The main trend for Bitcoin in 2015 is that not much happened. The price is within 10% of where it was at the beginning of the year. Transaction volume in dollars is flat, or down a little. Many of the companies which were accepting Bitcoin no longer are; those that are report low transaction volumes. (There are lots of merchants which "accept Bitcoin" because it's an option in some shopping cart programs, but those just send the Bitcoins to Coinbase, which converts them to dollars and sends the funds to the merchant.)
The big trends in Bitcoin seem to be:
- Amateur hour is over. The remaining exchanges are bigger and seemingly more stable, although none of them are up to bank-level yet. New York's Bitcoin regulation seems to have been accepted.
- Mining is more centralized than ever. Most of the big Bitcoin miners are in cold areas of China with cheap power. China has well over 50% of the hash rate now. This may just be a way to convert yuan to dollars. (China has currency controls, but encourages exports. For a few months, it was legal in China to buy Bitcoins with yuan through regular payment channels, then sell the Bitcoins outside China for dollars. That drove the $1000 Bitcoin bubble, and was shut down by the People's Bank of China last year, causing the Bitcoin crash. Mining Bitcoin in China, and selling it outside China, is considered "exporting" and is a legal way to convert yuan to dollars.)
- Since the shutdown of Silk Road I and Silk Road II and the related arrests, Bitcoin is no longer considered a safe way to buy drugs. This doesn't seem to have affected the price much one way or the other.
- Bitcoin ATMs are disappearing. In the SF bay area, Hacker Dojo and Workshop Cafe got rid of theirs, and Nakamoto's doesn't have theirs working. Hero City (a co-working space) may still have one.
2013: "Decentralized money is amazing- Let me build a business around it!"
2014: "Hmmm... I just built a centralized business around Bitcoin, so now my customers have the same counterparty risks as before... why was I excited about Bitcoin again?"
2015: ???
2016: Profit
(If someone figures out the entry for 2015, please let me know what it is...)
2015: Let's start discovering where the big disruption comes. Blockchain. Many companies like for example Stampery.co are using the technology behind bitcoin to change failed ways to do things, like certifying things.
This could be very sigificant. Down to 12.5 BTC per block. Fees are currently not close to making that up that split. It would be really interesting to see if some of the larger mining pools can sustain their current hash rate if the reward drops but the fees don't particularaly increase.
As long as there isn't sigificantly more transactions than are reasonable to be included in a block there simply won't be too much pressure on the senders side to increase the amount of fees paid.
Some people argue that the reduced creation of new coins will take pressure off the price which could lead to a rally. Then again, that would only be true if miners were actually selling off their newly created coins immediately instead of holding them while waiting for higher prices.
The other aspect is the miner's inevitable margin compression. From the numbers we have seen (e.g. KnC in 2014), it seems that these companies are already operating on razor thin margins. Whatever money they have made, they needed to re-invest into upgraded hardware in order to stay competitive. Unless there is a meaningful increase in price before the reward halving, a lot of miners will likely run into trouble.
Placeybordeaux, you should buy Bitcoin in large quantities in anticipation of this prediction, then panic sell it after the halving, like everyone else who's saying the same thing as you. That way my profit for shorting Bitcoin during the the 2016 halving window will be as large as possible.
One of the nasdaq exchanges has a etf equivalent in Europe. Once we have options on those the market will be more mature.
I think countries giving up fiscal policy for the euro would make other countries consider bitcoin. Makes sense to have a tax regime based on immobile property taxes rather than resorting to inflation or foreign currencies. Since us and Europe already are pretty confident in their ability to collect taxes, they won't be too hostile to bitcoin.
I've seen it powered off, and then gone. Maybe it broke and went out for repair.
Originally, the Robocoin machines displayed their bid and ask prices on the attract screen. They stopped doing that; the size of the spread (about 15-20%) was embarrassing.
May be stability is what Bitcoin need? Especially when many other currencies are jumping like a mad cows. Bitcoin attracts many people who don't really need or even understand bitcoin, they just want to play a casino game. They are not healthy for bitcoin.
Bitcoin seems instable by design, the major flaw being an anticipation of increase in value due to "limited supply" which encourages people to speculate and horde rather than participate in real economic activity.
