Then along came the people like mr rich suit in this thread, who bought up all the BTC they could find, not to use as a futuristic currency, but to hold as a commodity so it could hopefully make them money.
The real problem is that bitcoin was designed as a currency, but is this year being used by the vast majority of its holders as a high risk high return high volatility speculative commodity.
1) BTC will return to something close to its stable value last year. In this case mr rich suit (remember he said "I only bought a meaningful number of bitcoins this year", and all his high finance type buddies will end up either with losses, or have sold out to a greater fool and made their money. Either way they'll move on to something less stable and more speculative until the next bubble and bitcoin will get a lot of liquidity back. Meanwhile bitcoin is back on the road to more widespread adoption as a currency.
2) liquidity will stay low, and bitcoins will fluctuate from $100, to $500, to $50, then back to maybe $100 or $1000. Many will make a fortune. An identical number will lose a fortune. all the big companies like Silk Road (I use the term company loosely there) and Wordpress will switch over to litecoin or a different crypto currency, and bitcoin will just be a bunch of bytes, used for nothing but a bunch of people selling coins back and forth to eachother while hoping to come out on top (i.e satoshi dice with lower transaction fees)
The real problem is that bitcoin was designed as a currency, but is this year being used by the vast majority of its holders as a high risk high return high volatility speculative commodity.
1) BTC will return to something close to its stable value last year. In this case mr rich suit (remember he said "I only bought a meaningful number of bitcoins this year", and all his high finance type buddies will end up either with losses, or have sold out to a greater fool and made their money. Either way they'll move on to something less stable and more speculative until the next bubble and bitcoin will get a lot of liquidity back. Meanwhile bitcoin is back on the road to more widespread adoption as a currency.
2) liquidity will stay low, and bitcoins will fluctuate from $100, to $500, to $50, then back to maybe $100 or $1000. Many will make a fortune. An identical number will lose a fortune. all the big companies like Silk Road (I use the term company loosely there) and Wordpress will switch over to litecoin or a different crypto currency, and bitcoin will just be a bunch of bytes, used for nothing but a bunch of people selling coins back and forth to eachother while hoping to come out on top (i.e satoshi dice with lower transaction fees)
Thank you for your concerns. I take the time to explain some of the motivations behind my actions, related to the quoted part of your post.
1. Yes, we bought up pretty much all we could find. The deciding moment was the resilience of Bitcoin community in the face of the fork last month. The issue was fixed with 10x more professionalism and determination than can be found in wall street. This gave me the confidence to go "all-in". I realize that every one of the current USD/BTC exchanges is unable to cope with the demand, but that will not affect the bitcoin protocol. I have no reason to panic if Mt.Gox closes down entirely. The people will find the way to buy bitcoins if they want them. The premier newspaper in Finland ran a 2-page article on Bitcoin today, without a single fundamental misunderstanding. I will roll-out a comprehensive newspaper ad campaign next week in all Finnish newspapers with 100k+ readership. I am selling bitcoins to people for a 10% fee. Bitcoin is so small at present, the value of the real estate in 1 kilometer radius from my house is more than an order of magnitude bigger. Give me 3 months to raise the awareness, so I can buy all the bitcoins anyone wants to sell for sub-$50, to sell them OTC for profit.
2. I don't believe the majority of bitcoins are in speculative hands. Speculators don't hold positions for long, and prefer to use leverage, options, etc. and not own the underlying. Even if there are many speculators out there in number, the number of physical bitcoins they hold at any given moment is negligible, by which I mean less than BTC500,000.
3. There is no way for bitcoin to return to any stable value less than $10,000. What you don't seem to understand is the supply/demand dynamics. Ben Bernanke has said, "there is this technology called printing press". As he speaks the truth, and there actually is such a technology, everyone should be aware that he can cap dollar's appreciation at any time by just doling out $100,000 of physical or digital cash to every citizen of his country (note: currently USD is not created by printing press, rather than loaned out at interest, which is a diametric opposite of a printing press - but he nevertheless has the printing press also, and the means to use it).
With bitcoin, there is no printing press. Barring a flaw in the protocol, nobody can create bitcoins at will. This leaves bitcoin's fate (as regards to its purchasing power) to be decided in the open market between the current bitcoin holders and current fiat holders. A popular misunderstanding is that the price of something is somehow decided by popular vote. If 90% are bearish on bitcoin, its value should decrease, don't you think so? I am afraid you are wrong. The price is decided by the highest bidder, compared to the lowest seller. There are only so many bitcoins out there, and much more dollars (and real physical wealth, such as gold, silver, land, RE, shares of income-generating businesses, which can also be exchanged for bitcoins). Last week, Wikileaks divulged that there is $32 trillion parked in a certain tax haven. If 0.01% of this money wants to buy out all the bitcoins in existence, they would be valued at $290 per. In reality, about 90% of bitcoins are not for sale at below that price, so basically a sudden influx of $3 billion to bitcoin, would raise its price far above $1000.
In a free market, only the ones that trade, have a vote. If you don't have any bitcoins that you are willing to part with, you have pretty little business trying to force its price down. If you don't have fiat (or anything else valuable) that you are willing to part with, you have not much chance to raise the price of bitcoins. Currently only about 100,000 people in the world are influencing bitcoin's price in any way. When the rest join in, the only candidate they have in their ballot is "UP". Shorting bitcoins is not only hazardous due to the instability of the platforms, and stupid, because the price is in uptrend, it is also almost impossible, because the large buyers/holders of bitcoins will take delivery, abolishing the chance to naked short it, up to any meaningful degree.
4. I knew of Bitcoin when it was still a non-traded currency. I chose my entry point to be much later, when I could trade the fiat (that I am good at making in the meantime) for bitcoins with ease. Now I recently decided to go all-in, which means that I have invested everything that I can afford to lose. Believe me, I don't regret for a second if the technology blows up. I still have my emergency gold and silver, my other businesses, my family, and my Lord. In the event that nobody else is buying bitcoins, I will buy them all the way to the bottom, and we will continue to play poker with the 10+ million bitcoins with my friends, hosted by the sole functioning node in my engine room. I am having a serious fun with this, I am grateful to satoshi, early adopters, devteam and (even) the operators of Mt.Gox for allowing me this chance to influence history. I will not lose my weekly bottle of Riesling no matter what happens to the price. My aim is to develop a healthy bitcoin brokerage, and continue to run it until I move on to other things. At that time I will sell it to the big guys coming after me, for 10,000 bitcoins (+ the book value). The big boys will not buy anything for less than $500 million, so either we make it or break it.
5. I would be sorry to see if you sell out too early. May I suggest you to use the method I deviced for myself, when I still had the mindset of "selling to the strength". After the initial investment, you just wait for the price to double. As it doubles, you sell 25% (or whatever you are comfortable with, as long as it is less than 50%). If it doubles again, you sell 25% of the rest. Repetitio ad infinitum. This way the dollar value of your remaining bitcoins can only ever grow (provided that bitcoin goes up, of course). Also your living standard increases all the time. If it crashes, you still win.
