Bitcoin market cap now +$200M as prices keep rising

by VaucGiaps • 14 years ago

46 51 14 years ago

josh26002• 14 years ago

I don't understand bitcoin.

The number of bitcoins on the market is increasing and so is the value of each bitcoin. I understand that bitcoin has to be mined and that mining is becoming harder and harder, but what is causing the value of each coin to increase? One would expect that supply and demand would not increase together for any significant period of time.

Is this an aberration or is Bitcoin going to stay at these pricing levels? Wasn't there a big Bitcoin heist last month due to the Rails vulnerability?

Some insight would be lovely.

jstanley• 14 years ago

This is almost certainly a bubble at the moment. I for one have sold all of my bitcoins in anticipation of a crash.

EDIT: And within an hour of me posting that, the crash has come.

SODaniel• 14 years ago

Until the day comes that you can ACTUALLY spend your BTC (I know there are places you can, but in all reality it's still very much a novelty currency today) and prices stop fluctuating wildly from month to month I am staying away from the entire Bitcoin craze.

Jach• 14 years ago

I'm wondering if it's just a delayed result from Halving Day, in which case it should stabilize around $20 or so. But who knows.

streptomycin2• 14 years ago

One would expect that supply and demand would not increase together for any significant period of time.

Why? It happens like that for lots of things. Furthermore, keep in mind that growth in the supply of Bitcoins is somewhat artificially capped.

Is this an aberration or is Bitcoin going to stay at these pricing levels?

Any answer to this question is a guess. You can make plausible guesses either way, but if anyone knew for sure, they'd invest appropriately, keep quiet, and become rich.

ww520• 14 years ago

To look at it the other way, the value of the bitcoin has not changed. Its price increase in dollar is just a reflection of the inflationary nature of the dollar.

drusenko• 14 years ago

at this early stage in the bitcoin game, the price is much more affected by supply-demand of the currency than inflation of the USD.

streptomycin2• 14 years ago

But that's obviously not true. The value of bitcoins has changed wildly, independent of inflation in the dollar.

For instance, the dollar hasn't lost half it's value over the past year. Your rent hasn't doubled. Your grocery bill hasn't doubled. Your salary hasn't doubled. But the value of a bitcoin has: http://bitcoincharts.com/charts/mtgoxUSD#rg360ztgSzm1g10zm2g...

mtgx• 14 years ago

One would expect that supply and demand would not increase together for any significant period of time.

Why would one expect that? The demand is increasing, and given the fact that the supply is increasing at a much slower rate, then it's quite normal for the value to increase.

That being said, I don't know what caused the "sudden" (few weeks) increase from $14 to $18, as I don't read about Bitcoin that often. But I do expect the value to keep rising as more companies start adopting Bitcoin payments and more people then get interested in it. And I also expect Bitcoin to remain relatively volatile at least until its market value is counted in billions or tens of billions of dollars, when each individual transaction will have a much smaller impact on its value, in either direction.

derrida• 14 years ago

Stuff just goes up in January, people are optimistic. https://ssl1.washingtonpost.com/opinions/why-do-stock-prices... Markets aren't rational. I bought in December & exited about a week ago on this strategy.

I think short term (1-3 years) there is a real issue with liquidity in the Bitcoin market (moving between currencies) & acceptance. I suspect to see a dip dropping below November prices March-July as people need access to cash later in the year (due to January optimism wearing & credit bills to pay) and in the process of trying to make liquid their bitcoin reserves discover the problems with liquidity, which have to do with shady exchanges: causing further dip. In person cash transactions are best at this stage, but require effort. Bitcoin has solid value though and isn't going anywhere.

Basically: what places that do accept bitcoin for currency are shady and uncertain, and few accept for goods.

pygy_• 14 years ago

It is crashing.

$16.65 right now, from $19.2 three hours ago.

http://bitcoin.clarkmoody.com/

baddox• 14 years ago

I'm not sure why you wouldn't expect supply and demand to increase together. It's been happening for things like tablets and smartphones for years now. In the case of bitcoin, supply obviously increases due to mining, and demand increases probably for several reasons (it's getting easier to use and accepted at more places, more people are finding out about it, etc.).

loceng• 14 years ago

I too have tried to understand Bitcoin. Perhaps I just don't understand the basic economic principles that are important for Bitcoins. Perhaps I'm just not trusting of it or that the money I put into the system would not just disappear - but if they want mass adoption then people certainly need to be better educated regarding it all.

sp3322• 14 years ago

what is causing the value of each coin to increase?

Anything that makes bitcoins more desirable will increase their value. This trivially includes anything that makes BTC more useful, like being accepted at more stores. Also services that make it easier to buy and sell BTC increase liquidity, so more people are interested in having them. But also, anything that increases the value bitcoins will have in the future (as trends in acceptability and ease of use increase) attract speculators. They basically gamble that the value of bitcoins in the future will be higher than their price right now. This drives up the price of BTC near the speculated future value.

