Topic: rpietila Calling the Bottom - page 19. (Read 45362 times)

I understand your argument, as I maintain a logistical, e.g. S-curve model, of bitcoin price data presuming that the price is correlated with the population of adopting bitcoin speculators. I use $1 million for the arbitrary, guessed-at maximum price. Likewise I hand-fit the logistic function in November 2013, and will re-fit the function sometime next year given more data.

https://docs.google.com/spreadsheet/ccc?key=0ArD8rjI3DD1WdFIzNDFMeEhVSzhwcEVXZDVzdVpGU2c

It doesn't seem like we've managed to sustain any kind of rally since the 18 August low of 442, so I'm pretty much expecting a retest of 442.  Actually, I wouldn't be at all surprised if 442 doesn't hold and we have to go all the way down to retest the 11 April low of 339 - or at least come close to it.

It doesn't feel to me that we really have 'blood in the streets' yet.  Remember what it was like after the rally to 266 when in early July we were trading in the 60's?  I don't think there's anywhere near as much despair here now as their was then....

I used Pascal's wager as an illustration of an argument that appears reasonable until examined.  I hope I didn't accidently suggest that Bitcoin is God.  The network effect is at work in every mass-adoption scenario.  It does, indeed, tend towards exponential growth.  Until it doesn't.
The network effect is not a law of nature, it is a way of explaining exponential growth when it happens.  There was an 80s TV ad for Faberge Organics shampoo:

"When I first tried Faberge Organics Shampoo with pure wheat germ oil and honey, it was so good I told two friends about it.  And they told two friends.  And so on, and so on…"

Network effect in action.
Now the whole world is using nothing but Faberge Organics shampoo.  Couldn't have ended any other way.
You use Faberge Organics?

Ahh ... but where are the network effects in religion with respect to Pascal's Wager? Do more believers make a certain God more likely to exist?

Unlike religions which for the most part have immutable doctrine, Bitcoin is defined by software which can be changed a large consensus of its community. I am hoping my altcoin under development has such an effect on Bitcoin, by demonstrating that certain alternative technology is better.

Here is the log chart of adjusted number of bitcoin transactions as calculated by Blockchain.info. Note that the most recent value is above any previous except for a few weeks at the bubble peak in 2013. Bitcoin transactions are growing in number and bodes well for the potential growth of bitcoin prices.

Not Bitcoin succeeds, but cryptocurrency succeeds.  Cuts the odds a bit, and introduces the dilemma of the right coin to invest in.

See my point?

I think it is a bit premature to call bitcoin's failure as an e-payment system, since bitcoin only really came out of complete obscurity just last year.  Payment processors like Coinbase and BitPay have barely gotten started signing up merchants, and those they have signed on represent a small fraction of merchants that exist worldwide.

In another 5 years if we are still only sitting on 1-5% of bitcoin usage as e-payment, then I'll begin to believe your argument that bitcoin demand as a superior form of e-payment is low or has failed completely.

Otherwise Risto is correct, the other major attribute of bitcoin is as a long-term deflationary store of value.  So why does your argument suppose an either-or scenario for success ?

Not God Exists, but rather Your God Exists. Cuts the odds a bit, and introduces the dilemma of choosing the right religion/faction for those who Believe.

If this argument proves anything, it proves too much (kinda like Pascal's Wager).  If it proves that if Bitcoin is logically locked in on success, it proves that *all the clone coins* will be similarly successful.

We know that could not be the case, since [total] mass adoption by one coin precludes [total] mass adoption by all the others.
Without total mass adoption, the argument quickly loses its luster--we need Bitcoin to represent world's total wealth--not just be "one of a billion SHA256 coins."
We need that [almost] infinite upside that makes Pascal's Wager seem convincing.  A bit of a tangent, i know, but...

Wait, if e-payment use is not what gives value to bitcoin, why is it different from litecoin or any other altcoin?  

To be a store-of-value, it does not matter whether the coin is accepted by merchants, it matters only (like gold) that it has no inflation and that there is some market somewhere that provides liquid conversion to some currency.   Problem is that its vaue (like gold's) will be sustained only by the general consensus that it has value.  Such "faith-backed" value could pop at any moment (like gold's).

All this time, bitcoiners have been saying that bitcoin will "go to the moon"  one day because of its demand as a means of e-payment.   Is the discourse changing now?

Wrong (x3).

Transaction use accounts for about 1-5% of Bitcoin's value. Most important reason why it has value is that it has value (value storage). This accounts for the rest, 95-99%.

Another barbarous relic, gold, has even lower transactional utility: unlike Bitcoin it is not even free, instant, and verifiable. Despite this, gold's market cap is the highest of non-fiat moneys, about $6,000,000,000,000. Bitcoin is still 1000 times behind gold and Monero is 1000 times behind Bitcoin.

The original post is a valiant and well-argued defense of bitcoin, but it falls short in several points:


Indeed technological ideas are "indestructible", but that also includes the slide rule, the solar-powered car, the backyard trash incinerator,  ...

People understanding a technology is largely independent of them adopting it. See the solar-powered car.

Governments cannot kill a technological idea, but can effectively ban its relevant use. See the trash incinerator.  (Or Bitcoin in China.)

Technological ideas that were widely adopted and understood at one time may go completely out of use, sometimes in a matter of months.  See the slide rule.


That is just a statement of faith, not supported by argument.  "It is not right. It is not even wrong."

As the poster himself wrote in another thread, it is not the current 1-2 million owners who will push the price up by another 1000%.  For that to happen, bitcoin needs the opening of another market, with a BTC demand 10x bigger than China's.  Where will that be?

