Share your feelings with the group.
On second thought, don't.
Topic: Warning! Please don't create another bubble! (Read 4889 times)
I'll forward this to wall street.
Shuai,
For someone doing business with bitcoin you're kind of naive. I'm in China as well and have been using bitcoins for a large number of smallish business transactions and this has so far been a great success.
The second you're doing this you need to hedge at least part of your positions, if you don't do that then yes you'll end up with unhappy customers etc. THIS IS ESSENTIALLY THE SAME AS WHEN DOING BUSINESS IN ANY NON LOCAL CURRENCY. Once you hedge your costs you're beyond the point of people getting upset about losses etc provided that you've explained the volatile nature of the medium to them.
For someone doing business with bitcoin you're kind of naive. I'm in China as well and have been using bitcoins for a large number of smallish business transactions and this has so far been a great success.
The second you're doing this you need to hedge at least part of your positions, if you don't do that then yes you'll end up with unhappy customers etc. THIS IS ESSENTIALLY THE SAME AS WHEN DOING BUSINESS IN ANY NON LOCAL CURRENCY. Once you hedge your costs you're beyond the point of people getting upset about losses etc provided that you've explained the volatile nature of the medium to them.
Interesting post.
Bubble happens. Bubble is a way of evolution, i think.
Bubble happens. Bubble is a way of evolution, i think.
Oh, by the way... if BTC's somehow make it down to $2 again, I will probably drop another $100k on them.
I'd likely do another $10k-ish assuming similar conditions as the last time (lack of Bitcoin system weaknesses, scary global monetary issues and some disposable (and lose-able) income.) Actually, I'd probably be buying into such a decline so I would not have the full funds left at the $2 point.
I expect that the only way to get down there again is if some truly massive holders decide to bail in something of a panic for some reason. Back at the $15 level I thought it could only get into the $5 range if such players cashed out in a big way, and that they probably would do so mainly if they had advanced awareness of a weakness. I was quite wrong it seems. This wrong conjecture moderated my purchases, but fortunately (it currently appears) a lot of the moderation was on the way down and I plowed a good bit in in the lower ranges.
I don't understand all this talk about buying bubbles with bitcoins. You can just run over to Dollar tree or Dollar General and buy a three pack of bubble solution for a buck. An economic bubble? Oh, never mind! Emily Litela.
Shuai has a point. Also, you can't count exchange volume as trade volume, trading is indeed still fairly small.
But then again, it's pointless to try and stop speculation. We need these hiccups and rallies to build a financial foundation for larger-scale trade. 8M @ 2 USD is a little small to provide the kind of market a business trader from and to China is likely to need.
Bottom line: live with the fluctuations for a bit longer, and don't give up even if you lose the majority of funds at some point. Every day this goes on is one day less until we reach stability. And don't forget that swings can go both ways, volatility is both a risk to lose money and a chance to win some. Don't put in too much and you'll likely be fine.
But then again, it's pointless to try and stop speculation. We need these hiccups and rallies to build a financial foundation for larger-scale trade. 8M @ 2 USD is a little small to provide the kind of market a business trader from and to China is likely to need.
Bottom line: live with the fluctuations for a bit longer, and don't give up even if you lose the majority of funds at some point. Every day this goes on is one day less until we reach stability. And don't forget that swings can go both ways, volatility is both a risk to lose money and a chance to win some. Don't put in too much and you'll likely be fine.
I concur with the statement that bubbles cannot be avoided. I think the opposite, it's rather important that this kind of pattern happens! This just means that there is a dynamic exchange between all sorts of interest groups around bitcoin. All those groups vary in size and if the trade volume is an indication, the groups grow in size, too. I also predict that this kind of pattern will happen more and more often in the future, if bitcoin rises in interest.
As a long term miner myself, I haven't been selling bitcoins for the past 6 months. 2 $ is way to low to be cost efficient. So, a price around 10$ isn't a bubble to me AT ALL.
