Bitcoin leaves skeptics behind as it blasts to record $10,000

[TexasTowelie]

Bitcoin surpassed $10,000 for the first time this week, bringing this year’s price surge to more than 10-fold even as warnings multiply that the largest digital currency is an asset bubble.

The euphoria is bringing to the mainstream what was once considered the providence of computer developers, futurists and libertarians seeking to create an alternative to central bank-controlled monetary systems. While the actual volume of transactions conducted in cryptocurrencies is relatively small, the optimism surrounding the technology continues to drive it to new highs.

Bitcoin has risen by more than 50 percent since October alone, taking off after developers agreed to cancel a technology update that threatened to split the digital currency. Even as analysts disagree on whether the largest cryptocurrency by market capitalization is truly an asset, its $167 billion value already exceeds that of about 95 percent of the S&P 500 Index members.

“This is a bubble and there is a lot of froth. This is going to be the biggest bubble of our lifetimes,” hedge-fund manager Mike Novogratz said at a cryptocurrency conference Tuesday in New York. Novogratz, who says he began investing in bitcoin when it was at $90, is starting a $500 million fund because of the potential for the technology to eventually transform financial markets.

Read more: https://www.seattletimes.com/business/bitcoin-leaves-skeptics-behind-as-it-blasts-to-record-10000/

[Xipe Totec]

1. ...

[sl8]

2. Pretty! I'll give you 3,500 guilders/ bulb, final offer. n/t

[TexasTowelie]

3. I know how that story ends.

I guess some people made a fortune getting involved with Bitcoin, but there are plenty of others that will get burned.

Remember when silver was over $40 an ounce? I knew a lot of people that were burned by the dream that the only way prices could go is up.

[BannonsLiver]

5. Dont forget Iraqi dinars

I have a friend who pissed away a thousand bucks on what is now basically wallpaper.

[Pachamama]

8. +1000

Exactly....

[MisterProton]

19. Wrong analogy

The analogy is incorrect.
1. Tulips are not limited in number. Bitcoin's are. Prices are determined by supply and demand, limited supply is a big issue.
2. The tulip market never recovered after its crash, Bitcoin goes up and down, but continues to recover.
3. Tulips are not a new technology. Bitcoin being a new tech uses the adoption S-Curve model.

[Xipe Totec]

23. Sounds like you have skin in the game. Best of luck to you. nt

[zipplewrath]

30. Assumptions

Can you equally outline the assumptions in the curve you presented?

[MisterProton]

41. Here is a start

https://en.wikipedia.org/wiki/Diffusion_of_innovations

[zipplewrath]

46. What you're missing

Failed diffusion
Failed diffusion does not mean that the technology was adopted by no one. Rather, failed diffusion often refers to diffusion that does not reach or approach 100% adoption due to its own weaknesses, competition from other innovations, or simply a lack of awareness. From a social networks perspective, a failed diffusion might be widely adopted within certain clusters but fail to make an impact on more distantly related people. Networks that are over-connected might suffer from a rigidity that prevents the changes an innovation might bring, as well.[42][43] Sometimes, some innovations also fail as a result of lack of local involvement and community participation.

The curve in your plot that was unmarked was the "percentage of market penetration". Your other curve works out if the penetration achieves 100%. Very few innovations achieve 100%, especially at the pace that would be needed to support the bubble the bitcoin is seeing. There are 3 ways this can pan out, and two of them are bad for the speculators.

1) The bitcoin takes over markets

Good luck with that, there will be powerful resistance to it.

2) It achieves a penetration much less than 100%, and remains a "boutique" currency for criminals and the doomsday crowd.

That's where this current situation becomes a bubble. It will go back to a level that is consistent with its final penetration, not the speculated one.

3) It fails.

It never pans out and develops a really bad reputation that causes total collapse, or at least gets replaced by a competitor.


Put any probability on those three options you want, but unless option #1 is well north of 75%, it's a VERY risky bet.

[MisterProton]

47. I never said it would be used by 100%

No currency has 100% usage. It's not required for it to be very successful.

1) The bitcoin takes over markets

Good luck with that, there will be powerful resistance to it.

