Discussion in 'Bullion Investing' started by goldcollector, Mar 17, 2017.

  1. PeacePeople

    PeacePeople Wall St and stocks, where it's at

    The exact same thing that backs the US$, confidence, no more and no less. Why do people find this so hard to comprehend?
    imrich, Prime Mover and Co1ns like this.
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  3. Co1ns

    Co1ns Member

    and just like gold, Bitcoin has an extremely loyal, borderline maniacal, dedicated buying base ... the only difference is bitcoin bulls can actually pull off a decent rally! :p
  4. HawkeEye

    HawkeEye 1881-O VAMmer Supporter

    Thanks for your post and it does help clarify a thing or two. To me the most interesting issue is price. Historically currencies don't have prices like stocks, and while the might have exchange rate fluctuations based on world events, they are largely stable for all the reasons discussed.

    But if Bitcoin is limited in number and can fluctuate based on supply and demand then to me it fails any currency test, electronic or otherwise. Also as discussed, if the primary use is the movement of illegal or untraceable money then the demand is being created by those outside the law. I assume the need to move money illegally exceeds the supply of units capable of carrying that transaction, thus prices rise.

    While the concept is interesting, the lack of stability is a downfall in my books. With a limit of 21 million Bitcoin, and commerce being unlimited, competitors will emerge if governments don't shut it down. When the competitors emerge the supply may equal or exceed demand and more classical econometric forces come into play. At that point it seems to me that the price drops precipitously.
  5. HawkeEye

    HawkeEye 1881-O VAMmer Supporter

    Actually the very large bills were pulled because they were no longer needed and were never in general circulation in any significant number. The primary use of the really large bills was daily settlement between banks for net transaction flow. When banks were able to accomplish this by wire transfer through the FED the need for the really large bills was eliminated. They were legal tender, but now only collectibles to my knowledge. No one would spend one because they are worth more as a collectible or novelty. Their value is derived by limited supply, much like a rare coin.
  6. HawkeEye

    HawkeEye 1881-O VAMmer Supporter

    Much like Enron and their control of energy, or the Hunt brothers and silver. If Bitcoin bulls can force a rally then the underlying principles are really in question. Manipulating a rally will call the Feds into action for sure. Supply and demand is more plausible, but at best questionable as a business practice.
  7. Michael K

    Michael K Well-Known Member

    Don't know allot about bitcoin but it begs the question what back is it up monetarily?

    But nothing backs the US dollar monetarily either.
    The dollar is backed by the faith in the people, of our government to pay it's debts. Which we are not doing.
  8. SuperDave

    SuperDave Free the Cartwheels!

    In my one hand I have a Bitcoin, a piece of machine code which only has intrinsic value because some believe it does, a thing which by definition cannot exist in the physical world. In the other hand, I have legal tender, backed by the full faith and promise of a sovereign nation (that's nothing, Michael K?). The difference is, with the former one laughs at those who believe in it, and with the latter one laughs at those who do not believe in it.

    The day will come, likely soon, when an entire nation officially switches its' monetary issue to "virtual" status. Then, and only then, can a reasonable, thinking person contemplate lending credence to a virtual currency. Until that time, anyone assigning "value" to something an inventive coder can create from scratch is, well, that's a political analogy and I can't go there.
  9. -jeffB

    -jeffB Greshams LEO Supporter

    But the dollar had ten or more times its current value at the time these bills were used.

    So, why not reinstate $1000 bills, so you can (as in the old days) carry the price of a new car in a wallet instead of a bag? Because if you're carrying the price of a new car in your wallet, you must be trying to get away with something. That's the only reasoning I've seen lately to justify their absence, and to justify (for example) the discontinuation of high-denomination Euro notes.
  10. -jeffB

    -jeffB Greshams LEO Supporter

    But saying virtual currency is "something an inventive coder can create from scratch" is like saying that greenbacks are something an inventive printer can create from scratch.

    You can print counterfeit greenbacks, but the effort to make convincing ones and get away with passing them is prohibitive.

    You can create your own alternative paper money, but until you can get a critical mass of people willing to use it, it's irrelevant.
    Co1ns and Santinidollar like this.
  11. Michael K

    Michael K Well-Known Member

    As I said Super Dave nothing backs our money except the faith in our government to pay it's debts. (Which we are not doing.) We borrow more than we pay back. We can't pay the interest on what we owe. And yet each year the government spends more than it takes in.
    How long before this whole pyramid scheme collapses?
    I can only hope our economy doesn't collapse until after I am dead.
  12. mpcusa

    mpcusa "Official C.T. TROLL SWEEPER"

    I guess that depends on how old you are...LOL
  13. Prime Mover

    Prime Mover Active Member

    So we have now a bunch of interesting replies and good discussion, this is what I had hoped for. :)

    I'm not going to quote individual pieces because, well, I'm lazy ;)

    First off, I'm going to say again that I don't believe Bitcoin's value (usage) is being as a replacement currency. I see it as pretty much a new, digital Gold or Silver. The parallels are unmistakable - you have to "mine" your coins, there is a finite amount available, and it is given a (substantial) financial value even though there is nothing "backing it". Honestly, it's metal that's pulled out of the ground. It has some uses industrially, but really, what makes it so special above and beyond any other metal we pull out of the ground that also has industrial uses? Steel is much more "precious" than gold, we couldn't have anything we have today without it, yet it's worthless compared to any PM.

    To quote above, anyone who assigns an artificial value above and beyond basic usage to something should be by definition delusional. Yet here we are on a coin collecting board watching and talking about things that have a face value of $0.01 going for thousands, tens of thousands, or even millions of dollars. Why? It's only "real" value is $0.01. Something is worth whatever people are willing to pay for it, for whatever perceived reason, logical or not. And most times, it's illogical and backed by nothing concrete.

    Now, to the whole "drugs and hookers and tax avoidance thing". Yeah, so what? If you are a person of nefarious intentions, you're going to use whatever tool you can to facilitate those means. PM's, jewels, cold hard cash, and now Bitcoin are used for it. Bitcoin is a tool in that belt, sure. Anyone who denies it is living in a dream world, just as anyone who thinks only Bitcoin is used for that is also living in the same.

    I will argue that Bitcoin is actually MORE traceable than US cash for illegal activities. Back to my last post, EVERY transaction made is recorded in a publicly available ledger. You can literally follow your Satoshi (a Satoshi is the Bitcoin equivalent of a cent, in simple terms) from the moment you "spend" it, forever more as it travels (anyone familiar with the "where is George" dollar bill tacking effort?). Take these recent Ransomware attacks. The ransom was paid in Bitcoin, and you'd think hey, illegal usage, and they'll never catch them. Nope. The authorities know the Bitcoin addresses where the ransoms were paid to, and are watching them for any movement. So, the thieves have collected zero so far, and as soon as they try to move the money, it'll be followed and they will be caught when trying to cash out. Even if it's 20 years from now. Yeah, try to do that with Cash.

    For every 1 bad thing associated with Bitcoin, there are hundreds if not thousands of good things that aren't trumpeted. There's a small family shop out in Utah (Bees Brothers if you care to look it up) where the boys were doing a project for school and it turned into a love of beekeeping. They took that and turned it into a business where they make and sell honey-based products, and guess what for? Bitcoin. I've bought some of their honey caramels, they are wonderfully tasty. They also sell for normal US fiat, of course.

    Everyone has a right to be skeptical about Bitcoin, for sure. The book is still being written, and right now, no one knows how the final chapter will go. Not even the creators know, and I'm sure there are plenty of the original folks marveling at just how far its come.

    The way I prefer to look at Bitcoin is that it was the first step in testing the water for a migration to digital "currencies", and it was setting the stage for an entire new way of thinking about the concept of "money" and how it can evolve into the current digital age and beyond. Look at monetary units over time, how they evolved, how they started from nothing (literally) and grew to be used for commerce. This is just the next step in evolution.

    If you twist the perception lens around, you can draw parallels to current monetary methods and see how it COULD work out. Take a look at it from the angle of Bitcoin = gold, Litecoin, Ethereum, CoinX = silver, platinum, etc. Then all the other alts as all the other types of currencies each country is using. There would be Dashcoin, Dogecoin, CoinX/Y/Z instead of rubles, drachmas, yen, etc.

    The biggest thing here is adoption. Remember, Bitcoin is the oldest one, and it's less than 10 years old. 10 YEARS! It's got growing pains, many of them, for sure. But, it's coming to a point where it is reaching critical mass and it is now in the conversations of more people on a daily basis, those from all walks of life, not just Geeks and Nerds and coders in mommy' basement. Yeah, it could crash and burn, and we have to be cognizant of that.

    This got way too long, I'll cut it here for now.
    Co1ns and HawkeEye like this.
  14. Michael K

    Michael K Well-Known Member

    What happens in the future when they say: Yes, I know we promised that there would only be a finite number of Bit Coins ( 21 million) but due to the current situation ( any host of things) we're just going to make 42 million more.
  15. Prime Mover

    Prime Mover Active Member

    It could be very bad, it could mean instant de-valuation, and worse possibly the death spiral of Bitcoin. This is one of the core tenants of this particular crypto-coin.

    Now, could that ever be changed? Yes, it's possible if someone changes the code to accommodate a higher limit. Probably not very easy because that number is tied to the very math behind the coin and its distribution schedule, but it could be done.

    However, it could not happen without "consensus", meaning 95% of the voting nodes would have to accept it and run the code base (a "fork"). Gaining consensus is a very long process and I'm sure this would be in the limelight for a very long time with heavy resistance, so likely it would not come to pass.

    But, should there ever be a scenario where this would be possible and likely, I'm sure you'd see a mass flight from the coin to another alternative (death spiral mentioned above).
    Co1ns likes this.
  16. Michael K

    Michael K Well-Known Member

    Anything can be hacked. Even Bit coin.
  17. Prime Mover

    Prime Mover Active Member

    I don't like speaking in absolutes, but I firmly believe Bitcoin itself as a whole will never be "hacked" and taken over by some rogue person or group, nor will any of the other mature, mainstream crypto-coins. There are too many failsafes within the designs to be able to mitigate any issues that may arise.

    People's computers have been compromised, thus losing their wallets and contents, but on a singular instance scale.

    Servers from some of the exchanges have also been compromised, losing the wallets and contents of customers, and forcing some of them to fail and dissolve into the ether. Again, isolated incidents which had no overall ripple effect.

    But if you understand the concepts of how it is built, how it functions, and how it self-regulates, you will also come to the same conclusion about its resiliency to survive any attempt at a traditional "hack".

    There are certain scenarios where an attempt to hijack it could be made (the 51% attack theory, which in and of itself is technically provable). There have been attempts in the past, and there could be attempts again. But going back to the failsafes, there are easy ways to thwart and recover from any such situations with little to no harm being done.
    meteor likes this.
  18. HawkeEye

    HawkeEye 1881-O VAMmer Supporter

    Like there will never be leaks from the NSA? Having worked in the technology industry, usually security failures originate from within not by hacks. Bitcoin will be compromised in time. But the real issue is "What is the underlying value?"

    All the proponents of Bitcoin in this thread talk about the security, popularity, and acceptance of the product. But all currencies, even crypto-currencies, must have some basis of value? On a very simplistic basis you cannot walk in to buy a cup of coffee with a coin that fluctuates in value. So why would I take payment for any real product with a currency that could be worth more or less once the transaction is completed, making my transaction unpredictability profitable or unprofitable?

    I also well remember the glory days of the Dot Com era when new entrepreneurs worked to convince people that profits were the old way of thinking. All that mattered were clicks. Clicks were the new currency, we were all just too old and dumb to understand.

    Where is Adam Smith when you need him?
  19. Co1ns

    Co1ns Member

    As I said earlier, the illegal discussion is way out of date. Appropriate 5 years ago, these days the darkweb is moving towards a more private cryptocurrency, Monero which can't be traced. Majority of bitcoin interest these days arises from something we can all relate to: capital gains.

    Sorry, but this is a poor comparison. It isn't a forced rally or manipulation, there is no central authority with the power to do so. Unlike the oil companies which control supply and are also the biggest players in the futures markets. I'm no expert on the gold markets, but most gold bugs I speak to believe these markets are highly manipulated. As far as forex, we've had libor scandals, institutional stop hunting etc.

    I invite you (and anyone else who wants to learn a little about bitcoin and cyrpto markets) to check out the Bitfinex exchange and margin trading platform, it is truly fascinating if you are interested in market mechanics.

    As I said earlier, this is fast approaching, though the solution will not be bitcoin. The big investment banks and tech companies are already investing in Ethereum technology, this is what renders a lot of the discussion in this thread so out of touch and absurd:

    "Thirty big banks, tech giants, and other organizations—including J.P. Morgan Chase, Microsoft, and Intel—are uniting to build business-ready versions of the software behind Ethereum, a decentralized computing network based on digital currency." Full article at Fortune


    and on that note, follow up of the chart I posted yesterday:


    Ethereum has notched another record close against bitcoin after a week of sideways following the channel break. Up 157% since April lows and 972% year to date.

    Finally, for anyone who really feels strongly about a lack of future for bitcoin - there is borrow available. Take a position. Short it. Put your money where your mouth is. The bitcoin proponents in this thread all have skin in the game. Anyone who doesn't have enough knowledge to take a position with confidence is just noise.
  20. Co1ns

    Co1ns Member

    Actually you can and have been able to do so at lots of coffee shops for years now.

    Steam accepts bitcoin, tons of big online retailers accept bitcoin. Paypal partnered with bitcoin exchanges more than a year ago, allowing all paypal sellers to accept bitcoin.

    I strongly suggest you research the topic a little more before attempting to talk about it publically, a lack of knowledge combined with a strong opinion just looks a little silly.
  21. -jeffB

    -jeffB Greshams LEO Supporter

    Now, that's just silly.

    I think there's a really good chance that, at some point in the future, one bitcoin won't even cover a cup of coffee.

    I also think there's a really good chance that, prior to that, it'll hit $3000, or $10000, or $1000000.

    Why on Earth would I take a short position on something that could bankrupt me with one burst of irrational exuberance?
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