It seems some people have mega riches, but is it actually feasible for me to realize that money (in US Dollars, deposited to my Chase bank account)?
There is an article here about that basically explains (this is my interpretation not his words) how the price of BTC is kindof like the sticker price on an item in the store. It doesn't represent the real value, it's simply the value as perceived by consumers and is, in a way, fixed -- http://falkvinge.net/2013/09/13/bitcoins-vast-overvaluation-...
But the fact that early adopters are psychotically rich for doing nothing is... one of the many signs of a flawed system. Basically if everyone started selling the market would destabilize because supply/demand curve would change & I'm pretty sure the value of what they're selling would plummet before they can unload most of their stack.
EDIT: Since I was immediately downvoted, please note that this happens regularly any time you speak ill of Bitcoin's pyramid scheme aspects and is completely expected/anticipated when I post these responses. It's a public service that I will drop eventually, but think about this -- even people who own a ton of BTC (article I linked to) criticize it as being insanely flawed. They only stay with it because as they point out, they believe the price will continue to rise. Speculators love it because they KNOW it's flawed, but still feel confident in a bet that the price will rise. I think it's why ultimately it will take gov intervention or a market catastrophe that screws over all the speculators to finally destroy such interest in Bitcoin and finally give it a chance to start over again... as a currency.
The price of everything is an illusion according to the Subjective Theory of Value [1].
No they risked their money with a speculation that had almost 0% chance of getting any return in the future. They took a huge risk, without this, bitcoin would not exist. And that's why they are rewarded: Taking a risk that almost no one would have taken to create something big.
> Basically if everyone started selling the market would destabilize because supply/demand curve would change & I'm pretty sure the value of what they're selling would plummet before they can unload most of their stack.
Bitcoin had already 2 big crashes (one time from $30 to $1-2 and one time from 200+$ to under 100$) and still recovered afterwards because there's people like me who see the potential in bitcoin.
And please tell me what your "real value" exactly is, because in my opinion their is only a perceived value for everything in the world.
Repeat each few weeks, and let's say there's 20 people that realized this and have enough bitcoins for this to be feasible.
End result = currency that's mostly owned by a few people. And when everybody realize this - bubble collapses.
At least that was my train of thought when I first learnt about bitcoin and now I hate myself for being too risk averse :)
If the highest standing offer to buy is at $700, it's not going to be an offer to buy all 120,000 of your BTC. It might be an offer to buy 100BTC. So you sell 30BTC at $700 and then move on to the next lowest OTB, which might be 20BTC@$699.95. You walk down a line of highest OTBs and the new market price is the highest OTB that you didn't manage to exhaust. The price is lowering as you sell out.
Similarly, you're not going to be able to buy in with your entire pot at the lowest standing offer-to-sell (market price). You'll exhaust the lowest offer-to-sell, then move on to the next highest offer-to-sell, etc. The price is rising as you buy in.
Assuming that the market is efficient, the decrease in price as you sell out and the increase in price as you buy in will be perfectly balanced against each other, and any extraneous gain or loss will reflect changes in market information that occurred while you were executing. Of course the market is not in practice perfectly efficient, but that applies to any other traded commodity.
i know thats kindof a tangent but.... seriously, i'm curious
How do you think an exchange rate between say USD->EUROS is decided? By the last trade price....
last trade price multiplied by number of units in circulation = total value of ecosystem
Bitcoiners do this CONSTANTLY
vs.
current trading price of something with no intrinsic value
However, non-voting common stock equities that do not grant dividends basically have no "intrinsic value" either I guess. It is just a proxy for the public opinion of the net worth of the underlying asset, similar to bitcoins.
I think this kind of "intrinsic value" line of reasoning isn't a very strong argument in general though because mostly the value of commodities is essentially based on the value people assign it via free market and psychological principles.
You sort of don't seem like you know much about econ/finance so I think it is strange that you are so outspoken about bitcoins.
BTC could still collapse, and it very well may. Even if we put the potential innovative benefits of btc aside though, things like this are more like cults vs religions. A cult is a cult until it has enough followers at which point it becomes a religion.
Cults and religions have a similar scam potential which is what it seems like you are feeling, however at this point I would say btc is reaching or possibly above Scientology levels of belief/followers. In fact the market cap of btc is possibly more than the market cap of Scientology right now. If btc is going to fall apart as a pyramid scheme it will likely be the largest to ever fall.
However btc is more than a pyramid scheme because it does offer some real benefits over the existing financial systems. The online blackmarket does require a currency similar to btc to operate. Right now sending money across borders is difficult and expensive. Right now buying things over the internet basically must be done with credit cards which has a lot of fees attached. Right now there is no real way to quickly send large sums of money to people without similar fees and specific hours of operation. You also have to go to a bank and deal with a lot of bullshit.
