Kshartle wrote:They would just have to get more bitcoins from other people with bit coins.
Right, but that can be extremely difficult when people are hoarding their Bitcoins — as they currently are . Anyway, my general question is what would happen if someone defaulted on a Bitcoin loan? Sounds like you'd be up a creek without much recourse. And generally speaking, that would make Bitcoin loans pretty junky.
Kshartle wrote:The existance of interest and borrowing does make currency expansion neccessary to pay off debts. I don't know what ever started this line of thinking but I hope you can see why it's not correct. Paying off the loan and interest only requires the borrow to aquire enough bitcoins through trade.
Again, it's difficult to pay off a loan when the currency is being hoarded and there isn't much trade. That's my main point. I'm sure it's not impossible, but it would take a lot of trade on a Macro level and if the trading wasn't there to support such mandatory payments, people would default.
The market will figure out how to prevent defaults or compensate lenders. If there were exchanges for bitcoin loans there would be a market for a company that provides credit ratings and appropriate interest rates or perhaps a third party that is 100% secure with other assets that would take a peice of the interest rate in exchange for backing the loan.
Who knows what the solutions would be, if I can think of a couple here then much smarter guys can flesh them out and make a mint off them.
The present volitility makes it impossible to lend or borrow though. How do you assign an interest rate to something that can fluctuate up 100% or down 50% in weeks or months.?
Kshartle wrote:They would just have to get more bitcoins from other people with bit coins.
Right, but that can be extremely difficult when people are hoarding their Bitcoins — as they currently are . Anyway, my general question is what would happen if someone defaulted on a Bitcoin loan? Sounds like you'd be up a creek without much recourse. And generally speaking, that would make Bitcoin loans pretty junky.
Kshartle wrote:The existance of interest and borrowing does make currency expansion neccessary to pay off debts. I don't know what ever started this line of thinking but I hope you can see why it's not correct. Paying off the loan and interest only requires the borrow to aquire enough bitcoins through trade.
Again, it's difficult to pay off a loan when the currency is being hoarded and there isn't much trade. That's my main point. I'm sure it's not impossible, but it would take a lot of trade on a Macro level and if the trading wasn't there to support such mandatory payments, people would default.
The market will figure out how to prevent defaults or compensate lenders. If there were exchanges for bitcoin loans there would be a market for a company that provides credit ratings and appropriate interest rates or perhaps a third party that is 100% secure with other assets that would take a peice of the interest rate in exchange for backing the loan.
Who knows what the solutions would be, if I can think of a couple here then much smarter guys can flesh them out and make a mint off them.
The present volitility makes it impossible to lend or borrow though. How do you assign an interest rate to something that can fluctuate up 100% or down 50% in weeks or months.?
Good point.
Nothing I say should be construed as advice or expertise. I am only sharing opinions which may or may not be applicable in any given case.
Gumby wrote:
Right, but that can be extremely difficult when people are hoarding their Bitcoins — as they currently are . Anyway, my general question is what would happen if someone defaulted on a Bitcoin loan? Sounds like you'd be up a creek without much recourse. And generally speaking, that would make Bitcoin loans pretty junky.
Again, it's difficult to pay off a loan when the currency is being hoarded and there isn't much trade. That's my main point. I'm sure it's not impossible, but it would take a lot of trade on a Macro level and if the trading wasn't there to support such mandatory payments, people would default.
The market will figure out how to prevent defaults or compensate lenders. If there were exchanges for bitcoin loans there would be a market for a company that provides credit ratings and appropriate interest rates or perhaps a third party that is 100% secure with other assets that would take a peice of the interest rate in exchange for backing the loan.
Who knows what the solutions would be, if I can think of a couple here then much smarter guys can flesh them out and make a mint off them.
The present volitility makes it impossible to lend or borrow though. How do you assign an interest rate to something that can fluctuate up 100% or down 50% in weeks or months.?
Heh. I don't think so. If we both agree on something, there's a decent chance we may have a point. Right now this is a hoarders' currency. That doesn't make it usable or functional but that may or may not change. I think it would take a lot for it to become either.
