Bitcoin

Where is the value here? The value of gold is going up an up, the land no the moon was for sale, but whose was it to sell in the first place!
Same for bit coin, its use is zero, and its valued against currency, which we keep printing because we don't have enough, this makes it a third stage utility, which doesn't exist. Its a certificatewhich we can all print. Of course the certificate carries weight, but the weight has no monetary value. It can only be traded out through itself. Yes it will make money for some. And how much a share is the imaginary non existent utility worth? Ask again, is it a bubble?!

pedronomix wrote: »

Interesting article from Forbes contributor on the topic

Testing Shiller's Nobel Prize Against The Bitcoin Bubble



Of course, this presupposes that Bitcoin is indeed in a bubble but I think that recent price gyrations show that it is, at the very least, showing the price behaviour of an asset in a speculative bubble. But here the interesting thing to me is something that Robert Shiller, joint winner of the Nobel for economics this year, has pointed out. That one of the things that pops speculative bubbles, one of the things that can actually prevent them forming, is people betting that it actually is a bubble. My contention is that if the Bitcoin market has an absence of these tools then that makes it more likely that we are indeed in a bubble.

Shiller’s basic point here is that in developed markets you can bet (speculate is the polite word) that the price of something will go down as well as up. That is, you can go short on stocks, buy a put option and so on. He then points out that you cannot do this with housing very well: and it’s the absence of that ability to go short the US housing market that allowed the housing market to get so out of hand. If there had been more people able to bet on falling prices then there would have been more people doing so. And the very existence of such speculation would have, if not popped, at least reduced the inflation of, the long only speculative bubble. This is why Shiller’s solution to this problem for the future is the creation of exactly those sorts of housing futures and options that would allow speculators to go short. And yes, this sort of research of his into financial markets is exactly why he got a share of this year’s Nobel.

Then we’ve this excellent little piece by Stephen Gandel. He goes off to test how easy or difficult it is to short Bitcoin. The answer is that it’s not easy, it’s not cheap and in at least one respect extraordinarily badly designed:
Bitcoin Market In Sharp Correction, What Is Next? Panos Mourdoukoutas Panos Mourdoukoutas Contributor
Bitcoin Gets Valued: Bank Of America Puts A Price Target On The Virtual Tender Samantha Sharf Samantha Sharf Forbes Staff
Central Banker On Bitcoin, At Least With Tulipmania You Got a Tulip At The End Tim Worstall Tim Worstall Contributor
Calling David Friedman, Redditors Providing Private Legal Enforcement Over Bitcoin Theft At Sheep Marketplace Tim Worstall Tim Worstall Contributor

With normal currency options you can choose to collect in whatever currency you are using to bet against another currency. So if you are betting the price of a euro will fall against a dollar, you can collect in dollars when the contract settles, thereby offsetting the fact that the euro just dropped in value.

You can’t currently do that with bitcoins. All of the bitcoin options and futures contracts are settled in bitcoins. This is a very bad deal. Because even if I end up with a bitcoin windfall, they will be worth a lot less when I convert them back into dollars.

That’s so badly designed that it is actually near useless as a speculative method of going short. But as a result of Gandel’s investigation we can see that there isn’t that market that Shiller would insist is necessary to prevent the forming of speculative bubbles. If you can’t short it efficiently then there is room for a bubble to grow.

This does not, of course, tell us that Bitcoin is in a bubble. That remains my opinion, that it is, but this particular test only tells us that one of the things that could or would prevent or pop a bubble is not present. That is a bubble is still possible.

alb wrote: »

It's depressing that on the "Entrepreneurial" forum of all places people are dismissing Bitcoin without seemingly understanding it, instead of being curious and wondering about the business possibilities it could bring.

