Because the previous times it wasn't being hyped in mainstream news and culture. The point where the guy on the elevator is taking about [bubble] is the point at which [bubble] is about to burst for real, because you've just about run out of new suckers to fuel it.
It's damn difficult to discriminate in advance between a bubble and a Revolution der Denkart [0].
The presence of hype, fraud and large fluctuations in prices do not invalidate new technology or concepts.
The dotcom "bubble" was a hypefest, then it deflated, but the underlying technology and concepts have spawned something many times larger than the original bubble.
If it turns out that cryptocurrencies have no purpose beyond a small niche, then we'll see in hindsight that it was indeed a bubble.
But if creative people find a larger use for cryptocurrencies, then hindsight will understand the 2018 "crash" as just another in the fractal series of price declines followed by even larger price increases.
Since the underlying technology has withstood sustained attacks across the technical, economic, political and legal domains, perhaps reports of its death are premature.
Well, the gold bubble has yet to "permanently" pop, and has been through multiple phases of mania - an arbitrary substance worth trillions of dollars which our entire supply of fits in 3 olympic swimming pools. Socially agreed upon value can potentially last for generations without any fundamental sense.
Gold is very different. There's a lot of ornamental uses(some industrial) and also historical and cultural value. Owning and hoarding gold is a status symbol in some cultures(2.5 billion plus with just China+India) way beyond owning the latest and most expensive iPhones.
Throughout most of modern history, you could buy things with gold and that's unlikely to change. Barring alchemy or some extreme globalwide natural disasters, there's a value floor on gold that's missing with bitcoin.
There are no current killer applications for bitcoin beyond some semi-legal trade of illicit drugs and ransomware which doesn't even need or cause the currency price to go up since it's usually converted back and forth to fiat. Perhaps this will change if countries currencies go belly up and die (think Venezuela, Argentina and Zimbabwe).
While gold has a much later stage "shared illusion of value" that comes from its brand and emotional associations, I'd argue that Bitcoin is extremely similar, just much earlier stage.
The purported uses of gold have no relevance, they're just part of the illusion of gold having value. We value 3 swimming pools of an arbitrary substance at 7 trillion dollars. There is no utility that even justifies 1% of this valuation. It does not produce dividends.
Would you rather speculate on a "shared illusion of value" that has massive room to grow into the digital age, or one that is potentially reaching peak levels of absurdity?
Both assets are illusory bullshit - but you can make a lot of money trading bullshit.
I could still see it getting bigger - you can’t buy a bitcoin ETF yet. Not saying it’ll ever happen, but there are big pools of money out there that haven’t touched crypto yet.
Would you be willing to make a friendly wager on whether it returns bigger than ever? My ten dollars says it will within, say, two years. What do you say?
Considering the downvotes I got, I suppose I was out of line suggesting a wager, but I've yet to see convincing evidence for why blockchain tech can't work. Sure it's overhyped way beyond what it deserves and it hasn't found its "killer app" or niche yet, but that doesn't mean it won't.
Nano's my favorite coin. It's fee-less, near-instant, and secure. Its largest flaw (and one all coins share at this point) is its tendency to fluctuate in value. But this problem is soon to be overcome by stable coins. Once that's done, its only remaining disadvantage will be lack of adoption. And if the product's right, I don't see any reason why a superior product won't gain market share given enough time. And it's not like crypto is under some investor enforced deadline to reach a certain market share, it's got all the time in the world.
Anyone care to point out any flaws in my thinking?
As to your questions, you can spend it some places. I think newegg takes it, Valve used to take it with Steam, etc. There are corner delis who take it, I'm not sure about yours. Your employees may be ok with you paying them in it, but that's an agreement you have to have with them.
To your last question -- no, I wouldn't think so at least for now.
I say you buy $10 worth of bitcoin and promise not to sell for 2 years. I'll stick $10 extra in an index fund and not sell that for 2 years. There, now we've made an implicit wager with each other and this way we won't have to reconnect in 2 years to work out exactly who won how much.