Bitcoin doesn't really attract many people, there is just this handful or so million users. Bitcoin is still really far from anything that could be called mass adoption or even mainstream.
The Bitcoin bubbles were driven by external use cases. The first runup was driven by Silk Road I, and the second by the use of Bitcoins to get around China's exchange controls. Bitcoin is now stuck waiting for a third killer use case.
No mention of the 'stress test' that's brought the network to its knees the past few days, or of the soft fork that resulted in suggestions to wait for 30+ confirmations? Puff piece.
C'mon Coinbase, at least spin them into a '<X> is actually good for Bitcoin, because <Y>' format.
For those who don't know, the stress test was where a company tested what would happen if someone filled the network with transactions.
The results were not favorable for bitcoin and highlights key design problems -> some transactions cost $280/transaction to put through, and other transactions that had <$20 fees were not processed and stuck in limbo.
Maybe some people paid fees that high by mistake, but no-one had too. Equally $20/tx fees are still ludicrously high by about three orders of magnitude.
Bitcoin miners prioritize transactions from highest fee to lowest; the attackers never sent transactions with more than 0.2mBTC/KB fees, which works out to about $0.01/tx. In other words, if you paid more than about $0.01 in fees, your transaction was unaffected by the flood.
The problem was a lot of badly written Bitcoin wallets don't let their users set fees at all, nor do they let you resend transactions stuck due to low fees. This is an easily solved problem, and fortunately we're seeing wallet authors fixing it. This should have happened years ago... but a lot of people are heavily invested into the idea that Bitcoin transactions are "free", which just isn't true...
> The results were not favorable for bitcoin and highlights key design problems
Some would disagree, considering the system kept functioning exactly as intended under the circumstances imposed on it.
Personally I agree that the whole thing is troubling, but was anything really discovered here?
Considering that the price has been rising, if you believe in prediction markets, these design problems could likely be overcome. After all, people have been working on it since long before any of these stress tests were performed.
Some would disagree, considering the system kept functioning exactly as intended under the circumstances imposed on it.
Yes, hence the GP stating, very clearly, that the results "[highlighted] key design problems".
The results of the stress test were not surprising to anyone who's been paying close attention, but it was a valuable demonstration that Bitcoin is it currently operates is misarchitected and will require some fundamental redesigns in order to operate at scale. These problems have been under discussion since at least 2011 and have been constantly disregarded, so perhaps this will help. It seems unlikely.
On the contrary, the network worked as expected. A somewhat costly stress test resulting in a backlog of transactions that were prioritized by fee, just as predicted.
The backlog has since been drastically reduced and high priority fees are back in the 50,000 satoshi per kb range [0]... the average Bitcoin transaction is about 250 bytes, so 12,000 satoshi per transaction, or roughly 3 cents. Low priority transactions of < 1 cent are still somewhat easily confirmed [1].
Even during the stress test I saw high priority fees hovering around the 85,000 satoshi/byte range, and never in the 1,000,000+ satoshi/byte range that you're talking about.
What's impressive is that the price [2] of Bitcoin was completely unaffected by a bit of weather [3] on the network and in fact gained in value during the entire ordeal.
Public data storage like the ledger maintained by the Bitcoin blockchain has a definite cost and it makes sense that prices would rise as demand increased. The blockchain is a scarce resource. It might make sense for transactions fees to end up around the price of a postage stamp at some point. It's hard to predict how this economic system will continue to evolve.
What's most important is that the ledger continues to be maintained, eventually consistent, secured by lots of hashing power, 100% verifiable and has an open and equal access to read and write as it ever did.
Not every transaction between two parties needs to be recorded on the blockchain. The blockchain is for clearing and settlement. Between lightning networks [4], private federated offchain networks for batch transactions, and possibly public sidechains (if they every materialize), there's a number of approaches that can help facilitate micropayments and other situations that require very low fees.
I'm calling statistical shenanigans. While the data presented is likely correct, the narrative is completely misleading.
> While the price is down 9% YTD (as of July 13), it's up over 213% over a two year time frame.
So they are ignoring the price drop from $1,000?
> This has attracted more institutional investors to the market and volatility has decreased as a result.
Chart indicates a gradual decrease, it's hard to establish causality. Also, it ignores the fact that 50% volatility for a currency is absurd.
