Bitcoins vs cryptocurenncy

[GazLaz]

Possibly, the answers are usually in the candlesticks though. Those Japanese rice traders never went far wrong!

50/200 day MA, Fibonacci ratios and Bollinger Bands were my key indicators.

The fact that governments around the world are doing all they can to halt its progress I find interesting. Are they doing it because they see it as a threat to their central banking system? Although I think at the moment “crypto currency” is a misnomer, it’s more a crypto commodity, I do think in theory it could be a blueprint for a world wide currency.

[RedJ]

They're probably trying to halt its progress because people use it for shady stuff on the deep/dark web.

[Glyn_Wigley]

Maybe they're just trying to protect people from themselves.

[BillyStubbsTears]

Gaz

I’ve heard that line about how Bitcoin could revolutionise the concept of currency. Maybe I’m too thick to understand but I just don’t get it.

Currency has two purposes.
1) To act as a means of exchange that’s better and more controlled than barter.
2) To act as a store of value - if you have £10 in your wallet on Monday and don’t spend it for a week, you know you have the wealth to buy £10 of stuff on Friday.

Both require a certain stability in the value of the currency. If a currency is massively appreciating in value, there’s no way I’m buying anything today because if I hold onto it until tomorrow, I’ll be able to buy twice as much stuff. And vice versa when it’s collapsing in value. I can’t spend the bleeding stuff fast enough.

So, at the moment Bitcoin stupendously fails that test. In the past 2 months it’s gone up in value 20 fold then lost 75% of that peak value. How can you use it as a means of exchange or a sensible store of wealth?

But let’s assume it settles down. Then you can use it as a means of exchange.

What about the store of wealth? What gives Bitcoin it’s inherent value? What stops it being worthless?

Traditional currencies have value because they are backed by the balance sheet and the policies of the relevant national central bank. In simple terms, the central bank holds assets that balance the currency in circulation. In theory, you could take a pound coin to the Bank of England and ask for a pound’s worth of, say, Govt bonds which the BoE holds. And generally, Govt bonds are the safest stores of value in the world. Because if, say, the UK collapsed to the point where its Govt can’t honour its debts, you’re in a world where every bit of certainty has collapsed. 

So, as long as the central bank’s balance sheet is ok, there are strong assets underpinning the value of the currency. Of course, it’s possible that Govts might default on their bonds in which case the currency is, literally, worthless. But most currencies in most countries in most times have this buttressing support of their Govt and central bank. It’s what gives confidence to people to hold currency as a store of value.

Bitcoin. What on Earth underpins Bitcoin’s value? Nothing whatsoever. Literally, nothing. There is no organisation that you can go to with a Bitcoin and say, “I’m relying on you to ensure that one Bitcoin will always be backedby a really, really stable asset.”

Bitcoin’s value exists because people think it’s worth something. But if people stop thinking it is worth something, there is literally nothing to prevent it from being worthless.

So no, I don’t see how in practice it can ever be a sensible currency.

[BillyStubbsTears]

Bitcoin and stability.

From Sunday morning to Tuesday morning, the price of Bitcoin fell by over a third. From Tuesday morning to today, it's up by over 40%.

That is not a currency. No currency could possible be used if you're unable to guess its worth form one hour to the next. And violent oscillations like that also show that the market is not working correctly in terms of properly assessing the true worth of Bitcoin. The oscillations are being driven by a manic desire to get in on the upswing or get out on the downswing.

[GazLaz]

Bitcoin and stability.

From Sunday morning to Tuesday morning, the price of Bitcoin fell by over a third. From Tuesday morning to today, it's up by over 40%.

That is not a currency. No currency could possible be used if you're unable to guess its worth form one hour to the next. And violent oscillations like that also show that the market is not working correctly in terms of properly assessing the true worth of Bitcoin. The oscillations are being driven by a manic desire to get in on the upswing or get out on the downswing.

I’m sure the thinking is that as liquidity and the number of transactions increase, so will stability. That’s a long way off though.

[BillyStubbsTears]

Could do Gaz. Still the issue about what underpins the value of Bitcoin. As far as I can see, it’s nowt but trust of users. That can evaporate in a flash.

[GazLaz]

We are lucky that we live in a country where the currency is pretty stable, and is underlined by the Bank of England hence your trust in the system. I’m sure if you spoke to a Venezuelan about central banking system and the real value of conventional currency, they may think differently.

[Glyn_Wigley]

Just because the Venezuelan currency has undergone inflation doesn't mean it's less stable that Bitcoin - there are more than one reasons for inflation. Even the Venezuelan currency is backed by the country's gold reserves, such as they are - what does Bitcoin have? Anything at all?