Last edited by Gumby on Thu Nov 14, 2013 4:12 pm, edited 1 time in total.
Nothing I say should be construed as advice or expertise. I am only sharing opinions which may or may not be applicable in any given case.
Gumby wrote:
Heh. I don't think so. If we both agree on something, there's a decent chance we may have a point. Right now this is a hoarders' currency. That doesn't make it usable or functional but that may or may not change. I think it would take a lot for it to become either.
It started to be usable as PS points out. Last week I was shopping online for some electronic parts and the check out basket gave me the option to pay in bitcoins.
Gumby wrote:
Heh. I don't think so. If we both agree on something, there's a decent chance we may have a point. Right now this is a hoarders' currency. That doesn't make it usable or functional but that may or may not change. I think it would take a lot for it to become either.
It started to be usable as PS points out. Last week I was shopping online for some electronic parts and the check out basket gave me the option to pay in bitcoins.
But did you pay in Bitcoins? My guess is no. If you did you would easily regret it in the not so distant future if Bitcoin continues to rise in value. That's my point.
Last edited by Gumby on Thu Nov 14, 2013 6:04 pm, edited 1 time in total.
Nothing I say should be construed as advice or expertise. I am only sharing opinions which may or may not be applicable in any given case.
They are usable as long as someone will accept them but my point is they have no value, whether intrinsic, utility or fiat. You can't do anything with a bitcoin and can't pay taxes with it. The only thing you can do is exchange it for something that has value. That's why I'm skeptical. I think the price is being supported by the belief that the price will go up but not because of any actual value.
That's where I separate it from fiat currencies or gold. When the belief is over the price will plumment to the actual value of a bitcoin (zero).
Of course I cannot be 100% certain this will ever happen nor of the timing. I just know based on my current understanding I won't trade anything of value for them, unless I want to make a secret transaction or whatever....not to holdthem, just to use them quickly.
When the selling starts the holders who traded things of value will be sorry (again, a prediction, not a statement of fact).
Gumby wrote:
Heh. I don't think so. If we both agree on something, there's a decent chance we may have a point. Right now this is a hoarders' currency. That doesn't make it usable or functional but that may or may not change. I think it would take a lot for it to become either.
It started to be usable as PS points out. Last week I was shopping online for some electronic parts and the check out basket gave me the option to pay in bitcoins.
But did you pay in Bitcoins? My guess is no. If you did you would easily regret it in the not so distant future if Bitcoin continues to rise in value. That's my point. People aren't using their Bitcoins very much right now — they are mostly being hoarded for speculation purposes. No one actually knows if people will actually feel like spending their Bitcoins at some point.
I didn't because I knew nothing about them. Marc and PS taught me about them this week and I appreciate that. As you well know..."The longest journey begins with one step".
Mdraf wrote:
It started to be usable as PS points out. Last week I was shopping online for some electronic parts and the check out basket gave me the option to pay in bitcoins.
But did you pay in Bitcoins? My guess is no. If you did you would easily regret it in the not so distant future if Bitcoin continues to rise in value. That's my point. People aren't using their Bitcoins very much right now — they are mostly being hoarded for speculation purposes. No one actually knows if people will actually feel like spending their Bitcoins at some point.
I didn't because I knew nothing about them. Marc and PS taught me about them this week and I appreciate that. As you well know..."The longest journey begins with one step".
So... let's say you move 5% of your net worth into Bitcoins. Would you start buying everything you could in Bitcoins? Again, my guess is no. My guess is that you would look at your pile of dollars and then look at your pile of Bitcoins and decide that it was a better idea to spend your dollars — which are gradually losing value over time — rather than spend your Bitcoins, which are rapidly increasing in value. Anything you bought in Bitcoins would end up looking incredibly wasteful and expensive a few months from now if Bitcoins continue to rise.
Most Bitcoin believers (i.e. the ones who believe Bitcoins will rapidly appreciate) are just hoarding for that same reason. There is no good reason to spend Bitcoins right now.
Yes, people are happy to accept Bitcoins, but as long as people are still willing to accept dollars, the dollars will likely be spent preferentially and the Bitcoins will continue to be hoarded.
