I can't find the article now, but there have been several good articles explaining the lack of gravity on bitcoin in general.
Basically, the price goes up quickly when new people are attracted to bitcoin and rush to buy. When the price dips however, because so much is bought for long term speculation, the price doesn't really dip much, as no one is incentivised to sell and hold out for when it gets better.
At some point the nerve of those holding out may crack, but if you read silly saurus2's post, its quite clear that many will hold out indefinitely on the belief or hope it will one day recover. So in this manner the bubble can deflate slowly. (If you call 10% in a day slow).
There are no settlement dates or ways to easily move money out (especially now) so a crash is prevented.
If a crash happens it'll probably happen before people realise it, but suddenly there just won't be anyone wanting to buy coins anymore.
But even that might not happen as people already invested into bitcoin use how wealthy they feel to buy bitcoins from each other. That can cycle for a long time before people realise there isn't new money in bitcoin.
If you had bought coins at 800-1000, why would you sell now? No one likes to cement a loss.
Those with the most reason to sell right now are the early adopters, but it's not actually clear how many of those coins are actually reachable.
The psychology part of this argument seems the same as with any commodity, not just Bitcoin.
Maybe Bitcoin would be different if you could put money in but not take it out. But it's actually the reverse now -- it's harder to get Bitcoin out. So wouldn't that tend to increase the selling pressure?
And if you don't want to sell to a sketchy exchange, you can sell to SecondMarket[0] and get a wire transfer to your bank account the same day.
Hang on. Isn't that just a matter of someone setting up a market and contracts for it? What you mean is that no one has setup bitcoins margins market yet right? Or am I misunderstanding something fundamental about BTC that prevents margins?
How are those contracts validated and enforced on sites like that? The SEC used to watch naked shorts relatively closely before 2008 and it's been banned since then; but how is that arranged in practice with a currency whose primary selling point is its anonymity?
Transaction irreversability makes it a lot riskier, combined with the lack of support from the legal system. If you lend bitcoins to someone, and they run off with them, how do you recover your loss?
Conversely, unlike stocks, you don't need a broker, so there's nobody who would take on that dealer role.
Nobody has setup a "buy bitcoin on margin" service yet, and the first person to do so will lose a fortune to nonpayment of margin calls.
Hang on I almost read that as meaning bitcoin has less financial capability as fiat currency, which we all know is patently false because the premise of bitcoin is centered around an increased flexibility compared with fiat currency.
You're quite wrong -- BTC is strictly less flexible than fiat. I have my own opinions, but this is inarguable and is presented as an advantage of Bitcoin, for example Bitcoin cannot be created arbitrarily by a government, Bitcoin transactions cannot be reversed, untraceable transactions cannot occur in Bitcoin, et cetera. All of these are clear restrictions upon existing currency systems.
Some possible ways that it might be interpreted to be more flexible are scripting, n-of-m transactions, and so on.
The reversibility of bitcoin is no different from passing around physical dollar bills. If you want to reverse a transaction involving actual cast, you must convince the other person to give it back, or physically wrest possession of the currency from them.
Reversibility shows up when you do transactions in a bank or other third party that can reverse the transaction on its own accord. There's no theoretical reason why this can't happen with bitcoin instead - you give your BTC to a hypothetical, highly regulated bank or broker or whatever, and then the transaction is exactly as reversible as any electronic transaction using dollars. The confusion sets in when you compare Bitcoin transactions with electronic transactions using fiat currency, when they're closer in many ways to physical cash transactions in nature.
> when they're closer in many ways to physical cash transactions in nature.
I very much agree with you. This is also the right way to think about BTC exchanges -- an unregulated website that you ship cash to.
There are some subtleties around the specific nonphysical transaction mechanism of BTC that differentiate it from a cash transaction, which are sort of difficult to quantify currently because the technical and legal aspects have not been fully explored... as a hard example, imagine a BTC wallet coupled with a memorizable private key (or an effective substitute). This is essentially a cash store that cannot be confiscated, and which can be communicated verbally, i.e. within a protected (attorney-client) setting. There are some interesting implications there.
You can protect against the risk by only providing the service between wallets held and controlled by you on your own exchange.
There also are brokers providing indirect Bitcoin shorting with 1:10 leverage in the form of CFD's (contracts for difference). Of course they could opt to always or sometimes not actually trade the coins - to their clients it makes no difference, as no actual coins can be moved in/out of the accounts.
