As opposed to "real" money like the dozens that have totally crashed over the last few decades?
I'm not planning on buying my groceries with bitcoins any time soon, but saying a four-year-old currency in the first throes of popularity and stress-testing, and using inadequate means for it at that, is "not real money" seems awfully shortsighted.
I don't own any Bitcoins, but the concept interests me. (I'm no economist either so these musings are probably entirely wrong or unfounded.) I can't help but feel like all this hooplah about Bitcoin's "price" on the dollar is missing the point of Bitcoin. People are measuring Bitcoin's worth by how many dollars it costs; is that really the measure of worth of a currency, or simply the measure of worth of a dollar?
It would be much fairer for people to measure Bitcoin's worth by (for example) how many gallons of milk or how many pounds of rice you could buy with it. But since we need to somehow know how much this medium of exchange is worth, and since Bitcoin still has very low adoption, we're using the dollar as a way of assigning worth to these imaginary collections of bits, and that makes it a target of speculation and bubble mentalities. In other words, we should tie its worth to something useful you could actually spend it on, instead of just using as it as a Monopoly-money "investment vehicle".
IMHO Bitcoin will never be able to be taken seriously until the price is pegged to some physical product of real-world value. Until then, it'll just be a USD proxy and thus functionally worthless to anyone but academics, speculators, crypto-nerds, and black marketeers who don't understand that Bitcoins aren't truly anonymous. The system has a chicken-and-egg problem of adoption, and right now given the poor PR it's receiving it looks like it's heading in the wrong direction.
Isn't this circular? Call the value of 1 BTC "x number of dollars", or call it "the amount of corn x number of dollars will buy you".
The problem is the same whether you do your accounting in dollars or in sorghum: BTC's value is unstable, wildly so, and it's unstable for predictable reasons.
Overall, well said. But IMO there's nothing wrong with BTC being "only" a proxy currency. It'd solve a technical problem. (in particular, it'd be a decentralized Paypal).
Anyway, this is the graph I watch actually. Every bitcoin transaction is public, so it is possible to count every single one, as well as it's value. The more transactions there are, the better it's adoption rate.
BTC price is missing the point. The real story is how many people are _using_ the damn thing.
Your issue is against using the dollar as the numeraire [1]. Fine, pick gallons of milk, oil, etc. and you'll see that the charts of recent days, when expressed in "real" terms and not in nominal/dollar terms, will look THE SAME.
At t his stage, dollar inflation and depreciation against other currencies is just measurement error when compared to BTCs fluctuations.
The second bit, I didn't entirely got. We can't PEG BTCs price to anything, as its price is market-determined.
This has come up several times. The buying power of a dollar has changed very little in the last month but the buying power of Bitcoin has increased, no matter how you measure it.
I'm far from bullish on Bitcoin, but this article strikes me as irrational nonsense. Why is the fact that Bitcoin is volatile today proof that it will always be volatile? There's no secondary analysis, just reiteration of this one axiom as if it were an irrefutable fact. The whole article sounds like someone in finance making their bet against Bitcoin and being really loud about it in hopes that everyone else will agree and it becomes a self-fulfilling prophecy.
All anyone needs to do is say "hey, bitcoin is not a suitable currency right now, don't use it". There is no contractual requirement for them to review the long-term potential of bitcoin, they aren't bitcoin salesmen. If bitcoin boosters can't make a strong enough case for the currency to override the objections of the moment then that's on them.
'Real' or not, there's just not enough stuff priced in BTC (regardless of the exchange rate) and not enough volume of trade by market making sized traders yet. The more of that stuff that happens the more 'real' it gets.
It depends on how you define 'real money.' Bitcoin is a real medium of exchange. It offers advantages that you cannot get from any centralized currency. It is cryptographically protected, it runs on a distributed network, it's (relative to other currencies) easy to use anonymously on a global scale, and it has a large userbase.
Bitcoin's volatility is a weakness, but it's not an achilles heel. Bitcoin has many strengths that are completely unmatched by any other currency. People use it for these strengths, and people will continue to use it for these strengths regardless of how much it is worth. That's why bitcoin will not die until there is something to replace it.
Bitcoin can't be used to store value (due to volatility), but that doesn't mean that it can't be used as a medium of exchange. (USD -> Bitcoin -> Silk Road, and vice-versa)
Bitcoin is harder to use anonymously than cash. Transactions are between pseudonyms and there is a huge amount of information one can get from that. From some view points, it is worse than credit cards since all of the data is public. Now, that might be fixable, but as of right now it is a problem. see :
If I hand you 50 cents there is no way to back track it whatsoever. With bitcoins every single transaction is public. So I fail to see any inherent ananimity advantage. Some peole might like the fact that current bitcoin banks are unregulated, but in just about every way that counts to normal people bitcoins are worse than cash.
PS: Want real ananimity online, buy visa gift card with cash.
Actually, gaining acceptance in the financial markets is probably the best thing that can happen to BitCoin long term. If BitCoin slowly but surely keeps providing utility and gains financial market volume, it will eventually stabilize in price. It's volatile now because the outstanding value of BitCoins is about$ $1 Billion, but the amount of investors trading it are capable of causing it take big swings. This makes it an attractive market to play in since the amount that can be made in a single day is high. This should eventually increase the number of investors in the market, increasing the total value of the market. If this goes on for long enough, the outstanding market value will grow and BitCoin will stabilize further and further, making it more suitable as a currency.
