Topic: Watching amateur finance types flail - page 4. (Read 35334 times)

The condescension and smug superiority in the title of the OP's thread alone are insulting enough. He then compounds it with scorn, direct insults, belittling, and expressions of pleasure at unfortunate events. Inability to distinguish between a hack of an exchange and the operations of the bitcoin network itself are dead giveaways.

Bitcoin's elegance, distributed nature and the math behind it are powerful forces he doesn't begin to grasp, which is evident when he equates it with Digicash and Beenz.  I have my own doubt and misgivings about Bitcoin, but an attitude of epistemic humility is much more fitting.

As for the allegation of the exchanges (repleat with scare quotes) being flaky: partially true, when the standard of comparison is institutions that have been in existance for decades in a gigantic multi-trillion-dollar financial system. But when you consider that until two months ago, the total value of all bitcoins in existence didn't exceed the market cap of even a single publicly traded micro-cap stock, only modest operations could have possibly existed, and they are necessarily very new. As Bitcoin matures and grows, the system around it will mature and grow. Witness Camp BX as a promising development in this regard. And MtGox may have learned some lessons, and their recent revenue growth will likely fund commensurate improvement in their own service.

They are not a depository institution. Mt Gox has custodial relationship with account holders. The funds _are_ held in a depository institution, namely Sumitomo Mitsui Banking Corp.

The recent publicity brought what surely was a speculative blow off. There's a world of difference between speculative excess in valuation (which happens to many perfectly-valid asset classes), and collapse of the tulip bubble or a ponzi scheme.

His inept, mostly stale website is testament enough. But consider what he asserts.
And if it doesn't rapidly finish its collapse, as predicted, "all the way" to zero, will we see a retraction, an admission of error, and apology for the insults he heaped on Bitcoin users? Don't hold your breath.

Well, you're entitled to your view. I won't comment further here as it's getting off topic.

[sigh] We didn't start using oil because of peak coal. There is reason to believe that the transition from oil will be based on the development of a new, superior technology rather than depletion of oil reserves. It's not a ceiling we will "bump" against. Marginal utility means that other technologies will slowly come on line and increase in use as the price of oil rises.  This will more likely be an orderly transition that a disruptive, abrupt change.

Not to say there isn't substantial risk of disorderly, abrupt change- just that it is likely to have little to do with oil.

It's lurking there like a ceiling that we'll bump against each time the economy gets on track and tries to push up through. So it doesn't get noticed or given attention except by the more abstract observers who don't have a vested interest in keeping the status quo and so aren't quite so blinded by mankind's arrogance.

Oil scarcity is not our biggest economic problem. Not even close. What scarcity there is is exacerbated by poor policy rather than dwindling reserves.

Right. Now we have a stagnant economy (limited by oil resources) and a wildly out of control money supply managed by criminals in designer suits.

What attracted John's attention is a crowd of people talking about finances that he could exploit to drive traffic to his own moribund site. Combine that with the likelihood of slow business and John is hoping that he can drum up some clients if he talks pseudo-intelligently about finances. This joker is all over the map though. In here he decries the bubble/ponzi/pump and dump nature of BitCoin while over here: http://forum.bitcoin.org/index.php?topic=21384.0 he gushes over the stability of the currency at $15.
He's either a) bipolar b) several people who aren't comparing notes or c) playing every side of the argument in hopes to attract a dupe to his services.
Whatever one of those things he is, he is primarily a troll.

you answer your own question:


...thusly:


he can't make any money from Bitcoin, other than as a miner or a participant.  "professional" finance types don't like exposure to risk reality.  they want to make money without touching, earning, or creating it.  and if one of their investments tanks, they were only advisors - not vested.

hence; naked credit default swaps.

Bitcoin isn't like that, is it?

I'm curious what attracted John's interest in bitcoin. It's interesting to see so many financial experts are watching it. I see the main difference from previous attempts at digital cash is that there is no way to stop people from using it and its at least as untraceable (and untaxable) as regular cash.

The main new thing about bitcoin is that it's decentralized. Digicash could fail if the company that owned the servers got hacked, went bankrupt or was shut down. Bitcoin cannot be shutdown because it is completely decentralized. There is no SPOF. As for how the protocol was originally created, that is about as relevant to whether it's decentralized as how TCP/IP was created and whether the internet is decentralized.

You don't even grasp the basic point about the technology and here you are criticizing it. This is FUD, pure and simple.

Actually, it's the third or fourth. Digital era predecessors in pseudo-currencies include Beenz, DigiCash, and frequent flyer miles.  Going back further in history, look into how the house of Thurn und Taxis got rich after inventing postage stamps. (They also built and ran the postal system).

The main new thing about Bitcoin is the generation mechanism.  DigiCash was equally anonymous, and had a comparable anti-double-spending mechanism. But it used a central "bank" to keep the transaction list.

It's also an illusion that Bitcoin isn't centralized. Some of the policy, such as transaction costs, is embedded in the client. The constants that drive the coin generation rate were set centrally at launch, and are embedded in the early coins. Those locked-in policies favored early adopters and set a ceiling on the number of Bitcoins which is not that far away.

