Another 15% to $8.50 at mtgox.
Would you invest in a stock with a chart like that?
Will its death be slow and lingering? Or will it just snap like a dry twig at some point?
Here's an article from Marketwatch.com that asks the key question all the bitcoiners just fail to grasp, emphasis mine:
The issue is whether Bitcoin will ever be so widely adopted that it acts like a real, stable currency.
Interestingly enough the article compares bitcoins to beanie babies.
Bitcoin, right now, isn’t just popular, it has the feel of a mania, like tulips in the 17th century or Beanie Babies in the late 1990s,
where supporters appear ready to suspend rational thought as they throw money into something that they desperately want to succeed.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
It makes for a catching analogy ("oh wow I remember those!") but it's not exactly accurate. People wanted Beanie Babies because...well because eveyone else wanted them. They wanted to collect them. Like Pokemon. "Gotta catch em all." It was a collector's game. And that was their hot time. Just like every other collectible has its heyday. Bitcoins are not collectibles. And people don't want them because they're trying to complete a "set" of unique bitcoins. The people buying and using bitcoins see them as a useful tool...something to substitute for the currency they currently use, as much as they can...and hopefully fully replace it.
People were not buying beanie babies because they felt they were a part of a movement to change the modern monetary system. Bitcoin users do. That's a big difference.
John James, it's true it was collectible and part of a movement.
But I think part of the appeal of beanie babies was that people expected a future return on hoarding those monstrosities in their houses. And having a few of the rare ones when they went on sale in limited edition. I think I remember 'pogs' were the same. Caused by the success of Star Wars action figures and other stuff that was left in the package.
John Ess: John James, it's true it was collectible and part of a movement. But I think part of the appeal of beanie babies was that people expected a future return on hoarding those monstrosities in their houses. And having a few of the rare ones when they went on sale in limited edition. I think I remember 'pogs' were the same. Caused by the success of Star Wars action figures and other stuff that was left in the package.
All of that does nothing but support my point. I'm not sure why you led off with "but".
You sir, are confused. First you tell us bitcoin is not money. Then you go on to describe how it is used as money. One rhetorical question for you...
Have you read "the theory of money and credit" by Mises?
Obviously you have not because if you had, you would not be so confused.
If it is not money then why did you name it Bit"coin"?
Who is benefitting from the expansion of the number of "coins" in circulation?
"All of that does nothing but support my point. I'm not sure why you led off with "but"."
I thought you were saying that they wanted them just to have them. Whereas I am saying they wanted to use them eventually, at a later date when they become able to. And the hype was mainly that you buy early, you get more money later.
Which is not unlike bitcoin. Though, I could be wrong. And bitcoin has at least the advantage of not having to keep toys in your house. But the gamble is the same. If there is no use in the future, buying them now to use later won't be beneficial.
Though to be fair to toys, some of them are fetching outrageous prices. I hope I am wrong about bitcoin and it turns into a success.
John Ess:And the hype was mainly that you buy early, you get more money later. Which is not unlike bitcoin.
It's obviously impossible to tell, but I'd be willing to bet at least a majority of bitcoin users have at least a considerable amount of belief in its viability as a store of value and unit of exchange, and hope to see it gain in popularity so that they might use it for (eventually) all transactions they currently conduct with fiat currency. I doubt most bitcoin users are simply speculators thinking they'll buy some now and sell them later for a profit, like any other speculative investment...which would have to be the case if it were "just like beanie babies."
But the gamble is the same. If there is no use in the future, buying them now to use later won't be beneficial.
There is a difference between "buying for future use" and "buying for speculation".
I've just read the whole article and I have to agree with it.
It first shows that right now Bitcoin is acting more as a commodity than as a currency. That is correct.
Then it goes on saying there are two problems with Bitcoin right now.
The first is acceptance: being a completely voluntary currency you cannot force people to accept it as legal tender. If you walk into my shop and offer me Bitcoin instead of dollars, yuans, euros or silver coins, I can refuse to accept them and there's nothing you can do. If you offer me legal tender of the country we are in and I refuse you can go to the law and force me to accept it.
The second is security. For most people interested in Bitcoin that's the biggest issue. If somebody robs my bank they'll just take the money they have in the counters. My account won't be touched. If somebody hacks into my credit card account I can block the account and ask for a refund. Up to this moment there's no such security for Bitcoin. The Mybitcoin fiasco sent alarm bells ringing far and wide: was the website genuinely hacked or was it an old fashioned scam? Did the website owners take every possible step to ensure safety? Did they provide guarantees to their customers? The answer is "we don't know".
Bitcoin is at this point a "Wild West", like the article says. Just like the "Wild West" there are opportunities right now to both make lots of money or go bust. There's no guarantee Bitcoin will steadily increase its acceptance base in the future: in fact it may even contract due to scandals like Mybitcoin. In short it's a gamble and probably not a very good one. But it can provide useful insights and lessons for the future.
If one strips away the ad hominems, we are left with the following summary of Irdial's defense of bitcoin.
1. Bitcoin is a wallet, so don't expect it to have the properties of a currency.
2. Just as the dollar is backed by nothing, so bitcoin can succeed despite being backed by nothing. Mises' regression theorem has nothing to say on this matter.
3. Since bitcoin is a wallet, looking at it's charts and analyzing them as one would those of a stock, [say of a wallet company], is foolish.
4. Just as we buy things nowadays by handing over an empty wallet, so too we will all [but for the disadvantaged] someday buy things by handing over bitcoins.
5. Bitcoin is a method, a container, a protocol. When you give someone $17 for a bitcoin, you are paying him for a method, a container, a protocol. When you go to the one restaurant in NYC that accepts bitcoins, and you buy a meal and offer a bitcoin as payment, you are paying with a method , a container, a protocol, a wallet. So don't be a luddite and think bitcoins are meant to function as money.
6. The proper analogy to understand bitcoins is the domain name of a website. Just as domain names have value because a good domain name attracts visitors, so too bitcoins have value because they are methods and containers and protocols.
7. The key insight that mainstream thinking people are missing is that Bitcoin can be exchanged for anything, not just money. Thus it is not even pretending to be a means of exchange, but rather a method, a container, a protocol, a wallet.
8. Just as you cannot buy a piece of the Internet [because it's only a protocol], but only of a company that provides goods and services via the internet, so too you cannot buy a bitcoin [because it's only a protocol], but only.....uh oh. I need help understanding this one.
Government moneys are backed by force. If you don't have them, you go to jail. If they were not backed by anything, they would drop to 0.
Learn here what the Austrian analysis of bitcoin is, using the means-ends framework: http://vforvoluntary.com/bitcoin .
If you don't have them, you go to jail.
Do you?
Wheylous:Do you?
Technically he kind of mispoke, but that's more or less correct for the vast majority of people.
Wheylous,
Try going without dollars for a year and see where you end up.
(I don't actually advise you try it)
Haha. I'm not arguing they aren't useful, but you said they're backed by force.
If you don't pay your debt to the government with dollars, you go to jail. If you resist, you're shot.
Government money are get-out-of-jail tickets.
To Europe with the Euro? :P
I'm kidding, but do you have a source that you can cite? Not that I don't trust you, I just participate in policy debate and am thinking of running an AnCap argument and want to have sources for all of my claims.
You're looking for a source that states if you don't pay your taxes in US dollars you'll be imprisoned?
Yes. I know it sounds silly, but it the stupid debate league you need to have every fact cited to someone (this excludes rationalizations from their facts).