Let's see how that works out. - Looks to be like it's making inroads into Wall Street just fine.
https://www.wsj.com/articles/nasdaq-plans-to-launch-bitcoin-futures-in-first-half-2018-1511968313


2) It achieves a penetration much less than 100%, and remains a "boutique" currency for criminals and the doomsday crowd.

That's where this current situation becomes a bubble. It will go back to a level that is consistent with its final penetration, not the speculated one.

Hmm, who knew I was a criminal for buying that ice cream down the street, or that steak dinner a couple days ago, or that flight to Nashville I'm taking soon.
https://airbitz.co/biz/9200/john-pass-old-fashioned-ice-cream-parlor/

3) It fails.

It never pans out and develops a really bad reputation that causes total collapse, or at least gets replaced by a competitor.

Possible, but the network affect is VERY powerful. If you were the only person in the world who owned a fax, its about useless to you.
The more people that own faxes, the more powerful yours is. Same for social networks, same for currencies.

[zipplewrath]

48. How's that fax machine doing these days?

It can come and go that fast, which is sorta the point. Even if it is "successful" it can be gone as quickly as they come, if not faster. I have a Palm Pilot sitting at home, and my boss hated giving up his Blackberry.

I have a book on a long list of "flash in the pan" products and an exploration of what happened. To date, there is nothing about the bitcoin that indicates it will be any better than any of them.

[hunter]

50. God. The fruit fly curve.

It doesn't work that way outside of laboratory experiments, much less the ecosphere, and even the most precisely controlled laboratory experiment go wrong more often than not.



Whatever. If people are willing to bet on "precious" metals like gold, "precious" numbers make about as much sense.

[tandem5]

38. It's true -- bitcoin is in a bubble phase, but...

this is the fifth or sixth such bubble and each time some confidently declared its demise as all but certain. How many bubbles did tulip mania have?

[MisterProton]

42. One of the points I made

In post #19, I brought up the point that the "tulip mania" event had only one instance of it peaking and exploding. It's a different dynamic than something that just rises and falls a lot. The ability to "mass produce" tulips absolutely ensured that it was going to implode.

[Binkie The Clown]

4. "Stock prices have reached what looks like a permanently high plateau." -Irving Fisher in Sept 1929

[OilemFirchen]

20. "Esperanto will be the universal language by 1915."

My grandfather, January 1911.

[Johonny]

25. It is the official language of Red Dwarf...

[PoindexterOglethorpe]

6. Digital gold : Bitcoin and the inside story of the misfits and millionaires trying to reinvent money

by Nathaniel Popper. It's currently at the very top of my pile of library books.

I heard Popper on the Terry Gross show, Fresh Air several weeks ago, which is why I'm planning to read it.

I have been highly skeptical of the long term utility of Bitcoin ever since I first heard about it. While it may well live on as an alternate currency, it's nearly impossible to see it replacing regular currencies in any substantial way.[

[Me.]

7. Is It Environmentally Viable?

Right now, or so I've read, they use as much power as the entire country of Ireland, and worse, primarily from coal.

[Xipe Totec]

9. Reminds me of the Golgafrincham in Hitchhiker's Guide to the Galaxy

“Thank you. Since we decided a few weeks ago to adopt the leaf as legal tender, we have, of course, all become immensely rich.”

Ford stared in disbelief at the crowd who were murmuring appreciatively at this and greedily fingering the wads of leaves with which their track suits were stuffed.

“But we have also,” continued the management consultant, “run into a small inflation problem on account of the high level of leaf availability, which means that, I gather, the current going rate has something like three deciduous forests buying one ship’s peanut."

Murmurs of alarm came from the crowd. The management consultant waved them down.
“So in order to obviate this problem,” he continued, “and effectively revalue the leaf, we are about to embark on a massive defoliation campaign, and. . .er, burn down all the forests. I think you'll all agree that's a sensible move under the circumstances."

The crowd seemed a little uncertain about this for a second or two until someone pointed out how much this would increase the value of the leaves in their pockets whereupon they let out whoops of delight and gave the management consultant a standing ovation. The accountants among them looked forward to a profitable autumn aloft and it got an appreciative round from the crowd.”

https://www.goodreads.com/quotes/685739-if-the-management-consultant-said-tersely-we-could-for-a

[Me.]

15. !

[madinmaryland]

10. This is a bubble and there is a lot of froth." Well if Santorum is involved, then it will end up

a frothy mess.

