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do178b said:   Bitcoin is a lot like gold. There's only a finite amount and it can only be mined at a slow rate. But unlike bitcoin gold has a 2000+ year historical significance. Bitcoin is nothing more than a protocol than can be copied and imitated. The dollar has the US military and a government giving it significance. There's a big difference.

I agree...

Also, the concept of currency is a stable value device to make the value of work done in one place fungible.

Ie: You are a farmer, have 200 lbs of carrots, and trade 50 lbs of carrots for a doctors visit, 20lbs for some bread, etc... But it is too much work to carry around all the carrots with you, and carrots have a shelf life, so currency was invented.

However, the concept of currency fluctuating rapidly based upon investor whim defeats that purpose. Kind of the same problem with the gold standard.

If the farmer can not count on the constant value of his carrots once sold, the use of the currency becomes questionable. The only reason we can count on the US dollar (for example) is we think it will buy a certain amount of carrots all the time.

One other thing: If the value of a currency can rise very quickly, it can slow an economy to a crawl. I just sold my carrots for bitcoins, but now I do not want to spend them because I think they will rise in value and if I spend them later, I can get more stuff for them. Right now, we have the US government regulating that increase (and the IMF).

SteveG

PS - I am not an economist... well, anymore

Mt gox, the trading site which accounts for 80% of bitcoin trading has announced a 12 hour freeze on trading to "cool down the market". What a joke, this is going to cause a massive sell off. at 02:00 UTC tomorrow.

https://bitcointalk.org/index.php?topic=173383.0

Bitcoin is not like gold. Anyone can take the source code and set up a parallel system.

Bitcoin is a new kind of fiat.

Bitcoin is a transactional medium. Unlike national currencies, it is not a claim on a nation's production backed up by demands for currency-specific payment by taxing authorities.

Bitcoin is meant to be used transactionally or for short-term holdings.

Until significant and profitable lending operations generate interest for BTC holders there is no reason to use it for a store of wealth - invest in things which actually produce. If you're going to choose a non-income generating asset, the security of gold is unparalleled.

Bitcoin is the new Tulip?

hatoraide said:   Mt gox, the trading site which accounts for 80% of bitcoin trading has announced a 12 hour freeze on trading to "cool down the market". What a joke, this is going to cause a massive sell off. at 02:00 UTC tomorrow.

https://bitcointalk.org/index.php?topic=173383.0
But I thought BT was P2P and decentralized.

The chart alone does not necessarily suggest a speculative bubble.

The recent parabolic move was spurred by a mass socialization of wealth in troubled European nations, as well as fears of mass socialization in other nations.

Suppose that a person, spurred by panic and wishing to get their money out free of capital controls, hurridly buys BTC - dumping their national holdings in a hurry. Now they have to figure out what to do with the BTC. Do they keep them? Do they exchange them for another national currency? If so, where, and how do they set up the account? What about real assets? Again, if so, and where?

The process of figuring out what to do with your BTC takes time - in research, paperwork processing, and transfer time.

If the number of people who are hurrying into BTC out of panic goes parabolic then so too will the BTC price because BTC was thinly traded and lacked the liquidity of a national currency when it was in the hobbyist phase. None of these people have to hold speculative long positions to see the movement we saw.

Suppose the average EURefugee requires 1-2 weeks to figure out what becomes of their BTC. That would create enough demand to see what we saw as they all take short term long positions while waiting to cash out. These EURefugees wouldn't be speculating, or participating in bubble frenzy, just buying at a known excessive price and hoping to sell at a similar price shortly, for fear of losing even more.

The fraudsters knew this and timed the DDoS perfectly.

If I owned bitcoins (which I do not) my biggest concern would be how easily the market was manipulated. All it took was a little tweak and the sell off ensued.

rufflesinc said:   hatoraide said:   Mt gox, the trading site which accounts for 80% of bitcoin trading has announced a 12 hour freeze on trading to "cool down the market". What a joke, this is going to cause a massive sell off. at 02:00 UTC tomorrow.

https://bitcointalk.org/index.php?topic=173383.0
But I thought BT was P2P and decentralized.


