Bitcoin is a clearly identifiable economic bubble

Discussion in 'Alternative Investments' started by Brendan Burgess, Nov 25, 2017.

  1. Dan Murray

    Dan Murray Frequent Poster

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    Someone told me once that there are 10 types of people in the world.................those that understand binary and those that don't.

    Reading this thread, I feel like adapting this to something like - those who are open to the possibility of bitcoin and those who are not.
     
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  2. landlord

    landlord Frequent Poster

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    I worked through the night last night and have just woken up after sleeping for 3 hours this morning (7/12/17). The euro price of bitcoin in those three hours jumped from €12,000 per coin to €14,700 per coin. This is not sustainable!!! Who is jumping in at these levels institutions or mum and pop investors?
     
  3. Dan Murray

    Dan Murray Frequent Poster

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    Hi Landlord,

    You mean $s, right?
     
  4. landlord

    landlord Frequent Poster

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    NO EURO ....THE DOLLAR PRICE IS OVER $15000
    Something very strange is happening right now????!!!
     
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  5. Duke of Marmalade

    Duke of Marmalade Frequent Poster

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    This is an extremely pedantic point. I doubt whether those who are currently paying €12,000 for a BTC would quibble with the Boss's description of "worthless" if in fact they were worth €0.00000000000001 (sorry didn't count the zeros).
     
  6. landlord

    landlord Frequent Poster

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    The number of zeros here is irrelevant, the point being made in this example is that potentially there is grey area here and not just black and white.
     
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  7. TheBigShort

    TheBigShort Frequent Poster

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    That depends on what bitcoin is. Does anyone know for certain (other than those who have declared it to be worthless) what it is?

    Perhaps it's true value is €20,000 or €50,000 or more?
    Perhaps it is only €1, you would be spot on.

    Perhaps it will be the international medium of exchange for all goods and services bought over the internet?
    Perhaps it is just a fraud?

    FB market cap was €70bn? When it went public, today it is $500bn+
    Who knew what a 'social media' site would be 15yrs ago?
     
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  8. rgfuller

    rgfuller Frequent Poster

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    Interestingly Steam (Online Game Sales & Distribution Platform) have stopped accepting bitcoin for payment. I quote their post below:
    "
    Steam is no longer supporting Bitcoin

    - Kurtis

    As of today, Steam will no longer support Bitcoin as a payment method on our platform due to high fees and volatility in the value of Bitcoin.

    In the past few months we've seen an increase in the volatility in the value of Bitcoin and a significant increase in the fees to process transactions on the Bitcoin network. For example, transaction fees that are charged to the customer by the Bitcoin network have skyrocketed this year, topping out at close to $20 a transaction last week (compared to roughly $0.20 when we initially enabled Bitcoin). Unfortunately, Valve has no control over the amount of the fee. These fees result in unreasonably high costs for purchasing games when paying with Bitcoin. The high transaction fees cause even greater problems when the value of Bitcoin itself drops dramatically.

    Historically, the value of Bitcoin has been volatile, but the degree of volatility has become extreme in the last few months, losing as much as 25% in value over a period of days. This creates a problem for customers trying to purchase games with Bitcoin. When checking out on Steam, a customer will transfer x amount of Bitcoin for the cost of the game, plus y amount of Bitcoin to cover the transaction fee charged by the Bitcoin network. The value of Bitcoin is only guaranteed for a certain period of time so if the transaction doesn’t complete within that window of time, then the amount of Bitcoin needed to cover the transaction can change. The amount it can change has been increasing recently to a point where it can be significantly different.

    The normal resolution for this is to either refund the original payment to the user, or ask the user to transfer additional funds to cover the remaining balance. In both these cases, the user is hit with the Bitcoin network transaction fee again. This year, we’ve seen increasing number of customers get into this state. With the transaction fee being so high right now, it is not feasible to refund or ask the customer to transfer the missing balance (which itself runs the risk of underpayment again, depending on how much the value of Bitcoin changes while the Bitcoin network processes the additional transfer).

