Amid Bitcoin's Bloodbath, Silence from Silicon Valley Press

http://www.realclearmarkets.com/articles/2015/01/16/amid_bitcoins_bloodbath_silence_from_silicon_valley_press_101490.html

by lmg643 • 12 years ago

102 85 12 years ago

realclearmarkets.com

eli_gottlieb• 12 years ago

People don't like to publish much while they're still smarting from losing large amounts of "money". It helps that Bitcoin wasn't just an asset, it was an ideology: that the deflationary shrinking-resource represented by coin mining was necessarily valuable. People don't like questioning ideologies like that: it threatens their entire sense of how the world can be a good place at all, it feels from the inside like a nihilistic pit of darkness.

throwawayaway2• 12 years ago

I'm more of a buttcoiner myself, but all this past tense "bitcoin is done" reeks of "foregone conclusions" and I don't think that's wise.

I will say that it's possibly less of a crime that the self interested unbridled optimism of its advocates.

throwawayaway2• 12 years ago

remember! all these downvotes are actually good for bitcoin!

fnordfnordfnord• 12 years ago

I'd love to see a good article on the subject rather than some jackass trying to rub salt in peoples' wounds.

vertex-four• 12 years ago

subject to decline every time the compute power to "mine" the Bitcoins got cheaper

But the network reacts to that by making it more difficult, and thus more expensive, to mine. That's very much not the reason bitcoins become less valuable - assuming the same amount of money being poured into newer/faster mining equipment, it'll always cost the same to mine a block.

azeirah• 12 years ago

Why's everyone pretending bitcoin is dead now? It simply dropped in price in a short time, it's not like it has never done that before...

rtpg4• 12 years ago

That's a bit disingenuous. Bitcoin's price has dropped over 75% over the past 12 months, in a constant decline.

Despite a lot of VC money pouring into BTC startups, there just doesn't seem to be any traction. My guess is that Mt. Gox irrevocably destroyed faith in the system for the "common user", because even the biggest exchange couldn't bother with hiring some security people (well, at least bitstamp seemed like that, what exactly happened at Mt. Gox is still a mystery to me).

jonas21• 12 years ago

My guess is that Mt. Gox irrevocably destroyed faith in the system for the "common user"

Assuming there was any faith in the system for the common user to begin with.

sillysaurus36• 12 years ago

Well, before Mt. Gox, bitcoins were about $80/coin. Its initial upward trajectory from $100 seems almost assuredly Mt. Gox pumping up the value. Who knows why Karpeles did it, but it probably had some kind of avalanche effect which he had no idea would peak at $1,100/coin. Since then, the price has been slowly resetting to pre-Mt. Gox levels.

By pre-Mt. Gox," I of course mean "pre-manipulation."

That's my working theory. If true, the fact that bitcoin has slowly been resetting to pre-manipulated levels would be the first example of the market ever being rational that I'm aware of. (Besides, you know, the fact that insider manipulation of the market was successful in increasing the price, which is rational by definition. Just not in an open happy way that people normally associate with the phrase "market rationality.")

But there are all kinds of problems with that theory. It's something so simple that you want to believe it's true. There's no reason why someone else wouldn't also be trying to manipulate the market now, like BTC-e. There's a financial incentive to try to pump up the price, so why is it continuing to fall, or rather why are current attempts at manipulation failing? Could it really be true that Mt. Gox was the only manipulator ever to have had a significant effect on the price? Seems unlikely.

Maybe the true explanation is that there was all this pent-up unknown hype for bitcoin, which Karpeles' manipulation unleashed on the world like a crack that broke a dam, either to his joy at skyrocking the price or his shock and horror at skyrocking the price, and now everyone's resetting back to pre-hype levels.