Whether btc will be the solution to these problems I am not sure, but it is a very big deal that it already has so many users/followers. That is the hardest part of changing things, getting large scale adoption.
It solves a real problem, yes, but not so much so that every Bitcoin should quadruple in value every 6 months, this is a bit ridiculous. After all, one could implement a BTC alternative (Litecoin for example) and achieve the same needs.
So essentially yes I see Bitcoin as a cult of naive investors who think that because of its theoretical underpinnings it will save us all. The truth is, huge stores of it are owned by black market operations and early adopters who had an exponential advantage in the ease of getting these things. Its basically like a free money machine for anyone who had change left in their pocket after spending their first crop of BTC.
If the system were ever to go down via cashout or crash or whatever, these people have as good a shot at grabbing the exit cash as anyone else, plus they can trivially buy a ton of real-world goods now through stores that accept Bitcoin, who themselves essentially send 3rd party processors the bill since presumably the processors are the ones storing Bitcoins while paying out the current exchange rate (or maybe they put them on an exchange soon after). The processors are assuming the risk because they want a foothold in the emerging shadow Wall St landscape. These are people who are putting their blood/sweat/tears into building the infrastructure that is essentially just magnifying the wealth of the founders / online gambling institutions / black market ops.
If instead all the rational people were to abandon the cult & quietly cash out, all that baggage could be left behind. The online casinos could instead foot the bill, and we could begin again with a new more stable cryptocurrency that has more utility as an actual currency. Market volatility adds some lure into the intrigue of the system but it's really just a vehicle for wealth redistribution to those who are prepared to take advantage of a flawed system.
Btw telling me it's gaining traction as a cult is not really endearing me to the ecosystem. I'm just not a big cult-lover. :P
But I guess it wouldn't work because if you sell a lot of bitcoins you couldn't sell all at the same price.
Eg. you want to sell 10k Bitcoins. The price is 750$ and the first 50 Bitcoins you can sell for 750$. Now after that there are not enough limit orders anymore available for that price category. So you would sell a lot of bitcoins for much less than the price was originally when you started selling.
And vice versa if you buy them. So I would doubt that you make a profit (because you can't sell/buy at price x and then afterwards the market price reacts. The market price reacts already while buying/selling in large quantities).
As I see it it's the same principle as if you own a large part of a stock, there you could argue the same.
Read the section in this article titled Enter the tape-painting “Shark Squad”. I've seen a few similar articles that document how simple it is to do market manipulations in Bitcoin that would get you immediately cuffed on Wall St. And it doesn't even take that many parties to pull them off! Because Bitcoin is actually transacted sooooo little.
I can't say for sure though. There are a lot of debates about transactional volume but impossible to tell because some of the big money Bitcoin holders just buy/sell to heighten the perception of its popularity.
http://falkvinge.net/2013/09/13/bitcoins-vast-overvaluation-...
1. Buy 1% of bitcoins
2. Price increases
3. Sell your bitcoins for more than you bought them
4. Goto 1
I commend you for not getting involved. I think Bitcoin speculators are immoral. Someone is going to end up footing the bill and it will ruin many lives.
This is also the case with rich families. It doesn't make the system unusable.
Bitcoiners are getting rich for designing a pump-and-dump scam & passing it along. It's called a pyramid scheme. You make a pitch that sounds convincing and then shop it out through "Multi-Level Marketing" strategies.
Why do Bitcoiners believe so much in a currency that allowed the originator to pull so much wealth out of thin air?
Say we estimate conservatively and say the Bitcoin ecosystem is only worth what was put into it. Well, now the founders own like 1/4 of all that money, for doing nothing but coming up with a convincing sounding scheme ("ummm... call it deflationary people will think that sounds intellectual"). A currency is not a currency if it is so distorted that it is radically reorganizing the wealth of those who convert to it.
They didn't just buy a few bytes of data & see the value appreciate by 9billion% just for sitting on their fat asses.
And that's the other issue. Land is an ACTUALLY limited resource. We don't know how to pull it out of thin air. The Bitcoin currency is artificially limited just to force a supply/demand situation. People can make other competing currencies just by forking the code.
Or really anyone who buys a stock early for a company that becomes huge.
I mean, if you buy bitcoins right now you are speculating that it will become a stable currency at some point. It offers a bunch of interesting and disruptive features that cut out a lot of middle men.
.com addresses appreciated in value because they are an actual good -- an address on the web that only 1 person can own. Bitcoin is a currency that isn't serving its purpose yet and whose function can be easily mimicked. All it is is an open source codebase & some infrastructure. If another coin (Litecoin, for example) were to take off, they would just add support for that too no big deal.