It is. Many people use sites like Mt. Gox for the sake of convenience. Mt. Gox holds their BTC on their behalf.

JamesPolk said:   Something about a currency exchanging being able to be shut down and manipulated without repercussions doesn't seem like a good investment...
Let me clue you into how the biggest market in the world works - FX trades maybe $4T USD worth per day, and there are no rules against insider trading or manipulation in FX.

do178b said:   Bitcoin is a lot like gold. There's only a finite amount and it can only be mined at a slow rate. But unlike bitcoin gold has a 2000+ year historical significance. Bitcoin is nothing more than a protocol than can be copied and imitated. The dollar has the US military and a government giving it significance. There's a big difference.

Bitcoin is nothing like gold. Gold at least has some tangible use.

One of the main reasons people don't take Bitcoin seriously is the collection of loons that act as the face of it. Check out https://bitcointalk.org/

Scams, Ponzi get rich quick schemes and a total lack of understanding of financial concepts.

If this is who's leading the parade, they're going to march right into a brick wall.

rufflesinc said:   hatoraide said:   Mt gox, the trading site which accounts for 80% of bitcoin trading has announced a 12 hour freeze on trading to "cool down the market". What a joke, this is going to cause a massive sell off. at 02:00 UTC tomorrow.

https://bitcointalk.org/index.php?topic=173383.0
But I thought BT was P2P and decentralized.


bitcoins != bitcoin exchanges.

So yes, bitcoin is P2P and decentralized; the exchanges (and this one in particular) is not.

Gold is a proven currency over a period of 3000 years.

Gold has intrinsic value... people like its properties and it is used for jewelry. It is also an excellent conductor of electricity that is resistant to oxidation.


Bitcoin is unproven, has no intrinsic value, and fluctuates wildly by the day.

I couldn't sleep at night having my life savings in bit coins.

I can't make a large purchase with bit coins because I don't know what the value will be in the future. If I wanted to buy a house and pay with bit coins, the price could go up or down 50% before the transaction is closed. No one would want the risk of that deal.


I do think it is funny though the people criticizing bit coins also fail to apply that same logic to fiat currency. A US dollar is just a piece of paper with no intrinsic value... the only reason it has value is because other people perceive it to have value... but those perceptions can change just like bit coins... especially with the supply of dollars greatly increasing over time and zero interest rate policies.

wvtalbot said:   If I owned bitcoins (which I do not) my biggest concern would be how easily the market was manipulated. All it took was a little tweak and the sell off ensued.
It's publicly estimated that at more than 10% of bitcoins have been stolen from their owner at one point or another, so you might want to change your biggest concern.

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etc etc etc...

My guess is that somewhat less than 10% of all gold has been stolen since bitcoin was started, gold being the other big "I don't trust the dollar/Euro..." instrument. In fact I'd guess it's even less than 10% of privately held gold has been stolen since bitcoin started.

brettdoyle said:   Gold is a proven currency over a period of 3000 years.

Gold has intrinsic value... people like its properties and it is used for jewelry...
Sort of ... 150 years ago, the work needed to find, mine, process, etc. an ounce of gold was many times of what is needed today, yet gold's value is much higher (even adjusting for inflation). The price of gold has gone up 5x's in the last 10 years and like other precious metals could drop even quicker (just ask the Hunt brothers).

So it does have a value as something to be used, but like diamonds is still manipulated.

brettdoyle said:   I do think it is funny though the people criticizing bit coins also fail to apply that same logic to fiat currency. A US dollar is just a piece of paper with no intrinsic value... the only reason it has value is because other people perceive it to have value... but those perceptions can change just like bit coins... especially with the supply of dollars greatly increasing over time and zero interest rate policies.