    At this point, it has become untenable to support Bitcoin as a payment option. We may re-evaluate whether Bitcoin makes sense for us and for the Steam community at a later date.

    We will continue working to resolve any pending issues for customers who are impacted by existing underpayments or transaction fees. "
     
  9. elacsaplau

    elacsaplau Frequent Poster

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    Just a few comments:

    I think we might have different views on this BTC phenomenon but I believe you are raising a very interesting point. When I get time, I'll try set out how I went about addressing it.

    I too am invariably (not always) wary of people in business and in life taking absolute positions - actually tried to say something similar myself yesterday.

    Stick with the day job, Dan!
     
  10. cremeegg

    cremeegg Frequent Poster

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  11. landlord

    landlord Frequent Poster

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  12. Firefly

    Firefly Frequent Poster

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    Interesting thread!

    I think as long as it's used (primarily) by drug dealers and other dodgy people to buy and sell their wares it will be valued at something.

    It's all so new and nobody really knows what it's worth, but I think it's clear to most that it's a bubble at current prices. Of course there is one sure way to determine if it is a bubble....it would be the day after I buy my first Bitcoin!!!
     
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  13. elacsaplau

    elacsaplau Frequent Poster

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    Hi Firefly,

    Nice one re your ability to ensure the end of the road for BTC. Please let me know when you pull that trigger!

    On a serious note, I actually don't know what you mean by "at current prices" - I've asked this question and variations of it many times. The point of my question being: if BTC is in a bubble "at current prices", when did it reach "bubble range" and how did you arrive at that conclusion?

    I think that it's a fair summation of this thread to say that the only valuation that I have been given by the Bitcoin-sceptics on this thread is that it's all a complete nonsense and accordingly worth nothing. In other words, any price above zero is bubbly.
     
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  14. Firefly

    Firefly Frequent Poster

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    Last edited: Dec 7, 2017
    You have no idea! Any shares I have ever touched have become near worthless.

    Nothing based on empirical evidence that's for sure! A quick Google on Bitcoin Bubble throws up a lot of hits around 2013 so probably then. If and when it does crash, I think it will be revalued to the price of a dollar or a multiple of that. This way if the Fed prints more dollars, the value of Bitcoin will have something to base itself. Or it could be pegged at the price of gold, or something like that. No idea really.

    I think that it's a fair summation of this thread to say that the only valuation that I have been given by the Bitcoin-sceptics on this thread is that it's all a complete nonsense and accordingly worth nothing. In other words, any price above zero is bubbly.
     
    Last edited: Dec 7, 2017
  15. Firefly

    Firefly Frequent Poster

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    I think as long as someone accepts it for payment it is worth something. Interesting that the bad dudes and dudettes of this world who are using Bitcoin are being found out and they are probably the largest users of the currency, probably doesn't look too good.
     
  16. Firefly

    Firefly Frequent Poster

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    I think another point to be made is that the purchase of Bitcoin is not widespread compared to other bubbles. Most people don't really know what it is and if / when it bursts not a lot of people will be affected. Back in the dotcom days, it seemed like everyone was buying shares. I don't personally know of anyone who has purchased Bitcoin
     
  17. Duke of Marmalade

    Duke of Marmalade Frequent Poster

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    Last edited: Dec 7, 2017
    Let us analyse the demand for BTC or more specifically the demand to exchange € for BTC. I list the possibilities.

    1. To purchase something from a supplier. I don't think any supplier is insisting on being paid in BTC unlike conventional currencies where the supplier will have a preference. Of course some nerds might like to boast that they bought a cup of coffee with BTC but otherwise I think we can dismiss heading 1 as negligible. This is in contrast to conventional currencies where heading 1 is dominant.
    2. As a store of value. At these volatilities BTC is useless as a store of value.
    3. As a way to hide monetary assets. We have heard of cash being found in the sheds of criminals. But we also heard that BTC was found in a recent raid on drug dealers. Possibly they should have kept their BTC on their iPhone and kept the iPhone locked. All the same I doubt there is meaningful demand under this heading.
    4. As a curiosity. We have heard it described as almost a cult. A minimal holding would satisfy this craving.

