Topic: Why I think bitcoins are a bad investmen at these high prices. (Read 4949 times)

To amend my post above, I think the total trade volume must come from reading the blockchain, since it appears to be too high for one exchange. If I'm wrong about that, please correct me. It's possible to game these numbers and make them appear high by transferring coins to a different wallet without changing ownership. The using the trade volume within the exchange itself, from which the price was derived, would be more meaningful.

More meaningful metrics can be estimated very simply from the information provided on coinmarketcap.com. I think this information comes from Vircurex, and might not be very comprehensive, as it does not include all exchanges. If I'm wrong please correct me. I think actual sales are a more meaningful measure of market depth than are bids and asks. For example, at the time of this writing, 45,749,635 USD worth of bitcoins were sold in a 24 hour period. The bitcoin price at this instant is 727 USD. I'll use this instantaneous number as a price estimate estimate since I don't know the 24 hour price history. Dividing you get 62,929 XBT sold. Dividing by the total number of bitcoins minted you get 0.52% of bitcoins exchanging hands in a 24 hour period. Now compare that to ripple, ranked number 2 on coinmarketcap, you get 0.0051% of ripple exchanging hands in a 24 hour period. This is 100 times less, and shows how ripple, being premined, has a high market cap due to artificial scarcity. This confirms that market cap is a worthless metric.

More meaninful metrics can be derived by histogramming the age of coins and recording sale price over time. It's much harder for a developer of a scam coin to game those numbers. New metrics will eventually emerge for cryptocurrencies, which differ from those of fiat or physical commodities.

So you see the market cap doesnt make much sence for Bitcoin, yet you still use it to reason all your arguments

To use your logic, I could just as easily say its easier making $20 profit by investing $1000 than it is by making $20 by investing $20 since my $20 needs to give me 100% return in profit while my $1000 only needs to increase in value by 5% (and this is regardless as to whether my $1000 buys me 1 or 1000 BTC). Sure I am risking more but the potential profit on my investment is 20 x higher.

OK, I understand your point, and now agree, market cap is inaccurate.
Of course depth is even more useless, its easy manipulated and huge sells or buys will only result in massive oscilations around a new less extreme price.
There seems to be very few metrics we can apply to bitcoin that give meaningful information.
I guess market cap gives nice media headlines.

My point is stock companies can be bought. All shares may not be present on an exchange, but they are available for purchase. Therefore, calculating their market cap (# of shares * price) makes sense.

Calculating bitcoin's market cap as "# of shares * price" is inaccurate because it is literally impossible to buy all of bitcoin. So many of the mined bitcoins simply are not available for purchase, at any price. They may as well not exist. Don't use them to calculate a "market cap". All we can really work with is market depth. By looking at market depth, we can see that it would not take a very large investment to make bitcoin's price skyrocket to the moon.

This claim that bitcoin is too expensive is based upon flawed logic. BTC is an arbitrary unit. If you think 1BTC is expensive then buy microBTC instead. They are a million times cheaper.


 

What has that got to do with what I said. I'm talking about market depth. The size of all the bids in a market is not relevant when calculating the market cap, and the market cap of any stock can't be obtained by simply selling into the market...its never deep enough.  All the bids willl never add up to the market cap.
In any event a buy-out doesn't cost the market cap, it would only cost just over 50% at most.

No, public companies are purchased all the time, typically for a price not much more than their market cap.

For example, Dell was public for 25 years, before it was bought out just a couple months ago. http://en.wikipedia.org/wiki/Dell#2013_buyout

Bitcoin cannot be liquidated by a leveraged buyout. Bitcoin is not a stock.

Thats the same as a Stock, No market is ever deep enough to allow the liquidation of a stock to the value of the market cap.
Bitcoin is not a stock, but it has similarities in the way it behaves and the way it can be analysed.

Peter R, I think that you have a very good idea, but sadly I see that I am a little too late for that. To take on an project like that, so that it would generally change the bitcoin exchange scene, would take time and effort that I can't afford. There is the time issue, where a new exchange not only has to be built, but needs a proper run in to gain the confidence of traders. When I see that bitcoin has probably 1 or 2 years to live, then that project would be on a very tight schedule. If you have about 2mil.$ to spare on a very risky venture, where there is a possibility of no return, then I'm in and we can start tomorrow.

First thing I would like from the core developers and the community leaders is that the subject should be talked about. People with expertise and experience should start thinking of different options how to improve the integrity of markets. The threat that unregulated markets present to the future of bitcoin is real, and it should be taken as real. Maybe bitcoin can be classified as an product or an brand, then there are always legal ways to set the terms of it's usage. Maybe a public rating system should be made to grade the exchanges in depth... these are just some ideas that popped into my mind. All I am asking is that people who are interested in the growth of bitcoin, would do the same and start throwing ideas around. The market integrity crises will be a big one, but all problems can be solved. The community should start early on thinking of an solution for this crises that will come sooner then most think. If all hell breaks lose, then there is no time to fix anything and confidence fades quickly. Bitcoin only needs a couple of weeks of waves of bitcoin exchange scandals, and the value will be back to single digits and it probably won't rise again.. And this will come in waves and with rapid speed. If one exchange is using dirty tricks in the market, then be sure that the others do the same. Only the level of dirtiness will varie. Soon greed will take hold and one exchange will leak the material that is needed to hurt the integrity of an competing exchange. This will be answered by a counter-attack that will leak shady doings and will probably spice them up a little with some made up stuff. When people are already unsure about bitcoin because of the previous scandal, then the next one will hit even harder. If the exchanges are corrupt, then greed will make them destroy themselves like this.