There are other things that could increase their value, like if people start to trust their security more than other forms of transactions. Or if someone finally gets around to writing a cool application that uses more features of the protocol.

stcredzero2• 14 years ago

> Or if someone finally gets around to writing a cool application that uses more features of the protocol.

What features would you like?

jere• 14 years ago

>Wasn't there a big Bitcoin heist last month due to the Rails vulnerability?

Just curious, but why is there a widespread belief that security incidents that have nothing to do with the bitcoin protocol will lead to the value to implode? Seriously, maybe I don't understand something here.... does this happen to the dollar when US banks are robbed?

wmf3• 14 years ago

Banks have insurance, but you can't buy Bitcoin insurance. Some people see Bitcoin as uninsurable due to the fact that transactions are irreversible and each wallet is controlled by a single private key. It's a very brittle system; if you make a single mistake your money is gone forever. This may eventually be fixed with HSMs and multiple signatures.

yebyen2• 14 years ago

If it was a really big heist, you do kind of expect the value to drop, and we have seen that happen especially with that big heist that brought down the value when it had reached as high as $30, less than a year ago.

The robber makes plays to dump his illegally acquired currency on the market and launder it into clean money, and while dumping he accepts prices that the original owner(s) would never have considered, simply because he's seeking to convert it into something untraceable before he can be apprehended.

I am kind of thinking that some day in the next couple of years, we are going to see a large bitcoin bust, and we'll get to make up our mind in the media whether the perp was the legitimate owner and is persecuted, or if he's a thief and should go to jail.

I don't think they will ever get Pirateat40 for his First Pirate Savings and Trust scandal. I'm not even sure that there's any law enforcement who is out there looking.

stcredzero2• 14 years ago

> what is causing the value of each coin to increase? One would expect that supply and demand would not increase together for any significant period of time.

Yes, but a lot of economics is psychological. http://www.npr.org/templates/transcript/transcript.php?story...

Summary: A currency works because enough people think it has value. Psychological sleight of hand is how Brazil beat 80% hyperinflation two decades ago.

gojomo2• 14 years ago

Many of the analogies used to explain Bitcoin are, unfortunately, misleading. Saying 'each bitcoin', for example, as if it were a tangible collectable, introduces a bunch of associations that aren't helpful for understanding.

Instead, think of Bitcoin as a giant consensus accounting ledger. Everyone can see which crypto-signing-keys have the right to spend which balances. (The balances happen to be measured in an integral unit called a 'satoshi', and 100,000,000 of these satoshis equal "1 BTC"... but these are tallies in a ledger mapping key-identities to available-spending-balances, not rare collectables.)

Given that, a person's Bitcoin holdings are simply numerical totals which, at the direction of their signing keys, can be handed in full or part to other signing keys. But it works like having a bank balance at a shared "bank in the cloud", massively replicated, with no single authority or point-of-failure, where everyone can see every transfer. (Balance transfers are public announcements, not the secure sending of a rare secret.)

So bitcoin balances are valued with regard to $USD (or other currencies) like other foreign-currency bank balances - who's willing to buy it, for how much, compared to who's willing to sell, for how much. That is, yes, "supply and demand", but based directly on the willingness of holders/seekers to transact, and only indirectly on the total 'supply' in existence.

That the price has run up indicates that holders of current bitcoin balances want more $USD to give it up, and that seekers are offering more $USD to get it. Every day more people hear about Bitcoin, and slowly and slightly (because it's pretty complicated and different) come to understand it better. Also, using a heuristic common for new technologies, people only believe something new will survive after seeing it survive for a while. [1]

From my perspective, heists and scams are good for Bitcoin, because they're providing a trial-by-fire and accelerated-education in various economic, security, and usability topics for anyone involved (or just watching from the sidelines). Things that took decades or centuries to work out in traditional economic systems will be resolved in months or years, and with countermeasures optimized for today, not the 18th/19th/20th centuries.

[1] See for example Nassim Nicholas Taleb on the 'Lindy Effect': http://www.wired.com/opinion/2012/12/worlds-not-ending-but-t...

josh26002• 14 years ago

Great comment. I love Nassim's writings.

This is fascinating. So you're saying that bitcoin doesn't have any inherent value (like real currency) and that the value of bitcoin is essentially in security and openness? Is that a fair analysis.