Despite it's growth, BTC is only beginning to enter the general public awareness. It's rare people who will both welcome a radical new idea as early adopters and further build on that to develop a business. I've no doubt some of those people will be Irish, and possibly Boards.ie users- but it might be a little too early to expect a warm welcome for our favourite crypto-currency. On the upside, this means lots of low hanging fruit if you happen to have a good idea.

pedronomix wrote: »

Your comment about the nature of the responses to the topic on a business and enterprise forum would lead me to guess that as you earn your living as a software engineer, rather than as a small business owner. I of course could be wrong and if I am I apologise in advance.

He may be. I'm certainly much more a tech person and don't have much of a business mind. I suspect that trend would be common among BTC adopters. The question is whether ignorance of business and economics is the key influence driving adoption or whether it's better understanding of the tech. Probably both to some degree. There's a compelling elegance to BTC, and it's track record for utility (limited as it might be) and security is incredibly encouraging.

relaxed wrote: »

Moved it where?

I can move money between bank accounts and pay no transaction fees.

Not internationally you can't.

pedronomix wrote: »

Most of the attraction appears to be to the buyer rather than the business seller.

You think so? The non-reversible transactions seem to favour the seller more, since payment is typically confirmed before service or product is provided.

dkane wrote: »

Secondly transaction reversals. Legitimate businesses absolutely have to worry about fraudulent charge backs. Customers who claim that goods never arrived or that goods were not as described. Bitcoin puts the seller in control of refunds.

In fairness this can be an advantage or a disadvantage.. Is it really unheard of that businesses are fraudulent?

To reword:

Legitimate customers absolutely have to worry about fraudulent sellers. Sellers who claim that goods were dispatched or that goods were as described. Bitcoin unfortunately puts the seller in control of refunds.


If anything the bias and complete denial of bitcoins weaknesses is the biggest turnoff of the currency IMO. These risks need to be accepted rather than ignored. For traditional currencies VISA, Mastercard and PayPal protect the customers. This is a service that is missing from bitcoins.

The flip side of this is that they charge a premium for this service. This is an advantage of bitcoin.

Do they charge for the service?

Graham wrote: »

Who monitors and regulates the escrow services? Haven't there been cases where bitcoin processing/transfer companies have just vanished off the web?

Yep- an escrow service requires a trusted party, whereas bitcoin was designed to function without one. Services using BTC such escrows, savings accounts, credi facilities etc. will all probably have to be subject to regulation, if only to build consumer trust.

relaxed wrote: »

But it doesn't cost anything at the moment, for most of u,s to do normal online bank transfers, at least not within your own country, or even across the EU AFAIK, so I don't see what bitcoin will do for the vast majority of business transactions.

I can't speak on the balance of international versus EU/national transactions- but there's clearly great potential for companies that want to do international business. Even more so for companies dealing in digital products such as music, video and software. I wonder too whether multinational corporations might find it far easier to move money between their subsidiaries if they keep it in BTC. That would require much greater price stability than we're seeing today, mind you.

relaxed wrote: »

If I go to a restaurant on a Saturday night how are they going to accept bitcoin? I assume some sort of online terminal will be required = fees and charges.

There are places (but none in Ireland that I know of) that accept bitcoin. They use tablet apps to display a QR code that the customer scans with their smart phone. No fees or charges aside from the measly 0.0001BTC network fee in the case of very small transactions.

relaxed wrote: »

Who is going to the develop all the software for businesses to adapt, ultimately there will be normal transaction fees associated with shops, bars and restaurants accepting this.

There hasn't been so far, why would there be now? In a restaurant, I get my food before I pay. When I pay, I scan a QR code and once the restaurant gets confirmation, we're done. This is already up and running. Neither side pays fees to anyone.

If confirmation fails then it's the same situation as if I find my wallet empty or my Visa declined. I will find myself washing dishes I suppose.

To justify fees, a payment app would need to be offering some serious added value. Perhaps if an escrow type arrangement is needed, fees might be appropriate, but in the case described above that has never been necessary for cash so it isn't necessary for BTC either.