You need to change your name to either:

UnHappyBitCoinUser

or

HappyBitCoinNonUser

Yes, that's my understanding too, nastybit, and is why I said that "I didn't understand what that would look like or how that could be accomplished."   

But kkaspar feels we need more regulation at the exchanges and I think he had some idea on how that could be achieved.  I was hoping that he would address my last post, as I believe the voluntary free-market system we already have is perfectly sufficient. 

Edward50, you say that $20 > $40 is a better investment than $1k > $2k only because we are well over $40, it's a psychological limit you have.


core developers can't force anybody to do anything really. Consensus drives Bitcoin

Isn't this what we already have, kkaspar?  For example, YOU could choose to form a group (say a bitcoin exchange) and implement the rules and regulations that you see as important (perhaps independent audits).  Anyone that invests or trades with your group would have to follow your rules or you can kick them out.  If other individuals like what your group has done (e.g., the exchange audits) then they will want to work with your group and play by your rules.  If not, then, like you said, they can live by their own rules without the support of your group. 

So I don't understand what you are proposing.  You mentioned something in one of your posts about the core developers forcing the exchanges to behave a certain way, but I didn't understand what that would look like or how that could be accomplished. 

You will fail if you try to build group cooperation on inner responsibility, that is based on subjective understandings of moral and ethics. People are different with different understandings of right and wrong. If different views aren't discussed and middle-ground isn't found on how to do things, so everyone are satisfied, then conflicts emerge that slow down progress. That is the meaning of rules - to establish what is best for the group in general and to guide people to follow this path. Breaking the rules mostly means consequences like banishing the rule breaker from the group. So, rules mostly give people a choice 1) If you want to be a part of an group, then you have to follow the rules that are for the good of the group 2) If you want to live by your own rules, then live by yourself without the support of the group.

Now to more practical maters..

Bitcoin is already flourishing. You can say that bitcoin is in a critical phase where it can shoot off to heights or fall down to rubble. There is no middle-ground on the current phase. There will be growing trust in this system or there will be none.. Trust is the only thing that gives value to bitcoin.
But, like I said, I can't see that anything is done to take care of the markets


Like I said, if bitcoin will continue this path, then it will shrink down to 0,1$ per coin with a small group of true believers. That is the future where no exchanges are needed and people can just trade bitcoins with each other.  
Big things can't be run on just faith that everything will somehow just be ok. Big things need attention and work because too much will be at stake. Without proper markets with rules and regulations, bitcoin will never be big, because it is lacking the main thing that the majority needs - security

I personally wanted for bitcoin to get big. I know that bitcoin can never be an everyday currency, because of it's simplistic macroeconomic properties. I was just hoping that bitcoin will survive long enough to give it's throne away to a better cryptocurrency with more complex properties that modern economics need. But now I see the downfall that unregulated markets cause and I can see that it will cause problems that will make the evolutionary step in finance much longer then it should have been.. and this is sad..

Stop thinking of "market cap" as the total number of bitcoins times the current price. Bitcoin isn't a stock. Take MtGox for instance. It would only take a purchase of about $20 million to take the price to $2000. That's a far smaller number than $12 billion!

MtGox = group of fallible human beings

Government = group of fallible human beings

Regulators = group of fallible human beings

If you are not trying to make jokes here, then this claim is plain old childish. Rules and regulations are there to protect the market, because markets need integrity and trust for any trading to take place. Rules and regulations need to be made so that traders trust is gained, or else the market will just fail. If rules are made for only to protect the few in control, then the market won't get any traders and it will fail. Without rules and regulations there wouldn't be NASDAQ, because without rules there are no agreements and cooperation, and that is what the society is all about.
It's common for teenagers to think that all rules are bad, because they are rebelling against their parents rules and they don't have the experience in functioning in a larger community where rules are necessary for cooperation and stability.

That is exactly it. Without any rules and regulations there are no possibilities to find any proof on the fraudulent actions of exchanges. They are private companies and they can keep the necessary information as private as they like. I can only observe the public information that I can see on the order list and order history, and by that I can tell you that the information rises serious doubts.
The bitcoin dev should actually create an department that deals with auditing the exchanges and enforces certain rules that are needed to keep stability. The bitcoin dev actually has power to set those terms, but I see that they have 0 interest in this. I have been trying to get them to take down MtGox as the main recommended exchange market from bitcoin.org, but this also received 0 attention from the dev and from the community. MtGox is accidentally incompetent at best and probably they are deliberately incompetent to manipulate the market on their own investments. But bitcoin.org still sends all the new interested people straight to MtGox as the main recommended exchange market. To me, this means that they are either in on it or they are totally oblivious of the financial trust issue that will be affecting the usability of bitcoin more and more.


