Topic: Why has bitcoin been increasing so quickly? (Read 4459 times)

https://bitcointalksearch.org/topic/fundamental-analysis-thread-143973

Your ant has made try and squash it 3 times now and I bet I am not the only one

Yeah that's clear

It's always just a matter of price.  The price will rise until demand is satisfied.  The price will drop until supply is satisfied.  Nothing to see here.

If people aren't selling, it's because the price isn't high enough.  Likewise if people aren't buying, the price isn't low enough.

Ahh ok. So "everyone has their price" falls into this topic here. Even a bitcoin hoarder that hates to sell or give them up has their price. The only problem with that is even relating this to real American money people do the same thing. Hoard their money and never let it go. They'll actually die before they give it up. With American dollars when someone dies at least that money can be reached. If a bitcoin hoarder dies, good luck with that I guess.

You are describing what economists refer to as a shortage.  To see what causes a shortage, check out my responses to this post:

https://bitcointalksearch.org/topic/can-a-keynesian-demand-crisis-happen-147813

Basically, new bitcoins don't have to be added.  Shortages are resolved with higher prices.  If no one wants to sell you a bitcoin, just offer me a million bucks for a bitcoin and trust me, I'll stop hoarding it.

If there are no new bitcoins introduced into the network and more and more people start buying bitcoins, what will start to happen? I assume more people are holding/storing bitcoins then using them. If these people don't sell them and more and more investors jump in wouldn't the system in time run out of bitcoins to buy? I'm not a stock market person nor a finance expert, but I guess I should go back to the very start of how money is even conceived. I mean not one person can just add a million BTC into the network and cause problems. Just like US dollars. Someone, somewhere must have the power to introduce new money itself into the system. Having that ability, power and control is hard to imagine. Eventually though since there is a CAP on BTC things will just all flaten out?

It seems like the price isn't stop increasing..
 

This! Don't keep bitcoins on exchanges and banks longer than the shortest possible time.

There is actually a pretty easy way to prevent this. Require physical delivery of Bitcoins. In other word: each and every trade should be visible on the Blockchain otherwise do not except it and don't pay. If everyone does this naked short selling (of Bitcoins) is infeasible. The same would be true for PM but physical delivery (sending and insuring the PM) is costly when compared to physical delivery of Bitcoins (having a transaction included in the Blockchain).

I agree.  Leveraged short selling on the futures markets has allowed the bankers to keep the rise in gold and silver prices under control.  Considering all of the quantitative easing and fiat currency debasement going on around the world, the precious metals prices should be moving up in a parabolic fashion similar to what we see are seeing with bitcoin.  I sure hope the bankers aren't able to devise a way to naked short sell bitcoins.

Low supply and high demand are causing bitcoin's current rise in price.  The rise in price is not indicative of a problem with bitcoin, it's a problem with the dollar.  More and more people are trying to make their dollars someone else's problem.

Why would you need that in the first place? Why would you need to give somebody the tool to leverage short bitcoin sell without having the bitcoins? Why would you need to give somebody a weapon to kill the bitcoin?

Bitcoin is cash. You can't sell cash if you don't have the cash! You can't sell something you don't have! Leveraged margin trading in fiat has practically killed the fiat financial system. Why would you want the same happen to bitcoins?

The thing I keep in mind is that a) the market (=80% MtGox) is quite small, also compared to total Bitcoins and b) does not have a sophisticated short function yet. Therefore, selling pressure will only appear when an existing BTC holder cashes out. Negative sentiment with others won't be reflected in the market. Thus, this small market is much more prone to air pockets than big sophisticated markets.

Since we all know that markets never move in a straight line, I am keeping all options open. Given my approach (all or nothing, trying to increase stake by medium term trading), any reversal to the mean means a buy in terms of trading. If BTC has a future, we have only just begun.

How would you quote a 1 year lasting contract in BTC? Yo´ll never know what value you´ll have to pay.

Pump n dump is so 2011... Or Ltc, ppc, Dev, solid, etc... Btc is past pumping then dumping.  No more one night stands for btc.  

There is no volatility. There is a steady rise and this is different from volatility. It should be rising much faster because the slow rise today will lead to much aggressive rise tomorrow.

Definitely rising too fast. Too much volatility keeps the masses from switching to BC.

Yeah, thats what I did past week. Stupid me..

I don't think it's rising quickly. Actually this is a very slow rise and should be much, much faster!

It would be nice if it were supply and demand. Great for all of us as the upside is vast.

However, I'm thinking its a pump and dump, easy to do in such a small market. Just buy the price up, then offload your coins in the bull hysteria

Well.  Limited quantity. People think BTC is great and want it.  Supply and demand.  Going big time.  Imagine if only 1% of the world pop wants just 1 btc.  Buy now before the super wealthy do. Make some cash. Watch the bears day trade and lose... Again. Be glued to Clark Moody's real time trades on mt.Gox . Grab a few beers and enjoy the show. Read the press releases. Rinse and repeat.

  TC

Decentralized crypto-currencies could be a one shot deal where only one is the winner and towers over all the others which bounce around at ankle-height.   Bitcoin has a humungous potential vulnerability -- the 51% attack.  The Bitcoin network can be shut down (i.e., all transactions ignored) by any malicious party with 51% of the hashing capacity.

