So maybe the bubble is still growing… I don’t see how that should make you reconsider much. I wouldn’t be super surprised to see bitcoin hit $1000 or greater, but I also think it’s likely to lose 50% of its value or more at some point in the next 12 months.
I don’t think bitcoin is a bad long-term investment. Maybe not even at the current price, for 1% of your portfolio or whatever. But I do think the recent rise has been overwhelmingly speculation-driven, and a panic is pretty likely. I think Bitcoin’s price as a commodity isn’t necessarily related to its use as a currency, either. The more volatility in bitcoin, the more merchants (like reddit) will convert out of bitcoin after completing a transaction. We can do this kind of fundamental analysis all we want, but realistically I think speculation has been and will be the overwhelming factor affecting bitcoin prices… and speculation is random and hard to predict, hence the rebalancing recommendation. (Has there been any investigation in to bitcoin transaction volume by speculators vs real usage?)
But it sounds like you’re a lot more informed on this issue than I am. I’m also sick right now and therefore less intelligent than usual :P
Mt.Gox is giving a high of $266 and a low of $105 right now, so in that sense it’s lost ≥50% of its value already. But that’s exaggerated by cherrypicking the high & the low, and the exchange rate’s hovering around $170 now. We’ll have to wait and see whether it returns below $130ish and stays there.
It collapsed again during the time it freakin’ took me to get back home from university, during which I had 0.42 bitcoins on bitcoin-24.com (I’m not crazy enough to play with more money than that), but now it’s back up. (Mt. Gox seem to be down at the moment and I don’t dare imagine what happens when it’s back; I’m selling some of my bitcoins in case they collapse, but not all of them in case they skyrocket again.)
So maybe the bubble is still growing… I don’t see how that should make you reconsider much.
The longer a ‘bubble’ goes on without popping, the less it looks like a bubble and the more like a permanent price increase.
(Has there been any investigation in to bitcoin transaction volume by speculators vs real usage?)
The only one I can think of is the Shamir blockchain paper, which since it’s using the blockchain, is a rather naive and guaranteed-to-be-wrong approach.
Ah, the nay-saying begins. “Oh no, it’s only up 5x over the last month and not 10x!” Remember that the predictions I was talking about blowing were that it would peak in the $30s or $40s; I and and anyone like me was wrong, still are wrong, a fall to ‘just’ $100 does not make me feel much better about having blown them, and I will still have learned that there are enough people willing to buy into Bitcoin for any reason that its exchange rate can be pushed all the way to $260.
More generally, just as a large price increase does not prove that Bitcoin will ultimately not be a bubble and will go to $100k, a large price decrease does not prove that Bitcoin will ultimately be a bubble and go to $0. We of all people should know to not apply double standards and hindsight bias.
Heh, apparently I have absorbed Sumner’s thinking to the extent that I almost wrote his post for him:
When the bitcoin price crash comes, most people will wrongly say; “Aha, I told you that it was a bubble.” But why? Because they will have forgotten about their first bubble prediction. People were calling it a bubble at $2, and again at $30. Now it’s over $200. If it plunged to $35 dollars, the bubble predictors will say they were right all along, but they will have been wrong. They’ve merely remembered their bubble predictions, not where bitcoin was when they made their predictions. [Ha! I wrote this yesterday and delayed posting—that’ll teach me. It’s $160 tonight]
...I can’t predict where bitcoin is going, but I can predict there will be many false “bubble” claims when it eventually crashes—and it will crash. The only question is whether it will crash from a price so far above the current price, that it’s still a good buy at $160. And the EMH says that the answer to that question is; “God only knows.”
So maybe the bubble is still growing… I don’t see how that should make you reconsider much. I wouldn’t be super surprised to see bitcoin hit $1000 or greater, but I also think it’s likely to lose 50% of its value or more at some point in the next 12 months.
I don’t think bitcoin is a bad long-term investment. Maybe not even at the current price, for 1% of your portfolio or whatever. But I do think the recent rise has been overwhelmingly speculation-driven, and a panic is pretty likely. I think Bitcoin’s price as a commodity isn’t necessarily related to its use as a currency, either. The more volatility in bitcoin, the more merchants (like reddit) will convert out of bitcoin after completing a transaction. We can do this kind of fundamental analysis all we want, but realistically I think speculation has been and will be the overwhelming factor affecting bitcoin prices… and speculation is random and hard to predict, hence the rebalancing recommendation. (Has there been any investigation in to bitcoin transaction volume by speculators vs real usage?)
But it sounds like you’re a lot more informed on this issue than I am. I’m also sick right now and therefore less intelligent than usual :P
$133 as of now. (Bitcoincharts.com is down, but I think I saw it at around $260 this morning.)
Mt.Gox is giving a high of $266 and a low of $105 right now, so in that sense it’s lost ≥50% of its value already. But that’s exaggerated by cherrypicking the high & the low, and the exchange rate’s hovering around $170 now. We’ll have to wait and see whether it returns below $130ish and stays there.
It collapsed again during the time it freakin’ took me to get back home from university, during which I had 0.42 bitcoins on bitcoin-24.com (I’m not crazy enough to play with more money than that), but now it’s back up. (Mt. Gox seem to be down at the moment and I don’t dare imagine what happens when it’s back; I’m selling some of my bitcoins in case they collapse, but not all of them in case they skyrocket again.)
The longer a ‘bubble’ goes on without popping, the less it looks like a bubble and the more like a permanent price increase.
The only one I can think of is the Shamir blockchain paper, which since it’s using the blockchain, is a rather naive and guaranteed-to-be-wrong approach.
cough
Ah, the nay-saying begins. “Oh no, it’s only up 5x over the last month and not 10x!” Remember that the predictions I was talking about blowing were that it would peak in the $30s or $40s; I and and anyone like me was wrong, still are wrong, a fall to ‘just’ $100 does not make me feel much better about having blown them, and I will still have learned that there are enough people willing to buy into Bitcoin for any reason that its exchange rate can be pushed all the way to $260.
More generally, just as a large price increase does not prove that Bitcoin will ultimately not be a bubble and will go to $100k, a large price decrease does not prove that Bitcoin will ultimately be a bubble and go to $0. We of all people should know to not apply double standards and hindsight bias.
Heh, apparently I have absorbed Sumner’s thinking to the extent that I almost wrote his post for him: