I am new to bitcoin and need some advice.

Discussion in 'Intelligence & Machines' started by aaqucnaona, Sep 28, 2013.

  1. aaqucnaona This sentence is a lie Valued Senior Member

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    Are crypocurrencies safe/stable? Where does the value of a bitcoin come from? A note has value because its amount in gold [a small portion of it anyway] is held in reserve, right? When a bitcoin block is created, how is it a real, valued sum of money? And why would someone use bitcoins over, say, USD over a paypal account? What benefit does the bitcoin user have [with his paypal equivalent I guess] over the USD user? And where are crypotcurrencies headed? Will the mining bubble burst a few times and the diminishing returns shut it down where bitcoins are used...as what? And valued by and for what?
     
    Last edited: Sep 28, 2013
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  3. Captain Kremmen All aboard, me Hearties! Valued Senior Member

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    The currency has value if you can exchange it for other currencies or for goods.
    At the moment the number of large scale businesses accepting bitcoins is, I think, zero.
    see list here: https://www.spendbitcoins.com/places/
    If you have a bitcoin, you can exchange it for Dollars at about $145 for each bitcoin.
    see here: https://www.mtgox.com/

    Bitcoins do not figure prominently in World Commerce,
    but they seem like a quite a good idea.
    If ever they become widely accepted as a form of payment, their current value of $145 will be multiplied many times over.
    On the other hand, if they become discredited or superceded, they could become worthless.

    There is no reason to believe that the currency is particularly unsafe.
    A spate of publicity led to a large price rise not long ago,
    but the volatility has settled down.

    I would imagine that many of them are bought and sold by speculators.
    If you want to speculate, I would advise you not to "bet" more than you can afford to lose.
     
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  5. Stryder Keeper of "good" ideas. Valued Senior Member

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    The real concern for Bitcoin is if the Criminal element start's using it for it's transactions since other systems of laundering have been shutdown. If that occurs then Bitcoin could potentially be targeted because of such a criminal element which would mean any legitimate "value" tied up in bitcoins could get put on hold (account freezes etc)
     
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  7. Captain Kremmen All aboard, me Hearties! Valued Senior Member

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    There may be ways round the criminality problem.
    I'm sure that the banks wouldn't like a new kid on the block,
    and will use every kind of trick to pull them down.

    At the moment, my hunch is that the currency is well overpriced,
    but if someone like Amazon came to accept it, then the current price could look a bargain.

    There will only ever be 21 Million of them. The final one will be minted in 2040.
    To be a world currency, they would surely need to be worth $10,000 each.
    Gain on current value of $145 is roughly 70-1. Is that good odds or bad odds of it succeeding? I don't know.

    If I were a rich investor, a few bitcoins in my portfolio wouldn't go amiss.
    You and BillyT have a few, surely?
     
  8. exchemist Valued Senior Member

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    I'd leave it alone or risk losing your shirt. Do you think Warren Buffet would have anything to do with bitcoin? No, nor do I.
     
  9. Captain Kremmen All aboard, me Hearties! Valued Senior Member

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    I agree whole-heartedly.
    Warren Buffett would not buy a bitcoin.
    He would laugh at the notion.
    I'll have a google and see if he's made a quote on the subject.

    Added later.
    He has at present zero bitcoins in Berkshire Hathaway's holdings.

    This is interesting though:
    Max Keiser, host of the Keiser Report on RT and writer for the Huffington Post, has bet¹ Warren Buffett 100,000 BTC that the price of Bitcoin will reach $200,000 USD before the price of Berkshire Hathaway (BRK.A)² reaches $200,000 USD.
    http://betsofbitco.in/item?id=1446

    The price of BRK,A is $172,210
    I think that is a ridiculous bet, placing a value on the invented currency at $420 Billion.
    We'll see.

    Not everyone is laughing though:
    A leading investor, Fed Wilson, said this in May:
    "We believe that Bitcoin represents something fundamental and powerful, an open and distributed Internet peer to peer protocol for transferring purchasing power,"
    Read more: http://www.businessinsider.com/fred-wilson-invests-in-coinbase-2013-5#ixzz2gMolLNej
     
  10. exchemist Valued Senior Member

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    There's always some sucker, sure. "Internet peer to peer protocol for transferring purchasing power", my arse. I'll see him down the Labour Exchange when it's all over.

    It depends what type of person you are. Some people go in for betting on the horses. And a few - very few - even make money out of it. But statistically, you will probably lose, otherwise bookies could not make a living.

    I was in Houston during the dotcom bubble in 2000. Serious people were talking about a "new business model", in which you did not even have to be trading to make money: the potential of web-baed business idea was enough. I was told I was a fool not to get myself a piece of the action. Buffett stayed out, of course. And we all know what happened. And many of my US colleagues lost a lot of money.

