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As it begins its rise we all realize if we had bought a 300 dollar bitcoin a week ago we would have doubled our money. Can Bitcoins go to a million dollars?
The Bitcoin has no value other than as a collectors item that everyone wants. It will be worth a trillion dollars to the company that is slowly releasing 'new bitcoins' and has a plan to release about a billion of them. So assuming they wont be releasing them at a cent a bitcoin, lets say they have a billion bitcoins and are going to release a certain quantity of new coins - lets say a million coins a month - that gives the market time to absorb the currency and the price averages back to a thousand dollars each time - until the bitcoin recovers and begins a climb. All up they make a Trillion Dollars or more in profit. That is pretty good for a company selling an increasingly numerous collectors item.
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Government actually embraces bitcoin in meeting.
I agree that it's a speculative virtual object currently. Pricing must be a nightmare for vendors. We can use it to purchase real things. I donated to a radio show in bitcoins. Mises.org offers purchase in bitcoins as do a gold/silver dealer site i found.
I'm not sure I follow your post yellow. Bitcoins are mined by user's computers who verify transactions. A company cannot create bitcoins unless they have computers that do the work. Even then, bitcoins are released at a steady rate based on work input. The OP seems like the printing press of Bernanke senario, but bitcoin doesn't work like that.
The amount of bitcoins released into circulation is fixed. I might have just misunderstood your post.
Right up until the people realize that there is no value to them. The same thing happened in the 90s, and then people realized that 'dotcom' didn't mean free profit. Companies that only existed as a website were worth x dollars a share, but did nothing, produced nothing, sold nothing, had no business plan, etc. then someone realized this and the stocks dropped to pennies a share, then disappeared.
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Everything has one single value: What someone is prepared to buy it for. Anything else is not economy, it is fantasy coo coo land.
Given that it is money, bought as money, by people aiming to use it as money... In what way is it different to any other kind of money? We have had serious dollar crashes too, and nobody claimed the dollar was worthless. With fewer bitcoins, prices will more easily go up and down... But do you honestly think people don't understand that?
Given that it is money, bought as money, by people aiming to use it as money... In what way is it different to any other kind of money? We have had serious dollar crashes too, and nobody claimed the dollar was worthless. With fewer bitcoins, prices will more easily go up and down... But do you honestly think people don't understand that?
Just a question -- who or what backs bitcoins? The US dollar may fluctuate, but the chances of it taking a complete nosedive have been slim because the entity backing the currency, the US government, backs the currency in good faith. It's the only reason (so far as I know) that we were able to come off of the gold/silver standard once upon a time.
By "backs", do you mean something like "protects the value of"? Perhaps you should take a look at the value drop of the dollar since the gold standard was removed?
By "backs", do you mean something like "protects the value of"? Perhaps you should take a look at the value drop of the dollar since the gold standard was removed?
I'm not saying that the value of the dollar hasn't dropped since the US went off the gold standard (it has), but isn't the only reason paper currency is worth anything is because of the government backing it? I was just curious as to who or what "protects the value of" (your phrase is as good as any, Sissyl) the bitcoin from going off a cliff like Beanie Babies or some similar collectible?
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Sure. The point is, people KNOW this. The bitcoin could fall to cents a piece within a month - but people don't think it will. They know it's speculation, and risky, but honestly, in a world where Fannie Mae and Freddie Mac crash because of exotic financial instruments, why denigrate people who believe in bitcoins? It is a new technology, it shows promise, and some people think it has something that could become very interesting further down the line. Should we all keep our money in savings accounts for 0,02% interest for all time?
And no, as I said: The reason the dollar is worth anything at all is that many people believe it is worth something. The old mechanism during the days of the gold standard, that the money could be exchanged for a certain amount of gold/silver, i.e. the state guaranteed the value of the money, is long gone. The dollar is a fiat currency now, and the state no longer guarantees anything regarding its value. Which puts it in much the same situation as the bitcoin, really. But... there are far more dollars out there. That has the effect of dampening the rises and falls of the exchange course, and isn't a desirable trait in something you want to gamble on.
Sure. The point is, people KNOW this. The bitcoin could fall to cents a piece within a month - but people don't think it will. They know it's speculation, and risky, but honestly, in a world where Fannie Mae and Freddie Mac crash because of exotic financial instruments, why denigrate people who believe in bitcoins? It is a new technology, it shows promise, and some people think it has something that could become very interesting further down the line. Should we all keep our money in savings accounts for 0,02% interest for all time?
I don't like it because it inherently favors those who entered the market early and those that are independently wealthy outside of the bitcoin market. So it solves fundamentally none of problems of paper currency but adds in massive instability and lack of reliability. It also feels a lot like a ponsi scheme.
You mean like the one every American taxpayer had to finance in bad housing credits? Understand that much of the allure of the bitcoin is that people don't trust the state.
You mean like the one every American taxpayer had to finance in bad housing credits? Understand that much of the allure of the bitcoin is that people don't trust the state.
Instead you have a currency primarily supported by online drug sales and people with huge amounts of real money to spend on mining rigs.