Agree with everything you said except the above.

As others have pointed out, the major difference between this fiat currency and the dollar is that the dollar has an enormous military and global economic system backing it.

Sure, things can change overnight, but for now there are still are some reasons to see value in dollars. Bitcoins? Not so much....

brettdoyle said:   Gold is a proven currency over a period of 3000 years.

Gold has intrinsic value... people like its properties and it is used for jewelry. It is also an excellent conductor of electricity that is resistant to oxidation.


Bitcoin is unproven, has no intrinsic value, and fluctuates wildly by the day.

I couldn't sleep at night having my life savings in bit coins.

I can't make a large purchase with bit coins because I don't know what the value will be in the future. If I wanted to buy a house and pay with bit coins, the price could go up or down 50% before the transaction is closed. No one would want the risk of that deal.


I do think it is funny though the people criticizing bit coins also fail to apply that same logic to fiat currency. A US dollar is just a piece of paper with no intrinsic value... the only reason it has value is because other people perceive it to have value... but those perceptions can change just like bit coins... especially with the supply of dollars greatly increasing over time and zero interest rate policies.


Bitcoins can buy you drugs and firearms - that in itself gives it intrinsic value to some.

bitcoins are a lot like buying air in a ballon

once the ballon pops --- your air is the same as the rest of the air around you

ha ha ha ah ha

jaimelobo said:   brettdoyle said:   Gold is a proven currency over a period of 3000 years.

Gold has intrinsic value... people like its properties and it is used for jewelry...
Sort of ... 150 years ago, the work needed to find, mine, process, etc. an ounce of gold was many times of what is needed today, yet gold's value is much higher (even adjusting for inflation). The price of gold has gone up 5x's in the last 10 years and like other precious metals could drop even quicker (just ask the Hunt brothers).

So it does have a value as something to be used, but like diamonds is still manipulated.


No, the marginal cost of extraction has skyrocketed, and many formerly economic mines are now uneconomic due to the immense rise in energy costs. Worldwide gold production is closely tied to the price of crude.

What happened to the Hunt Brothers cannot happen in the gold market. Gold and silver are vastly different in market size. Gold is a store of wealth. Silver is primarily an industrial metal. Most the the gold ever mined in human history is still in our possession; most of our silver has been consumed.

The Hunt Brothers went after silver because it is an consumed industrial resource - it could have just as easily been FCOJ futures.

Their actions were prior to the rise of digital photography.

kamalktk said:   wvtalbot said:   If I owned bitcoins (which I do not) my biggest concern would be how easily the market was manipulated. All it took was a little tweak and the sell off ensued.
It's publicly estimated that at more than 10% of bitcoins have been stolen from their owner at one point or another, so you might want to change your biggest concern.

Text
Text
Text
Text
Text
etc etc etc...

My guess is that somewhat less than 10% of all gold has been stolen since bitcoin was started, gold being the other big "I don't trust the dollar/Euro..." instrument. In fact I'd guess it's even less than 10% of privately held gold has been stolen since bitcoin started.


See: Executive Order 6102.

jaimelobo said:   brettdoyle said:   Gold is a proven currency over a period of 3000 years.

Gold has intrinsic value... people like its properties and it is used for jewelry...
Sort of ... 150 years ago, the work needed to find, mine, process, etc. an ounce of gold was many times of what is needed today, yet gold's value is much higher (even adjusting for inflation). The price of gold has gone up 5x's in the last 10 years and like other precious metals could drop even quicker (just ask the Hunt brothers).

So it does have a value as something to be used, but like diamonds is still manipulated.


This is true... Gold is worth way more than the value as a ring, earings, or an electrical contact primarily due to a perception of value, which can be manipulated.

Note that Gold can only be manufactured within stars, making it scarce (at least on the crust of the earth). If we find a passing asteroid next month made out of gold (which is possible), what would happen to the perceived value?