[BillyStubbsTears]

Aye, there are countries which have wildly unstable currencies. But few of them these days. Central banks do know how to stabilise and underpin currencies as long as there is the political will.

There is another issue with Bitcoin, which was pushed very hard by aficionados when it first started. Bitcoin effectively allows you to opt out of the government tax collection process.

Sounds wonderful, but if that was the way that all transactions were made, then the current model of collective services paid for by tax collapses. That’s one of the reasons why Bitcoin has been so popular among libertarians.

https://pando.com/2013/04/17/why-libertarians-and-gold-hoarders-love-bitcoins/

Personally, I’ve always thought that paying tax in large amounts and having commensurate high quality collective services is the mark of an advanced, civilised society. Look at the list here. Apart from a few oil states, there aren’t many advanced countries with very low taxes and very few poor countries with high taxes. Would you rather live in Chad or Sweden?

https://en.m.wikipedia.org/wiki/List_of_countries_by_tax_revenue_to_GDP_ratio

Someone asked why developed states’ Governments have been so anti-Bitcoin. There’s a good answer up above. If Bitcoin did take off and lead to a collapse in tax revenue, that’s a world that not many of us would want to live in.

[GazLaz]

I’ve just seen Bitcoin being accepted as a payment method on a retail site for the first time. Will this soon become the norm?

[BillyStubbsTears]

Here’s a bit of a problem with the Bitcoin model.

http://www.bbc.co.uk/news/technology-43030677

Figures I’ve seen indicate that Bitcoin mining uses up the same amount of electricity as the entire nation of Singapore. About 0.25% of all the world’s electricity output.

Put it another way. Bitcoin mining currently uses up the equivalent of all the output of Eggborough and Drax running at full power, 24 hours a day. And the consumption has trebled in the past 4 months.

[Sprotyrover]

It needs to be regulated,it is the safe haven for the gangsters,pimps, Drug Cartels and terrorists interested in laundering money and also funding illegal activity.

[nightporter]

It needs to be regulated,it is the safe haven for the gangsters,pimps, Drug Cartels and terrorists interested in laundering money and also funding illegal activity.

Yeah, they should leave that to the bankers.

[Glyn_Wigley]

It needs to be regulated,it is the safe haven for the gangsters,pimps, Drug Cartels and terrorists interested in laundering money and also funding illegal activity.

Yeah, they should leave that to the bankers.

Yeah, the bankers that are subject to all sorts of anti-moneylaundering legislation that the cryptocurrencies aren't - which is why cryptocurrencies are the criminals and terrorists first choice of hiding what they're doing. But that's OK as long as the bankers get pissed on, isn't it?

[legendslounger]

which bitcoin wallet does everyone use?

[GazLaz]

which bitcoin wallet does everyone use?

Bread wallet I use.

[Dare to dream!]

I truly hope that those of you who were buying into this bubble in November and December got out at the upper end of the market.

Classic bubble, built on nothing but the mad dash to join in.

The price rise is because the blockchain technology is actually unbelievable and can add more value to society and have lower costs than traditional monetary systems. It will go up even further.

Did you see JP Morgan leaked cyrcytpocurrency report?

[Sprotyrover]

I see the Icelandic Government has kicked off, Bitcoin miners have been setting up production facilities in Iceland where George thermal power sources mean relatively cheap Electricity. There are currently so many that they are using 40% more power than the entire human population of 340,000. The Icelandic Goverment is looking to bring in regulation as the production units bring little in the way of jobs or revenue to the country as a whole.

[Dare to dream!]

I see the Icelandic Government has kicked off, Bitcoin miners have been stting up production facilities in Iceland where ge thermal power sources mean relatively cheap Electricity. There are currently so many that they are using 40% more power than the entire human population of 340,000. The Icelandic Goverment is looking to bring in regulation as the production units bring little in the way of jobs or revenue to the country as a whole.

This is a problem for crypto especially as it becomes more mainstream, where will the miners go? China have already started kicking them out also

[BillyStubbsTears]

Well aye.

How can a currency have any underpinning value without some “work” being done to give it that value? You can’t conjure value out of thin air.

It’s effort and work that gives the basic value to a currency. If every person in Ruritania lies in bed thrapping off all day, the Ruritatian Real won’t be worth much.

Back to Bitcoin. You could argue that it has a basic value if you have to “invest” $5000 of electricity to mine each Bitcoin. But that assumes that people are prepared to see that as a real investment with a real value behind it. The moment people stop trusting Bitcoin as a currency, it is worthless and all that electricity expenditure is worthless.

[Glyn_Wigley]

Also, if they don't submit to anti-laundering controls I can eventually see countries just outlawing any transactions in cryptocurrencies altogether.