... do you know what a bubble is?A bubble is a trade in high volumes at prices that are considerably in opposition to intrinsic values. That's why I wrote a "bubble to me". Though I know there is no direct correlation between market price and costs for miners, as long as miners are the main supplier of bitcoins they hold the power to not sell bitcoins under average production costs plus a profit. This will change when the minting rate will drop in half. I certainly am not willing to sell for dumping prices, and I am not pressured to sell for a long time. And I don't think I am the only miner who sees it that way. So, let the prices rise and we can talk again about any kind of bubble.
Bubbles happen. It's human nature. You can't stop them.
This is correct and by the way, it was really not a bubble in logarithmic terms which is the more appropriate way to chart assets that show exponential rises in very short time.
And, bubbles or however people call strong rises, can not be avoided. Herding psychology is human and can never be avoided in free markets.
As a long term miner myself, I haven't been selling bitcoins for the past 6 months. 2 $ is way to low to be cost efficient. So, a price around 10$ isn't a bubble to me AT ALL.
... do you know what a bubble is?
As a long term miner myself, I haven't been selling bitcoins for the past 6 months. 2 $ is way to low to be cost efficient. So, a price around 10$ isn't a bubble to me AT ALL.
What is going to happen instead is that the moment this new bubble bursts I will have to cease all trading with Bitcoins. There's no way I can give a rapidly depreciating currency to my partners. I would lose all credibility if my payment had lost 20% of its value after a few days.
If price stability is an important factor, bitcoins received can be moved to an exchange and converted to USDs within minutes after receipt. At some point there will be options and other derivatives that will provide the ability to hedge and lessen exchange rate risk without having to immediately convert out of bitcoins.
selling bitcoins for money is such a huge clusterfuck, especially in China
Perhaps I didn't explain that step properly. Converting bitcoins to USDs allows you to lock in the exchange rate but there's no requirement that those funds be withdrawn at that instant in time. Those USD funds can be left in the account with the exchange.
At a later time conversion back to bitcoins can occur at whatever exchange rate exists at that time and as a result, bitcoins once again can be withdrawn. There's no exchange rate risk using this tactic and the exchange fees are reasonably small -- for both selling and then buying back later the fee ranges from 0.6% to 1.2% combined, depending on monthly volume. There might be risk to holding those USDs at the exchange though so this may not be the ideal approach.
Moving those funds to Liberty Reserve does add an additional expense but that provides a place where the funds can be parked and then easily moved back into a bitcoin exchange at a later time.
It is too bad there isn't yet a BTC/GAU exchange where the GAU is backed by physical gold (where delivery can be taken even). http://Bitcoin-central.net offers a BTC/PGAU (Pecunix GAU) market but it appears to be unused -- currently there are no sellers shown. That's probably what would serve you best for the problem you are describing.
Until it is possible to easily buy and sell bitcoin, speculating is the cheapest way to buy them. International wire transfers cost around $50. Using a wire transfer to buy $5 worth of bitcoin would be stupid. I am planning a $500 or larger transfer, just to keep the transaction costs below 10%.
Since I have no immediate plans to spend those funds, I would mainly be buying and holding. I would likely try to convince businesses I deal with (especially remotely) to accept them, but they would likely incur the same fees while converting back to fiat.
OP has one thing correct: the fundamentals of the bitcoin economy are more important than the price. OP seems to feel that the fundamentals won't develop in the face of rapid speculation (which is probably true). However, the converse is also true: the fundamentals of the bitcoin economy can not improve without pushing up the price. Every exchange puts upward pressure on the price of bitcoin.
Since I have no immediate plans to spend those funds, I would mainly be buying and holding. I would likely try to convince businesses I deal with (especially remotely) to accept them, but they would likely incur the same fees while converting back to fiat.