I still think bitcoin has value. Even after being used and abused, and dragged through a meatgrinder that shred away every ounce of my bitcoin fanboyism. There is true value there, and that is its ability to get money from you to me in seconds, and then my ability to sell those coins on an exchange for fiat that's deposited into my bank account within just a couple days. In that scenario, it doesn't even matter what bitcoin's current price is. All that matters is that the exchange honors the agreement at the time the coins were sold, because the flow is that the coins go from you to me to being sold on an exchange/middleman within a few minutes. So the current price of bitcoin is whatever it is, and I'm still paid however much I was expecting from you.

And it seems like a solid upward trajectory could even be built on that foundation.

But it's going to take patience and time.

zipwitch• 12 years ago

As a non-bitcoin user, it seems to me that the value of the system as a medium of anonymous transaction is mostly irrelevant to the current price. As long as its stable enough for that, the only "problem" with the bitcoin price crashing is for speculators...

trevelyan• 12 years ago

There is definitely traction in the sense of increased network usage:

https://blockchain.info/charts/n-transactions-excluding-chai...

Honestly, whenever I look at these long-term growth charts, I'm sort of surprised there isn't more speculative pressure.

cgjaro• 12 years ago

Again, like azeirah said, this type of decline has happened in the past: after the $30 peak in June 2011, Bitcoin declined almost constantly. 12 months later it was still hovering around $5. That was a 80%+ decline! It took a total of 21 months before Bitcoin reached $30 again in February 2013.

I think journalists are finally understanding that a big decline in Bitcoin's price is far from a sign of its "death" (since it always survives these drops), and is not even a shocking news anymore. That's why they don't write about it that much.

rjdagost• 12 years ago

The ongoing extreme volatility of bitcoin is the news here. If bitcoin backers want it to be taken seriously as a store of value the massive price swings need to be smoothed out. Otherwise, bitcoin will just be a purely speculative asset.

rasz_pl• 12 years ago

what do you mean pretending? beanie babies also 'dropped in price in a short time'

rtpg4• 12 years ago

It's weird, because I feel like there is a story on the general volatility of bitcoin. There's also a story on the general incompetence (as much as I can say this as being completely unqualified in running a financial institution) of the companies running exchanges and the like.

I don't get why that stuff isn't being covered more in detail (the headline writes itself: "When will bitcoin exchanges stop screwing up?"), but the fact that some guy invested a bunch of money in BTC when it was worth 3 times as much? Get in line with literally everyone else with assets in it.

markburns3• 12 years ago

The short-term market price doesn't have a lot to do with it's long-term viability. Liquidity is relatively tiny hence shocking volatility.

Anyone's bitcoins only represent a loss on a particular day if they actually choose to sell them or spend them. Same goes for people gloating when the price is up.

There's 3,600 bitcoins per day being generated creating a significant downward pressure on the price. But reward halving is ETA July 2016, marking a significant change in supply and probably the day-to-day price.

I can understand the schadenfreude for anyone who has watched people become very wealthy and watched other presumably greedy people subsequently 'lose' tons of money.

The majority of my holding will be likely to sit for 10 years or so and I will admit I was wrong if I've made a significant loss and I probably will sell them off. People can have their schadenfreude then. In return, I'll agree not to gloat if the price sky rockets.

crm4162• 12 years ago

What I worry about is the effect that market price can have on the security of the network (via global hash rate).

The system will reach equilibrium when the revenue generated by mining is equal to the amount spent on mining. When the value of BTC goes down, mining generates proportionally less revenue (if miners are valuing BTC at market price, which they may not be), and the global hash rate will drop.

Imagine if the price plummeted, the hash rate dropped, and someone launched an attack on the network. At that point, consumer confidence in Bitcoin would possibly never recover, and its long-term viability would be severely damaged.

markburns3• 12 years ago

There is an incentive for miners to not have confidence in bitcoin damaged. It's a bit of an interesting Nash equilibrium kind of game. In general, I think these things will balance out assuming rational actors.

Yes there could be a crisis of confidence but I can't see it spinning out to completely cancel out its utility e.g. usefulness in international remittances. At the very least it will replace or significantly threaten the Western Union business model.