> As of June 30, there were 6,109 Github repositories referencing Bitcoin. By comparison, there were 2,352 Github repositories referencing Stripe and 2,318 repositories referencing Paypal.
Comparing a currency with a currency processor is blatantly comparing Apples and Oranges. How many GitHub repositories are there mentioning Coinbase?
If institutional investors were responsible for the decrease in volatility, I'd think we would've seen a corresponding increase in liquidity. (It's the additional liquidity and depth of market that they presumably would provide that dampen the price swings). I haven't run the data recently, but anecdotally I don't think liquidity has improved much.
The most liquid/highest volume period was still the run to $1000.
> How many GitHub repositories are there mentioning Coinbase?
Conversely, how many GitHup repositories are there mentioning USD or GBP. Oh wait, you can not transact USDs online without a payment processor. So what would be a better way to compare? By comparing all the fiat payment processor mentions against Bitcoin and Bitcoin payment processors. Which is kind of what they are doing here.
Wow, the first graph in this article looks exactly like the graph of the bubble phenomenon (http://i.imgur.com/Amon5PR.jpg). I guess stability will increase, which is a good thing.
key differences: The downslope in most bubbles is twice as steep as the upslope. For bitcoin it was half as steep. Bubbles typically drop below the pre-bubble price.
One possible reason for the differences: Bitcoin speculation is less of a leveraged instrument than most other speculative activities. This is about to change as Bitcoin makes it onto ETFs (where leveraged investors can play more easily) and if potentially leveragable contracts (like ripple) gain in popularity.
That is, if you believe Kindleberger's thesis in "manias, panics, and crashes".
To me, it looks like January 15, 2015 could easily have been the final moment of despair in the the 2014 downtrend. Of course, only time will tell.
Sidenote: That bubble graph has been posted hundreds of times (literally) on the bitcointalk.com forums and reddit over the past few years, for different bubbles even: 2011, 2013 part 1, and 2013 part 2. The posters often proudly & spitefully think they are first to see the resemblance, and are usually received pretty poorly... It is an inside joke at this point. So I found it entertaining to see the comments in this thread here (not trying to say anything negative about the posters here :)
When all the greek and chinese people who have jumped in (see the transaction spike in the article) in the last two months discover that no one will buy their coins then we will see the trough. I have to say though, I genuinely did not see the switch out of the recent past coming - good luck to the folks who did, and commiserations to the folk switching in ...
I notice they are still pushing out the number of wallets and accounts they have as a sign of anything. Coinbase you are now a few years old and have raised over $100m. It's time to leave behind local social networks, and underused sites everywhere and start reporting MAU. No one but fanatics care how many people have signed up. How many people regularly use your service.
>As global events that highlight the restrictions of closed banking systems and insecure data security practices (e.g. the Greece debt crisis and recent United States Office of Personnel Management data breach) continue to occur, we believe that bitcoin is likely to be adopted by more people looking for digital money that is global, secure, and inclusive.
How would Bitcoin have prevented or mitigated the OPM hack?
It's possible that one could use the data leaked in the OPM hack to hijack someone's bank account. I imagine a lot, maybe all, of the verification info a bank would ask for in order to do a password reset would be in those files for many people.
Trends as I see them: decreased media interest, loss of trust in the Bitcoin Foundation and by extension the core development team, lots more government surveillance of related businesses (helped by a stabilization of centralized exchanges), still virtually no banks globally willing to work with Bitcoin-related companies, failure to achieve any real 'killer app' at scale: beyond tax or forex-restriction evasion or international drug distribution.
On the plus side, scope creep seems to have slowed, more people are aware of the overall concept, and Merkle trees have begun to be applied experimentally to additional problem domains.
PS. Reading between the lines, new user growth has slowed dramatically at Coinbase. IIRC they sent an email this week begging for referrals, offering $25/signup. And like all startups, it probably defines users as people who once gave them their email address, rather than actual regular users of some nontrivial part of the service. "A trillion wallets!" indeed.
PPS. What percentage of increased Bitcoin transactions are due to the use of automated gambling sites for Bitcoin-trail erasure type money laundering through numerous microtransactions?
91 year old billionaire Charlie Munger has referred to Bitcoin as "rat poison". His friend, 84 year old Warren Buffett has said Bitcoin is "not a currency" and advised people to "stay away from it".