I wonder if one could argue that bitcoins, if accepted as currency, are less subject to a change in perceived value than gold based on this... their scarcity is quantifiable.

Lunacies of Bitcoin:

1. The blockchain (the record of all transactions made, YES, including the cocaine and hookers you paid for using BTC) 3 years ago could fit on a floppy disk. 2 years ago could fit on a 250MB zip disk. 1 year ago could span 2 CD-Rs. Today requires a Dual-Layer DVD-R to store it. For any transaction made, the blockchain grows and between January and today it has grown about 2GB. Do the math, but the system is not setup well to accommodate for large transaction volumes. To put things into perspective, BTC networks have about 7 transactions per second. VISA does 2000-10000 transactions per second, depending upon season.

Sources for the above:
https://blockchain.info/charts/blocks-size?showDataPoints=false&...
https://en.bitcoin.it/wiki/Scalability

2. The Bitcoin network is controlled by blockchain parity. That is, if the majority of Bitcoiners have matching blockchain data, they all agree that a transaction "happened". However, if any singular entity ever had enough computing power to consist of 51% of the entire network, they could modify the blockchain after purchases are made, convince the other 49% that their data is the "good" data, and thus spend the same Bitcoins twice. Obviously this would be impossible for a single user to do, but "mining pools" are aggregated groups of people, and they could work this way.

Source for above:
https://en.bitcoin.it/wiki/Double-spending

3. In fact, double spending JUST RECENTLY HAPPENED! In March, the Bitcoin software forked between 2 different "versions" of Bitcoin. That is, some users were on .7 of the software, and some on .8. This allowed someone to cash out $10,000 from a company on the .8 fork, then turn around a couple hours later and cash out the SAME $10,000 on the .7 fork, since the blockchain for .8 indicated the $10k had been debited, while the blockchain for .7 DID NOT.

Source for the above:
https://bitcointalk.org/index.php?topic=152348.0

4. As a Bitcoin user, your Bitcoins are stored in a "wallet" file, a digital file stored on your hard drive. Have $1,000,000 worth of Bitcoins and your hard drive crashes, and you didn't have backups? OH WELL! Your money is gone and there is absolutely no way to get it back. Someone get your wallet password and then get access to your wallet (any modern trojan has at least these capabilities)? Your money will be gone, and there is absolutely nothing you can do about it. While YES, there are precautions you can take to prevent these unfortunate outcomes, people on a whole have been proven to create poor passwords, click on sketchy links or install sketchy software, and just overall practice poor online safety behaviors. Imagine the outcry if after your debit card got skimmed your bank DIDN'T make you whole! That's Bitcoin!

Source for the above:
https://en.bitcoin.it/wiki/Securing_your_wallet

5. Bitcoin miners (the people that find "free" Bitcoins) as a whole are currently using about 1 GIGAWATT of electricity. To put things into perspective, 1 megawatt is commonly thought to be able to power about 100 homes. Yes, you just did the math correctly. Bitcoin mining uses enough electricity to power an entire city of about 100,000 homes. To further the ridiculousness, all of the computers in the Bitcoin network perform computations at the rate of about 775 PETAFLOPS. The other big network-distributed supercomputer that everyone knows about, Folding@Home? You know, the people that are trying to find the cure for cancer? About 12 petaflops. Yes, the aggregated Bitcoin mining pool is 65x more powerful than the network trying to cure cancer.

Sources for the above:
http://blockchain.info/stats
http://bitcoinwatch.com/

But let's forget all that. The Bitcoin market is so insane that the high for trading yesterday was $266 and the low was $105. The entire thing is absolutely incredible and hilarious to watch, so long as you avoid transacting in Bitcoin with a 10-foot pole.

And yet people still speculate in Bitcoin. It's really quite amazing!

jaimelobo said:   brettdoyle said:   Gold is a proven currency over a period of 3000 years.