Last edited by Gumby on Thu Nov 14, 2013 6:15 pm, edited 1 time in total.
Nothing I say should be construed as advice or expertise. I am only sharing opinions which may or may not be applicable in any given case.
Gumby wrote:
But did you pay in Bitcoins? My guess is no. If you did you would easily regret it in the not so distant future if Bitcoin continues to rise in value. That's my point. People aren't using their Bitcoins very much right now — they are mostly being hoarded for speculation purposes. No one actually knows if people will actually feel like spending their Bitcoins at some point.
I didn't because I knew nothing about them. Marc and PS taught me about them this week and I appreciate that. As you well know..."The longest journey begins with one step".
So... let's say you move 5% of your net worth into Bitcoins. Would you start buying everything you could in Bitcoins? Again, my guess is no. My guess is that you would look at your pile of dollars and then look at your pile of Bitcoins and decide that it was a better idea to spend your dollars — which are gradually losing value over time — rather than spend your Bitcoins, which are rapidly increasing in value. Anything you bought in Bitcoins would end up looking incredibly wasteful and expensive a few months from now if Bitcoins continue to rise.
Most Bitcoin believers (i.e. the ones who believe Bitcoins will rapidly appreciate) are just hoarding for that same reason. There is no good reason to spend Bitcoins right now.
Yes, people are happy to accept Bitcoins, but as long as people are still willing to accept dollars, the dollars will likely be spent preferentially and the Bitcoins will continue to be hoarded.
In that case there would be no sellers at all, which is obviously not so. Like any marketplace some people think they will go up while others think they will go down (like you).
Kshartle wrote:
The reason I ask is because I am actually very skeptical of bitcoin and it's price. I can't understand why anyone values it and I think a lot of it is driven by people expecting the price to keep rising.
Given that there is a hard algorithmic limit on the number of bitcoins, this expectation is actually pretty rational. It is sort of the perfect speculation in that it can't help but appreciate as long as enough people believe in the hope that it will someday become non-volatile enough to use as a functional currency. If that eventually happens, then the people with lots of BTC will be rich. If it doesn't, and enough people catch on that its inherent properties make it more suitable for hoarding than spending, I suspect that the party will be over very quickly.
PS --
You and I have reached similar conclusions, with one minor difference. I also don't view the longer-term proponents of btc as irrational, but at some point the volatility will have to diminish and some level of predictability will have to come in the market for the btc to be accepted by a substantial number of people as a medium of exchange.
I think the concept of a medium of exchange having an inherently deflationary bias (which requires almost infinite divisibility) is very difficult for many to envision. It is opposite to what people over the last century have become used to as "money."
But I do think it is possible for currencies or monies having differing degrees of liquidity value (i.e., medium of exchange use) versus purchasing power retention (i.e., store of value use) to co-exist for extended periods. In other words, we could see some manifestation of "Gresham's law" with respect to national currencies and the btc (or some other alternative). In such a case, the party might not necessarily end very quickly.
This isn't a prediction, but simply a statement of logical possibility. I do plan to hold on to a small number of btc until they either completely flame out or end up demonstrating long term (at least for me) staying power. In my VP, of course.
Last edited by HB Reader on Thu Nov 14, 2013 6:36 pm, edited 1 time in total.
Mdraf wrote:In that case there would be no sellers at all, which is obviously not so. Like any marketplace some people think they will go up while others think they will go down (like you).
You've misunderstood me. If someone is a Bitcoin hoarder — as most Bitcoin holders are — and the hoarder at some point perceives that Bitcoins have run their course in terms of gaining value, that hoarder will immediately try to cash out their Bitcoins into dollars — particularly if others reach that same conclusion at the same time. In that case, there may be too many sellers and not enough people buying Bitcoins (i.e. a crash).
I'm not saying that has to happen and I'm not saying that this is what all Bitcoin holders will do. What I'm saying is that if most people are hoarding — which they are — it implies that they are simply waiting to cash out and have no intention of buying things with Bitcoin. I could be wrong, of course.