Some people have claimed that the approval of COIN trading on NASDAQ will create such a demand, including in the US.  Perhaps. But COIN will probably start using the private hoards of the Winklevosses and other backing investors.  Moreover, investing in COIN will be attractive only if people believe that the price will rise.  So the demand for COIN may just ride the eventual next bubble, rather than lead it.  (SMBIT has stopped selling shares since the price stopped rising.  While some early investors made a profit, real or on paper, by my estimates it has been a bad investment so far on the average -- that is, the set of all outstanding shares are worth less than the total money clients paid for them.)

Bitcoin's "intrinsic value" is supposed to be its utility as a payment medium.  All predictions that the price will eventually rise "to the moon"  are based entirely on the assumption that there will be substantial and increasing demand for that use.  In particular, its value as an investment depends entirely on that premise.   

So, how is that demand going?  Unfortunately there seems to be no reliable data about use of bitcoin for e-payments (and the top bitcoin promoters do not seem to be interested in obtaining it).   AFAIK, Bitpay and Coinbase do not regularly post their processing volume.  Bitpay claimed to have processed 100 million USD in 2013,  but it is not clear how much was really payments for goods and services.  On the other hand, there are hints that the use of bitcoin for payments is much smaller than the volume traded at the exchanges.

Moreover, considering the costs and hassle of acquiring bitcoin, it seems likely that most of the payments processed by Bitpay and Coinbase is generated by people who already owned bitcoins, rather than people who bought bitcoins specifically for payment.  Therefore, instead of generating increased demand for payment use, those processors are only encouraging the moving of old hoards to the market.

Thus, as many have pointed out, bitcoin's price is sustained only by the vague hope of it "catching" for e-commerce in the future, and by speculative trade, at various time scales (from the day trader who expects to sell in a few hours, to the "old owners" who do not believe in lasting success but are holding in the hope for another bubble or two).  And the eventual listing of COIN will not affect its use in commerce, immediately or in the distants future.


It reminds me of this old joke:

  A guy is standing at a bus stop, when an expensive car goes by, brakes, and pulls back.

  'Mick, is that you?', says the driver to the man on the sidewalk. 'Do you remember me? Jeff, from high school?'

  'Why... yes, of course! Nice to see you, Jeff!'

  'Nice to see you too! How have you been doing? You were the brightest in our class, you must have gone far...'

  'Well, I did OK... I went to university, then got a PhD in math, now I'm teaching a public college... Not a great salary, but it's enough for a decent living, can't complain... But what about you? Look at your car, you must be doing very well.'

  'Oh, I'm doing OK too, I would say. As you remember, math was not my thing at all, so after high school I went into commerce. I don't really know much about business, all I do is the basic: buy for 10 bucks, sell for 20 -- and that 10% profit is good enough for me.'

Agreed, if "manipulation" is used in a rather relaxed sense, more or less meaning: price moves based on technical reasons more than on fundamentals. And sorry for the confrontative phrasing of my post, I'm just starting to get allergic to the overuse of the word "manipulation". I blame the Wall Observer thread :/

Indeed.

You shouldn't be too judgemental as the word manipulation can stretch a wide variety of phenomena. The complaint here is that the price discovery mechanism is broken, as the price action doesn't support the narrative drawn by the fundamentals. What classical economists fail to understand is that price is more a function of the properties of the marketplace than the traded asset. And I guess we all agree that the marketplace for bitcoin trading could use some more developing.

Cool. Distributed manipulation for a distributed currency. Sounds good to me.

(Seriously, this is beyond pathetic. Price doesn't go where it *must* go, according to autism logic, hence: manpiluationz!!!)

It's not about a particular analysis. It's about a frame of mind. To understand this watch e.g. Peter Schiff here and replace "gold" with "bitcoin":
https://www.youtube.com/watch?v=6oQSSS2yGK0&index=3&list=UUG-G8LLr38fQUNZU8K0t-EA&t=260

As long as markets are dominated by paper clowns it's hard for the bitcoin price - or any other price for that matter - to break free from liquidity traders. This is especially true if the price for liquidity is zero. The only backstop against this kind of collective manipulation is the scarcity of the resource in question (bitcoin) and the fact that a heavy disconnect between the paper price and the real demand accelerates the accumulation of the resource by buy-and-hold players and becomes unavailable for the floating supply. What follows is a violent upswing, such as outlined by rpietila. The bigger the disconnect, the more violent it will be.

The value proposition of bitcoin has never been stronger. With borders closing all around the world, the need for a counterfeit proof global payment system is bigger than ever. The stage is set and global elites will makes sure the next crisis will induce a paradigm shift towards cryptocurrencies. Failure to understand this is to miss out on the biggest wealth transfer in the history of humankind.

The call for the bottom should be interpreted as a statement of disbelief that the current price reflects true demand and the suspicion that the market is still dominated by players who have an interest in low BTC prices.

In the name of humanity, please do not buy litecoin.

Right there with you my "frienemy." 

In fact, I am just going to go on a vacation this week and ignore the price. (Or try to anyways) It does get a bit painful waking up every morning to see a lower price per coin but I remember what it was like to wake up to crazy increases in price too.  I guess we have to take the bad with the good.  When it is good, it is VERY good!   

I drew some lines in my purse, fundamental TA stuff and such. The analysis was disastrous: There's simply no more fiat left to be spent on Bitcoin except the tiny bit that I'm not willing to spend due to nostalgic reasons

My lines on graphs tell me we won't go further down than 420, but even if we go further south, I might have several heart attacks, but no selling attacks, cause now is the time for the return of the HODLER!

Planning to make another bitcoin purchase today, and maybe some litecoin too. Feels like a final capitulation in altcoins.