Topic: Bitcoin price is too high at 20$/BTC - page 3. (Read 10859 times)

Is this where I sign up to join "the bitcoin is too damn high!" party?

heres your typical 'bitcoin user'

http://forum.bitcoin.org/index.php?topic=22245.0

This pretty much sums up my experience trying to buy/sell things in bitcoins.  Lowballers, scammers, snotty 18 year olds, europeans, you pay first, no u pay first, etc.. then 'screw it go on ebay and sell it to regular people using regular money'

if it was in deflation that would show up in a massively growing productive economy.

also note that the conclusion from my points is only a small part of my post.
most of it was describing a scenario that is required to sustain this price. if you think this scenario is likely I disagree but I don't have any problem with that.
I don't think though that an increase in difficulty and price shows that we're on our way to that scenario.

what exactly is a "bitcoin user"? and what differentiates him from a bitcoin speculator?

The OP's argument is meaningless since you can't compare a rapidly increasing population base (bitcoin users) with a stable, slightly increasing population base (currency users).  Take this factor into consideration and bitcoin is in hyper-deflation (since it's obvious anyways, price per coin from 0.01 to $15, difficulty up x 100000)

Silk Road? Ok, maybe 'killed by app'

Mainstream can only mean major merchants adopting it. Not the mom and pop socks, fringe esoteria and undergrad webdesign type peanut markets but a seriously large one like bol.com (Bertelsmann) or Ikea. But I don't think that's very realistic right now.


A persistent economy justifies BTC, but not any price. If 60k traders have on average put $100 into the economy, then that should be the real valuation (6.7 million BTC/6 million USD -> 1 BTC=~0.90 USD). I came to a similar back of a napkin calculation based valuation of the actual economy using Bitcoin (<5 million USD -> <0.8 USD/BTC). Add reasonable speculative margin and it's still not worth anywhere near $15-20. Also factor in 50% inflation from mining this year, 33% next year, I'm pretty sure that kind of growth is not happening on the economy side without a different kind of participation (i.e. I have a feeling the technologically savvy/mental contingent who would accept BTC already do, this market will not grow by 50/33% anymore). If the miners don't cash out, the nominal value diverges from the theoretical one by that amount.

The price must eventually track the size of the economy. Don't make the mistake of extrapolating economy size from all BTC at current price, because most BTC are actually 'worthless' in the sense that they have been mined at near 0 difficulty and aren't participating in the economy (add up the entries in the rich 100 list which haven't moved in blockexplorer). When they suddenly do, at current valuation ($16), the socks and undergrad free time instantly run out, as does exchange liquidity. Which is exactly what you saw in the flash crash, even though that was done with the express intent of driving price down.

You could look at it another way: even though the Mt. Gox attack was dumping ~500k BTC at 0.01, there were still not enough orders to satisfy more than half of it. 260k+ went to an opportunistic 0.01 USD order. If we take the wildly speculative average of 17.5 and 0.01, i.e. 8.75 and multiply that by the ~240k that did go through, we get a liquidity of 2.1 million USD. This is a good indication that the economy cannot be much larger than that (i.e. not orders of magnitudes larger, like a ~200 million USD valuation at a $30 high).

So then you arrive at the speculative value for future expansion of the economy. This simply means that sure, $20 may be reasonable, if you do expect 180 million USD influx within a certain amount of time. The question is, what is this amount of time, and will everyone holding on to BTC keep waiting for this. (the influx itself is possible, there is no $1000 a day limit for putting money in AFAIK, and this limit can be lifted anyway)

Speculative valuation is just that, gambling with the future. Even gamblers have cut off dates by which the gamble has to pay off compared to a traditional investment's return, or a different gamble will be made. When that cutoff date arrives the price must drop and if the gamblers are large enough, it will implode. That will make a large dent in the economy (merchants holding BTC from daily trade will suddenly take a large hit) and many will lose confidence/leave the market, which could end up in a death spiral.

Then there are two other major factors noone seems to take into account: even if speculators hold on and Bitcoin putters on for years without significant leaps, long before then there will be a more or less effective crackdown, and/or preemptive strikes in the form of competing currencies, not to mention the possibility of a protracted smear campaign that will prevent Bitcoin adoption to any significant degree. That eventually means the deathspiral described above.