OP has one thing correct: the fundamentals of the bitcoin economy are more important than the price. OP seems to feel that the fundamentals won't develop in the face of rapid speculation (which is probably true). However, the converse is also true: the fundamentals of the bitcoin economy can not improve without pushing up the price. Every exchange puts upward pressure on the price of bitcoin.
Perhaps the bitcoin economy has increased, but what I'm saying is that there has not been anywhere near a 250% upsurge in intra-bitcoin trade since the price was at $2.
For that to mean anything you would first have to establish that $2/btc is where the price "should" be. Maybe $2 was too low to hold for the amount of intra-bitcoin trade, in which case you wouldn't need 250% upsurge to justify the now higher price.
nobody has the intention of building a wall bubble.
Bubbles happen. It's human nature. You can't stop them.
People made way too much out of the last bubble, proclaiming the "end of bitcoin" when it popped. All nonsense. It was just a hype bubble, nothing new in the world here.
That's why if you believe in Bitcoin, as I do, but you're not into market timing or speculating, you can just use dollar cost averaging by buying BTC every month -- and stop worrying so much about the day-to-day price changes. Let the speculators sweat that stuff, you don't have to if you only care about the long-term success of BTC.
I've bought BTC at 6 cents, and I've bought it at $30. Overall I've been increasing my wealth since I discovered BTC because the long-term trend is up. And I don't worry about it.
People made way too much out of the last bubble, proclaiming the "end of bitcoin" when it popped. All nonsense. It was just a hype bubble, nothing new in the world here.
That's why if you believe in Bitcoin, as I do, but you're not into market timing or speculating, you can just use dollar cost averaging by buying BTC every month -- and stop worrying so much about the day-to-day price changes. Let the speculators sweat that stuff, you don't have to if you only care about the long-term success of BTC.
I've bought BTC at 6 cents, and I've bought it at $30. Overall I've been increasing my wealth since I discovered BTC because the long-term trend is up. And I don't worry about it.
Based on my analysis, I think that high volatility is probably here to stay for the foreseeable future. I don't think that it can be prevented, other than by growing the economy. I actually thought earlier today about writing something like the OP, before I saw this post.
I don't think that warning people will avoid it. However, I would advise people to act rationally rather than emotionally when speculating, and to expect further bubble(s) in the future.
I don't think that warning people will avoid it. However, I would advise people to act rationally rather than emotionally when speculating, and to expect further bubble(s) in the future.
I consider this offensive.
Growth in the Bitcoin economy exceeded two standard deviations from the mean during the bubble. It is currently less than one away right now and the capital inflows have been steadily rising. Overall, the general pace has resumed to what it was before the April-June bubble. The USD exchange rate would have to exceed $5.80 on the week to start being concerned, and $6.20 to trigger an immediate sell signal. Each time the price has jumped since November, it's built a stable base before continuing up.
It's also important to keep in mind that advances in science & technology are cumulative - they amplify prior improvements. Look at the comparison of bitcoin to gold - the former at a weekly level and the latter on a yearly level. That would effectively be about a 50:1 rate of growth just based on relative USD prices (the Bitcoin values are from mid-2010, not 2009).
It can be expected that adoption rates will remain accelerated simply because of how small the Bitcoin economy still is relative to the rest of the world. I've compared Bitcoin's growth to that of Facebook and the patterns are similar there as well. We're still in an early phase, and Bitcoin has a far wider usage potential.
It's also important to keep in mind that advances in science & technology are cumulative - they amplify prior improvements. Look at the comparison of bitcoin to gold - the former at a weekly level and the latter on a yearly level. That would effectively be about a 50:1 rate of growth just based on relative USD prices (the Bitcoin values are from mid-2010, not 2009).
It can be expected that adoption rates will remain accelerated simply because of how small the Bitcoin economy still is relative to the rest of the world. I've compared Bitcoin's growth to that of Facebook and the patterns are similar there as well. We're still in an early phase, and Bitcoin has a far wider usage potential.
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