Well I have bitcoin and I'm in no hurry to sell. I bought them at the tip of the previous bubble when they were £150 and was kinda disappointed when it dropped.
Was hoping to have a large amount in bitcoin so i can buy online services relatively anonymously.
Since then I more then recovered my loss even at the price it has now.
I dont think the person you replied to meant a crash, but rather an implosion. i.e. a massive failure in the bitcoin protocol that renders it useless. This is the only way in which no one will want to buy coins. In that situation your best bet is sending your coins to an exchange and selling them into the listed buy orders which have not been removed because the person who listed them is either asleep or unaware of the news.
However this is incredibly unlikely, bitcoin went though a fork last year that caused some problems but was quickly rectified, this current maleability issue is also being worked on to get a resolution. These sort of network wide problems are problems with the fundamentals of bitcoin and should, by right, affect the price of bitcoin much more than say government regulations in China or India, that they dont is because most holders of bitcoin understand that these problems can be resolved with some dev time and BTC has some great and comitted devs working on it.
Namecoin (NMC) had a similar issue where it meant that web addresses linked to NMC were not secure, that caused a crahs but no where near going to zero and that is a coin with minimal developer support.
Wow this makes a lot of sense. I personally believe that this is yet again another one of BTC's large dips that will eventually recover onto it's upwards path.
But then if people panic and see how hard it is to get back into fiat from BTC won't they just go into relatively stable altcoins instead? For example DOGE is skyrocketing as we speak and it's USD price was totally unaffected by BTC's recent plummet. http://coinmarketcap.com/
More like 4th, given that Ripples can't be mined, is controlled by a single entity, most of the existing coins are not freely circulating, and the transaction volume is consistently so tiny that it looks very much like the price is intentionally manipulated to make the coin look desirable.
More like 3rd. In the 8 hours since vidarh posted this, Dogecoin surpassed the Peercoin market cap. The 24h trading volume of Dogecoin is also nearly 6x that of Peercoin right now.
Really that means nothing though. Neither Peercoin or Dogecoin have merchant or payment processor support. No one is interested in taking dogecoin in payment for goods and services, right now it is just a toy coin that people can use to learn about cryptocurrencies cheaply and that is pretty much what it will always be. If dogecoin had a maleability issue it does not have the dev support to resolve it in a reasonable time frame, a fork like there was in BTC last year would have a similar result. There are lost of transactions because you can send 10 or 100 or 1000 coins to anyone and you still have sent less than a few bucks. Lots of transactions does not equal a big currency it equals a lot of transactions. And in this situation these transactions count for very little economic activity.
There isn't really any development team comparable to that of Bitcoin in a different coin. Things that get fixed in Bitcoin are not fixed in other coins. But if another coin happens to fix something, it will be fixed in Bitcoin too.
Typically a copycoin will only have the same fixes as Bitcoin depending on when they decided to copy it. But then they will invariably lag behind.
It is quite short sighted to think that all digital currencies are "forked" from bitcoin: see http://www.openudc.org/ for instance:
"The OpenUDC softwares are designed to manage a free money system as described by the TRM (Théorie Relative de la Monnaie), that means a money system where no human has privileges in front of money creation either in time or in space."
The concept is therefore quite different from BTC which clearly gives some people a huge privilege in front of money creation in time
Basically, the price goes up quickly when new people are attracted to bitcoin and rush to buy. When the price dips however, because so much is bought for long term speculation, the price doesn't really dip much, as no one is incentivised to sell and hold out for when it gets better.
At some point the nerve of those holding out may crack, but if you read silly saurus2's post, its quite clear that many will hold out indefinitely on the belief or hope it will one day recover. So in this manner the bubble can deflate slowly. (If you call 10% in a day slow).
There are no settlement dates or ways to easily move money out (especially now) so a crash is prevented.
If a crash happens it'll probably happen before people realise it, but suddenly there just won't be anyone wanting to buy coins anymore.
But even that might not happen as people already invested into bitcoin use how wealthy they feel to buy bitcoins from each other. That can cycle for a long time before people realise there isn't new money in bitcoin.
If you had bought coins at 800-1000, why would you sell now? No one likes to cement a loss.
Those with the most reason to sell right now are the early adopters, but it's not actually clear how many of those coins are actually reachable.