It's different because when the market cap of Bitcoins was less than one million, an 80% drop or pop did not mean much. One somewhat wealthy person could pump the price up at will.
When it hits a market cap of $334 billion, it becomes something more real. That is when Warren Buffett and Charlie Munger take a look at it and declare it something to avoid "like the plague" (Munger called Bitcoin "rat poison"). The greater market looks at it and it drops 80%.
Bitcoins are completely worthless. They have no value whatsoever. So the entirety of its current supposed market value of $61 billion (which was supposedly $334 billion a year ago), is closer to $0 than $61 billion.
Many overpriced dot-com stocks in 2000 or over-priced real estate in 2008 are still things which have value, even if the price went down for a while. Bitcoins have no value. I said so when the market cap was supposedly $240 billion ( https://news.ycombinator.com/item?id=15986475 ), I say so now, when the market cap is supposedly $61 billion, and I will say so until its graph starts hitting the $0 limit.
People say "it's valuable because it can be traded electronically", which is meaningless. Dot-com stocks could be traded electronically in 1999. The important thing is the value underlying what is traded. Bitcoin has none.
There's a lot to dissect in this chart, so take some time with it. Some observations:
* Most of the market is traded during bull runs. Each bull run sees a large segment of year+ holders take profits. Between bubbles, price-discovery is driven by short-term trading.
* Bear markets see remarkably little activity from holders. 'Hold waves' form between bubble cycles that clearly demonstrate that the majority of coins are held by 'firm hands' that bought in bull runs.
* Right now, a large segment of people that bought in the 2013 bull are starting to mature into the 5+ year bracket. A significant amount of coins are still being held in this way. It's remarkable to see it in real time. Neither the crash to $150 or the run to $20k motivated a large selloff.
* It took about 2 years after the 2017 bull for <6month bracket to fall to ~25%. It only took one year this time.
* Age distribution is becoming more bimodal: stubborn holders and large healthy active market.
* The current price crash is rather anomalous. An incredible 4% of coins in existence moved out of 3+ year bands very suddenly. This is among the 3 or 4 largest shifts, the others occurring in much different contexts. Given how sudden it was, and how specific the age band, I have my guess as to whether this is a cause or effect of the drop.
The main takeaway from this is that Bitcoin investors are remarkably willing to hold. "Hodl" is more than a meme, and the current crop seems about the same as previous ones in this regard, with a growing 'hold wave'.
I also think the last 'pop' was a lot worse due to the looming existential scaling threat. This has been addressed in an unoptimal way, but one that is remarkably true to Bitcoin and overall encouraging.
> The main takeaway from this is that Bitcoin investors are remarkably willing to hold.
How does this look like in other markets? It sure tastes like survivorship bias. As in: "Investors are willing to hold" because everyone else already quit.
How many people got burnt in the dotcom crash? In the financial crisis of 2007-2008? Black Monday of 1987? Did all of those people swear off investing in traditional equity instruments forever?
After the 2007/2008 financial crisis—the worst financial crisis in the history of the US—the S&P500 dropped 54.1% from peak to trough. BTC is currently down over 80% since its peak.
Let's also make sure we understand that the S&P500 (or any stock ownership) is owning _business(es)_. Businesses make money, and they return that money to their owners. Bitcoin is purely speculative and depends on someone else buying it from you, presumably for more than you bought it for. Good luck finding another batch of suckers to fall for this after that last round.
If you look at the history of Bitcoin's price, it has dropped 80+ % about three times before and then bottomed and gone up like 10x over the next three or so years. I find that quite a good argument to put to the next bunch of suckers.
Bitcoin has about 9 years of history. And until ~October 2017 it was a pretty obscure thing, primarily known about by “nerds”. That is no longer the case. I will leave myself a calendar reminder to check this thread in 5 years. I will be very surprised if BTC is trading higher then than it is now (~$3500).