Now you can ascribe this to them being old fuddy duddies who "just don't get it". You can also ascribe this to the wisdom of people who lived through the Great Depression, World War II etc. and have seen every scam and snake oil pitch under the sun.
Which is exactly what Bitcoins are. They are worthless, they have no value. They're not only a scam, they're a scam that should be obvious on the face of it, like subprime real estate, or a Pets.com IPO. People talk about a Silicon Valley bubble - nothing is more indicative of a bubble than Bitcoins. These guys may not know the specifics of blockchain algorithms, but from decades of hard experience they can distinguish value from non-value, and Bitcoins have no value.
I can't think of a commodity it makes less sense to hold onto than a Bitcoin. Gold has value, as do other precious metals, oil has value - Bitcoins have no value. The only comparison I've seen made to Bitcoins is fiat money, but it would take too long to fully explain why Bitcoins don't have the value of a US dollar in a post here.
For some laughs, read http://bitcoin.org/en/faq#why-do-bitcoins-have-value - "Bitcoins have value because they are useful as a form of money. Bitcoin has the characteristics of money (durability, portability, fungibility, scarcity, divisibility, and recognizability) based on the properties of mathematics rather than relying on physical properties (like gold and silver) or trust in central authorities (like fiat currencies)."
What? Commodities which already have value(!) become currencies because they have "durability, portability, fungibility, scarcity, divisibility, and recognizability". Gold has all of those properties so it has made a good currency through history - but even if it had none of those properties, it derives its value from it being a commodity with useful physical traits - like the ability to fill a tooth, or conduct electricity, and so forth. Bitcoins have no such traits - they have the traits which would make a commodity with value a good currency, but it has no inherit value as a commodity!
Witness all the angels and VC's who sing the high holy praises of this scam. Are they just complete fools who have no understanding of the economics they claim to have expertise in, or are they just scammers trying to fleece suckers out there? I don't know the answer to this, but at the end of the day, all the VC's and seeders and angels on Twitter etc. who support this Bitcoin scam are either fools or thieves. Keynes said markets can remain irrational longer than he could remain solvent, but it's inevitable that Bitcoins price will go to $0. Since my first statement of this here, Bitcoin has gone from $460 to its present $290. It will inevitably go to $0, no matter how many of the scammers downvote this post so people won't see it. Because no matter what anyone says, the market cap of the $5 trillion worth of gold mined will never change more than an order of magnitude (barring some amazing chemical technological advance). Whereas lack of doubt is all that is keeping Bitcoin's $4 billion market cap from going to $0. From it's scammy beginnings (the anonymous "Satoshi"), to all the legal problems and scams of Mt. Gox, Butterfly Labs etc., it's only a matter of time before this Ponzi scheme comes to an end. More instructive than that is all the existing VC's, seeders, angels etc. who are vocal in their support of this scam - that's what you should really remember.
I don't know what the market will do, maybe fall hard, but I can tell you from personal experience it has utility over the alternatives in situations I've come across
Sorry you got downvoted. I don't agree with you, but I agree it's a valid point of view to have. But in the end, only the future knows if bitcoins price will rise or fall. Everyone is guessing here.
Let me leave you with this: If I told you 10 years ago, a website where everyone can edit the pages, and were nobody gets paid, will create an encyclopedia that has more content and is more accurate than professional encyclopedia publishers, would be believe me? I definitely wouldn't, that concept is completely absurd to me, but yet, it worked. Bitcoins seems like a way more viable idea to me.
Bitcoin is not competing with gold, it's basically competing with "I owe you" notes, managed by some central entity. You could argue that those "I owe you" notes have value, but maybe so does distributed transactions.
Bitcoin might just keep itself alive: because it has value, you can do transactions with it, and because you can do transactions with it, it has value.
> Bitcoin is not competing with gold, it's basically competing with "I owe you" notes, managed by some central entity. You could argue that those "I owe you" notes have value, but maybe so does distributed transactions.
As I said, it would take too long to fully explain why Bitcoins have less value than dollars and euros (of course last year, EUR/USD was 1.35, today it's 1.09, but the problems of Greece etc. are a little tangential...) Dollars had no inherent value in 1970 - you could trade dollars for gold, but it was still just a promissory note - I'd rather have an ounce of gold in my hand than a note promising me an ounce of gold.