[ansible]

11. I remember when it was $50 and thinking how stupid the whole idea was

[kcr]

13. I don't think you have any reason to be banging your head.

It was always a fools game, and they often blow up into a bubble. Don't worry. It will burst.

[fescuerescue]

12. I've been saying it's a bubble for 3 years now

When it hit $200.

Now that it has hit $10,000 - I know that I'm 50 times more right now than I was in 2013.

[Cicada]

14. Other better crypto currencies will become popular

The Bitcoin app is just the beginning. This technology, blockchain, will save us a lot of money. Remitting money abroad often costs 10%. Soon it will be almost free. McDonald’s will be able to track the food it buys on its path to them to better avoid possible contamination. Instead of buying a lovely Sari made in India from Amazon, which gets up to a third of the price, still a really good deal already, why not buy it directly from the nice Indian lady in her shop?

Obama said this is the best time ever to be born. I think he’s right.

Especially once this embarrassing clown Trump is gone.

[WinkyDink]

16. Wait; does this mean one Bitcoin is "worth" $10,000? How would one

buy a loaf of bread?!

Who takes this backed-by-nothing "currency"? Isn't it nothing but a computer trading symbol, as opposed to a physical entity?

IOW, it's really just a form of barter amongst like-minded individuals, no?

IDGI.

[sadiegirl]

17. And I wonder how is your wealth considered for tax purposes? Is it?

If you are a bitcoin billionaire how do you handle tax reporting on the profits? Are the profits real? Can you buy a home with bitcoins?

What can you actually buy with them?

Seems like good currency for drug cartels and dealers and all sorts of other corrupt practices. All that meaning somewhere, somehow, and at some point the Feds are going to have to step in and regulate transactions using bitcoins if not the coins themselves.

[MisterProton]

18. Easy to transfer into normal currency

Just like Paypal, most the exchanges allow you to link your account to your bank. You can move currency in either direction, buying bitcoins and storing them in your digital wallets - or selling and depositing dollars back into your bank account.

Taxes are handled via capital gain. Hold them more than a year and you use long term capital gains (~15%), holding shorter than a year is short term capital gains (~30%).

I know a number of stores here in my area that accept Bitcoin. I have bought donuts and coffee, as well as steak dinners with it. Its accepted online by a number of major services - from Microsoft, to Travelocity.

[OilemFirchen]

22. Hilarious.

It's a currency... when you convert it into a currency.

Brilliant!

[WinkyDink]

28. I repeat, if one Bitcoin is "worth" $11K, exactly how did you buy a

doughnut with it?

Is it that you bought Bitcoins, sold them to some other Bitcoin buyer who then deposited dollars into your bank account, from which you bought the doughnut?

Or did the doughnut shop accept your computer-only "currency" and give you a fraction of a Bitcoin as "change"?!

[Azathoth]

34. Bitcoins are dividable into smaller units

The smallest unit of BTC is a satoshi, which equals one-hundred-millionth of a bitcoin.

[WinkyDink]

36. It just gets more and more absurd. A Bitcoin does not even exist. Now, I

realize that many financial transactions occur only in cyberspace, but one CAN demand actual, physical cash on the barrelhead.

[Azathoth]

40. But physical cash has no intrinsic value

It derives value from the fact that the government backs it and mandates its usage and works to prevent unauthorized production of the actual bills and coinage. A "dollar" is really an imaginary unit of value; the physical bill is nothing more than a method of unambiguously proving who possesses that unit, like a title to an imaginary car. As in a card game, we don't have to rely on some authority to tell us how many points we have; the cards (or bills) speak for themselves.

Bitcoin is an interesting experiment in theoretical economics. Major economies haven't used currencies with actual intrinsic value in a long time, so currency has become essentially an abstract concept. Bitcoin uses mathematics to do the same thing as paper money; it allows someone to prove to a mathematical certainty that they possess so much of an imaginary unit of value, and to transfer that ownership to someone else. In theory, it is exactly the same as all other fiat currencies. In practice, however, it suffers from two problems. First, there are all kinds of technical shortcomings. And second, it lacks the "fiat" aspect of fiat currency; there is no major government backing it, guaranteeing it, and mandating its usage (and thereby putting the weight of its economy behind it).