Gold has intrinsic value... people like its properties and it is used for jewelry...
Sort of ... 150 years ago, the work needed to find, mine, process, etc. an ounce of gold was many times of what is needed today, yet gold's value is much higher (even adjusting for inflation). The price of gold has gone up 5x's in the last 10 years and like other precious metals could drop even quicker (just ask the Hunt brothers).

So it does have a value as something to be used, but like diamonds is still manipulated.


Not only that; science has been able to mimic the properties of gold (and diamonds for that matter) in materials costing way less

tinlizzy said:   ChipLeader said:    What is the hard asset that backs Euros or USD?

Weapons?


True. Part of the value of money is a bet that the country or union backing it will be around when you feel like spending it...

outtawhack said:   I'm curious - why so much hate on Bitcoin?

From everything I've seen, this is now the de-facto currency of international crime - for everything from drugs to gambling to human trafficking. The reason being it's not traceable, it's secure, and it is a true global currency which can't be devalued by a central bank.

While I wouldn't want to "invest" in something which caters to the worst of mankind, does it not also validate that Bitcoin is legit and won't go away, or lose its value over the long term?

I'm sure I'll get flamed for this, but I'm genuinely curious.


The best thing I read on bitcoin is to think of it as two things as once, one being that it is currency, but more importantly, that it is a "investment," and a speculative one at that. Since the former isn't gaining wide acceptance (and it won't) because of the latter (speculative investing), the idea it being currency gets eroded quickly.

Most businesses won't want to take a risk in accepting something that might lose value the next day. There's a reason why some businesses if they accept bitcoins, they convert it to a actually currency as soon as possible.

But I have nothing against bitcoin. It might not succeed, but instead might pave for something similar that is more like a currency (easy to transact with everyone) than speculation.

But those that are making money on bitcoins, I hope you are reporting those gainsto IRS. Last thing you want is them asking 1. why aren't you paying taxes and 2. thinking you are doing something illegal with those bitcoins.

outtawhack said:   I'm curious - why so much hate on Bitcoin?

From everything I've seen, this is now the de-facto currency of international crime - for everything from drugs to gambling to human trafficking. The reason being it's not traceable, it's secure, and it is a true global currency which can't be devalued by a central bank.

While I wouldn't want to "invest" in something which caters to the worst of mankind, does it not also validate that Bitcoin is legit and won't go away, or lose its value over the long term?

I'm sure I'll get flamed for this, but I'm genuinely curious.


You have seen nerds claim that on the internet - it's far from true. A few months ago the daily volume of bitcoin transactions per day in USD was rarely over $10,000,000 and usually less than $1,000,000. It cracks me up to see people claiming it's being used a ton for criminal money transfers. The only "criminal" money transfers it is being used for mostly is nerds that are buying acid and such. The math is very simple to see how "big" bitcoin really is in the scheme of things.

The de-facto currency of international crime is still the $100 USD bill as it has been for many years. Bitcoins have taken up less than 1% of that market.

Bitcoin is used and traded by some very talented programmers in an unregulated world without a book on ethics. A single trader could easily begin attacking a server and begin a transaction to get favorable exchange rates leaving someone else to hold the bag. There are probably millions of dollars being made as someone else loses. Or counterfeit Bitcoins could be made. Who knows what the outstanding float size of Bitcoins are out there, or if new Bitcoins are being "printed". Bitcoins are supposedly used to pay for software exploits by malicious hacker groups to the tune of tens of thousands dollars per exploit. Unless you're savvy enough to be able to see and predict what another Bitcoin trader/hacker is intends to do, don't think Bitcoin is just another currency being traded with the same psychology as Forex.

Andreessen Horowitz has backed Ripple, a competitor to Bitcoin, because Bitcoin has little security.

tinlizzy said:   ChipLeader said:    What is the hard asset that backs Euros or USD?

Weapons?