What does the phrase "gold reserve" mean ( https://en.wikipedia.org/wiki/Gold_reserve )? The USA golds 8000 tons of gold in Fort Knox (and in NYC's Federal Reserve building). Why? Why does it do this? It must cost a lot to hold all that gold. The reason it does is because that gold implicitly (but not explicitly) backs the US dollar. If the dollar began crashing tomorrow, Obama could go on TV and say he was opening the vaults of Fort Knox and would exchange dollars for gold. Gold doesn't have any special properties, it's just convenient to use a currency, any commodity trade would do.
Even with economic dips, people don't think about the things underlying economic confidence in the face of potential collapse - but governments do think about these long term things, and major changes in policy always indicate changes in thinking ( http://www.nytimes.com/2013/01/17/business/global/german-cen... ).
Gold price has been falling for the last few years. Even with all this economic uncertainty and recession it has not had the usual uptick you would expect to see if people considered it a safe haven. In addition it seems likely that there is far less gold in Fort knox than there should be. They could not actually open the doors to Fort knox to exchange for dollars because at that stage the game it up. They just keep them closed and tell everyone their gold is safe and secure.
Nobody disagrees that Bitcoins have no value other than being a currency. The thing is: that doesn't matter, nor does it make it a "scam". Value purely as a currency is value nonetheless. Your argument is lacking the justification that only "inherent" value is "true" or "real" value.
If they're worthless and have value, why are people willing to pay so much for them?
I mostly agree with you, overall, but the "value" part of your argument is simply wrong.
And don't ignore the large positive impact Bitcoin had on people trying to purchase essential medicines. Can you explain why I can't easily buy medicines free of regulation without Bitcoin?
You say that gold has value. What is that value? Certainly there's some value in using it for things like electronic contacts, but that doesn't come anywhere close to accounting for the price. If you buy an ounce of gold right now, the $1323 is maybe $13 practical utility and $1310 collective faith in its use as a currency. Do you think that tiny bit of utility is enough, or do you disagree with my assessment that gold mostly has no value?
Yes, but it's not really useful as jewelry, just admired. People can admire large numbers with interesting cryptographic properties too, so I don't think this is something you can use to separate Bitcoin from gold.
History is often clearer than the present, so let's look at the price of silver around 1980. In 1979 silver was $6 an ounce, by 1980 it was worth $48.70 an ounce by 1982 it was back below $5. Was silver really have $48 of value in 1982 dollars? Clearly not. Over the short term the price of gold, silver, subprime real estate, dutch tulip bulbs, pets.com stock etc. can soar over its real value. Over the longer term, price and value always come back together though.
> the $1323 is maybe $13 practical utility and $1310 collective faith in its use as a currency
But non-speculators pay $1323 to fill teeth and conduct electricity. For them, the $1323 is 100% for practical utility. Of course, as the value of gold soars, they look for alternative products to fill these needs (ceramic, copper). Over the long term, I think gold derives 0% of its price from anything other than its value, over the short term, different factors come into play (like silver in 1980).
The vast majority of gold ever mined sits around doing nothing. If it was seriously useful for practical purposes then people would pay a lot more than $1323/ounce for things like plating electrical conductors, in order to get that gold out of vaults and people's dresser drawers and into useful applications.
Compare with oil, which stores pretty well, but where the vast majority of oil that is extracted is used rather than stored.
> But non-speculators pay $1323 to fill teeth and conduct electricity.
Well, It tends not to be used for fillings any more, and for coating conductors, only a tiny amount is used. Even then, half the time the gold plating is social value ("Audio connector with GOLD PLATED TIPS!", rather than practical value.
Mostly, it just sits in stockpiles, though; it's practical value is less than the value of stockpiling it.
> I think gold derives 0% of its price from anything other than its value
This is a tautology. However, a large portion of that value comes from the perception of value. It's valuable because people think it's valuable.
Works pretty fine for me when I buy stuff with it, idk. Not like it's replaced money for me, but sometimes I use it. I wouldn't go investing in it as a currency on its own but completely writing off at the very least the technology itself is a bit ignorant, don't you think?
And don't forget that Ponzi schemes were originally invented using that foolproof valuable currency you cite as a foil to bitcoin's scam! I'd say the time and resources that go into making bitcoin have inherent value just like using a little bit of gold to fill a tooth.