Many of the points you make would apply to traditional currencies if the systems were less obfuscated, which is where I'm beginning to see a niche for bitcoin.

querulous2• 14 years ago

one of the individuals who was preselling asic's has to refund allegedly $200k in preorders and is planning on doing so via bitcoins. speculation is rife he was behind a large buy a few days ago but he is still well short of enough bitcoins to repay everyone. speculators are likely driving up the price in anticipation of the increased demand he will bring. there's not a lot of real market depth, so a $200k buy is signigicant

acomjean• 14 years ago

Are bitcoins Ints or Floats? If so at 19$ per coin the currency can only be used for larger purchases.

mcantelon• 14 years ago

Floats. You can pay with any fraction of a Bitcoin AFAIK.

gigq2• 14 years ago

Bitcoin transactions can go down to 0.00000001 BTC. They aren't however stored as floats due to rounding errors this can introduce (https://bitcointalk.org/index.php?topic=13837.0).

wmf3• 14 years ago

Integers. BTC is only used for display; everything is actually computed in terms of Satoshis (1 BTC = 10^8 Satoshis). Thus very small transactions are possible.

gbaygon• 14 years ago

Bitcoins values are stored in 64-bit integers, with 1 BTC stored as 100,000,000 which gives plenty of room to fractionalize, since it's stored as if it where a double-precision number.

thomasz• 14 years ago

This website reminds me on one thing about internationalization:

Do not, under any circumstances, serve auto translated content by default. It's horrible, and a little bit insulting. If you don't have the resources to do a proper translation for a locale, just serve en-us and maybe a link to google translate.

Jesus. "Blocks Verminte"... That gibberish roughly translates to "blocks defended by minefields."

bdcs• 14 years ago

Agreed. Although, if you want to help out an open source project and make ca. 250$, you can provide a translation here: https://bitcointalk.org/index.php?topic=135336.0

gesman• 14 years ago

I just wrote a Wordpress plugin (actually WooCommerce payment extension) to allow building of online stores and accept bitcoins through blockchain.info.

Zero fees!

Essentially it allows anyone to sell physical and virtual (digital downloadable) goods and charge either normal currency or Bitcoins - leaving choice to customer.

Now I have to find a time to put it online....

wmf3• 14 years ago

"Zero fees" is misleading. Merchants are likely to convert BTC back to real money which will incur fees. Exchange rate volatility (oh look, down 3% in the last 5 minutes) and conversion losses due to poor usability are effectively fees as well.

nym• 14 years ago

If you're interested in buying bitcoins, check out this guide:

http://howdoyoubuybitcoins.com/in/united-states/

Also, I recommend these companies:

- Coinbase (1% charge) http://howdoyoubuybitcoins.com/from/coinbase

- Bitme (0.75% charge) http://howdoyoubuybitcoins.com/from/bitme

metaperl• 14 years ago

I dont know why bitfloor was not mentioned there, but you can transfer directly from an Electric Orange checking account into Bitfloor.

theklub• 14 years ago

Every time I'm about to get some Bitcoins I see some news story about people being robbed or ripped off and decide to wait. Then a month later the prices continue to rise, then someone gets robbed. Its like a huge cycle and I can't decent whether to give them a shot or not.

TkTech• 14 years ago

You hear about it more often because of the culture and nature of it. How often do you think physical/digital money in other forms is stolen?

The bigger thefts come from people trusting untested websites acting as banks & brokers that are not regulated, do not (usually) have a physical presence, and usually do not have the required capital to insure their holdings.

bunderbunder2• 13 years ago

> The bigger thefts come from people trusting untested websites acting as banks & brokers that are not regulated, do not (usually) have a physical presence, and usually do not have the required capital to insure their holdings.

e.g., bitcoin wallet websites

snake_plissken• 14 years ago

The only thing I don't understand is this: how is an upper bound on the supply of bitcoins deflationary? I constantly read pieces extolling this virtue.

Maybe I am reading this wrong. Perhaps prices in bitcoins will tend to be deflationary. But does that really matter? FX risk is the same thing as inflation/deflation, and you to buy in bitcoins you need to purchase bitcoins first. The floating rate guarantees no stability.

bunderbunder2• 14 years ago

> how is an upper bound on the supply of bitcoins deflationary?

If the supply of currency doesn't grow at exactly the same rate as the economy as a whole, then overall prices in that currency will change. If the supply of currency grows faster than the economy, then the currency will become less valuable in relation to goods and services, and prices will rise. This is known as inflation. On the other hand, if the currency supply grows slower than the economy, then the currency will become more valuable in relation to goods and services, and prices will fall. This is known as deflation.

The upper bound on the supply of BTC is deflationary because it guarantees that the rate of growth in the supply in bitcoins is forever approaching zero. This means that, in the long run, any growth in the bitcoin economy whatsoever will result in deflation.

Whether that's a virtue or not is, at best, debatable. Economists generally agree that deflation is very bad in the modern economy. While they aren't synonymous, the historical record indicates that economic deflation and economic recessions (and depressions) tend to go hand-in-hand, and there's a fairly strong theoretical explanation for why this should be. That's the whole reason why governments try to always maintain a small amount of inflation. Zero (or near-zero) inflation might be the ideal, but policymakers consider deflation to be scary enough that they prefer to err a little bit on the side of inflation as a cushion to guard against deflation.

dkulchenko• 14 years ago

Ironically, about 45 minutes after this was posted to HN, bitcoin began to crash, down almost 20% as of this comment: http://bitcoin.clarkmoody.com/

undrcvr• 14 years ago

http://buttcoin.org/wp-content/uploads/2011/06/buttcoin-info...

Bitcoin market cap now +$200M as prices keep rising

Related Stories