Gumby wrote:
The currency is also really annoying the way it's currency structured, IMO. You have to be a real computer nerd to set up and maintain your wallet properly. Make a little mistake and your money evaporates. I envision average laypeople will make some classic security mistakes and that will cause rampant scams and hackings that deter people from using the currency. And despite all that, I think the "Bitcoin mania" is probably just beginning.
This is becoming less of an issue every day... check out Coinbase. If millions of people have managed to figure out PayPal, they can certainly figure out Coinbase. Conceptually, it's almost identical.
Gumby wrote:
The currency is also really annoying the way it's currency structured, IMO. You have to be a real computer nerd to set up and maintain your wallet properly. Make a little mistake and your money evaporates. I envision average laypeople will make some classic security mistakes and that will cause rampant scams and hackings that deter people from using the currency. And despite all that, I think the "Bitcoin mania" is probably just beginning.
This is becoming less of an issue every day... check out Coinbase. If millions of people have managed to figure out PayPal, they can certainly figure out Coinbase. Conceptually, it's almost identical.
Ah... I see. There we go. Nice tip.
Nothing I say should be construed as advice or expertise. I am only sharing opinions which may or may not be applicable in any given case.
Mdraf wrote:In that case there would be no sellers at all, which is obviously not so. Like any marketplace some people think they will go up while others think they will go down (like you).
You've misunderstood me. If someone is a Bitcoin hoarder — as most Bitcoin holders are — and the hoarder at some point perceives that Bitcoins have run their course in terms of gaining value, that hoarder will immediately try to cash out their Bitcoins into dollars — particularly if others reach that same conclusion at the same time. In that case, there may be too many sellers and not enough people buying Bitcoins.
I'm not saying that has to happen. What I'm saying is that if most people are hoarding — which they are — it implies that they are simply waiting to cash out and have no intention of buying things with Bitcoin. I could be wrong, of course.
Strange as it sounds I agree that this is the current situation. What I don't feel strongly about is whether the price will go to $1,000 in the next two months or $100. I think the chances are equal.
How can something go up 300% in a month or whatever in price? It makes sense for a stock that comes up with a new product or market....it makes sense for gold in the event of a currency crisis, it even makes for bonds if you think of a scenario where yields plumment. What has been the driver for BTC? What can it be other than people buying in anticipation of higher prices?
I'm sincerely interested in any answers from those who currently hold them.
Kshartle wrote:How can something go up 300% in a month or whatever in price? It makes sense for a stock that comes up with a new product or market....it makes sense for gold in the event of a currency crisis, it even makes for bonds if you think of a scenario where yields plumment. What has been the driver for BTC? What can it be other than people buying in anticipation of higher prices?
I'm sincerely interested in any answers from those who currently hold them.
I think it just might be entirely due to hoarding...
Zachary M. Seward wrote:What you’re looking at is the result of bitcoin hoarding, which is not great for its future as a currency, and affects the supply of available bitcoins on the open market. Lower supply makes the price go up, which should make people even less inclined to part with their bitcoins, reducing supply even further, and on and on. That’s happening at the same time demand just keeps going up and up. It’s a spiral or a crisis or whatever you want to call it. A bubble, perhaps?
As bitcoin receives attention, demand for it goes up, which pushes the value higher, drawing still more attention, which should lead people who already own bitcoins to expect the price to rise even further, causing them to hold onto those bitcoins, reducing the available supply, sending the price up, and so on.
I hate to point this out, but even if you look at Marc's advice, he too seems to be recommending we hoard Bitcoins as a speculative investment. This is what the currency's value is paradoxically based on as best as I can tell.
Last edited by Gumby on Thu Nov 14, 2013 8:35 pm, edited 1 time in total.
Nothing I say should be construed as advice or expertise. I am only sharing opinions which may or may not be applicable in any given case.
I would think folks here would be more open minded to the very libertarian properties of Bitcoins.
Bitcoins have some compelling attributes: decentralization, anonymity, ever increasing security, cuts out all sorts of middle men, tax free possibilities, and limited supply.
