Discussion in 'Business & Economics' started by Saint, Nov 7, 2017.
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Apparently, yes, as it is almost there.
is it a bubble?
Almost certainly. I do not think Warren Buffet will be getting involved. And I'd stay well away if I were you, unless you are very rich and have money to risk.
I am not quite old enough to remember the Tulip Bulb Bubble or the South Sea Bubble, but I am old enough to remember the Poseidon Share Bubble (an Australian nickel mining stock) in 1969-70. Mass psychology trumped the fundamentals as everyone of a particular cast of mind and sufficient funds piled in. And lost. Bitcoin is different because, although the usual join-the-party psychology is present, there is an additional element. Bitcoin is reputed to be somewhere where funds can be tucked away and transactions carried out hidden from the authorities. Bitcoin is buoyed up by investments from some very dubious sources: from drug dealers, racketeers, tax evaders, etc.
BUT I have news for the criminals. Here is Cheltenham UK, GCHQ know exactly who many of the big players are. They are tracking the transactions and gloating over what will be a triumph of major proportions. And, intellectually, it did not require hacking or codebreaking of the highest calibre, or of any novelty. It's just down to the old business of watching patterns and connections.
I am not going to make a forecast of just how high Bitcoin can climb, but I will make one prediction. It will come down even faster than it went up, though not necessarily on the next shake.
Why is it valuable?
it is not like gold, a physical thing.
I think I can guess how things will develop. More and more publicity for Bitcoin will attract new buyers and sustain its high price. Meantime, "boiler room" operations reminiscent of the dot.com bubble will promote copy-cat cryptocurrencies, flogging them to suckers. These copy-cats will also be driven higher in price, and as word gets around this will bring in a new round of suckers. Repeat until everyone is thoroughly kooked. Finally, someone will shout the equivalent of "the king is in the altogether". The scales will drop from people's eyes as they realise that behind all the apparent wealth there's nothing actually there. Bitcoin will then tumble amid the wreckage of its imitators.
dn 10% today
It will go as High as it can until those running the scam feel they can't drag in anymore suckers
That's the time they will sell off into real money
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I don't understand it so I am suspicious.
I putting my cash into tulip bulbs they are ready for a come back.
I might be wrong but Bitcoin appears to be a more "solid" version of what was locally called the Golden Rocket scam. A form of pyramid selling that sells seats on a rocket but actually offers nothing except the opportunity to sell more seats. When the seat sales slow down the entire scam vanishes along with most peoples money.
It comes down to the crazy way folk value stuff.
The folk that buy old signs and crap that are imminent land fill surprises me.
It was rubbish when they scrounged it and so it remains but there is some fool who buys it and so a market starts joined by other fools thinking they now hold something that can only appreciate in value.
When at hospital I overheard two guys talking about bitcoin, one thought he was going to become rich and said he was getting all he could, the other said the value only holds whilst folk sell them otherwise there is no way to set a price.
I think he was trying to warn the other but the other guy just wanted to tell how clever he was...he seemed like a fool to me.
Bitcoin can be stolen, and the company won't compensate you.
And now, surprise, surprise, bitcoin is crashing.
A lot of fools will be losing a lot of money.
no, it rebounds very fast
This isn't quite true: crypto-currencies do have value, in that they enable decentralised applications. Without the likes of bitcoin, ether, litecoin etc, you can not operate decentralised applications. So the value of these assets (and they are not strictly currencies any more than any other bartered asset is a currency) will ultimately be in the worth of the decentralised application.
If noone sees any real future in decentralised applications then these crypto-assets will become worthless. However, if such applications take off and become more widespread then they will need the crypto-assets to operate effectively.
And as I've heard it said elsewhere, if you don't have an informed view on decentralised applications then you can't really have an informed view on these crypto-assets such as Bitcoin.
And not all crypto-assets are equal...
As I understand things, Bitcoin is a single application: a decentralised application for making payments.
Filecoin is a single application: a decentralised storage service - where files are stored on a peer-to-peer netwrok rather than some vast server bank such as for Dropbox.
And Ethereum is actually a decentralised application for making decentralised applications. So most new decentralised applications are actually built on top of ethereum. In my mind it makes Ethereum that much more interesting and, possibly, longer-lasting.