Point being, it isn't the sole implementation of this concept. .com addresses are by nature unique.
There are alt DNS systems as well.
IMO, the best analogy for Bitcoin is gold. Gold is valued way beyond its intrinsic value and yet, few people claim that gold is a pyramid scheme.
I don't want to get into the other thing. There are a ton of things that distinguish gold from BTC. For one, it has an intrinsic value. As in, "worst case scenario I have to sell this gold to a metalworker/scientist/jeweler/whoever who worse with gold".
If Bitcoin doomsday hits who is gonna pay a cent for one more file on their system. Useless bytes of data are not a commodity.
You helped out the king and he granted you a lot
of land. Several generations later, your descendents
are ridiculously wealthy because you got in on the
'ground floor' of what would later become the world
economy we have today.They would fall under the rubric of what the parent comment said about "rose to political power." The old nobility got that way because they supported the king in military campaigns in exchange for titles, land, and protected agricultural or mercantile monopolies and warrants. (Incidentally, the origin of the word "entitled" dates back to the titling of the nobility by royal authority. A title is, in essence, the exclusive right to something. In many cases, that right was to specific regions or lands. When we say that someone is "entitled to" something, or "has a sense of entitlement," we are figuratively harkening back to an age when an "entitlement" was something very literal.)
For what it's worth, the fluidity of the nobility is vastly underreported in popular conception. Noble families rose, fell, were made, were broken, etc., about as often as in Game of Thrones. Today's "old old money" descends from the old old noble houses who, by some combination of luck and savvy, ended up on the right side of countless civil wars, uprisings, wars of succession, and dynastic transitions.
Did these families "earn" their fortunes? I'd say no more and no less than any of today's political elites. We're kidding ourselves if we believe the political patronage system in the US is all that different from the political patronage system of the Tudor dynasty, or that of Louis XIV. The mechanics of government are different; the rules of the "Game" are entirely unchanged. (Replace "King" with "Presidential Administration.")
Great headline: "Crypto-Currency of the Future Promises a Return to Medieval Economics via Anonymous Self-Proclaimed King"
Even in those systems, people had to WORK to get that $$. We're kindof seeing that now with those setting up the Bitcoin infrastructure, but early adopters are richer than they at this point -- just by trading for a couple magic beans before the masses decided they HAVE TO HAVE THEM!!!
I think the coolest thing would be if cryptocurrency folks set up the Bitcoin ecosystem decided there was a BETTER digital currency, and just utilized that same tech stack with the better product. F--k Bitcoin it was an experiment and it can rot
It's just a more ingenious version of Amway, because rather than pushing products around & trying to have to prod people into trying their hand at sales, they are being sold THE IDEA OF MONEY! And if people decide to buy that money, the value of the originator's money increases. And to make them feel as if they are equals he says "Oh well if you want you can work on these hash equations and free money will appear" but as long as it's propelling the greed for this "money" it will never hurt the value of his stash.
Sad stuff. and the greatest beneficiaries are probably the criminal organizations who use it. Half the reason i wanna see it crash is because it will wipe a lot of bank accounts used by gambling organizations etc. who prey on misery to begin with.
Bitcoin is the risk I knowingly didn't take, because I didn't think it would amount to anything in the future.
All markets get created out of thin air. Everything you use now at one point had someone looking at it thinking, "what the hell is that ever going to be good for?"
Even if you don't believe in bitcoin, the problem with fiat currencies is that they are insecure.
> Baaaaaw Bitcoiners' wealth are disproportionate to their merit
Just like in fiat currency, in Bitcoin, lots of people who don't "deserve" anything are rich. Deal with it or go back to your imaginary universe that gives economical advantages to people based on "merit". Notice how I'm using quotes around the words that have no objective definition.
> A currency is not a currency if it is so distorted that it is radically reorganizing the wealth of those who convert to it.
What is your definition of currency?
Currency is something relatively stable, it's not a trading platform. I spoke about it in this way the other day --
One should not have to consult an exchange rate to figure out how much their currency is worth. They should know what it's worth by how much it costs for a dozen eggs. If that number changes rapidly (dozen eggs costs 1 BTC Monday, 3 on Friday, .5 next month, 100 in the future, .002 after that) well.... you don't have a currency, you have a speculative commodity.
The only reason Bitcoin users don't complain is because they're mostly hoarders/traders & the general trend is up.
This is just not true for many currencies that have undergone hyper-inflation and hyper-deflation. You are only comparing btc to the most dominant currencies in the world right now, and btc obviously is not one of the most dominant currencies.
When that happens, people tend to abandon them as currencies (though a currency undergoing hyperdeflation would be hoarded as a store of value).
