Why I believe we're on the cusp of the 3rd great Bitcoin bubble
We've recovered from the last crash You might think it's a bit early (based on the time frame for the last recovery), but things are looking a lot different than in 2011. I would suggest its because the last bubble popped prematurely due to Mt. Gox's failure of a trading engine. Interest in buying Bitcoins has gone up to its highest point since the last bubble. There's a similar spike in general interest. Partly helped along by the Silk Road news. The network is being used at the same rate as during the last bubble. The Bitcoin ATM story (see below) is causing Bitcoin to trend in Canada on Google (was #1 for a bit). The $27 story (see below) will almost certainly cause a large spike worldwide in Google trends once they're updated up to yesterday. Lots and lots of new businesses now accept Bitcoins One legitimate criticism of Bitcoin last year was the lack of places to spend them. We basically just had Alpaca Socks, Reddit and Wordpress, we've grown a lot since then!
The $27 story is going massively viral I think the attention this story is getting took a lot of us by surprise. We're thinking "of course if you bought Bitcoins in 2009 you're rich" and it didn't make much of a splash. But to the rest of the world it's a very novel and interesting story.
Institutional money is coming Afraid with the price at $200 that it will be hard to find enough moms and pops to keep money coming in faster than miners are selling? Don't be, there are individuals out there with a net worth higher than the entire Bitcoin ecosystem.
Governments are explicitly saying it's not illegal More and more governments are either saying Bitcoins are legitimate currency, or releasing guidelines for exchanges to comply with anti-money-laundering laws.
New generation of exchanges Mt. Gox's terrible trading engine was a huge factor in the last crash. They couldn't keep up with all the new interest. This time around there are more exchanges in more countries, and not a single point of liquidity.
GBTC is not an ETF. ETFs have arbitrage mechanisms whereby 'authorized participants' can purchase components of the ETF and trade them for ETF shares, or can trade ETF shares for components of the ETF. As a result, if the price of the ETF diverges in either direction from the net asset value ('NAV') of the underlying assets, authorized participants can earn money via arbitrage trades and bring the price back in line. It also means the supply of the fund is theoretically unlimited: if there is huge demand, shares can be created and traded in unlimited quantities, coupling supply and demand of the ETF and the underlying assets. While the precise regulations are complex, what's important to know about GBTC is that the number of shares on the OTC market will be limited to those sold by original investors who have (a) held for 12 months and (b) gone through the process/paperwork of preparing those shares for OTC trade. An inevitable consequence is that it will be a small and illiquid market. It's even possible that despite the technicalities being sorted out nobody will want or need to sell their shares, at least initially. A few more important points:
There are no GBTC shares for available for OTC trading right now. As a consequence, you should read precisely nothing into any "bid" prices you see.
Even once there are trades, there is no particular reason to assume the price of the fund will move the price of bitcoin elsewhere. No arbitrage mechanic means supply and demand for the GBTC shares could decouple dramatically from supply and demand for bitcoin. Even if the shares appear to trade for a huge premium, expecting that to translate into bitcoin's price on exchanges would be the ultimate example of the tail wagging the dog.
Be careful of underestimating the ability of "wall street" to invest in something just because there aren't shares of it on an exchange. There is a lot of money to be made providing access to investments in real estate, private companies, art, collectibles, etc. via private investment channels (like GBTC for the past year!), derivatives, etc. To the extent there is institutional demand for bitcoin, there is no reason to expect a few shares of GBTC being made available for OTC trading will be the first outlet for that demand.
The creators/promoters of the GBTC fund have an incentive to hype the trading and attract new investment and increase the liquidity for existing investors.
While using bitpay to pay for my domain, I wondered about where do they dump their bitcoins and how can they guarantee the the price at the moment of selling will be the same than at the moment of confirmation. Is converting BTC to USD using services like bitpay bad for bitcoin?