If I was hazarding a guess I'd say the next crypto boom will be lead by a proof of stake coin, maybe a new improved ETH so BTC may languish a bit. BTC is a bit environmentally unfriendly.
As far as 5 years from now -- who knows where it will be trading. I suspect it will be higher than it is now, but there's never a guarantee on any of this.
My father-in-law didn't know what Bitcoin was in 2011, nor were the sort of newspapers he read covering Bitcoin in prominent articles. Neither of those things are true in 2018.
Obscure for who? I doubt very much your average grocery store cashier, barber, or airline pilot had ever heard of Bitcoin. The farthest-back data I can find (from 2013) shows BTC had a market cap of ~$800 Million. At its peak, it was over $600 Billion. Amongst the HN crowd, BTC was not obscure in 2011—you're right.
MtGox wasn't a secret. It was relatively well known and covered in the news, and I don't mean tech news. 2011, maybe 2012, was when bitcoin entered the public lexicon and it's only become more and more ubiquitous since.
We value 3 swimming pools of an arbitrary substance at 7 trillion dollars. Any utility for it is irrelevant at this valuation - it does not produce dividends. Gold is a brand, and the value of gold is a shared illusion. Bitcoin is much newer brand but it's not inconceivable that it could maintain a similar shared illusion.
I am a huge crypto currency skeptic and think the market is largely driven by massive amounts of fraud.
That said -- eventually the price will drop to the point where the price is entirely driven by Bitcoin's natural customer base -- tax cheats, money launderers, drug dealers, etc, and will probably in fact over correct.
Just for the sake of argument, let's said that 'natural price' is $500 or $600 a bitcoin -- it bottomed out around $300 last time and we've had a 'halvening' since then. So let's imagine the price drops down to below $1000, and stays around that range for a year or more. Then a new halvening happens, the price doubles to $2000. Maybe someone figures out how to do something useful with cryptocurrency? 3-4 years from now, people will have already forgotten about the last bubble and might FOMO again. Bitcoin has a long history of boom and bust with each boom being bigger than the last. It won't take much to convince people that another boom is on the offing.
> Bitcoin's natural customer base -- tax cheats, money launderers, drug dealers, etc, and will probably in fact over correct.
Funny I should read your comment about Bitcoin's use for criminal enterprise after I read about Goldman Sach's alleged hand in a multi-billion dollar fraud in Malaysia, or Deutche Bank's multi-billion dollar money laundering. Or going back a few years the Panama Papers and that entire underground financial apparatus that drummed up exactly zero long term outrage or changes. I'll be more inclined to believe crypto is only for thieves when you convince me that the existing financial system isn't also completely rife with thievery and cheats.
Every system involving money will attract criminals. But a new system that's much better for criminals and much worse for regular people will obviously attract more of the former than of the latter.
Still, I agree with vkou:
> Ransomware authors, heroin dealers and money launderers don't care how much BTC is worth - they only use it to cash out into USD. For them, the spot price is largely irrelevant.
That is, they'll still want to use Bitcoin, just not necessarily care about the spot price. The price is, I believe, driven up by gamblers.
Funny you should say that. I bought in at the beginning of the frenzy last September, and sold ten minutes after I read in early December that Wall Street was about to open up futures trading. I guessed that meant that the likes of Goldman were about to vaccuum up cash from the normal folks on my Facebook timeline with no technical background suddenly posting "I should buy Bitcoin!".
Ransomware authors, heroin dealers and money launderers don't care how much BTC is worth - they only use it to cash out into USD. For them, the spot price is largely irrelevant.
All their prices are denominated in USD, all they care about is that the exchange rate is stable. As for the launderers, you can launder money with BTC just as well when it is $3/coin, as you can when it is $3 million/coin.
An interesting technical point I saw on that is that you may be better getting out a little after the peak. The reason being on the way up there is no way of knowing where the peak is. For example in the recent bitcoin run up you might have bought at 1000 and sold at 2000 missing most of it. If however you waited until it looked like it was on the way back down you likely would have sold at around 16000 - 10000 and so done better.
I think the key is more to buy in early rather than near the top. Indeed if you time that ok you can sell half your stake when it goes 2x and so be kind of risk free for the rest.
If history is a guide bitcoin will go nowhere for 6 months to a year, then up up slowly, then have another silly bubble a few years later. So my infallible guide is buy in a years time, sell half when the price doubles, wait till there is a bubble and when it's super hyped but starts crashing sell out, probably about 1/3 below the next peak.
> leading people on like that is just not right. Stop that.
You are free to disbelieve, at your own expense.
About crypto, I sometimes make bold claims, that are downvoted [1], but I stand by them. And they come true [2] much more often than not.
Last time was about DOGE. Went quite up as predicted, went a bit down during the last crash but still like at position #21 today. And I still expect it to go higher - at least around #15 soon, unless something similar comes.
Before that, it was against ETH maximalism [3] - that ETH was not going to be #1 even while it was raising. I thought it was a good #2 but even that seems was too generous, as it is now in #3 and I can easily see it sliding down more.
Likewise, I state that BTC will bubble up, again and again, until something else offers better features. I haven't seem that "something" yet, hence my claim. The only question is how low it will go before it bubbles up. I'd say 1000. There isn't blood in the streets yet, the crash is just starting :)
Hey buddy, if you feel that investing in cryptocurrencies is too risky, and it may harm you finances and future, you should really find safer investments to consider. I would talk to a professional about it, perhaps with your local bank.
Investments aside, you should really try to get your hands on some Bitcoin testnet coins and play around. Alternatively, something like Defcoin (http://defcoin-ng.org/) is intentionally worthless and great for experimenting. It's neat stuff and helps you appreciate the technology, as well as appreciate the currency shortcomings that require smart people to try and fix.
Many of us talk about how this has happened and will happened again not because we want you to invest, but because it's old news and articles like this are super boring. We have spent time working with the technology and community and see value in it. Value you may not see without wanting to go deeper, but value that is real and exciting.
I'm more worried about the United States carrying a 21 trillion dollar debt load and what that will do to our economy more than I'm worried about "past performance not being indicative of future results" in the crypto markets.
"Millennials, like generations before them, just got a painful lesson about speculation." and yet the first tweet is from McAfee... I know life has been hard to him but that is one very aged Millennial.
Just add this bad article to the 300+ Bitcoin Obituaries, and the even more writings that try to point out the hard lesson learned by us idiot Millennials.
A reminder that some Millennials are almost 40 now, we were the first generation to grow up with the internet, and we lived through things like the dot com bubble and the 2008 housing crisis. What could we possibly know about technology and money? What could we possibly desire to see possible change and improvement in?
Cryptocoin speculation will likely be remembered closer to beanie babies or baseball cards as opposed to the dot com bubble etc.
This was just the first time we saw this happen globally and with digital goods. Which, possibly coincidentally, happened to baby boomers right when they were around the same age/point in life as the millennial generation is now.
Sure, downvote me because I was a bit mean sounding, or maybe because you are sick of hearing about Bitcoin. I feel like it's a fair question though. To say that Bitcoin will be remembered more like beanie babies and baseball cards, rather than the dot com bubble, sounds absurd to me.
You have the worlds largest tech companies, banks (the IMF!), the Big Four advisory firms, top lawyers around the world, governments at all levels, and just some incredibly active open source communities, all working with this technology. Why belittle it like what was done in that comment? Can't we at least agree that after ten years, Bitcoin has been an experiment worthy of its own story rather than being lumped on either side of "beanie babies or baseball cards as opposed to the dot com bubble"
A weak defense of Bloomberg here: it was a bubble/pop, and this wasn't an obituary. They actually resisted calling it dead. The story was more about the dangerous of 'bubbly' assets, which is entirely legitimate. Obviously the millennial angle is dumb, but meh.
Totally fair comment. The author does admit that they themselves are still holding, so an addition to the obituaries isn't accurate. I think the millennial part just frustrated me.
>The Bitcoin hype cycle is driven by the mass media.
It’s much more nefarious...the boom and bust articles are essentially ordered by individuals/groups with the influence as part of the market manipulations. It’s not entirely unlike what people refer to as submarine articles, what’s lurking underneath these publishing’s are attempts to move the markets (the first wall street movie actually does a decent job of demonstrating this practice in the 80’s for the stock market).
These details will be exposed now that the SEC is beginning to target manipulations in these markets.
The thing that really bothers me the most about crypto trading is all the wanna-be day-trader bros who fundamentally misunderstand what they are actually buying and selling.
"Open source distributed transaction ledger" sails right over their heads but if I said I hand out a new dirtcoin to whoever moves the most dirt around my yard each day and here are some exchanges carrying dirtcoin I'm met with an avalanche of Wall Street jargon about how dirtcoin is the best investment anyone can ever make.
I knew we were at peak in Dec 2017 when a fellow tourist in Mexico proclaimed his iPhone was stolen, apparently along with his BTC wallet, and he no longer had funds to continue the vacation.
Because its (energy cost) overhead is still sky high and likely to remain reflected in prices?
Because it is the "brand name" market with whatever caché remains to that name reflecting in prices?
Because sunk costs of existing investors want to keep the price high for as long as possible?
Those are just a few of the more obvious reasons. Not that I think it's any one thing here, it's probably some admixture of the above and other reasons.
Yes, it's down from the bubble peak in mining, but it is still a massive over-expenditure of energy per value. Right now, still, according to the Digiconomist stats above, ~15 average US homes can be powered for a day with the energy spent to make a single Bitcoin transaction block. That's a considerable amount of energy.
That’s a relative term, is like saying amazon is expensive st 1500 as opposed to 15 after did a 100:1 split. The point is no one knows how to price BitCoins and what to base the price on. At the current price point it could go up or down based on how happy people are with it, almost zero fundamentals to say what is worth.
> The point is no one knows how to price BitCoins and what to base the price on.
That's because bitcoins base price is a very round zero, and the only value associated with them was derived purely from speculation and prescribed prices used in money laundering operations.
Venture investment in Blockchain went up in 2018. The median deal size increased over $1.0mm and the number of deals is also up. [1] Once the ecosystem of complements matures, Bitcoin's utilization is expected to increase. [2] The price of Bitcoin is driven by speculation that utilization of Bitcoin creates value. [3]
The stats can be misleading, because I have 3 verified accounts. How many people expanded the number of accounts they hold to access more ICOs / tokens / P&D?
BTW, the reference states
"The study indicated user growth rates were higher in 2017 but continued on into 2018 at a rapid pace."
Private blockchain seems to be crossing the chasm at a much better place. Bitcoin has yet to offer something of value to the mass market. My money is pretty much digital already, and I'm not really down with my transactions being out in the public. Perhaps another crypto currency will meet the needs of the major market, though I have a hunch the current financial institutions will get there first.
I think Bitcoin would be a good fit for transferring value between large entities (governments, banks, etc.), where having public accountability would be especially valuable. Those entities could then exchange it with other lower-valued cryptocurrencies, fiat currencies, precious metals, seashells, etc. more suitable for day-to-day consumption by the general public.
There’s millions/billions in sunk costs embedded in them, in the form of electricity bills already paid by miners. But being sunk costs, they do not contribute to any intrinsic value on their own.
Compared to a transaction at a bank, via PayPal, a credit card, or just about anything. Is there a more expensive (financial and environmental) way to make a transaction?
I would love an analysis on who is moving the market today. In the last month there have been three occurrences where the price of BTC jumped 10% in a single moment (followed by equal sell-offs hours/days later).
Stranger still, all coins seem highly correlated. BTC goes up, all coins go up.
I realize this behavior is not new and the market has been highly correlated since the beginning, ...but why?
In a stock market, some companies outperform others by being more valuable at one moment than another. The difference in value results from differences in the companies’ expected future cash flows.
Crypto coins, despite ICO promises, have not historically been revenue generating assets, so there is no future cash flows generated by them. Thus they can be considered fungible, retaining the same value despite their different symbols and nominal prices. With the level of distrust in the ecosystem, only “bad” news affects a given ICO, sending its value to zero. Neutral news, or good news, does not increase a given coin’s price, so they all settle around the same “value”, and all their “values” move together.
When anyone or their pet monkey can clone a Git repo, change some variables, and launch their own ICO with zbsolutely zero proprietary innovation, it is to be expected that all crypto coins will approach the same value.
(I put “value” in quotes because different coins have wildly different prices, being a function of some variables in the coin’s software determining e.g. how many were “issued”, but you have to ignore those prices and instead think about the underlying “value” represented by the coin. It’s really not much at all — perhaps only the sunk cost of electricity, but likely less than even that.)
I would also love an analysis on what is moving the market. It has to be more than Tether at this point.
Most exchanges that have coins other than Bitcoin use Altcoin/Bitcoin pairs. So you're not trading in relation to the US Dollar, you're trading in relation to Bitcoin.
For a trader, that means that to them 1 ETH is currently worth 0.02678663 BTC. The USD price of Bitcoin doesn't come into play here. So, if Bitcoin goes down, the relation to ETH means that it follows, since 1 ETH is still worth 0.02678663 BTC.
Edit: Why would they do this? A number of reasons, the biggest two being habit and volume.
Most coins are traded on networks that don't have fiat currencies, so they had to choose a cryptocurrency base. Also, many traders in the realm started out with Bitcoin, and love Bitcoin, and want more Bitcoin. So they don't care if a trade gets them USD, they just want to grow their BTC holdings.
Finally, with trading, volume is very important - you want as much being offered for sale as possible. If you split up every order book (btc/eth, xrp/eth, ltc/eth, usd/eth, xrp/ltc, xrp/usd, ltc/btc, etc etc) then the volume of each 'book' is divided amongst the options, making it harder to move larger amounts from one to the other.
> Stranger still, all coins seem highly correlated. BTC goes up, all coins go up.
My current theory is that Bitcoin is the "reserve currency" of all these coins. That is, their price is better understood as being expressed in Bitcoins, not in USD or other currency.
Either McAfee was being facetious in that tweet, or he was smoking something good.
It's one thing to believe that Bitcoin is the future, it's another to believe that "Bubbles are mathematically impossible in this new paradigm. So are corrections and all else."
What we won't tell you is that many investors have realised that the price will fall freely if the supply can't be limited in demand drops. And they are now seeking to gain control over as much of the circulating supply as possible.
Bubbles only pop once. Bitcoin has spiked and crashed multiple times and it isn't unreasonable to expect it to do so again.
Eventually, we might see the terminology change from "bubble" to "spike." It's already happening... Albeit slowly [0]. Can anyone think of a better term?
A spike is something that happens and completes in a very short period of time, not drawn out over a year like this was. The terminology used pretty clearly follows the shape of the price charts — there’s no need to try to redefine terms to meet whatever point one is trying to make.
Like the dot com bubble, and here we are today bigger, better and stronger. Think in terms of a public trading vehicle that enables anyone to raise capital in a global marketplace. Either real value gets translated to that vehicle or it does not.
Negative. Innovation is great. But new inventions won’t all be successful. And claiming one will because another invention was successful in the past is bad logic.