[Azathoth]

33. "I know a number of stores here in my area that accept Bitcoin"

You must live in a unique area. Outside of online vendors, I've never encountered a business in my day-to-day travels that accepts BTC, and I live in a top metro region.

Bitcoin is a bubble. Its price fluctuates all over the place, trading like a commodity rather than a currency, yet it has no intrinsic value like a commodity or a stock, so its worth is being determined entirely by human emotion. Virtually all meaningful transactions involving it require a currency exchange. I've met people who think they are "paying in Bitcoin" with their debit card, blissfully unaware that the card company is performing a currency swap (with a padded exchange rate, of course) every time they purchase something. They might as well be selling baseball cards and then using the profits to make their purchase.

I'm not against Bitcoin technology. I happen to like the idea of a non-centrally controlled currency. But there are major technical limitations right now, including the ability to permanently destroy currency (from a permanently limited supply) and the total inability to claw back funds.

[Amishman]

21. Bitcoin is currently divisible to 8 decimal places, and can be adjusted to go further.

[Johonny]

26. I'm pretty sure you only buy cocaine with it.

[Eugene]

24. Make that $11,000.

Bubble trouble? Bitcoin tops $11,000 after $1,000 surge in 12 hours (Reuters)

https://www.reuters.com/article/us-markets-bitcoin/bubble-trouble-bitcoin-tops-11000-after-1000-surge-in-12-hours-idUSKBN1DS2X1

[Loki Liesmith]

27. A currency with skyrocketing value is useless

Because there is no incentive to spend it

[WinkyDink]

29. It is not currency, but a stock. A quarter is 25 cents, no matter what.

[Loki Liesmith]

32. A quarter is 25 cents today

But is not necessarily 25 cents yesterday

[WinkyDink]

35. It is 25 cents, period. Whether a quarter BUYS the same as yesterday is not

the topic.

[LanternWaste]

43. Circulus in probando

Circulus in probando. A rather pragmatic defect in any argument.

[moriah]

31. Time to check your bitcoin wallets from faucets... ;)

If you made $2.00 a year ago, it could be a lot more now.

[OnDoutside]

37. My Shoeshine boy was only telling me this morning, to get into Bitcoin....hmmm

[NCTraveler]

39. What a loaded and foolish headline.

First sentence in backs skeptics yet the headline says something else. So much ignorance and propaganda in one article. Impressive.

[doodsaq]

44. All I can imagine is...

...a pile of 10000 books stacked precariously on top of one another.

The crash will be spectacular.

[brooklynite]

45. The Dutch Tulip craze...

https://www.investopedia.com/features/crashes/crashes2.asp

In 1593 tulips were brought from Turkey and introduced to the Dutch. The novelty of the new flower made it widely sought after and therefore fairly pricey. After a time, the tulips contracted a non-fatal virus known as mosaic, which didn't kill the tulip population but altered them causing "flames" of color to appear upon the petals. The color patterns came in a wide variety, increasing the rarity of an already unique flower. Thus, tulips, which were already selling at a premium, began to rise in price according to how their virus alterations were valued, or desired. Everyone began to deal in bulbs, essentially speculating on the tulip market, which was believed to have no limits.

The true bulb buyers (the garden centers of the past) began to fill up inventories for the growing season, depleting the supply further and increasing scarcity and demand. Soon, prices were rising so fast and high that people were trading their land, life savings, and anything else they could liquidate to get more tulip bulbs. Many Dutch persisted in believing they would sell their hoard to hapless and unenlightened foreigners, thereby reaping enormous profits. Somehow, the originally overpriced tulips enjoyed a twenty-fold increase in value - in one month!

[joshcryer]

49. Hedge funds are targeting $35k.

The current price is mainly due to hedge fund "investment."

[Blue_Tires]

51. 1. That reads like a press release instead of a news story

2. I personally prefer currency I can touch and feel, and I still haven't heard the first compelling argument on why I should switch...

[TexasTowelie]

52. It's Bloomberg News

so I suspect that it has a pro-business bias.

I also prefer more tangible assets to use as currency. As Hurricane Harvey reminded me earlier this year, it is preferable to have cash on hand because you might not be able to withdraw money from an ATM or even swipe a card if computer networks are down. I tried to send money to my brother via Western Union, but their network was down after the flooding.