If people think such a scenario can't easily happen again, then they're wrong about that. A small number of major bitcoin holders mostly determine the price.
It is not as significant as you would like people to believe. Look at bitcoin over a period longer than 12-18 months, and given it has only existed for a little over 5 years this is a resonable time frame, and you are talking about it being $50 to $350 with a peak of $1200. So apart from a small period of time (probably 8 weeks maximum) the vast majority of bitcoins have held, or increased, their value.
Yes, it's minor compared to the currency I used to have. The number of MXN could have gotten you 1470 USD in 1994 would have only bought you 338 USD by the middle of 1995:
$1200 to $350 and almost certainly back to $1200 at some point. Compare that with a government issuing a new currency and rendering the previous one invalid.
$1200 to $350 and almost certainly back to $1200 at some point.
You can't afford think that way. I did, and it took me a long time to realize that I was being insane while I was doing it. Unless you're planning for a timescale measured in "decades," you're setting yourself up to get burned.
Out of all the persuasive arguments I could make, consider this: There are better ways to double your money than bitcoin. Within the next decade, you probably won't see something like the leap from $6 to $600 again. I'll be happy to eat my words about that. Personally, I don't see how you'd even get to 10x your investment. $350 to $1200 would be 3.4x ROI. And while that's a good return, there are other ways to grow a nest egg from $20k to $68k without gambling it. And if we can't publicly admit that bitcoin is essentially gambling, not investing, then we should at least admit that to ourselves.
EDIT: One point I'd like to underscore is that the price of bitcoin is mostly determined by the major holders. If any of them lose faith and pull out, that will trigger others to pull out. Also, they have a lovely tendency to dump a lot of money into the market, which jumps the price, which causes other people to pour money in. Then the major player sells, capturing all of that money that everyone else poured in. You see? It's a predatory game, and you don't have to take my word for it. Examine the graphs and you'll see "jump-sells" like that over and over again.
If you don't care what happens to that $20k, then do anything you want with it. But if you do, the EV on bitcoin is probably worse than, say, learning to play poker semi-professionally.
Why would that be certain? The only reason Bitcoin is more valuable than the seanflyonCoin that I just invented is that people trust it. If people stopped trusting Bitcoin its value would go to near 0 and stay there.
It seems utterly reasonable to me. What could be more reasonable than wanting your medium of exchange to be out of the control of incompetent, corruptible governments? What could be more reasonable than wanting your medium of exchange to be based upon open-source, community-edited code, that anyone can review, contribute to, and build on top of? What could be more reasonable than wanting your medium of exchange to be available to anyone, anywhere, anytime, regardless of political orientation, without asking anyone's permission?
Sorry but fiat currencies possess no advantages other than incumbent localised network effects. The world needs a true global currency and Bitcoin is it.
Until somebody invents a quantum computer with a sufficiently large number of Qbits. Then they can completely destroy the blockchain.
Alternatively, wait a few hundred years until you need several hundred terabytes to store the blockchain, which is required for transactions. That's going to be a problem.
Or you could switch to Bitcoin before realizing that currencies which deflate in value are a terrible idea.
(For the record, I support cryptocurrency. I just think Bitcoin has too many issues to be viable long-term. Nice proof of concept, but it needs to be refined).
>Until somebody invents a quantum computer with a sufficiently large number of Qbits. Then they can completely destroy the blockchain.
That wont be developed overnight, by the time it is a possibility people will be working on solutions. a quantum computer would impact a lot more than bitcoin, all cryptography would become useless.
>Alternatively, wait a few hundred years until you need several hundred terabytes to store the blockchain, which is required for transactions. That's going to be a problem.
With the cost of storage rapidly reducing then that probably wont be an issue in a few hundred years.
>Or you could switch to Bitcoin before realizing that currencies which deflate in value are a terrible idea.
Currencies that inflate have had their share of problems and we certainly have not found a way to solve those problems or the issue of inflation/hyper-inflation. Any problems with delfationary currencies (which you do not detail) are merely hypothetical as no real deflationary currency has existed before.