Doing what amounts to a a "reverse split" on the currency is a measure issuers take to get the unit value of currency to a usable value.
This is true. But generally speaking, people go quite a bit out of their way to use currencies that are perceived to have a predictable future value.
This is why the dollar (and the Euro) is so popular the world over; it's value is pretty predictable, compared to most other commodities.
Please explain to me (or refer me to material explaining) how USD can possibly be stable when used by billions of people. Just because it's been stable from my point of view, doesn't mean it's stable for everyone. If your explanation relies on trusting a single person or organization, you see why I favor Bitcoin.
> The only reason Bitcoin users don't complain is because they're mostly hoarders/traders & the general trend is up.
The only reason fiat users don't complain is because from their perspective it looks like it's working.
He's the single person YOU rely on -- the one who designed the mining system, currency caps, etc. Ridiculous.
USD is more distributed than Bitcoin just because people are always watching theorizing monitoring USD. Bitcoin is at the mercy of market manipulators and there are no legal protections provided against even basic tricks.
I am assuming that you are fine with 90% loss in purchasing power of the US dollar in the last 100 years.
> He's the single person YOU rely on.
For security, no. The protocol is public. So I assume you mean only by market manipulation. But how so? Is this the same way I rely on Bill Gates not to trade all his money to a foreign currency?
Inflation figures for USD are readily available. That it is more stable when considered against most goods and services than bitcoin is not something about which there is any room for serious dispute.
This is not the observation of one person or perspective. It's the actual purchasing power of USD.
Consider tulip mania from the 1600s. Speculation drove up prices of tulip bulbs to the point where the only people buying tulips were other speculators who were willing to pay the high prices because they thought they could sell it for more later on--the exact reasoning you just posted. Speculators were just trading tulips--or worse, tulip futures--amongst themselves. When the time came to sell the tulips to people who wanted them for decoration, it was discovered that none of them actually valued tulips that much, and the bubble popped.
There are arguments for a bitcoin having an intrinsic value of $100k. If bitcoin were ever used for, say, something as large as the real estate market, it would be hard to imagine the price being any lower than that. But bitcoin is extremely far from being used as the dominant currency in any market that large.
51% attack publication didn't kill it.
Silk road bust didn't kill it.
Selfish miner attack publication didn't kill it.
I'm not saying that a flood of sellers won't lower the price dramatically. But to say a rumour is "all it will take" is to ignore recent history.
Are you talking about some new attack? The "51% attack" is a security property that fell out from the design of bitcoin: A cooperating group of people needs "51%" of the computing power to break bitcoin.
either one should do the trick, but right now greed is leading
Of course, anyone who has invested in BTC is highly interested to push the hype button and spread the word of BTC as universal payment system. This is the only way to bring more hard currency into the BTC cashflow.
The whole idea of Bitcoin transactions requiring special efforts to cash out is a sign of weak liquidity/weak infrastructure. If some bitcoin-exchange-house is limited to cashing out $10k/day, then how can you practically distinguish it from a Ponzi scheme that claims to have money but actually doesn't?
Have the money wired to your bank. If you're selling on bitstamp, even that step is easy.
Done.
Most of the bitcoin super-rich are the early adopters, who mined hundreds of bitcoins on their personal PCs while that was still possible.
And contrary to the popular folklore, you can get USD out of gox, it just costs you a fair amount to do so. If you're dealing in million dollar transactions, it can be arranged.
I wonder if it would be possible to come up with some kind of market indicator to detect when one of major holding addresses starts to sell off on one of the exchanges. This may be possible if the escrow/intermediary accounts are known. If one of these 'major holders' really felt like being evil, they could test out some of the BTC to USD processors to see how well their setup to handle large transactions and nuke them with 1000BTC conversions. Coinbase.... BOOM!... BTCQuick.... BOOM!
[1] Bitcoin Charts / Markets - http://bitcoincharts.com/markets/
Edit: turns out Coinbase has a 50BTC/day buy or sell limit.
Or you can move your Bitcoins to another exchange (which have a much lower valuation) and which are all foreign. Then cash out there. Then repatriate your USD. Which has tax implications. So in an amount as big as $10M you're going to lose a large amount of "money."
You also have to pray that somewhere along the way your anonymous untraceable Bitcoins aren't stolen.
http://bitcoincharts.com/markets/mtgoxUSD.html http://bitcoincharts.com/markets/btceUSD.html
Useful if you're a US citizen or resident and have bitcoins you want to sell.
So it works similar to trading.
So if you want $1million dollars at $700 per bitcoin you would have to find a market with enough people to buy at $700.
Probably would be more along the lines of a private sale than dumped on an exchange, though of late we've seen dumps/buys in the million dollar range.