Personally I think not focusing on this is what’s causing the Bitcoin supporters to miss the point. There are numerous red flags all over the place with Bitcoin. Making excuses for each and every one of them and pushing forward anyway is what causes people to eventually lose money. This Mt. Gox thing is just the latest issue, but it will not be the last.
It’s just a new payment system, not a currency. If you want to buy into Bitcoin, focus on finding companies that will benefit from the new technology we are seeing develop here. I would strongly advise against anybody viewing this thing as currency or any form of price appreciation vehicle. Remember, digital “currencies” can be created literally out of thin air. There’s nothing particularly special about Bitcoin. Just research Dodgecoin and Litecoin and you should start to see some of those red flags.
It sounds like your prediction is that the value of bitcoin will eventually go to $0 and lots of people will lose a lot of money. Is that about right? I don’t want to mischaracterize your position but you’ve been raising red flags all year…
My prediction is that it won’t drop to $0, that adoption will increase, that the ecosystem will develop and respond to changes (as it has already done many times), that bitcoin is here to stay (largely because of the first mover advantage), and that everyone and their grandmother should rush out and buy $20 worth today just in case I’m right.
That being said, I am not a mindless cheerleader, nor have I drunk the bitcoin kool-aid… and I’ll happily own up to being totally wrong about this (and many other things) if that’s how it goes. I can tell you’ve got way more expertise in the financial world than I do and I’ll defer to that wherever it seems you are better informed than I… but some of what I’ve read here in this thread (and I’m not speaking specifically of your posts) just sounds like skepticism based on shoddy mainstream media coverage, misinformation, and/or a poor understanding of bitcoin itself. And that makes me want to quibble and pick things apart… just as I get on people’s cases when they make grand pronouncements about bitcoin being the future of money, the cure for the Federal Reserve Blues, or whatever else.
Anything could go wrong… but to me it seems like bitcoin has accumulated sufficient mindshare to muscle it’s way through to a future in which cryptocurrencies actually matter.
It doesn’t have to go to $0 for people to lose a lot of money.
The problem is that the people that bought bitcoin on the big runup were speculators. The big runup has absolutely nothing to do with any of the progressive thinking arguments that people are making. Your suggestion of buying $20 just in case is exactly the issue. People are treating cryptocurrencies as a purely speculative play instead of anything like a currency.
Yes, that’s fair to say. I disagree with anyone making the argument that bitcoin is just another currency and there certainly is more speculation than actual usage going on. All of that is based on a mixture of empty hype and genuinely sound arguments predicting a future where bitcoin adoption increases significantly. Trying to sort all of that out isn’t easy and no one knows what’ll happen next… but that’s why I make the $20 recommendation: it’s not a lot of money and you won’t be left out in the cold if bitcoin keeps growing.
Of course, all of this has little to do with everyday usage… but we’re talking about the market here. Coinbase provides a good example of business infrastructure being built on top of the bitcoin protocol. Merchant fees are vanishingly small and businesses needn’t be exposed to bitcoin’s volatility. The ecosystem is growing to be a whole lot more than incompetent exchanges and shady marketplaces for illegal things…
Or six and a half million or more or less depending on what bitcoin is selling. For roughly 20$.
While Brent seems skeptical about the crypto currencies. I would suggest people are more skeptical of currencies that the owners can just print more when they feel like it. The rules to Bitcoin prohibit and limit the amount of coin in circulation. Backed by gold has not been the case for fiat money for a long time, when one realizes what money is used for, its easy to see the attraction.
Oh, I happen to owe you 10 billion trillion dollars, no problem, let me print a billion trillion dollar coin with your ass on it. Real products that took real man hours to make and traded in what?
A crypto currency makes a lot more sense than the system we have to me. I doubt it will be bitcoin though.
As noted, $20 of bitcoin a few years ago is worth big money now… but the historic increase in value is not the only thing driving speculation right now. There is this idea prevalent in the bitcoin community that the future value is unlikely to muddle along in the range it occupies now; it’ll either drop to $0 or shoot “to the moon” as the saying goes. The basis of this argument: bitcoin is inherently deflationary; there is a known limit on how many coins can be mined; some will be lost due to spoilage; and if bitcoin ever eats even a small fraction of the global economy… well, you do the math. And so I suggest buying $20 worth today, printing it out on a paper wallet, and forgetting about it for a few years. Either it’ll be worth a lot down the line or you’re out $20.