The current model for Bitcoin exchanges is over-centralized, because the "exchanges" also act as depository institutions, and are sluggish about handling withdrawals. In the real world, a broker can execute a trade on any exchange, and the exchange can't tie up funds. Even limit orders are cross-exchange now; this is done through a "consolidated limit order book", where all the exchanges work off the same limit orders.

This isn't a magical new development. It's a minor advance over previous technology.

Hold on here. An immediate crash could occur if, for example, a flaw were found in the fundamental bitcoin logic such that it could be hacked. People would stampede out the door.

Very well said, sir. Very well said. Many have confused the making of money as being a valid replacement for morals and ethics.

Bitcoin is not a company or a stock so it never will "generate revenue" and will always fall short (for you) in this respect.


You are correct. The excitement in this teeny, tiny micro-community is due to the anticipation of bitcoin's use as a currency.  There is risk in speculating that it will be adopted as a currency but there could be huge payoff too!  Your criticisms of bitcoin seem based more on analyzing charts than on appreciating its fundamentals.

Bitcoin is the first of its kind.

If you read this very good article you will learn that "Bitcoin isn't just a currency but an elegant universal solution to the Byzantine Generals' Problem[1], one of the core problems of reaching consensus in Distributed Systems." The "useless work" of mining (solving computations) is actually at the core of what enables bitcoin to "live out on the network" and maintain the fidelity of its ledger. It is a prototype of many decentralized applications that will now be forthcoming.

Bitcoin is (in theory) beyond the control of governments, so it can't be manipulated and inflated or killed by them. Unlike your other examples it is decentralized (as mentioned), and it is (or can be) private so it can move across police state or capital-controlled borders. 

Those are some of its technical points, but there is a certain morality at play here too. The invention of bitcoin is the response of humanity to the economic system that we were born into and which we now understand oppresses us and always has. A tiny financial class benefits enormously from the present system and seems to be so arrogant that they no longer attempt to hide their thefts from us, their victims. Something simply has to be done. So, you can be "amused" watching us little people struggle but what kind of man are you? What are you doing to right the wrongs of this parasitic class? Is the morality of an investment something you consider for your clients or do you have them invested in oil companies, Monsanto, uranium miners, defense companies, etc.?

OP, can you clarify the following quote?

"When Ponzi schemes crash, they crash fast, and they crash all the way."

Bitcoins "crashed" from 30 down to $12, and then back up to $18.  How does that fit in with "they crash all the way".

Later, mtgox hack/faulire occured.  BTC "crashed" again down to $14~ on tradehill, but worked back up to around $16.  How does that fit with the quote?

It doesn't seem to me that BTC have crashed fast, or all the way.  Either they are crashing really really slow, or they are not crashing at all, or they are not crashing "all the way".

 Based on your quote, BTc can't be a ponzi scheme, since it's crash didn't follow the standard model for ponzi scheme crashes.

BTC is like any speculative asset:  Its only zero-sum if it goes back to zero.  If it stays high its considered wealth creation, not zero-sum.

I agree with you that merchants are at a disadvantage.  That's why its obvious that bitcoin, a floating currency, will probably remain as a speculative value storage and transfer system more akin to gold and silver.  Also plainly clear that merchant activity is not the economic activity supporting the price of bitcoin,  but the exploding volume of trading which occurs on the exchanges.

Maybe it will also succeed along the lines of a conventional currency or micropayments system, maybe not.  But a lack of merchants says little about the health of the economy.  The growth in volume of trading on the exchanges does.

I tend to agree.

That's not the real problem, though. The real problem is that almost nobody is actually using Bitcoins as a currency. The speculators are playing a zero-sum game, and there's little motivation for anyone to use Bitcoins in a payment system. In fact, the volatility from speculation is a dis-incentive for merchants to accept Bitcoins.

If real-world merchants were to accept Bitcoins, they'd need volatility protection. This could be done via options, but that would probably make the speculation problem worse. A module for a shopping cart program which allowed quoting prices in Bitcoins, based on the current exchange prices plus a risk factor computed from volatility, could work. Bitcoin prices would be a little higher than other prices, and if and when the volatility came down, the spread would narrow. This would result in merchant pressure for market stability.

If there was some killer thing you could buy with Bitcoins, this might be worth doing. So far, there's nothing for sale for Bitcoins that anybody really wants badly. (Except maybe on Silk Road).

note that bitcoin at present is not deflationary. it's quite inflationary, with more bitcoins being produced per bitcoin than dollars, pounds, or any other major currency. that inflation won't stop for some time.

(as i've described elsewhere, both the 'deflationary spiral' crowd and the austrian crowd are making significant mistakes. i'm just pointing out something narrower here because too many people speak as if the operation of the bitcoin market, or the speculative gains or losses they've received, are somehow tied to the operation of deflation. they are not.)

let's leave the inflation-deflation debate out of this.
not beleaving in the deflationary-spiral BS isn't amateur. the rest of it is amateur, yes, but I don't hold that against bitcoin either.
my point is rather that I don't see a way it can grow anywhere near the order of magnitude the current trade price and monetary supply growths implies.

btw, a constant monetary base doesnt mean no inflation. compare M3 to monetary base in other monetary systems.
in a "grown-up" bitcoin economy there will be a (probably growing) multiplier, too.

You got me there!    I didn't realize the circle I'd gone in.