Bitcoin hasn't had anyone (that we know of) even come close to successfully doing a 51% attack.  With multiple ASIC vendors shipping (ASICMiner, shipping to their own mining operatioin) and Avalon ASIC and more coming (BFL, presumably ... have faith   ), there's no way a competing effort using FPGA or GPU has a chance to reach 51%.  Maybe someone is hard at work in stealth mode building new ASIC hardware with an unlimited budget, with malicious intent.   They'll need to beat the free market, and it looks like the free market is winning.  It has quite an advantage though.   Bitcoin is currently paying out $3.5 million worth each month to miners, and miners are buying millions of dollars worth of ASICs.   I can't imagine any single entity that could justify a gamble on procuring ten million USD+ to try to build technology to take on some fledgling digital currency.

But compare that to a fledgling alt currency that is decentralized and uses a similar proof-of-work approach as well.  Bitcoin long ago subsidized the CPU miners, then the GPU miners then the FPGA miners using the seigniorage that came from an exploding exchange rate (able to pay out currency worth ten to twenty million dollars in each of 2011 and 2012, and at an even greater pace so far for 2013).  Bitcoin is currently probably too big to bust today, but back when it was vulnerable nobody took crypto currencies seriously enough to take a serious stab at killing it.   Alts don't have that luxury.  They aren't getting the high valuation to build a resilient network of hashing capacity before anyone notices.   As long as they stay under the porch, it doesn't matter that they exist.  Start to take significant value from the big dog though and it wouldn't be surprising for a couple hundred grand worth of idled GPU equipment to be recommissioned to see just exactly what happens when a functioning and growing decentralized proof-of-work digital currency gets hit with a 51% attack.

Now that doesn't mean it wouldn't be good for one or more alts to succeed (we all benefit when healthy competition exists), or that I don't want an alt or three to succeed (I've at various times held some alts), it is just that people do things to protect that which is valuable.  Most alts work like Bitcoin where any peer node can introduce a solved block.  Or it can be done through Tor as well.  So a 51% attack can be done without anyone knowing who the attacker is.  Add these up and you get a near certainty that someone would start thinking about doing an attack on an alt once it starts gaining altitude.

Would the advent of other crypto currencies not cause inflation in a way?

That's like listening to MSNBC where they say the stock market rose because Netflix did blah, or Apple blah blah, when really it might have been because of a completely different reason -- more cash floating around chasing the same number of stocks.  Ask ten people and you'll learn of ten different reasons why Bitcoin is today valued the way it is.  None have the exact answer but everyone is right.


Anyone who says they can predict the future is lying.   There are patterns that have happened historically.  Sometimes history repeats itself.  There aren't many times in history a decentralized digital currency has gone from being an experiment to becoming functional as a substitute for fiat currency.  In fact, that's never happened before.  Therefore, nobody knows if all bitcoins combined should today be valued  $20 million USD, $350 million USD or $18 billion USD.    The market says about $350 million USD based on what information is known today.


Lost coins are lost.  To spend bitcoin funds the private key for the Bitcoin address with the funds is needed.  Without that private key those funds can no longer be moved.


Right.


It doesn't.  Well, it does, thanks to the block reward subsidy which currently is inflating the bitcoin currency supply at the rate of 12.5% per year, but that will slow gradually, day by day (as a percent of all currency that exists), until all 21 million bitcoiins have been issued and then there are no more issued at all.


The market does.  The value of the remaining coins would likely increase somewhat proportionately as a result.  Lose a hundred dollars worth of bitcoins?  You'll probably start working on buying $100 worth to replace it as a result.  That's the mechanism that corrects for lost coins.

Then allow me to cut in front of you to ask and what is likely your next question.

But won't the increasing exchange rate as the result of lost coins cause people to hoard?  And the currency will fail then, because nobody is spending their coins?

The answer is ... no.  

Bitcoin is both a currency (used as a store of value) but it is also payment system.  It is an efficient payment system which has properties that will cause it to be preferred over other payment systems.  One of these is non-reversible transactions (no chargebacks).   Another property is low fees (about a penny's worth to send thousands of dollars worth, in many instances).  Another property is that it is universal and it knows no borders. And that it can be used anonymosly.    

Because of these advantages people will prefer to send bitcoins or receive bitcoins (or both) over other payment methods.   So there will always be value to bitcoins because you cannot use the bitcoin payment network without first having bitcoins in your wallet.  

Is hoarding good for Bitcoin?  Hoarding is fine.  It is when those hoarding stop hoarding that a problem presents itself.  That causes volatility.  

If I check a yearly chart it looks like around January 1st of 2013 the BTC value has quickly increased from around $13 all the way up to $31 in 2 months. No where in the past 1.5 years it has done that. What is causing it to rise so quickly and can we expect either a crash, flat line or keep increasing?

Also, what happens to coins that are lost or just frozen? Someone loses a wallet. Loses their key. Someone dies. These coins aren't circulated back into the system, right? How does the system get more coins introduced, who controls that?