This danger should offset the speculative optimism and lower the price accordingly, which hasn't happened yet.

BTW, any services around Bitcoin like option markets, banks, podcasts and magazines do NOT constitute a productive economy, they may only enable it. Without agriculture and industry, hairdressers, speechwriters and telephone sanitizers will meet an altogether different fate than they expected

If your 'bubble' assertions were true, then TradeHill would've been a collapsed heap of nothing but offers in the market. Yet, I open my browser and see them trading at 15.45 last.

Is 15 'too high'?

To you, I suppose, thinking that any sustained price level is too 'bubblicious', it may be. To me, I understand how price fluctuates and know how to formulate a trading strategy to capture this. Right now, I'm fine with the price where it is because I not only see the last quote, but what the potential target is.

Keep saying 'bubble' though, I suppose you have a chance every hundred years of being right. If you remain solvent, that is.

Famous words before every bubble.

Property.

Dot Com Boom.

Plenty more examples.

Second Life.

what is sl?

Bitcoin will not replace US currency until you can pay your taxes with it and my mother can understand it.

6 million bitcoins, 6 billion people 

Someone should make a Farmville clone that uses BTC.

sl will replace the USD one day, it's inevitable!

the funny thing is, people were saying similar things at the heights of the SL hype. not replace, but that it'll be used for realworld trade.

except that anything made in sl is just as worthless as bitcoins... lol....

i think thats a great idea, but there must be many very capable programmers working on this...

relative,
Aren't all of these things only a problem as long as you're concerned about convertability to USD?  From my pespective as a newbie to the currency and community, this is the very beginnings of a new marketplace being formed - Take a look at the auction sites, or classified sites and you'll find a suprisingly diverse variety of goods and services available.  Sure there are gaps, but every new convertee potentially adds to that pool, especially if they see it as a way to invest in a currency with good fundamentals while not having to put down an outright capital outlay (i.e. buying BTC for USD).

This is only the beginning, and I for one am very excited to watch and participate in what we're going to build together over the next few years.  Very exciting times!

imho money can only function as a store of value if that function is a "side show" , i.e. the medium of exchange function is predominent.
people have to be _very_ convinced they can get out of their position. for example, they've been able to spend their dollars their entire lifes. and even given that, investors react rather panick-y if they suspect that might change (see recent shift towards real assets/commodities since 2008).

if you buy bitcoins now even though it isnt really a medium of exchange, I wouldn't call that storing value. it is speculation on bitcoin's success as a medium of exchange.

nothing wrong with that though, if you're convinced of its success. but it is comparable to investing in a startup company, not to storing money at a bank.

I bought a bunch, and was withdrawing the max each day. Didn't make it to the end. I definitely didn't plan on keeping them there.

All that I can say about that is take a hint from your great-grandmother and learn a bit more distrust of banking institutions.  I had a trade account at MtGox as well, but I have less than 5% of my bitcoins holdings even exposed to the Internet in total.  MtGox had less than 2%.  Yes, it sucks.  But never risk what you can't afford to lose, and there is no logical reason to keep a vast sum of coins at MtGox, or any other exchange, unless you intended to risk them in speculative plays.

And Paypal can be hacked as well.

I agree with all the above... but Bitcoins would be so much better if I didn't lose 1/5 of them at Mtgox.

1)  Bitcoin transfers are cheaper.

2)  Bitcoin gift transfers do not require that both parties are registered with the same website.

3)  Bitcoin does not discriminate against users who live an certain countries.

4)  It's impossible to violate the terms of service or policies of Bitcoin.

5)  If you are from certain countries, using Bitcoin doesn't contribute to the tax base of your perceived (true or not) oppressor or occupier nation.

6)  Bitcoin transactions between two people can occur off of the Internet altogether, as there is no server necessary to actually perform the transaction.

7)  If you are the vendor, Bitcoin won't take back your sales revenue because someone says their account was hacked or because they claimed that you defrauded them; nor can Bitcoin reverse any transactions for any  reason without your consent.

  Bitcoin won't submit tax reporting on you if you exceed $600 in sales in a single year.

But you're right, there is no obvious benefit to using Bitcoin over Paypal for legitimate transactions, to you.