Dogecoin, if you’re still following along, is gaining ground because it is a kind of antidote to this way of thinking… it is inflationary rather than deflationary so it encourages spending. It is fun and welcoming instead of complex and arcane. There’s lots of it to go around and mining is easy. It’s a cryptocurrency with training wheels… but it’s also a response to the argument that bitcoin isn’t really a currency, which is a fair point to make. I don’t think it’s much of a currency either. But of course that doesn’t mean it isn’t useful…
As noted, $20 of bitcoin a few years ago is worth big money now… but the historic increase in value is not the only thing driving speculation right now. There is this idea prevalent in the bitcoin community that the future value is unlikely to muddle along in the range it occupies now; it’ll either drop to $0 or shoot “to the moon” as the saying goes. The basis of this argument: bitcoin is inherently deflationary; there is a known limit on how many coins can be mined; some will be lost due to spoilage; and if bitcoin ever eats even a small fraction of the global economy… well, you do the math. And so I suggest buying $20 worth today, printing it out on a paper wallet, and forgetting about it for a few years. Either it’ll be worth a lot down the line or you’re out $20.
Dogecoin, if you’re still following along, is gaining ground because it is a kind of antidote to this way of thinking… it is inflationary rather than deflationary so it encourages spending. It is fun and welcoming instead of complex and arcane. There’s lots of it to go around and mining is easy. It’s a cryptocurrency with training wheels… but it’s also a response to the argument that bitcoin isn’t really a currency, which is a fair point to make. I don’t think it’s much of a currency either. But of course that doesn’t mean it isn’t useful…[/quote]
It already shot to the moon. If you wanted to make big money then that time has passed.
I have to agree with this. I wonder if the problem is not that bitcoin is massively overvalued (which it obviously is, due to speculation and easy ASIC mining) but that it started off massively undervalued. I don’t see any real distinction between digital currencies and fiat currencies - they both acquire value only via people’s willingness to treat them as commodities, which is absolutely what’s happening now to bitcoin, albeit in a dysfunctional way. It’s not impossible that it might settle out to a ‘true value’ based on trades for real goods (they’re happening somewhere, right?).
I also think the time is ripe for a democratized currency to emerge. Governments are going to do their best to shut them down because they’re untaxable - and that’s the whole point. Cryptocurrencies are (eventually) going to make taxation obsolete, and that’s a very good thing: taxation worldwide averages around 40% of GNI, which is utterly ludicrous. Governments will be forced to come up with honest and efficient ways of funding the services they provide, instead of skimming every observable transaction and wasting the vast majority of their ill-gotten gains. This is especially true in third-world countries, where tax systems are arcane and a huge brake on commercial development.
That’s awesome. You think it’s actually possible for Bitcoin (and only Bitcoin) to approach the value of all of the gold held by governments (over a trillion dollars)?
And even then you made an incredible gain (200x) but that still only amounts to $4000. That’s pretty awesome but hardly life changing considering the long shot odds.
[quote]While Brent seems skeptical about the crypto currencies. I would suggest people are more skeptical of currencies that the owners can just print more when they feel like it. The rules to Bitcoin prohibit and limit the amount of coin in circulation. Backed by gold has not been the case for fiat money for a long time, when one realizes what money is used for, its easy to see the attraction.
Oh, I happen to owe you 10 billion trillion dollars, no problem, let me print a billion trillion dollar coin with your ass on it. Real products that took real man hours to make and traded in what?
A crypto currency makes a lot more sense than the system we have to me. I doubt it will be bitcoin though.[/quote]
I don’t mean to single this statement out because it’s certainly the norm for the general population and an opinion echoed a lot these days, but it does show a fundamental misunderstanding of what a currency really is. Did you ever stop to think why this piece of paper has value? And an extension of that, why it will continue to have value? People talking about printing dollars out of thin air? Is that really what you think is happening?
The fact is, US Dollars are the most stable, secure, FULLY BACKED currency in existence. It’s not pegged against anything, this is true, but it’s sure as shit backed, trusted, regulated, insured, and enforced by the full force of the US economy. People by the millions sleep soundly at night with their entire life savings denominated in US dollars. I realize it’s cool and trendy to trash the US and the FED’s policies but can we please apply a little bit of common sense? The US dollar is rock solid and isn’t going anywhere…
If people like Bitcoin fine, I’m sure they have their reasons. I personally don’t but that’s just one mans opinion. But liking Bitcoin, and recognizing that US Dollars are completely stable and fully backed are not mutually exclusive. People can actually trust in Bitcoins future and still understand basic economics at the same time. If people have a good argument as to why Bitcoin has a promising future I’d love to hear it. I hope however that it doesn’t involve a prediction of the US dollars imminent demise. That’s just crazy talk…
People living in the US and spending daily life in the US would sleep sound at night … but when living abroad they wouldn’t and shouldn’t sleep sound having their entire life savings in US dollars. US dollars and Bitcoins are not the holy grail of finance.
[quote=“Belgian Pie”]People living in the US and spending daily life in the US would sleep sound at night … but when living abroad they wouldn’t and shouldn’t sleep sound having their entire life savings in US dollars. US dollars and Bitcoins are not the holy grail of finance.
Sent from my Nexus 7 using Tapatalk[/quote]
You missed the word denominated. Regardless of where you live you would be foolish to have your entire life savings in US dollars.