If you know anything about the currency market or the stock market, then you should know that this isn't normal by any means. When unbreakable invisible walls will be lifted just before a new and unstoppable rise/fall will start, then this is not normal. This means that the market is controlled from a single source without any opposition. The market should not do illogical behavior like this without any opposition. There should be stronger ties to the real value of bitcoin, what is calculated by the mining network and by available usability, but most rises and falls don't have much to do with anything real that is happening with bitcoin. "Some mysterious rich people that no one know about" are just selling or buying out of the blue and most regular "investors" are just sheep who are waiting for where the graphs will go.
This is not normal behavior! This is a behavior of an heavily manipulated market and and disaster waiting to happen.
I can predict you what will probably happen to bitcoin if it continues to go down this road. The instability of the markets will rise and the "mysterious figures" get more greedy and careless every month. Soon they won't even try to synchronize their actions with fake news that they themselves will publish from cryptocoin newsportals they themselves own. This carelessness will contribute to all the leaks that will come out, that the exchanges are heavily manipulated and the market data is simulated or all out fake. By that time bitcoin will have a general reputation of being a scam. No one cares about anymore the technical beauty of bitcoin but they only see the scandals that have surfaced about how the people have been tricked by the exchanges. Then this is the end. Bitcoin will cost about 0.1$ and will consist of a small cult of "true believers", who keep chanting "Chooo chooo to the moon".
The rest of the world will move on and new cryptocurrencies will begin to surface that also promise market safety and price stability. It will take time before any new decentralized monetary form will spread, since most of the people are still skeptical because of the history with bitcoin.
So, you see. This stupidity and greed that runs the current bitcoin markets will set back the general monetary evolution that bitcoin could have started. When the community is mostly supported by degenerate gamblers who are only into bitcoin because of the adrenaline rush of unpredictable trading, then nothing good can come of this.

btw. I am not one of those who is angry at bitcoin because he lost big. I bought at 203$ and sold at 1020$. But every day, looking at the current downtrend, I am getting more convinced that I shouldn't invest back even if the trend turns upwards. I invested in bitcoin because I truly believe in decentralized monetary future and I truly believe that monetary services should be private and therefor competition will better the quality of the financial world. But this current situation with bitcoin market is just silly. There is no idealism nor vision in the current direction that bitcoin is going with it's markets. It's just full of stupidity and greed, with excited people creating illusions of wealth without work nor knowledge and are  fueling each others illusions with traded cheers. Feels more and more like an religious cult then a technological and financial community...

I discovered Bitcoin by accident in February 2013. I needed to pay someone USD10. At the time, you could buy Bitcoins easily using block chain.info in the UK I paid GBP25 via bank transfer (approx USD40) and bought 1.7BTC within a few minutes. As you know, the banks have now made this infinitely more difficult and bank transfers take days. Even then, I loved how easy they were to use... and also the fact that (at that time) they kept rising in value and it seemed to be a never ending supply of USD... I kept spending it... but there was always at least $50 in BTC.

Now lets compare it to traditional banking...

I do business in several different countries and several different currencies. In order to transfer GBP to a GBP account in a different country... my bank charges me GBP17.00 (approx USD30) .The transfer is usually instant as its within HSBC. - I then need to ask them via a contact form to convert the funds into local currency (takes a further 24 hours as their business hours are different to mine) - Once converted, I pay various recipients and they charge me around $5 per transfer (and the recipient pays a further $3 to receive)- These transfers usually take 1 to 2 days to get to the recipients banks and exclude weekends.

There is also a limit to how much I can transfer per day using the online system. Anything over their threshold requires me to "contact them directly"

Transferring this way takes around 4 business days and requires me to perform a number of different steps at different times. I pay considerable bank charges each month and I'm restricted by the differing public holidays, working weeks and business hours of the respective countries.

This morning, I realised I needed to make some payments and would need to spread this over two days as I  would exceed my daily maximum.

However - My bank is only open for one more working day until the end of the year as Thursday was already over in that country.


As such, we will be unable to reply to your messages nor process any requests received after banking hours of Monday, 23 December 2013; Friday, 27 December 2013 and Thursday, 30 January 2014, respectively. Normal operations will resume on Thursday, 26 December 2013; Thursday, 02 January 2014 and Monday, 03 February 2014, accordingly. "


Bitcoin is vastly superior. No bank. No fees. No Holidays. No Working Hours. No inflation. No physical storage.

As they become easier to convert, and people become more understanding of what they really are, the 21 million coin limit makes them look seriously undervalued right now....

I particularly like this post -> https://bitcointalksearch.org/topic/why-bitcoin-is-going-to-succeed-the-reason-nobody-is-talking-about-176049