Are decentralised applications going to take off? In my mind there seems to be some benefit in having some things decentralised, but you do lose a chunk of benefit in centralised applications: Bitcoin, for example, is far less efficient as a payment system than, say, Paypal, but the benefit is decentralisation, anonymity, no censorship etc.
As to where the value of Bitcoin will get to... who can really say, as it's simply a speculation at the moment - still very early days for decentralised applications in general. But they are here to stay in some form or other. And while there are people who want to use them there will be value in the underlying assets required to facilitate them.
And as purely a speculative punt, the key is to invest no more than you are prepared to write off, and then hope that you sell when the market is still above what you paid. The current situation may well turn out to be a bubble, and certainly the lack of understanding that most of us have in what these assets really are will fuel this thought of it being a tulip bubble. Time alone will tell, during which many will get rich, many will fall foul, and much energy and resource will have been expended.
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You need to store it "under the mattress", so to speak. The best ways to store crypto-assets is in an off-line wallet or on paper (which you store in a safe). If it's not at one of the exchanges then you can't lose it to hacks.
Questions that have bugged me:
What determines the value of a bitcoin?
How many bitcoin are in circulation and how is it restrained? ( regulated to maintain value)
Who "prints" bitcoin?
If the crypto currency is not centralized how is consistency of value maintained?
"Is there anything stopping me from creating another crypto currency, say, called Quackbit, throw it into the marketplace and watch it sore to $10000 usd as people speculate on it's future"
In the video game design industry they have been using crypto currencies for ages. A game I am currently playing ( The division) has over 4 different currencies all totally worthless outside of the game. This is until the game designers allow you to purchase real goods and services using these fantasy currencies outside the game environment.
Example: 20% discount vouchers could be purchased in game for future game releases or a coffee at Starbucks etc.
Bit Coin has notoriously been used as a method of batter on the dark web for many years. Mainly illegal drug, hacker, pharma and various nefarious services. The only people really making a killing on this scam are the crooks that had them in hand to start with. As far as I can see...
The people willing to buy and sell it. It is simple supply and demand. The demand is currently being fuelled by speculation.
As to the supply...
Currently around c.16.7m bitcoins have been "mined", out of a theoretical maximum of 21 million.
However, coins like Ethereum have no upper limit.
New bitcoins are "mined" - which means they are created and given as rewards to those solving the cryptography required to validate transactions.
The principle of the bitcoin blockchain, as I understand it, is that the blockchain is a decentralised ledger of all transactions. Each new block of transactions is validated through the solving of a crptographic puzzle - which at the moment requires considerable energy and resource to solve. Those who invest their time and effort (pc processing power etc) are rewarded should they be the first to solve the puzzle. And when solved it becomes a permanent part of the blockchain.
With Ethereum new Ether coins will be produced each time a solution is found for the first time. There are currently just under 100m Ether coins in circulation. It is easier to mine than Bitcoin.
For Bitcoin, when all 21m coins are mined, the reward for being the first to reach solutions will be through transaction fees - i.e. the person wanting to trade will have to pay a higher portion of the amount being traded as a fee.
Through the exchanges that match buyers with sellers. The buyer can set whatever price they want to buy the coins at, and the sellers can also set what price they're willing to sell at. Should the two meet, you have a value for bitcoin. Obviously buyers want a low price, sellers a high price, but with a reasonable market you soon get a constant flow of trading activity, thereby establishing a constantly changing price.
Yes, but none that are insurmountable. The "currency", as mentioned previously, is really just the means to facilitate a decentralised application. To create another crypto-currency you would need to develop such an application, and issue tokens (the starting coins) by persuading people that your application is worth it - the same way (in principle) that a business going public needs to persuade people to buy its shares. With shares this is called an IPO (Initial Public Offering) and with crypto-currencies it is called an ICO (Initial Coin Offering).
Unfortunately there are likely a large number of scams in the crypto-currency space, with people going through the process of an ICO, persuading people to buy a new crypto-currency and hoping it will one day take off. The higher the value of Bitcoin, the more you're likely to see these scam currencies. But their value is only created when a market for them exists. And the more the idea of crypto-currencies become mainstream the better people will get at establishing which are scam and which are bona-fide.
But with all of it being decentralised, there would seem to be a greater risk.
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