True, but there’s no reason why virtual currencies shouldn’t achieve the same status, especially in countries where the national currency is broken.
I think the ‘killer app’ that will make these things work is a robust digital wallet - I mean physically robust and in terms of security. Otherwise, people have no means of passing digital bits from hand to hand. At the moment mobile phones fulfil this function - phone load is often exchanged as digital currency in countries without proper banking systems, or where there is no faith in gov’t paper. But it would be nice to see a compact, cheap device emerge with the single purpose of storing and exchanging virtual coins. It’s an idea I’ve been toying with myself for a while (technically, it should be quite easy), but I confess I haven’t quite got my head around the math and theory of currencies.
The problem with bitcoin is its massive volatility. Otherwise it’s ideal for microtrades or small business transactions on the Internet, avoiding bank and credit card transaction fees. If somebody can come along and then back a rapid ultra low cost exchange into real world currency or offer some insurance of volatility , you have a winner.
You’re describing a payment system, not a currency. I have no issue with people seeing Bitcoin as such. It’s certainly an exciting technological advancement in that realm and I’m sure it will grow in usefulness and popularity. Most likely it won’t be Bitcoin that ends up on top because it’s just too rigid, but it was a good start. We’ll see where this goes. For an investment perspective, people should focus on what companies or industries will benefit from this new technology and invest appropriately.
My only concern is people who view bitcoin as a currency, and even worse as a potential replacement to US dollars. There is absolutely nothing wrong with US dollars. It’s the most secure, stable, trusted currency on the planet. This fantasy world that people dream of where the US dollar has failed under the crushing weight of hyperinflation and everybody is making transactions with Bitcoins and gold coins is nothing more then that, a fantasy. It’s a fantasy that a small percentage of the population just re-hashes and re-lives in every generation. There’s always a fringe element who actually think the end of days is upon us. Nothing and nobody can change their mind. It’s just a prediction of imminent demise that is constantly pushed further and further into the future as they continue to be wrong, but the prediction remains. It can never be disproved, it’s only ever early. So add 10 more years, 10 more years. They just keep telling us, it’s coming… it will happen… someday.
In the real world, the US dollar is a rock. It needs no replacement. Some more responsible people in charge of the system certainly wouldn’t hurt, but the currency itself is not broken in any way shape or form.
True, but there’s no reason why virtual currencies shouldn’t achieve the same status, especially in countries where the national currency is broken.
I think the ‘killer app’ that will make these things work is a robust digital wallet - I mean physically robust and in terms of security. Otherwise, people have no means of passing digital bits from hand to hand. At the moment mobile phones fulfil this function - phone load is often exchanged as digital currency in countries without proper banking systems, or where there is no faith in gov’t paper. But it would be nice to see a compact, cheap device emerge with the single purpose of storing and exchanging virtual coins. It’s an idea I’ve been toying with myself for a while (technically, it should be quite easy), but I confess I haven’t quite got my head around the math and theory of currencies.[/quote]
It’s called Easy Card …
Not really. As BrentGolf said, there’s a difference between a digital currency and a digital payment system. EasyCard is a method of exchanging a national currency (NTD) between consumers and retailers. I’m talking about a means of exchanging a completely synthetic currency between individuals. The EasyCard payment system isn’t particularly easy. It requires expensive and bulky infrastructure, which means its unwieldy for everyday transactions. You can’t use it for, say, buying an apple at the market.
I’m thinking of a device like a keyfob, a pen, or a card that you can swipe past another person’s device to exchange an agreed-upon quantity of tokens. It should cost an insignificant amount (no more than an ordinary wallet - say, half a day’s wages), and should of course be simple to use, and very small (much smaller than a smartphone). There should be some means to connect it to a wireless device (eg., a phone) to transfer tokens over distances. It doesn’t really matter what the underlying currency is, as long as it’s not the national one. The aim would be deliberate evasion of the banking system and government transaction-skimming, so that people can exchange minor services, favours, or simple goods among themselves as they might with friends, except the “circle of trust” is extended to strangers by the use of a currency. That currency (whatever it is) would of course have to be secured on something, and I suggest it could be secured in the same way as the US$ - by the aggregate economic momentum of the people using it. In other words, the ease of making payments should enhance the value of the underlying digital currency.
Would people use it to buy drugs and illegal stuff? Absolutely. So what? People do this anyway with $$. 99% of the time - I hope - people will be using to buy apples at the market.
As for “replacing” fiat currencies such as the USD - I don’t believe this is necessary or desirable. People will always want to interact with the financial machine under certain circumstances. But they should be given the option of not doing so, and I think that’s where complementary currencies come in. As I said earlier, the problem isn’t so noticeable in countries where the currency works. Try going to places where it’s fundamentally broken, or where the gov’t is a malevolent presence, and you’ll see the utility of an alternative.