From Dan Primack at Fortune: Bitcoinana: In September we discussed how SecondMarket had launched the first U.S.-based investment vehicle dedicated exclusively to Bitcoin, called The Bitcoin Investment Trust (beating out the Winklevii, who remain stuck in regulatory limbo). Now comes word that Fortress Investment Group is prepping its own Bitcoin fund, which likely will be much larger than the SecondMarket offering. Details remain scarce, although there are some rumors that some info could be revealed tonight at the Bitcoin New Year’s Eve Bash down on Broad Street (yes, this is an actual thing). But it is worth noting that Fortress earlier this year acquired Koru Ventures, a provider of patent-backed loans to tech companies, in order to launch an IP finance group. Among Koru’s principals (and new Fortress employees) was Steven Waterhouse (ex-CTO of RPX Corp.), whose LinkedIn profile yesterday said that he had just become a partner on an unnamed Bitcoin fund. After I sent Waterhouse an email requesting more info – and also placing a call with Fortress – the Bitcoin mention disappeared from his LinkedIn page (replaced only with “TBD”). My understanding, however, is that the Fortress effort will be something like a currency ETF (similar to Bitcoin Investment Trust), but that Fortress also may raise a separate vehicle to back Bitcoin-related startups. And there likely is some relationship to a new Bitcoin-related fund raised by Pantera Capital, a San Francisco-based hedge fund whose clients are known to include several Fortress executives. Pantera founder Dan Moorehead declined to discuss his Bitcoin efforts or relationship to Fortress – including if his effort and the Fortress fund were one in the same – but an SEC filing indicates that he already has raised around $150 million, and Pantera recently participated in a VC round for crypto-currency payment network Ripple Labs. Moreover, calls to Pantera’s main number are now met with a voicemail that only identifies the firm as “Pantera Bitcoin.” UPDATE: Official link: http://finance.fortune.cnn.com/2013/12/31/fortress-is-forming-a-bitcoin-fund/
TLDR: Bitcoin will win in the end and volatility is not an issue.
It seems like the most common argument I see against bitcoin is the day to day volatility makes it a bad currency. Even though it still has all the features built in necessary to be used as a transactional currency I agree that at this point it is still too volatile. This talk does a good job of explaining the growth cycle of bitcoin and why this volatility is to be expected and will settle down over time. Bitcoin has to grow in market cap by several orders of magnitude before it can really be a stable store of value and that takes time but I believe it will happen because it has better characteristics of money than anything else that exists currently. That is all it needs, to be slightly better than current money and over time it will be adopted just like how gold took over for thousands of years as the most trusted form of money because it was the only thing that had the fundamental characteristics of money. Currently it would be better to think of bitcoin as a commodity, as it grows volatility is decreasing and eventually it will level off once it has reached market saturation and there are better exchanges for liquidity and arbitrage in place (Second Market, Fortress, ETF, etc.). Once it has reached market saturation it should be relatively stable as compared to other fiat currencies (USD, EUR, CNY, etc.). Some core features of bitcoin that make it different (and better) than any other currency on the planet; 1) Open source - The full bitcoin source code is posted on github and available to anyone for review. It is an open source protocol just like TCP/IP, HTTP, SMTP, etc. that anyone can contribute to and improve. This means bitcoin is highly adaptable and flexible and can be improved over time and have new features integrated into it. Eventually people will be using bitcoin without even realizing it, just how they use the protocols I just mentioned whenever they access a webpage or send an email. 2) Decentralized - I would invite you to watch this segment by Chris Odom on the relation between bitcoin and bittorrent. Basically bitcoin cant be shut down because there is no central point of failure. 3) Deflationary & Divisible - Bitcoin is hard coded at a limit of 21,000,000 bitcoins ever and each bitcoin can be divided into 100,000,000 units. That means that each unit has the ability to expand to hold a near endless amount of value and since there is a hard cap on the total supply the demand is what dictates the price of individual units. 21,000,000 may seem like a lot of but if bitcoin were to take over just 10% of the value of gold (not to mention remittances, wealth storage, tax havens, dark markets, etc.) it would have to swell to well above $10,000 or even $100,000 per unit. It really is a modern day gold rush because there is only so much that will ever exist. It really takes weeks of research to fully understand what makes bitcoin a better form of money. I have done my best to break it down and simplify it but there is really so much more to it (I haven't even discussed the fact that it opens up automated contracts, direct property transfer, zero trust voting, autonomous corporations, etc. etc. etc. there is a whole world of potential that was never before possible because people couldn't figure out zero trust systems. This problem has been solved and the world will never be the same, you cant uninvent bitcoin just like you cant uninvent the internet, the car or the nuclear bomb. It exists now and there is no going back). If it is something that interests you I would highly recommend digging deeper as I have only scratched the surface. If not, feel free to ignore it, it will keep doing its thing behind the scenes, slowly (or maybe very very quickly) chipping away at the current model.
Cost basis $340, sell for short term capital loss? or wait, soon turns into long term capital.