    5. There is only one predominant source of demand - speculation.

    This is a BUBBLE.
     
    Last edited: Dec 7, 2017
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  18. joe sod

    joe sod Frequent Poster

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    That's true, it's still small in the overall scheme of things, maybe we westerners are sceptical because we have already experienced two big bubbles and the crash of the financial system in the last 2 decades. I think the big money (by their standards) is coming from the emerging world, India, China, and Africa. It's the first bubble they are experiencing since they all have smart phones now , they are probably immune to all the bubble talk as they have never directly experienced a financial crash in some asset they own. Also some of the countries of Asia and south America recognize it as a proper currency. I bet there is a lot more talk about it in these countries and a lot of people are buying it
     
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  19. fpalb

    fpalb Frequent Poster

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    On point 1. I don't think bitcoin is a replacement for paypal or your credit card for everyday purchases is absolutely not an important use-case right now. Bitcoin is generally worse for the consumer in this case, it's more expensive in terms of fees and it's clunkier. BUT there are edge cases where bitcoin offers advantages, some things people may want to spend money on online are sensitive, you don't want them on your itemised bill or purchase history, it might be kinky stuff, or gambling (https://nitrogensports.eu/ - btc only, no ID needed). Some people are too young to have a credit card, some people don't have access to paypal in their country. Some things have been blacklisted by the legacy system such as donating to wikileaks or some e-cigarette merchants, and some things are just flat out illegal.

    I've no idea how much usage all of these edge cases add up to, but I do know that bitcoin is frequently bumping up against the transaction limits, so there currently isn't much scope for payment use-cases to grow anyway. Having said that a lot of people are working hard on things that will help bitcoin scale. If the lightning network (https://lightning.network/) can actually work as well as those working on it believe it will it can open the door for way more payment use-cases. I don't know enough about it on a technical level yet to comment either way on whether it can.

    On point 2. I think you're underestimating this. I'm not bothered that the coins I bought for 100euro each have been up to 1000 then down to 200, then back up into the 10000s. If you're holding for the long term the short term swings don't bother you. If you've done your due diligence you know that volatility is expected. Many people are dollar-cost-averaging in with a fixed amount every week or month to lower the effect of volatility.

    On point 4. you're definitely underestimating this, bitcoiners want as many coins as they can get. I'm a fairly pragmatic logical guy but I have an attachment to my own holdings, I don't like selling them, I don't like having less than I had, I hope I get to buy them back cheaper.

    One use-case you missed is traders. The fact that bitcoin trades 24/7 globally, that it's somewhat volatile and can be delivered quickly attracts a lot of traders. There are people trading as a full-time job. Looking at the daily volumes on exchanges shows that it is a significant number of coins.
     
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  20. Dan Murray

    Dan Murray Frequent Poster

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    Hey The Big Short,

    I'm afraid I can't help you with your questions but I can certainly identify with the feelings outlined above. This stuff reminds me of the old one about faith in a Deity, as in:
    Some people believe in God, some people don't - the truth is probably somewhere in-between! ;)

    It's a fascinating subject though and I'm really enjoying trying to get my head around it. Some of the sites out there are amazing. In terms of making LSD out of it, I've a sneaky feeling that I may have missed that particularly bateau - at least on the way up! I just don't have sufficient comfort and visibility to take on such a punt at this stage in the game. I think if I had been better informed a few years ago, I might have got involved but who knows?

    One thing I do know is that my financial situation is such that I don't need to be bothered with taking financial risks. Even still the FOMO feelings within me are bloody strong and if such feelings are replicated more broadly, then there is potentially a reasonable chance that this, in itself, may very well help to drive momentum for some time yet.
     
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