I think I read or heard a story about folks converting their wealth in Greece to Bitcoins. That is a pretty creative way to transport wealth out of a failing country and a hell of a lot easier than a truck load of gold.
“Let every man divide his money into three parts, and invest a third in land, a third in business and a third let him keep by him in reserve.� ~Talmud
Bean wrote:
I would think folks here would be more open minded to the very libertarian properties of Bitcoins.
Bitcoins have some compelling attributes: decentralization, anonymity, ever increasing security, cuts out all sorts of middle men, tax free possibilities, and limited supply.
I think I read or heard a story about folks converting their wealth in Greece to Bitcoins. That is a pretty creative way to transport wealth out of a failing country and a hell of a lot easier than a truck load of gold.
Those are wonderful qualities. It certainly has a lot of potential in terms of its features. I don't think anyone is disputing that.
But, still, between 55% and 73% of all Bitcoins are held in dormant accounts rather than being traded or used to buy things. And that implies that the currency is mostly being used for speculative purposes and by people who are just out to make a quick profit. The hoarding creates scarcity — certainly not liquidity — which causes the currency to be highly volatile and quickly rise in value — causing more hoarding, which feeds the speculative bubble, and so on...
But, yeah, if most people weren't hoarding it, for speculative purposes, I'd think it was a pretty cool experiment.
Last edited by Gumby on Thu Nov 14, 2013 10:09 pm, edited 1 time in total.
Nothing I say should be construed as advice or expertise. I am only sharing opinions which may or may not be applicable in any given case.
My point is they are inherently worthless. Why would I want one except in the hope that someone else will also want it? Please don't say this is the same as gold. Gold has tangible utility value and actual physical properties that people desire, bitcoins don't, they aren't the same.
Why would you want a bitcoin? If it doesn't have value then you're not transferring value. Imagine collecting all the bitcoins in the world vs. collecting all the gold. In one case I think you'd have nothing and in the other it's clear you'd be very very wealthy.
dragoncar wrote:
Still doing this? If so, much thanks: 1LKRDyKhCweFtjpYLcPnMMiFuZnPtYrvcT
At one point, when BTC was about $0.25, I seriously considered throwing $5-10k into it as a purely speculative play. What ultimately stopped me was that I just didn't trust mtgox and was daunted by the possibility that a purchase of that size might move the market. I just kind of forgot about it without doing anything... kicking myself now (I'd theoretically have $16 MM in BTC, but who knows if I could get USD back... I probably would have ended up selling long ago anyways).
There you go dragoncar.
I'm so sorry you missed out on it, yet were so close.
My sympathies for your loss in opportunity. I know that can feel bad
I find it admirable part of you did see the opportunity so early.
I hope you succeed in negotiating better with your part that kept you from doing it.
That's how I succeeded in embracing the opportunity, by having an internal conversation and negotiation between my different parts. (I do it every day! )
If you want to, I think you still have an opportunity here. The tenfolding every year will likely continue for another 2/3 years but after that it will either stagnate or become bubbly and later lost again.
Thanks! Yeah I'm exaggerating the likely outcome because (knowing how often I check my PP) I probably would have tracked BTC prices daily and gotten spooked at one of the earlier drawdowns rather than forgetting about them for a few years. Kinda like saying "oh man I had the idea for Twitter ten years ago" without evidence that you have the business acumen to make any money off it.
When I dug up my wallet for this, I found some BTC I randomly generated back when nobody had dedicated hardware and the global hash rate was far lower so that's a plus.
Yeah that's true, there is a big difference between thinking about an idea, and doing it.
Great to hear you found some btc from earlier adventures
"We think, the more people on earth, the less we each have. But it's exactly the opposite, the more people, the more resources we all have!" - Julian Simon, The Ultimate Resource 2
Of course, Apple often dumps apps for silly reasons, so at this point it's hard to know what they're really up to. Just another reason I prefer devices that are more open.
Hey Marc I hope there's no hard feelings. When I make a case against BTC ownership it's not personal in anyway towards anyone. If I'm wrong please educate me. I'm most interested in your personal plans with your bitcoins. Like I said.....I was really considering buying some. I cannot take the risk after this big jump though.