Hey guys! Looking for opinions! Rode to the top at $1100 or so, sold and waited for the price of $340 to buy again in bulk. This was based on a historical volatility trade where I was seeking a ~73% decline in prices. There was a pattern % corrections after each rally before... 97%, 85%...... This is the lot of BTC I am concerned about. (I have other smaller lots). In May this will become a long term capital investment after it hits one year in age. This means that if I sold it for a loss after may, I wouldn't be able to deduct it against my other short term capital gains in other asset classes. Short term gain tax can only be offset by short term losses, and associated carry over losses, if I recall correctly. Long term capital gains can only be offset by long term capital losses, and long term associated carry over losses. I'm actually not sure about the carry over losses part, if that also uses the distinction of long term/short term. But this entire dilemma is based around that. Now, my forecast is based on information I know, that could increase the price, versus what will decrease the price. For the next two weeks, people may be riding off of the CNN expose' on bitcoin, getting their coinbase accounts set up with their tax refunds etc. The next two weeks also features the USMS auction, which means nothing in regards to the price. There is always the ambiguous and looming SecondMarket ETF coming to the stock market, and the Winklevii's. Aside from that, nothing really. I make much greater returns outside of bitcoin, and my position size is now too large to play around in altcoins. (Although Paycoin looked really liquid, my gambling appetite isn't available for that anymore). So, in theory I could hop out of bitcoin, and hop back in pretty quickly, ideally with capital gains. (It really bugs me that I can't sell liquid options on my bitcoin holdings, I would do this 90% of the time) So should I sell now, later? Before may? Why/why not I use bitcoin for various financing and acquiring other cryptocurrencies that have other useful features. I don't mind if bitcoin goes down, although I would like to use the sell (as a loss) to offset some tax, potentially.
Ten Non-sensationalist Bitcoin Predictions for 2014
Happy New Year! Since everyone else is doing it, I thought that it would be fun to put together a list of my ten predictions for Bitcoin in 2014. (Spoiler: I am not going to predict the final price per bitcoin because those predications are universally garbage. Unless you are tothemoonguy.) Without further ado, and in no particular order: 1) Regulatory Victories: Major nations in Europe and North America (including the U.S.) regulate Bitcoin as a commodity or security. Few if any treat Bitcoin as a true currency. That means that Bitcoin gains and losses will be taxable at long- and short-term rates, and wallet services will need to work quickly to provide accurate trading forms (with offsetting lots) for customers. Day-traders (including hobbyists) will likely need to register with the appropriate regulatory bodies to get preferential tax treatment. Silicon Valley tax lawyers rejoice when they see an influx of new business from Bitcoin's paper millionaires who are now panicked about paying taxes on the toys they purchased with appreciated bitcoin, cars, apartments, etc. By the end of 2014, China decides to get back into the game so they don't miss out on the next major tech boom. 2) Pot & Porn: Regardless of your personal values, marijuana and pornography are massive industries which straddle the line between legal and illegal. Don't expect BitPay or Coinbase to service these markets any time soon. Do expect one or more Bitcoin startups to focus nearly exclusively on these gray markets. Some will call them Silk Road Lites, I'll call them major money makers. (More tomorrow.) 3) Academic Interest: More academic study will lead to greater insights into the Bitcoin blockchain, price movements, and intrinsic value. I am personally interested, among other things, in using some of the blockchain's information to come up with a "fully-diluted" price for a bitcoin. Something that factors in a) the future bitcoins that will be mined on schedule, b) the estimated "dead" bitcoin from early miners who discarded or lost their private keys, c) the average sent vs. receipted split in bitcoin transactions, which affects the meaningfulness of "bitcoin days destroyed" - a weighted average bitcoin addresses that monitors how long they have been inactive. (Full topic next week.) 4) Wall Street Interest: 2014 will be the year that Bitcoin went Wall Street, if not mainstream. The Winklevii are still working on getting their ETF listed on major exchanges. SecondMarket's Bitcoin Investment Trust is a hot investment vehicle and now it seems that Fortress Investment Group and Pantera Capital have raised nearly $150mm for a new Bitcoin-related fund. Expect this to be the tip of the iceberg. I think we could see a major bank's trading desk integrate Bitcoin, and wouldn't be surprised to see a tiny startup like Coinsetter get swooped up for an eye-popping amount as a strategic acquisition / acquihire. 5) Volatility is Addressed: Bitcoin is still missing mainstream consumers. Without consumers, there will be limited demand for merchants to accept bitcoin. Without a vibrant transaction system, there will be limited value in bitcoin to investors. Without consumers, merchants and investors, bitcoins become worthless and the Bitcoin technology loses steam. Expect some new ventures to successfully tackle this volatility problem, including my company Inscrypto. Bitcoin doesn't need to be a currency, it simply needs to look and feel and act like one for non-investors. 