Where I think there may be cause for concern might be the irrational actors. People or organizations prepared to invest and lose money with the aim of bringing bitcoin down.

It gets a bit tinfoil hat to suggest that e.g. the Federal Reserve or world governments would want to spend billions on killing bitcoin, but it's at least an interesting thought experiment. I'd love to hear a defence from a strong bitcoin proponent against the 'irrational' actors. Irrational meaning not obviously acting in the interests of their own holdings. I've raise it before but not heard convincing arguments of how bitcoin would be safe against 51% attacks like that.

matco11• 12 years ago

Volatility is the result of several factors and liquidity is only one of them. For example, the oil market is very large and liquid, yet still fairly volatile. Volatility is obviously undesirable for anything that is intended to function as a reserve of value. This is why, for example, there is no discussion of oil being a reserve of value, or a currency. As for the example above, greater liquidity in the Bitcoin market will not automatically make it less volatile, or lower volatility enough.

Bitcoin's volatility is structural (it goes well beyond the issues with the exchanges). Effective currencies have several mechanisms designed to protect their value and minimize volatility: Bitcoin lacks them and hence it's structurally fragile and volatile. So, Bitcoin cannot represent a reserve of value. Stable preservation of value is a key characteristic of a currency (this is one of the reasons inflation is monitored by central banks, for example), hence, if Bitcoin cannot work as a reserve of value, it cannot work as a currency.

Perhaps, other crypto currencies, in the future, may be structured with more robust mechanisms and work better.

dpweb• 12 years ago

> Effective currencies have several mechanisms designed to protect their value and minimize volatility

Yes, government manipulation. I think many of the btc enthusiasts miss the point. You can't have a huge important currency without guarantees. Goverments have armies and taxes and so provide these guarantees. No world government/control of btc = no btc becoming the "global currency".

markburns3• 12 years ago

I agree that because of the lack of controls it will be more volatile than other currencies, but I think volatility will at least reduce to something like gold once the majority is mined. It's volatility is partly due to the difficulty increase and reward halving part of the protocol. I.e. the part designed to reward early adopters. Which was necessary to bootstrap it.

It's a speculative game for the first maybe decade or two. As the bitcoins gradually leave the early adopters as they cave in to whatever price is worth it for them there are bubble cycles. Once there is more general adoption, it will settle down though. As people gradually start to think less in e.g. Euros and consider not changing directly into local currency, but just to hold some for their day-to-day transactions because they are particularly useful in certain circumstances.

Once it's passed a tipping point they will be more useful in more and more situations, to the point that it's easier to just have your smart phone and cursing cash or credit card only places. I'm sure there will be retro hipster bars that take cash only in the future.

Anyway, as for the remaining volatility, it may just be that bitcoins serve as gold and another somehow regulated cryptocurrency serves as ordinary money.

moe3• 12 years ago

Congrats to Adam Kessler for discovering that Bitcoin is volatile.

But how could this sharp minded journalist miss the real silicon valley scandal that nobody writes about?

Coffee is hot, millions of investors get burned every day!

waps• 12 years ago

Welcome to market reporting ... the S&P 500 has dropped about 5% in the last month. And in my newsfeed I find "up 2%" from a dozen places.

Now this is not a lie. That particular day the S&P was up 2% (and it does indeed mention that the days before it was down 3% and 1%), but the point I'm making is there was little mention of downward market movement the days before.

It's weird. In every other reporting it's bad news that sells, and you have trouble finding good news. In market news only upward (or very large downward) movements get mentioned.

GreaterFool• 12 years ago

BTC volatility is nothing compared to the bloodbath that just occurred in CHF:

http://www.bloomberg.com/quote/CHFUSD:CUR

Yeah, it's "only" 20-30% move (depending on currency cross) but in highly leveraged FX markets even 1% can wipe people out.

Personally I never cared about Bitcoin "value". In my mind it is a great medium of settlement and not a store of value (which it might also be; given long enough outlook).