BitCoin right now is like the market for a low volume commodity like Caviar. But it could eventually become like the market for a high volume commodity like corn, but with all the benefits of being able to spend it electronically anywhere.
Basically, investor interest in the volatility now will eventually drive it to becoming a better currency faster.
Given the volatility you may doubt the longevity of bitcoin as a currency, but since you can exchange it for some goods and services it looks like Real Money to me (at least right now).
what an awful title. i wonder if the title was changed by someone who didn't write the article? "real money" doesn't appear in the text (which is concerned with whether it is stable, not real) and is obviously going to trigger, well, see posts here...
The Yen has fluctuated between 125 per USD and 75 per USD over the past 10 years. BTC has fluctuated between $260 USD per and $120 per over the last 10 days. These are horses of a different color.
[+] [-] devindotcom|13 years ago|reply
I'm not planning on buying my groceries with bitcoins any time soon, but saying a four-year-old currency in the first throes of popularity and stress-testing, and using inadequate means for it at that, is "not real money" seems awfully shortsighted.
[+] [-] InclinedPlane|13 years ago|reply
[+] [-] i386|13 years ago|reply
[+] [-] acabal|13 years ago|reply
It would be much fairer for people to measure Bitcoin's worth by (for example) how many gallons of milk or how many pounds of rice you could buy with it. But since we need to somehow know how much this medium of exchange is worth, and since Bitcoin still has very low adoption, we're using the dollar as a way of assigning worth to these imaginary collections of bits, and that makes it a target of speculation and bubble mentalities. In other words, we should tie its worth to something useful you could actually spend it on, instead of just using as it as a Monopoly-money "investment vehicle".
IMHO Bitcoin will never be able to be taken seriously until the price is pegged to some physical product of real-world value. Until then, it'll just be a USD proxy and thus functionally worthless to anyone but academics, speculators, crypto-nerds, and black marketeers who don't understand that Bitcoins aren't truly anonymous. The system has a chicken-and-egg problem of adoption, and right now given the poor PR it's receiving it looks like it's heading in the wrong direction.
[+] [-] tptacek|13 years ago|reply
The problem is the same whether you do your accounting in dollars or in sorghum: BTC's value is unstable, wildly so, and it's unstable for predictable reasons.
[+] [-] dragontamer|13 years ago|reply
http://blockchain.info/charts/n-transactions
Anyway, this is the graph I watch actually. Every bitcoin transaction is public, so it is possible to count every single one, as well as it's value. The more transactions there are, the better it's adoption rate.
BTC price is missing the point. The real story is how many people are _using_ the damn thing.
[+] [-] zzleeper|13 years ago|reply
At t his stage, dollar inflation and depreciation against other currencies is just measurement error when compared to BTCs fluctuations.
The second bit, I didn't entirely got. We can't PEG BTCs price to anything, as its price is market-determined.
[1] http://en.wikipedia.org/wiki/Num%C3%A9raire
[+] [-] wmf|13 years ago|reply
[+] [-] dasil003|13 years ago|reply
[+] [-] InclinedPlane|13 years ago|reply
All anyone needs to do is say "hey, bitcoin is not a suitable currency right now, don't use it". There is no contractual requirement for them to review the long-term potential of bitcoin, they aren't bitcoin salesmen. If bitcoin boosters can't make a strong enough case for the currency to override the objections of the moment then that's on them.
[+] [-] hkmurakami|13 years ago|reply
(and I've read Bloomberg News practically every day for the last two years...)
[+] [-] johnnyg|13 years ago|reply
Bitcoin is doing what free markets do, fluctuate relative to demand.
The QE-to-infinity is the fake stuff.
[+] [-] tptacek|13 years ago|reply
[+] [-] eah13|13 years ago|reply
[+] [-] PaperclipTaken|13 years ago|reply
Bitcoin's volatility is a weakness, but it's not an achilles heel. Bitcoin has many strengths that are completely unmatched by any other currency. People use it for these strengths, and people will continue to use it for these strengths regardless of how much it is worth. That's why bitcoin will not die until there is something to replace it.
Bitcoin can't be used to store value (due to volatility), but that doesn't mean that it can't be used as a medium of exchange. (USD -> Bitcoin -> Silk Road, and vice-versa)
[+] [-] anologwintermut|13 years ago|reply
https://news.ycombinator.com/item?id=5535321
[+] [-] Retric|13 years ago|reply
PS: Want real ananimity online, buy visa gift card with cash.
[+] [-] malandrew|13 years ago|reply
BitCoin right now is like the market for a low volume commodity like Caviar. But it could eventually become like the market for a high volume commodity like corn, but with all the benefits of being able to spend it electronically anywhere.
Basically, investor interest in the volatility now will eventually drive it to becoming a better currency faster.
[+] [-] sks|13 years ago|reply
[+] [-] tptacek|13 years ago|reply
[+] [-] Frozenlock|13 years ago|reply
[+] [-] kaoD|13 years ago|reply
[+] [-] andrewcooke|13 years ago|reply
[+] [-] tptacek|13 years ago|reply
[+] [-] ryguytilidie|13 years ago|reply
[+] [-] tptacek|13 years ago|reply
[+] [-] ultim8k|13 years ago|reply
[+] [-] ttrreeww|13 years ago|reply
[+] [-] InclinedPlane|13 years ago|reply
[+] [-] enoch_r|13 years ago|reply
The USD is worth about 7.3% more JPY today than on January 25, and 300% more BTC today than yesterday.
[+] [-] bowmessage|13 years ago|reply