The circled part:
And here you can learn about how this all came to be historically, and what kind of distorted reality we live under today:
The Economics of Legal Tender Laws (by Jörg Guido Hülsmann)
http://www.treasury.gov/resource-center/faqs/Currency/Pages/legal-tender.aspx
This statute means that all United States money as identified above are a valid and legal offer of payment for debts when tendered to a creditor. There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services. Private businesses are free to develop their own policies on whether or not to accept cash unless there is a State law which says otherwise. For example, a bus line may prohibit payment of fares in pennies or dollar bills. In addition, movie theaters, convenience stores and gas stations may refuse to accept large denomination currency (usually notes above $20) as a matter of policy.
That sounds to me like a roundabout way of saying they have a right to refuse service. As in, you walk to the counter, order something and then try to pay with a Benjamin, they can just say "sorry" and not give you your item. I guarantee you, if someone performs a service for you, and you attempt to pay them in pennies, and they refuse to take it, the law is on your side.
And what does any of this have to do with taxes? I really hope you don't think the government is a "private business, a person or an organization."
The treasury website disagrees, saying you can refuse to take bills higher than $20, implying you also wouldn't be forced to accept pennies. Do you suggest vending machines are illegal?
Man pays with pennies, gets fined:
http://newsfeed.time.com/2011/06/06/man-pays-medical-bill-with-2500-pennies-gets-140-fine/
Do note that it is for misconduct and not for pennies, but still.
Okay, you win. When the tax-man comes by you can pay him in blueberries or play him a song on your guitar. Or you can flat out refuse to pay, and there's nothing they're gonna do about that.
But then you have one thing left to explain: if government pieces of cotton are backed by nothing, and nobody uses it in production or consumption (which is actually a federal offense), then how does it have any market value at all? How does it fit in the means-ends framework of human action?
I am supposing I am walking into a trap when I say it has perceived value...?
I am unsure about taxes (those might necessaitate dollars), but I meant businesses accepting money.
Dropped again, below $8.00.
below $7.50
$7.05. In other words, 30% in ten days.
Do I hear $6.50?
@Wheylous: I think it would be more accurate to say "If you engage in any sort of economic activity whatsoever and you never possess US dollars (in the US), you are breaking the law." You must pay taxes on any economic activity - there's a tax law for everything. US taxes can only be paid in US dollars. Hence, if you've engaged in any sort of economic activity this year, then you must at some point get possession of US dollars if only so you can pay them to the IRS to settle your tax obligation. The citation is the US tax code. If you'd like a detailed refutation of all "frivolous tax arguments", just search that term in Google and click on the irs.gov link.
Clayton -
Bitcoin is not money. It never was. Without government adoption, it never will be.
$6.40 at mtgox.
get out while you can
two days of nail biting as bitcoin rose above $7, but old reliable is now at $6.30.
Target: Zero.
Yes, to that we can agree, Clayton.
I am saddened to find videos on Youtube where people pay businesses with pennies as a prank and then call the police claiming it's national law to accept the "legal tender."
6 bucks even, do I hear $5.50?
I do believe we've hit an all time low [after the peak of $30].
From $30 to $6 in three months.
I imagine Pete Surda and Irdail and Moonshadow and all the other Defenders of the Bitcoin Faith are too busy grabbing as many bitcoins as they can at this bargain price to write their long posts showing how foolish we are to doubt.
P.S. Dropped to $5.95 in the time it took to write this.
$5.44!
You are having so much fun :P
Heck yeah. After 38 pages of being called an ignoramus, this feels good.
$4.86 BTW.
Gosh darn, I got it all wrong.
1. I kept saying bitcoins are totally useless with no intrinsic value. Luckily Paul Krugman corrected me:
In effect, Bitcoin has created its own private gold standard...
Truth be told, I'm taking that line out of context.
2. I thought a three month drop from $30.00 to it's current $4.78 is a wile e coyote type crash. But no:
The dollar value of that cybercurrency has fluctuated sharply, but overall it has soared. So buying into Bitcoin has, at least so far, been a good investment.
3. Would make a great ad campaign. Bitcoin. Paul Krugman likes 'em.
Low blow. Let's keep this above the belt.
Smiling Dave,
you have yet to provide actual arguments. You are the one with blind faith in fairy tales.