Dec

5

Bitcoin, from Barry Gitarts

December 5, 2013 |

Hi Victor,

I'm wondering if you have studied bitcoin at all? Or do you only consider a market once its very liquid?

Victor Niederhoffer writes: 

Seems ready to implode.

Barry Gitarts writes: 

Based on what?

Victor Niederhoffer writes: 

Crooks are using it.

Barry Gitarts writes: 

Isn't that the case with all money?

Victor Niederhoffer writes: 

It will be shut down because it competes with things the government like to monopolize.

Barry Gitarts replies:

That was a fear earlier, however the senators, agency heads and Bernanke all seem to think it serves a purpose and are afraid to stifle the innovation:

Ultimately isn't the government just run by short sighted politicians who just want to be reelected? Any politician who stands up against bitcoin or any internet application stands the risk of being "Ubered" (see this article).

Bitcoin does seem to be a disruptor for traditional banking, but so was the internet for the post office, newspapers, tv and retail, that only grew the internet not kill it.

This reminds me of a half joking quote by Russian entrepreneur: "If you create a business that disrupts big business in Russia they will kill you, in America they buy your business."

Victor Niederhoffer writes:

I remember Peter Theil the founder of PayPal
saying that if they knew what he was doing, they would have shut him
down. As it is, only the Lousiana Attorney General was fast enough out
of the box to try to shut Paypal down. 

Richard Owen writes: 

Like all good bubbles, there is a legitimate story at hand. Even with Tulips there was a valid story of rarity that then seemed as psychologically permanent as does now the rarity and desirability of a Van Gogh.

Bitcoin is a bit like the currency of an island entrepot whose domestic economy is tiny and whose export base is mainly composed of criminality and laundering and for which the currency of the island is disproportionately held as wealth of a group of island oligarchs [I suspect he has sold some and someone might correct, but it appeared superficially that the founder's bitcoin may have a billion plus market value?]. Many accidental paper fortunes are held by bitcoin miners: will they stand passive in the face of volatility?

Of the three social gatherings I attended Weds to Sat of last week, all featured discussion of bitcoin and at one - of the type featuring participants who, to listen to their narrative over time, would appear as genius and never to have taken a loss - the non-documented boastage of coups won and utmost sagacity shown in the BTC market. Mr Thiel is smart: he is financing the pick and shovel providers, not running a large position in coin.

So yes, why not $10k BTC, but also, why?

Henrik Andersson writes: 

Richard, this is clearly the mainstream/consensus view - bubble. The contrarian trade is not always right (far from it), but was is clear is that many commentators don't understand the many faces of bitcoin. What is also clear is that a good investment decision (long term, not trading) can be done on the premise that the highest probability is that the ultimate value is zero. The question is what probability do you put to the USD 10k scenario. "Nothing is more powerful than an idea whose time has come" Victor Hugo.

Richard Owen writes: 

You make very good points, and I am sure you know all sides of the argument well. If you are long bitcoins I hope very much it is for a large and successful profit. Please manage your risk well. I am not smart enough to assign a probability to $10k. The thoughts are offered without prejudice and are an honest sampling of my experiences as have occurred. I have no position either way and should be distrusted or discredited on that basis. There may be commentary that it is a bubble and my thoughts or analogies may be derivative and unoriginal. The price is possibly also a form of consensus and that is that each BTC is worth a bunch of money, and increasing. As many have gone bankrupt shorting bubbles as being long. 

anonymous writes:

I recall the great Jim Rogers saying that Hysteria is the first thing to look for, but one still needs to pinpoint a reason to go against it. The kind of examples he gives are buying stocks in country's whose stock markets have been closed, buying tea plantations when the price of tea has plummeted etc. Bitcoin? Might just have to let it play its course. I think its a bad joke, but even I must admit it did survive the 50% drop recently before this latest headline grabbing advance. Anyway, this is just my two cents and I have no interest in even attempting to try and speculate with or against it. 

Jan Peter-Jannsen writes: 

Bitcoin as a technology is superb. Bitcoin as a currency is questionable. Bitcoin as an investment is a bad bet.

A great strength of Bitcoin is that it is open source. Any experts can validate the code, and so far there seems to be no flaws. The crypto-curency works!

But cannot open source also be a great weakness? Anyone can copy the code, improve it, and make an even better alternative to Bitcoin. Is there any reason to stick to Bitcoin if and when that happens? Bitcoin is volatile, no prices are quoted in Bitcoins and very few have both their income and expenses in it. Those who use Bitcoin need to exchange to and from other currencies, so why not switch to another digital currency?

In terms of investment I believe it is a bubble. The supply is very low; many coins have been lost and the majority of coins are probably in the hands of the founders. I guess they are selling at the moment, but at a low enough speed to keep the bubble growing. In terms of demand; everyone talks about it these days.

In the coming years I predict new payment systems to arise based on technology pioneered by Bitcoin. But Bitcoin itself will soon be forgotten.


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