Kshartle wrote:
My point is they are inherently worthless. Why would I want one except in the hope that someone else will also want it? Please don't say this is the same as gold. Gold has tangible utility value and actual physical properties that people desire, bitcoins don't, they aren't the same.
Why would you want a bitcoin? If it doesn't have value then you're not transferring value. Imagine collecting all the bitcoins in the world vs. collecting all the gold. In one case I think you'd have nothing and in the other it's clear you'd be very very wealthy.
What I suspect is happening here is that you have convinced yourself that government fiat currencies are similarly devoid of any actuall inherent value but are acquired simply due to the threats of imprisonment and death that back up taxation. I suspect you believe that in the absence of taxes, most people would dump their worthless dollars and Euros and prefer a currency with some actual inherent value backing them up, such as gold.
However, Bitcoin throws a monkey wrench into this belief because it is an unbacked currency with no inherent value just like dollars or Euros, and yet a great many people love holding Bitcoins and even spending it (I know this because many of them have bought things I sell with their Bitcoins). Your belief is challenged because you would not have expected this to happen and now you are trying to defend your belief in the undesirability of currencies lacking inherent worth while also attempting to exercise your genuine curiosity regarding this interesting new currency that many libertarian-minded people seem to really love.
Human behavior is economic behavior. The particulars may vary, but competition for limited resources remains a constant.
- CEO Nwabudike Morgan
Kshartle wrote:
My point is they are inherently worthless. Why would I want one except in the hope that someone else will also want it? Please don't say this is the same as gold. Gold has tangible utility value and actual physical properties that people desire, bitcoins don't, they aren't the same.
Why would you want a bitcoin? If it doesn't have value then you're not transferring value. Imagine collecting all the bitcoins in the world vs. collecting all the gold. In one case I think you'd have nothing and in the other it's clear you'd be very very wealthy.
What I suspect is happening here is that you have convinced yourself that government fiat currencies are similarly devoid of any actuall inherent value but are acquired simply due to the threats of imprisonment and death that back up taxation. I suspect you believe that in the absence of taxes, most people would dump their worthless dollars and Euros and prefer a currency with some actual inherent value backing them up, such as gold.
If the government didn't require you to accept slips of paper for your labor and pay taxes in them (which essentially forces employers to pay you in them)......you would take them?
Why on Earth would you accept valueless slips of paper for your property or labor? The ONLY reason people use them is because they are fiat. Is there any instance in hisorty where people volutarily exchanged something of value for a slip of paper that is backed by nothing?!?!? OMG why on Earth would anyone accept that swindle?
You realize the slip of paper is inherently worthless right?
Why do people accept something that is worthless? (they are required to accept them by law)
So it begs the question......why are so many people collecting bitcoins? I think it's only for the hope that they will make money on their "investment" and not to actually use them.
Pointedstick wrote:
However, Bitcoin throws a monkey wrench into this belief because it is an unbacked currency with no inherent value just like dollars or Euros, and yet a great many people love holding Bitcoins and even spending it (I know this because many of them have bought things I sell with their Bitcoins). Your belief is challenged because you would not have expected this to happen and now you are trying to defend your belief in the undesirability of currencies lacking inherent worth while also attempting to exercise your genuine curiosity regarding this interesting new currency that many libertarian-minded people seem to really love.
It's not that I don't think this could happen because it clearly is. I just think the small number of people buying bitcoins are making a mistake. Time will tell of course. Right now it looks great.
"undesirability of currencies lacking inherent worth".....well......don't they seem undesirable :):)
I don't care if someone is libertarian, anarchist, Austrian or whatever...I'm only interested in the content of their argument. I think the libertarians are getting sucked in to the bitcoin mania the more I learn about it. Really no offense meant by that. Obviously as long as the price stays in place or keeps going up I'll look like an incorrect jealous jerk. I assure you I'm not.....jealous. I might just be an incorrect jerk.
. Anyway, my general question is what would happen if someone defaulted on a Bitcoin loan? Sounds like you'd be up a creek without much recourse. And generally speaking, that would make Bitcoin loans pretty junky.