Ummmm... no. With the gold guarantee, there was little chance of the dollar falling far BELOW the price of gold, since if that happened, people would just exchange their dollars for gold. Certainly, the price of gold can vary, but the above doesn't change.
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Bitcoin is a really, really complex topic. It takes the already really, really complex concept of globalized fiat currency and compounds that complexity by adding a bunch of far-from-intuitive but nonetheless important details related to the actual mechanics of what a bitcoin is, how they are made, and how they are circulated.
If you are not familiar with how the bitcoin economy works (it's easy to fall into the trap of thinking you're familiar with it, while missing some important pieces of the puzzle), follow this infographic. It's a little out-of-date (coinbases have been halved to 25 bitcoins since the infographic was made) but the underlying mechanisms it explains haven't changed.
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Bitcoin is a really, really complex topic. It takes the already really, really complex concept of globalized fiat currency and compounds that complexity by adding a bunch of far-from-intuitive but nonetheless important details related to the actual mechanics of what a bitcoin is, how they are made, and how they are circulated.
If you are not familiar with how the bitcoin economy works (it's easy to fall into the trap of thinking you're familiar with it, while missing some important pieces of the puzzle), follow this infographic. It's a little out-of-date (coinbases have been halved to 25 bitcoins since the infographic was made) but the underlying mechanisms it explains haven't changed.
You talk about fiat currency like its relevant here. The bitcoin is an e-collectible with shortage value. NASA could just as well be issuing an Interstellar Currency based on the noise given off by individual stars - each being unique.
Obviously, many people do not agree with you, Yellowdingo. And, whether you like it or not... what people believe is what makes anything valuable.
I am glad you brought those up.
The Netherlands is the #1 producer of tulips today. They have a worldwide distribution of the flowers and a pretty big industry dealing with them. It is an important part of their economy.
None of that would have happened without the famous bubble.
But, again... as I said: what people believe is what gives anything value. Tulips, exotic financial instruments, homepages, gold, dollars, houses, oil... everything. Bitcoins are no different.
You talk about fiat currency like its relevant here.
It is, because bitcoin, like every other modern currency, is fiat currency. It isn't issued by a state, but it lacks intrinsic value all the same.
The bitcoin is an e-collectible with shortage value. NASA could just as well be issuing an Interstellar Currency based on the noise given off by individual stars - each being unique.
Look, you don't really understand bitcoin. That's fine. Nearly everyone doesn't. But you need to know that you don't know what you don't know. The things you are saying sound straight-up silly to people who are familiar with the technology.
I don't understand your objection here, thejeff. I would add that since nobody is required to sell the stuff they have, something can have a very high value, but not be on the market, and without transactions, there is no price. A price is an expression of value at an instant in time. You can also have a situation where you have a limited marketplace for selling something, which could exclude someone who would pay more than you can get for something there. But that is nitpicking. You are right, really. Over- and undervalued are very iffy concepts.
There is nothing that has intrinsic value. The concept is false through and through. Humans have needs, which can change the value of something because meeting a need adds value, but a house in a radiation poisoned area, without access to communications, or which will collapse randomly are still not valuable, and thus, houses in themselves have no intrinsic value.
I would even go so far as to say they can't reliably be. They are not alone in this; there are many things most of us consider valuable, yet very difficult to put a price on. A beautiful sunset, for example.
No. It is useful... But its value is what someone would buy it for. That it has a use to you doesn't preclude that.
For some, the appeal of Bitcoin is it's free market unregulated nature.
Those people often don't realise the drawbacks of unregulated currency.
There are some interesting points in the article, Scythia. I didn't understand much of the day-trading tactics, but the fact that bitcoin is largely horded, rather than spent is notable. It may be grisham's law, the bad currency (dollars, yen, etc.) chases out the good (in this case BTC). It is strange though, since BTC has never really made much of a mark as a currency yet. However, it currently works better than say silver or gold as a medium of exchange.
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You talk about fiat currency like its relevant here.It is, because bitcoin, like every other modern currency, is fiat currency. It isn't issued by a state, but it lacks intrinsic value all the same.
The bitcoin is an e-collectible with shortage value. NASA could just as well be issuing an Interstellar Currency based on the noise given off by individual stars - each being unique.Look, you don't really understand bitcoin. That's fine. Nearly everyone doesn't. But you need to know that you don't know what you don't know. The things you are saying sound straight-up silly to people who are familiar with the technology.A) You're debating yd like he's serious.
B) Regardless, I'm not so sure he's wrong here. The technology seems pretty irrelevant to me. I'm familiar with crypto in general and I've got a basic idea how Bitcoin works. I don't see that as having any relation to whether it's a currency or a collectible.
At the moment it's barely usable as currency. You can't get it or spend it in enough places and it's value isn't at all stable.
You can speculate in it, which you can also do with currency, but that's not the main point of currency.
If it's currency, it's currency that's undergoing hyperdeflation and that's a bad thing for a currency. It's great for speculation, if you can time the bubble collapse properly.
I am Serious. As an e-Currency its little more than an e-collectible. until it has real worth like the company that 'makes' them backs their value in Gold they are as e-collectible as JPEGS of the DBZ pogs I have stashed away. They currently only have value if someone wants them.
