28.5 billion). Since global ecommerce transactions are about $1 trillion / yr this implies that bitcoin should penetrate 2.85% of ecommerce. Big assumption here is that bitcoin does not work for real-world transactions as the confirmation time is > 15 min. This may be oversimplified because a lot of real-world transactions don't need to be real time. I'm also excluding time value effects which you can insert back in if you like.

From the data I have seen, the bitcoin real economy could be orders of magnitude smaller than that implied by the current price, although there is no way to know precisely how large it is. This is including "illegal" transactions (I'm not sure why sam is discounting drug transactions, unless he means to imply that these will be shutdown. It does make sense to exclude gambling transactions as they are extremely high velocity).

Note that sam's point about merchants immediately converting BTC back to USD serves to increase the money velocity (perhaps by >10x). This would mean that BTC is pricing in a real economy even larger than $28.5 billion. Based on current BTC-denominated real transactions, fair value of BTC is at most only a few dollars.

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