    By the way, I think your "Fed" Wilson is a Freudian slip! Good one.
     
  11. Captain Kremmen All aboard, me Hearties! Valued Senior Member

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    I reckon that WB would have taken the bet even if Max had proposed $1,000 rather than $200,000 as the bitcoin target.
    Perhaps Max thinks that the publicity that the bet generates will drive up the value of his holding by more than the (certain?) loss of $14.5 Million.
    Maybe he is crossing his fingers behind his back.
    Bets don't count if you do that.

    "Fed" is buying a company dealing with bitcoins rather than bitcoins themselves.
    Perhaps it has valuable software and good employees too, making the investment better than it initially appears.
     
    Last edited: Sep 30, 2013
  12. Stryder Keeper of "good" ideas. Valued Senior Member

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    FBI arrests Silk Road drugs site suspect
    [source: BBC]
     
  13. Captain Kremmen All aboard, me Hearties! Valued Senior Member

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    They are down to $127 today.
    Report says that an attempt was made to pay for a "hit" using bitcoins.

    The government’s complaint states that the hit wasn’t carried out, but it also doesn’t seem that FriendlyChemist was the source of investigators’ break in this case.
    That would come on July 23, 2013, when investigators gained access to a Silk Road server and made a complete copy of the data on the machine.

    http://krebsonsecurity.com/2013/10/...d-bazaar-silk-road-arrest-alleged-mastermind/

    There should be a large number of customer arrests following this,
    and bitcoins will no longer look so anonymous or attractive.
     
  14. Stryder Keeper of "good" ideas. Valued Senior Member

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    Unfortunately my point is being proven, first you have a whole bunch of criminal operators now pulling their bitcoins causing the drop (after all, if one person or group gets busted it opens the legislative nightmare of law related groups painfully examining every account holder and every transaction, so those that don't want to be caught pull their cash out.)

    This can be useful as it should only leave legitimate account holders attempting to ride out the turbulence, however there is a likelihood that the falsely inflated pricing through illicit usage will not be rein-acted any time soon which means if you have likely taken a loss, you will likely never recover the full value.

    The other useful point about the illicit's pulling their funds is the fact that Bitcoin wouldn't need to be seized by any law groups, so while you might have a loss, you shouldn't find your accounts frozen completely until after the legal systems have filtered out who's who.

    What is going to be interesting though is how much money has actually been pulled from Bitcoin and in what volume, and where of course that money intends to be deposited next. After all if it's anywhere near a similar amount to the Silk road guys then they can't just walk into a bank and deposit it without some backlash.
     
  15. Captain Kremmen All aboard, me Hearties! Valued Senior Member

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    It behaves more like a volatile stock than a currency.
    With the news of the dial-a-drug service being raided it fell, but has since rallied to $130.
    https://www.mtgox.com/
     
  16. Stryder Keeper of "good" ideas. Valued Senior Member

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    I probably refer to it more like Short trading which doesn't encourage long-term investments or good trading ethics. It's just get in an out when someone stirs the pot, that's why bitcoin isn't invested in by larger corporations.
     
  17. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    I don't have any, never have, but still have a half filled book of green stamps somewhere, I think. Sort of the same thing, is it not?* Why anyone would like fiat money, when not even government backed I don't know so have not even looked at bitcoin structure.

    *Perhaps better once as you could actually buy things with them.
     
  18. Captain Kremmen All aboard, me Hearties! Valued Senior Member

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  19. someguy1 Registered Senior Member

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    Not since the early 1970's when Nixon took the dollar off the gold standard. The US dollar is backed by nothing other than the full faith and credit of the US government. The dollar is losing purchasing power every day. The only reason it hasn't collapsed entirely is that all the other paper money in the world is doing even worse.

    To repeat: The US dollar is backed by nothing tangible whatsoever. It's vital for you to understand that in order to understand bitcoin. The value of a currency is a function of the belief people have in it.
     
  20. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    All true, but I'll add that part of the bitcoin's "belief of value" is probably due the declining strength of dollar's "belief of value." Hell, I'm trying to remember where I put my half filled book of green stamps for that same reason. (Just kidding - in cash value I'm about equal in Brazilian Real and dollars but dollars are increasing as I sell stocks.)
     
  21. Captain Kremmen All aboard, me Hearties! Valued Senior Member

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    There is nothing to stop a large company from copying the idea.
    Paypal could have a Paypalcoin, for example.
     
  22. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Many have. I don't know if still true, but years ago most coal mines paid in their private money, called "script." It mainly had value in the company's store.

    There was a popular song "16 tons" I think the name was.

    "You load 16 tons of #9 coal and what do you get?
    Another day older and deeper in debt.
    ...
    St Peter, don't you call me, cause I can't come
    I own my soul to the company store. "

    Or words like that.
     
  23. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Does the bitcoin have intrinsic value, like the dollar does?

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