Not that I'm saying startups are currently bubble level overvalued - but stuff like the Bitcoin hype is a canary in a coal mine.
> but completely writing off at the very least the technology itself is a bit ignorant, don't you think?
I can conceive of the possibility of people using blockchains and such things in the future for various reasons. I have no desire to right off the technology of the blockchain any more than I would write off the technology of a distributed git repository. The question though is whether Bitcoins should have a $4 billion market cap, and to me the answer is clearly no - it already fell from $11 billion to $4 billion, and I see this falling to $0.
P.S. Re-watching that Whoopi Goldberg ad about "hip, young" Flooz versus "old, out of touch" money gives me deja vu all over again....
This implies that a trustless perfectly transparent currency has no value, which is obviously not true.
Bitcoin might die because the protocol is flawed. It does make a lot of mistakes that altcoins do great work to solve - block size, chain size, volume, and proof of work are all messed up to varying degrees. The rate of monetary base inflation being a piecewise downward spiral to a limited final supply is in no way practical for a day to day currency, ever.
But the technology basically crushes whatever nonsense you want to throw around when discussing fiat currencies, because at the end of the day every fiat dollar has to be "trust us". The financial industry has exploded on the back of phantom wealth with no physical asset backing, and bitcoin and cryptocurrencies in general are the counter to that entirely by being perfectly forwarded backed assets moreso than any other holding or investment you can have.
You can literally have the wallet file controlling a portion of wealth, and that wealth is backed by the computational power of the network, and the combined appraisals of everyone else using the money. If you hold gold shares, you have records that you own an amount of gold held by a third party trading company, maybe (its not like you are ever going to go withdraw it), and you are in good faith assuming the market cap is accurate, because nobody can actually summarize the amount of gold out there, even in just the investment market, accurately. And fiat dollars are even worse, since fractional reserve banking and digitization had led to tremendous amounts of money out there being literally numbers in a database but they have none of the benefits of bitcoin having a collective ledger of transaction history.
The technology is superior. We just need a Snowden of money the way Snowden was of privacy to demonstrate that "trust us" is what has literally zero valuation.
> The rate of monetary base inflation being a piecewise downward spiral to a limited final supply is in no way practical for a day to day currency, ever.
Can you explain this, specifically what the relationship is between having a limited final supply and day to day practicality.
Something has "value" if people will buy it. People have been buying Bitcoin for US Dollars reliably for years, hence bitcoins have "value".
Could the US government collapse and the USD become worthless tomorrow? Certainly. Could everyone wake up tomorrow and decide "Bitcoins are worthless?" certainly. But both those things are unlikely to happen.
The more interesting question is whether Bitcoins are "overvalued" or "undervalued"... but that is a far more difficult question to answer.
Bitcoins have value, but it's safe to say that nobody is going to jail if they can't get their hands on it in lieu of other currencies. Because of this, BTC will be subordinate to those currencies where this is the case.
This may or may not be a problem for any particular BTC application.
People buy it because they can use it. Gold, oil, sitting chairs etc. have value because they are useful. Bitcoins have no inherit use after purchase.
> People have been buying Bitcoin for US Dollars reliably for years, hence bitcoins have "value".
No they have price, not value. I quoted Keynes before "markets can remain irrational longer than I can remain solvent".
> everyone wake up tomorrow...But both those things are unlikely to happen.
Both of those things are unlikely to happen tomorrow, but the chance of the US government collapsing tomorrow is relatively a much lower chance than Bitcoin's price diving tomorrow, and people selling it like crazy. I mean, this just happened - Bitcoins were worth $315 at the beginning of the week and are worth $290 at the moment.
What's the use value of a dollar bill? To wipe one's ass? To place into a wallet to make it bulkier? No: to store for later exchange for goods and services. And so with Bitcoin. And that doesn't even get into colored coins/smart property and the myriad of other uses that have been thought. It's hard to accept your assertion "Bitcoins have no inherit use after purchase."
It exactly because opinions like this exist that I am bullish on bitcoin. Because nobody fully understands bitcoin, it means it is either undervalued or overvalued. Since old people have trouble adopting new tech and have most of the investment capital, with all other things being equal, it is undervalued.