Faith

Can someone please explain to me the real difference between BitCoin and fiat money?

do178b said:   Bitcoin is a lot like gold. There's only a finite amount and it can only be mined at a slow rate. But unlike bitcoin gold has a 2000+ year historical significance. Bitcoin is nothing more than a protocol than can be copied and imitated. The dollar has the US military and a government giving it significance. There's a big difference.

No, BitCoin is more like the U.S. Dollar than gold. When they add BitCoin to the Periodic Table of Elements, you'll have me convinced otherwise.

greling said:   Can someone please explain to me the real difference between BitCoin and fiat money?

You're required by law and everybody does transact(buy goods, receive pay checks, and pay taxes) in one and the other is just something made up that has zero utilitarian use.

tomjef said: See: Executive Order 6102.

Last time I checked, that affected only domestically held gold in the hands of U.S. citizens, and had exclusions for jewelry, collector coins, and dental fillings.

I'm kind of enjoying this debacle. It's like a real life example of the Prisoner's dilemma.

greling said:   Can someone please explain to me the real difference between BitCoin and fiat money?You can't tip the dancer with bitcoin.

<serious answer to a non-serious question>

avalon6 said:   I'm kind of enjoying this debacle. It's like a real life example of the Prisoner's dilemma.

More like watching buyers of Beenie Babies and baseball cards after seeing the value of them fall fast and not being able to figure out why when people are telling them they just invested in a fad that doesn't mean anything.

magika said:   Here's Why Bitcoin Speculators Are Just Laughing At Anyone Who Calls It A Bubble
April 9, 2013
http://www.businessinsider.com/why-bitcoin-speculators-laugh-at-...

Oh the sweet, delicious irony.
"The most you can lose if Bitcoins go to zero is 100% of your money." -- seems like this applies to every investment, so i don't see the positive argument for BC from this statement.

By the way, just in case anybody thought that Bogleheads wasn't a bit of a crazy cult with quite the number of irrational investors self deluding themselves in being very rational... I present you: Boglehead Thread on Bitcoin

The vast majority of the people on it actually thought it was a good idea as another asset class and they were disappointed that there wasn't an ETF out there for it.

Dumb, dumb, dumb, dumb,...dumb!



P.S. Before I get some hate directed my way I didn't say that all boglehead members fit in that category. But I will say that in general the smarter finance guys are here not there.

dshibb said:   greling said:   Can someone please explain to me the real difference between BitCoin and fiat money?

You're required by law and everybody does transact(buy goods, receive pay checks, and pay taxes) in one and the other is just something made up that has zero utilitarian use.


You're required by law to accept it only in the country in which it is issued, provided it is intended to settle a debt. However, you can refuse to accept cash for goods or services at any time. There is no law that says you must take cash. There is simply a law that says that if someone owes you money and you refuse legal tender cash, that the debt can be discharged in court.

ZenNUTS said:   greling said:   Can someone please explain to me the real difference between BitCoin and fiat money?You can't tip the dancer with bitcoin.

<serious answer to a non-serious question>


Yes you can.

greling said:   ZenNUTS said:   greling said:   Can someone please explain to me the real difference between BitCoin and fiat money?You can't tip the dancer with bitcoin.

<serious answer to a non-serious question>


Yes you can.


Time to make it hail!

greling said:   dshibb said:   greling said:   Can someone please explain to me the real difference between BitCoin and fiat money?

You're required by law and everybody does transact(buy goods, receive pay checks, and pay taxes) in one and the other is just something made up that has zero utilitarian use.


You're required by law to accept it only in the country in which it is issued, provided it is intended to settle a debt. However, you can refuse to accept cash for goods or services at any time. There is no law that says you must take cash. There is simply a law that says that if someone owes you money and you refuse legal tender cash, that the debt can be discharged in court.


The point is that dollars have transactional value bitcoins don't. Until that changes Bitcoins are an absolutely crazy position to hold IMO. It doesn't matter if a couple places have accepted them for payment until wide adoption occurs it's still just a fad and nothing more.



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