As a Lottery economy I think they will net the creator of them a Trillion dollars (that's an average of a thousand dollars each for the entire billion bitcoins to be minted).
I am Serious. As an e-Currency its little more than an e-collectible. until it has real worth like the company that 'makes' them backs their value in Gold they are as e-collectible as JPEGS of the DBZ pogs I have stashed away. They currently only have value if someone wants them.
As a Lottery economy I think they will net the creator of them a Trillion dollars (that's an average of a thousand dollars each for the entire billion bitcoins to be minted).
There is no corporate authority that makes all bitcoins. You need to do some homework.
And "they only have value if someone wants them" is literally how all currency works.
No. It is useful... But its value is what someone would buy it for. That it has a use to you doesn't preclude that.
In the sake of precision, value and price are not the same thing.
The value is determined by how you rank a particular good in relation to the comparative cost of the second best alternative (for simplicity, what you are willing to give up or pay for something).
The price, on the other hand, is a market function resulting, primarily, from the values given to goods by both buyer and seller (several other variables also can influence the price, but it all starts from the value). Price is an equilibrium of values, but not value itself.
Most economic theories say that you buy something when the market price is at least equal or lower than the value you give it, while you sell something when the market price is equal or higher than that. In a perfect equilibrium, we couls say that value = price (which is different than saying that value and price are the same thing), but such states are like spherical chicken in physics: Only happen in paper.
While the details differ from model to model, most economic theories have a relatively solid understanding of what determines the price.
It's the value that no one is entirely sure how to determine. Most current economic schools think of value as a subjective thing with some parts that can be more or less measured but still leaving a wide marding for unmanageable variables, though there are some lines of thought, particularly on the Marxist-leaning end of the scale, that adscribe an Exchange Value (the value something would have from being useful for an exchange, ie, something that cannot be traded in a market has no Exchange Value) and a Use Value (the value something would have from its consumption).
There is a bit of thought about deflation. Perhaps it's not as bad as it has been painted? After all, the idea of economy as a "marketplace of completely rational beings" is pretty thoroughly discredited today. The only people who vaguely approach that "ideal" are autistic people. So, while it is true that things would become cheaper if you waited to make your buy, there are many factors to why not. First, most people would keep buying because they didn't understand the significance. Second, people want their stuff NOW anyway. Third, the difference in price won't impact cheaper products, say, people won't wait three months to buy a 100$ game because it may be 2$ cheaper then. Fourth, many of the products we NEED will be bought anyway. I would say it might reshape the economy a bit, but it's not likely to be as catastrophic as people paint it.
There is a bit of thought about deflation. Perhaps it's not as bad as it has been painted? After all, the idea of economy as a "marketplace of completely rational beings" is pretty thoroughly discredited today. The only people who vaguely approach that "ideal" are autistic people. So, while it is true that things would become cheaper if you waited to make your buy, there are many factors to why not. First, most people would keep buying because they didn't understand the significance. Second, people want their stuff NOW anyway. Third, the difference in price won't impact cheaper products, say, people won't wait three months to buy a 100$ game because it may be 2$ cheaper then. Fourth, many of the products we NEED will be bought anyway. I would say it might reshape the economy a bit, but it's not likely to be as catastrophic as people paint it.
A bit of deflation is not a disaster, just like a bit of inflation isn't either.
The problems of deflation come in two varieties: The danger of a deflationary spiral and the signals it gives out about the state of other aspects of the economy (mainly, and ailing internal consumption market).
Long-term deflation is problematic because more than just people waiting to buy. If prices continually go down, the income of the seller also continualy goes down (unless in the rare scenario of a deflationary phenomenon triggered by sharp increases in efficiency), which in turn means wages will start going down and ultimately consumption will suffer, further increasing the pressure on lower prices (inflationary spirals happen on a similar, but opposite, manner).
Thing is, lowering wages is far more difficult than increasing them, which creates a complex scenario in which margins go down at rates faster than costs. Deflation will cause some of the costs to go down, but the less manufacture-intensive companies (such as services, which are a stapple of more developed economies) will see a progressively smaller possitive impact of deflation in their costs (and thus a sharper negative effect).
Debt deflation is also a problem, though how much it will affect the economy depends on how is its debt market structured.
Hi thejeff, Klaus.
Bitcoin does have a slowing rate of inflation. Bitcoins are "minted" and released to miners who's computers do the work of verifying transactions. I recently made a transaction and was charged a transaction fee (not sure what that was about and if anyone knows please fill me in).
Bitcoin is similar to gold, and in some aspects better. Gold is too valuable to use in small transactions and was replaced by greenbacks slowly and surely. I see potential in bitcoins because one can secure them easily on their own. They can also be used in small and large transactions without banks. It will be difficult for a central authority to take over, or for banks to fractionally reserve them.
I recently made a transaction and was charged a transaction fee (not sure what that was about and if anyone knows please fill me in).
Transaction fees are (ostensibly optional) incentives provided to bitcoin miners to ensure that a given transaction makes it into the next verified block.