First we need to grow the Bitcoin economy to a decent size and then we can talk about "price stability". Transaction volume at the moment grows rather slowly. The rest is just speculators.

moe3• 12 years ago

but in highly leveraged FX markets even 1% can wipe people out

The CHF spike did wipe people out.

For example the world's largest currency broker FXCM; http://uk.businessinsider.com/fxcm-currency-broker-news-2015...

(okay they're not entirely wiped out, only $300MM in the red...)

m52go• 12 years ago

To clarify, the CHF spiked in value. People who lost had bet against it.

getsat• 12 years ago

That surprise EURCHF move was the largest single day G10 currency movement since the gold standard was dropped in the 1970s.

The main difference between this and bitcoin volatility is that this was the direct result of a central bank's action. Bitcoin has no central bank, yet still manages to have extreme volatility.

justincormack• 12 years ago

fx markets are not generally highly leveraged, other than the retail companies designed to fleece delusional punters.

walshemj• 12 years ago

quite a few eu countrys have a substantial number of citizens with home loans dominated in Swiss francs.

rtpg4• 12 years ago

That is extremely different. Basically what just happened was 3 years of price changed bottled up into 2 days, because the Swiss stopped pegging the price.

Bitcoin is way more volatile than that on many more periods. As someone mentioned, there was a 20% change in value over a few hours in BTC. Considering that transactions are not instant, that is enough movement for price to change significantly just while validating your transaction.

lumberjack• 12 years ago

I find all these elaborate theories for why the price has fallen, a bit ridiculous.

Here's my simply hypothesis.

1. People got bored waiting for legitimate uses for Bitcoin that aren't in some way or another black market trade. I'm one of them.

2. The recent online black market busts made even those who were just betting on Bitcoin being a black market currency, uneasy.

smtddr• 12 years ago

3. People like me who were just in it to profit off swings ended up guessing wrong; now stuck with overpriced coins have decided to pack it up and call it a day. Really, my time & money would have been better off just being in the S&P 500 index. I'll never lose track of my coins' private keys, but I'm done trying to chase quick money.

runeks2• 12 years ago

Their value was always in Fantasyland and subject to decline every time the compute power to "mine" the Bitcoins got cheaper, which it does every day.

The creation of new bitcoins is limited by the network adjusting the difficulty in case new bitcoins (blocks) are created too quickly.

The network hash rate has increased enormously over the past few years, by several orders of magnitude. Yet the average number of bitcoins created per 10 minutes is still only 28.7920673077, or around 15% above the target value of 25.

This is measuring from block 210,000 to the current block (339,357). This period has taken 780 days, so far, so the average number of blocks per 10 minutes is: (339357-210000)/780 / 24 / 6 = 1.151682692 (or 15.168% above the target of 1 block per 10 minutes).

crm4162• 12 years ago

"I think the technology used to implement the Bitcoin payment system is fascinating - public ledgers and crypto and block chains will all be game changers. Bitcoins themselves? More of a necessary component to creating a new financial system."

Another article that seems to suggest that the blockchain has value with Bitcoin. I've heard others (pmarca in particular) promote this view, and I think it's far from validated. At the moment, BTC is the most important incentive to mine, and mining is the most important factor in establishing the blockchain's security.

It's true that, in the future, we might be able to come up with other incentive structures to encourage mining (the Bitmessage protocol is one such example). But if we want one blockchain, and we want it to be as secure as possible, how could we ever come up with an incentive that is as universally desirable and infinite as money?

natrius• 12 years ago

There's a common view that Bitcoin's proof of work is the only way to maintain a secure blockchain. That view is the product of a herd mentality of people who have bought bitcoins and want them to increase in value, so anything that could prevent that must be wrong. This Bitcoin maximalism leads to false conclusions, and it should be avoided.

Plenty of non-Bitcoin blockchains are secure.

dperfect3• 12 years ago

If we look at bitcoin for what it is (the technology and theory behind it), it hasn't lost any real value. If it did (e.g., if a major flaw were discovered in the technology to render it useless), then people wouldn't still be trading bitcoin. We have to remember that for every bitcoin sold (at any price), someone on the other side of the transaction is still buying those bitcoins. If it were truly "dead" or indisputably flawed, trading would come to a halt because there would be no bids for something truly useless.

Instead, what we're looking at with the recent price decline is simply a reflection of how people feel about bitcoin - and in this case, that opinion has everything to do with factors that are irrelevant to the technology (failed exchanges, criminal activity, etc). If bitcoin were a public company, of course those kinds of things would matter (it doesn't matter if public opinion is wrong; it can still ruin your business), but since bitcoin's usefulness and underlying value do not rely on public opinion, it remains unaffected at the core by any of these recent events.

hendzen• 12 years ago

So what you're saying is, this is actually good for bitcoin?

dperfect3• 12 years ago

I understand you're poking fun at the common expression used by bitcoin fanboys (or to mock them), but in reality this is neither good nor bad for bitcoin. I personally feel no differently about bitcoin today than I did when I first learned about it (trading at < $1 at the time).

sillysaurus36• 12 years ago

We have to remember that for every bitcoin sold (at any price), someone on the other side of the transaction is still buying those bitcoins.

Actually, "an exchange made it look like someone bought a coin." https://willyreport.wordpress.com/

Bitcoin probably can't ever prevent good old insider manipulation, because every exchange affects every other exchange due to arbitrage. A price jump of $20 on BTC-e will swiftly travel to Bitstamp and everyone else. So if BTC-e decides to do something similar to what Mt. Gox did, there's nothing stopping them. All it takes is one shady popular exchange.

Bitcoin's dependency on exchanges is its greatest strength and weakness. Without exchanges, you probably wouldn't be able to sell bitcoins locally except in a sporadic way. There wouldn't really be an agreed-on price. But with exchanges, herd dynamics are always in full bloom, and you won't ever escape them.

EDIT: People buy and sell bitcoins at current market rate, and current market rate is defined by exchanges. That means if an exchange decides to make their own price artificially jump up, then everyone else's price will jump up too. That means bitcoin's price will be defined partly by whatever insider manipulation is going on at the time.

dperfect3• 12 years ago

Bitcoin doesn't depend on exchanges any more than your HN karma might depend on exchanges, yet karma still has value in its own sphere - with or without an exchange rate. Anything that can be traded will be traded on a market if there is demand for it. All of that (everything that happens due to market forces, manipulation, etc) is irrelevant to bitcoin as a technology.

shit_parade3• 12 years ago

Because the libor scandal, gold fixing, and central bank puts don't happen in the real market? US congress can even legally get away with inside trading, having laws against it really only allows those in power to punish those without it.

SixSigma• 12 years ago

Is the index a reflection of the price of sales or the price of bids ?

If I go the the store I am told "this is going to cost you $1" not "you set the price by buying that for $1"

For a real example, read this :

http://mechanicalforex.com/2015/01/trading-a-real-market-wha...

cynicalkane• 12 years ago

We have to remember that for every bitcoin sold (at any price), someone on the other side of the transaction is still buying those bitcoins

An alternate explanation is that supply is holding out, demand is spooked, and existing trading activity has little relation to supply and demand. Economic liquidity is not equal to book liquidity and trading volume isn't equal to the health of a market (especially when Bitcoin holders can generate fake volume at a very low cost). This is why buying assets headed south--called "catching a falling knife"--is a classic trap for amateur traders.

This is going to be especially true for Bitcoin because there's no viable way to short it that I know of--no way to depress trading demand unless you're unfortunate enough to own some already. There's nothing that can try to force Bitcoin to it's supply-demand equilibrium price, nothing except time.

shit_parade3• 12 years ago

exchanges like bitfinex allow shorting.

ilamont• 12 years ago

There are believers in the Bitcoin platform who are investing significant time and capital in improving it.