>Deflationary currencies reward saving over spending. Aka, you can just sit on your money and it increases in value.
>That's really bad for an economy.
The economy is hardly in brilliant shape right now. This process of Boom/Bust has been running for the last century or so and they still cannot control it (or properly understand it) and they have had a lot of time to try and master fiat currency, controls, regulation etc. You say that people saving is bad for an economy, but that implies that the only good thing for an economy is constant spending and growth. That is bad for an economy, the belief that only through constant growth can the economy work. At somepoint there is a plateau, the planet cannot support an infinite number of people, at some point the world economy will stop growing. according to current thinking that may as well indicate the end of the economic world as we know it.
It is time to try something new, it may go against what most people believe but it cannot be any worse than the current situation which is not working as evidenced by the economic slump of recent years.
| Alternatively, wait a few hundred years until you need several hundred terabytes to store the blockchain, which is required for transactions. That's going to be a problem.
It seems more likely to me that in a few hundred years, several hundred terabytes will come in your mobile implant than for hundreds of terabytes to be a storage problem.
There is a limit on information to area in space. Eventually, bitcoin is going to be impractical to store even if you have a very large storage device at absolute maximum capacity.
The blockchain length is only growing linearly with time, but that's because it can only process O(1) transactions per hour. It'd be growing exponentially if either the monetary velocity or the size of the real economy was growing exponentially.
This is an issue that only a small percentage of people will ever care about as long as the system works well enough (eg annual inflation circa 3%). Even if people were to care, why is Bitcoin guaranteed the victor?
> A small number of major bitcoin holders mostly determine the price.
Wrong. Your assertion is easy to debunk: if this was true, then, since they hold many bitcoins, why don't they make the price go up to increase the value of their assets? Why do they let it fall from $1200 to $350? Answer: because they can't willy-nilly make the price go up or stop the fall.
The reality is that anybody who is wealthy (the millions of high net worth individuals in the world, which is a lot more people than the ~1000 guys in the world holding 1000+ BTC each) can somewhat influence markets, up or down, but nobody can really "determine the price".
The price bubbled to $1200 because Mt. Gox was buying bitcoin for months leading up to that point. This is very well documented. It fell because it was such a large bubble, at the time, that there was no sense letting it do anything except deflate.
Now we're reaching a point that might be a somewhat reasonable valuation for the currency. But my stance here is that even this "low" valuation is extraordinarily precarious. If someone with tens of thousands of coins decides to pull out of the market, they will trigger others to follow suit. Similarly, if someone else decides to buy tens of thousands of bitcoins in order to trigger another bubble, that's quite possible too. Remember, 10,000 coins is "only" ~$10M, which isn't much when compared to the billions that a lot of funds manage. And if someone spaces a large number of buys over a long timescale, it'd be easy to give the impression that the entire bitcoin scene is experiencing healthy, sustained growth, even though that growth is mostly artificial.
This is doubly a problem when you hold a privileged position like a bitcoin exchange, where you can use your position to either manipulate the markets directly or to be privy to info that others don't have. Which, by the way, is totally legal. Even if it's not legal in the US, it's legal in other countries. As far as I know, no one knows who's behind the BTC-e exchange. They're very popular, and they can use that position to do whatever kind of manipulation they want. And since the price at every exchange affects every other exchange (arbitrage), there's no way to avoid being manipulated.
In an unregulated market, you, as one of the multitudes, can't win. Others will always have access to information that you don't, such a whether the growth you're seeing is artificial. You can't win unless everybody wins. And when it comes to BTC, that outcome is far from certain. Especially when people are trying to prey off you.
Wrong. Your assertion is easy to debunk: if this was true, then, since they hold many bitcoins, why don't they make the price go up to increase the value of their assets?
I think the point the parent was getting at is that it doesn't take much buying/selling to really move Bitcoin's value.
Why wouldn't they make the price go up? They could, but what good would it do? You need to sell Bitcoins to realize a return and selling will push the price down.
If people think such a scenario can't easily happen again, then they're wrong about that. A small number of major bitcoin holders mostly determine the price.