Then there are the traders, many of whom could care less about the underlying technology. They are in it for pure speculation, and care only about the flaws of the Bitcoin ecosystem because as long as it impacts their investment. This subpopulation is really not much different than the people who trade (and shill for) penny stocks.

rhino369• 12 years ago

If we look at bitcoin for what it is (the technology and theory behind it), it hasn't lost any real value.

The question should be: Does it have any value in the first place? It is essentially a really cool monopoly money system. Bitcoin is taking pokemon cards.

A bitcoin is essentially a fancy cell on a very secure distributed excel file. Great, but that doesn't mean it will be currency.

underlying value do not rely on public opinion

Oh very much so. A bitcoin's value is 100% based on what the public values it at.

VexXtreme• 12 years ago

A bitcoin's value is 100% based on what the public values it at.

So just like any other currency and commodity then? Intrinsic value doesn't exist. Everything is relative to where you are and what you're trying to achieve.

ThomPete2• 12 years ago

There is only one relevant graph and it's the bottom of these two IMHO

https://twitter.com/Hello_World/status/555454120258457601/ph...

djrtwo• 12 years ago

Fascinating! Are you suggesting an increase in use as a currency or just an increase in trade as a commodity?

ThomPete2• 12 years ago

To be honest I am not really qualified enough to have an opinion on that. All I have is my layman intuition being generally interested in cryptorotocol.

But in my opinion you see it growing because a lot more are thinking about the blockchain protocol rather than the currency. But it purely based on a hunch not actual data.

ac29• 12 years ago

If you look at the implication of those two together you see that total transaction value (in USD) has been fairly flat over the past year, with the exception of price spike periods: https://blockchain.info/charts/estimated-transaction-volume-...

There have been more, but smaller transactions.

edit: It should be noted the most active addresses are for known gambling sites: https://blockchain.info/popular-addresses

adevine• 12 years ago

Yeah, "transactions" doesn't mean people are using it to pay for actual goods with their bitcoin, it's just every time btc moves from one wallet to another. I'm sure the volume of tulip transactions was very high during the tulip mania, too.

programmarchy• 12 years ago

Maybe the Bitcoin Foundation should lobby Congress for a bailout. The blockchain is too big to fail!

jordanpg• 12 years ago

Maybe these publications are hesitant to comment because they realize they're not economists. They write and think about products. If we concede for the moment that, as product, Bitcoin is sound then we are left with what Bitcoin's role in the economy is. This is uncharted territory and lots of people have already been burnt being overly optimistic or pessimistic about them. But no one knows.

Because of this uncertainty, Bitcoin has had a major PR problem since the moment it went mainstream. And since the perceived value of a (quasi-)fiat currency means a lot, it has been a net negative for the future of Bitcoin. It has suffered under the weight of tremendous doubt, however slight.

rrggrr• 12 years ago

Merchants lose about $500 billion/year to transactions fees, chargebacks, fraud and equipment fees. Want to know what the inherent value of Bitcoin is? Then think in terms merchants desire to avoid payment processing fees in a 3.6 trillion dollar marketplace. Guys like Draper, with wealth sufficient to absorb significant paper losses to volatility, are playing the long game and betting on bitcoin reducing transaction fees globally.

susan_hall• 12 years ago

Regarding the price that people are willing to pay for Bitcoin, what has become relevant is how people judge, not merely other people's willingness to pay, but other people's estimate of how others might be willing to pay. Relevant here is the Keynesian beauty contest, a reference to a practice in which towns used to give awards to those who could get guess who the prettiest girl in town was, with "prettiest" being determined by the other people in town:

"It is not a case of choosing those that, to the best of one's judgment, are really the prettiest, nor even those that average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practice the fourth, fifth and higher degrees."

(Keynes, General Theory of Employment Interest and Money, 1936).

http://en.wikipedia.org/wiki/Keynesian_beauty_contest

jacquesm• 12 years ago

There is no blood. Bitcoin isn't viable (yet!) as a long term store of value but anybody that thought that it was should outsource their financial services to Nigerian princes for a better long term return on investment.

If and when bitcoin will be usable as a long term store of value we'll be a decade down the line at least, and if it hovers around $10 by then then I think it should still be considered a small miracle. The hardest challenge that bitcoin has is not to stabilize as a currency (because it isn't) but to simply stay alive. So far so good on that front.

jerguismi2• 12 years ago

To me what you suggest sounds somewhat conflicting. If bitcoin might be a good store of value in the future, it might be a good investment today. Which means good store of value, but a big dose of risk.

I guess other way to say what you are trying to say would be: "Bitcoin is a very bad store of value for those with a low risk-preference."

ska2• 12 years ago

"store of value" has a standard usage in this area, and you aren't using that definition.

To be a good store of value means that you have predictable recovery, which is the opposite of what you are say. BTC may or may not be a good (high risk) investment at the moment, but it isn't a good store of value.

ingler3• 12 years ago

Yet another article from someone who has an obvious personal issue with Bitcoin. For some reason, Bitcoin destroys objectivity in journalists.

Remember when Bitcoin crashed from ~$32 to near zero and everyone said that Bitcoin was dead? I do. THAT was a crash. Even I gave up on Bitcoin for a few days. The author of the article missed a chance to detail Bitcoin's crashes and its recoveries from those crashes.

Even if Bitcoin goes to zero because the network gets attacked, the blockchain itself is now just as much part of network technology as any other protocol.

Digital cash ain't going anywhere, be it Bitcoin or an improved version of the idea.

SippinLean• 12 years ago

An article makes the front page of HN that uses "epic FAIL" in a non-sarcastic way?!

chmartin• 12 years ago

The Bitcoin crash is similar to crashes in other financial markets and is a signature of self organized criticality:

https://charlesmartin14.wordpress.com/2015/01/16/the-bitcoin...

danbruc• 12 years ago

If you have no stakes in Bitcoin, you don't care. If you believe Bitcoin will succeed, you want positive press. If you believe Bitcoin will fail and you are still invested, you want positive press to get out as well as possible. Nobody really wants negative Bitcoin press.

comboy• 12 years ago

There are those who understand the implications but didn't get any bitcoins. In their opinion it's too late to buy right now, so they are just waiting for "the next thing" wishing Bitcoin all the worst. So there is quite a bit of negative press. Not much from rational sources though. Rational agents fit your description.

Bkty• 12 years ago

And there are those that think Bitcoin is the holy grail and the only shot at electronic currency thats worth any effort. In their opinion anything else is just a nuisance in Bitcoin's glorious path to world domination, not fascist at all!

Udik• 12 years ago

The maximum number of bitcoins is capped at 21 million. The current number in circulation is around 14 million. Now, my intuition tells me (but I might be wrong) that if a currency is used to pay for goods (and not just for speculation), the value of the currency in circulation should roughly match the total value of the goods that can be exchanged with it. If this is true, and the total of e-commerce sales is now (completely ballpark estimate) around $1.4trillion, then in a world where all online transactions are made in bitcoins, the value of a single bitcoin should be of approximately $100k. That means that in the process of a widespread adoption of bitcoin as a real currency for online transactions, its value should rise from the current $200 to $100k, a factor of 500. And this is a huge problem, because any currency that is used for buying goods must have a value that is consistent (and possibly slightly decreasing) in time, otherwise nobody really wants to use it. It's completely foolish to part from a bitcoin in exchange for a phone today, when at some point in the future that same bitcoin will be valued 3, 10, or 500 times more.

Bottom line: the bitcoin is trapped. The more goods can be bought with it, the more its value rises, the less people are actually willing to use it. And this cycle will go on forever, as the total value of goods will keep increasing at a high rate, while the number of bitcoins increases at an progressively lower rate until it stops completely at the cap of 21 million.

toomim• 12 years ago

This guy has the causality wrong. Bitcoin gains value when there is press coverage.

The drop in value is BECAUSE of the decline in press coverage, not the other way around!

Amid Bitcoin's Bloodbath, Silence from Silicon Valley Press

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