6) Financial Cowboys Get Rich: Holy crap, I wish that I were a tech-savvy Wall Street guy because Bitcoin is a FinTech experts wet dream. Institutions might have to wait until the regulatory bodies green light their activity in Bitcoin, but individual day traders have no such restrictions. There are massive arbitrage opportunities between exchanges. Chartists can actually make money by exploiting trends that make the illiquid market inefficient for the time being. Trading algorithms may be written that improve system-wide liquidity and enrich their authors. Wild. 7) Entrepreneurs Solve Problems: Some of bitcoin's biggest critiques (volatility, illiquidity, etc.) will yield tremendous innovations in 2014. All an entrepreneur with a bitcoin obsession needs to do is spend a day on /bitcoin and he'll come up with a dozen startup ideas. As one MIT Sloan student asked me: "Can't you just take anything in financial services and make a bitcoin version?" Pretty much, yeah. That's why so many people are salivating. 8) Bitcoin Remains the Dominant Crypto: Bitcoin's healthy alt-currency ecosystem is good for Bitcoin the technology platform because it provides a back-up plan to any existential threat to bitcoin the currency. That said, the majority of developer talent is building on top of the Bitcoin protocol first, and the new layers and applications that are created this year will continue to strengthen the overall Bitcoin ecosystem. Expect Bitcoin to remain the gold standard of crypto-currencies, and Litecoin and others to maintain their silver, bronze and honorable mention status. 9) Bitcoin as Legal Tender: No, it's not going to happen in the U.S. any time soon. But I'd expect some countries to start storing bitcoin in their central banks in the new year. It's got similar properties to gold as a long-term store of value and the potential for exponential growth. In addition, I'd expect at least some government to accept bitcoin for taxes. Could be a national government or a struggling domestic municipality, maybe Vicco, Kentucky. 10) Price Appreciation: I'm not going to venture a guess into the future value of Bitcoin, but suffice it to say, I believe strongly that the currency will continue to appreciate significantly. Regulatory clarity, greater consumebusiness exposure, insane levels of developer interest, eye-popping investor interest from Wall Street and the VC community, and layers of innovations on top of the underlying Bitcoin protocol will outweigh any negatives. Moreover, the early adopters in Bitcoin aren't selling any time soon. Over half of Bitcoiners polled by Coindesk believe that Bitcoin will go above $10k USD in 2014. Absurd, but shows that this community isn't simply waiting to cash out when the Greater Fools make their buys. So there they are. My professional crystal-ball predictions for 2014, which are incredibly safe and non-sensational. I look forward to checking in on them in six and twelve months, and hopefully becoming a rich man in the process. To the moon!
I, and as i think it's generally assumed, thought that the ETFs will drive price growth. However, I rethought this today. COIN and secondmarket need btc, but haven't they been buying for the past year+? That means there won't be any sort of magical demand growth once it goes live - all the bitcoin buying has already occurred. Now the certificates are just transferred to the retail customers. I could see some marginal demand as more people are interested in the product, meaning that the ETF operators need to acquire more to meet the customer pool. Does this all sound correct? Unless demand via ETFs outstrips expected demand, forcing the ETFs to acquire drastically more coin, then where will all this demand come from? Edit: I can see an immediate bounce just because fundamentals have changed; i.e. the gates to a new market have opened. I can also see how long-term price increases due to demand, the market is open and demand increases. I'm just suggesting that a bubble isn't going to launch with the ETFs because the existing coins will satisfy demand of the new market in the short to mid term.
Wrapping up the block size debate with voting | jl2012 at xbt.hk | Aug 04 2015
jl2012 at xbt.hk on Aug 04 2015: As now we have some concrete proposals (https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2015-July/009808.html), I think we should wrap up the endless debate with voting by different stakeholder groups. Candidate proposals Candidate proposals must be complete BIPs with reference implementation which are ready to merge immediately. They must first go through the usual peer review process and get approved by the developers in a technical standpoint, without political or philosophical considerations. Any fine tune of a candidate proposal may not become an independent candidate, unless it introduces some “real” difference. “No change” is also one of the voting options. Voter groups There will be several voter groups and their votes will be counted independently. (The time frames mentioned below are just for example.) Miners: miners of blocks with timestamp between 1 to 30 Sept 2015 are eligible to vote. One block one vote. Miners will cast their votes by signing with the bitcoin address in coinbase. If there are multiple coinbase outputs, the vote is discounted by output value / total coinbase output value. Many well-known pools are reusing addresses and they may not need to digitally sign their votes. In case there is any dispute, the digitally signed vote will be counted. Bitcoin holders: People with bitcoin in the UTXO at block 372500 (around early September) are eligible to vote. The total “balance” of each scriptPubKey is calculated and this is the weight of the vote. People will cast their votes by digital signature. Special output types: Multi-sig: vote must be signed according to the setting of the multi-sig. P2SH: the serialized script must be provided Publicly known private key: not eligible to vote Non-standard script according to latest Bitcoin Core rules: not eligible to vote in general. May be judged case-by-case Developers: People with certain amount of contribution in the past year in Bitcoin Core or other open sources wallet / alternative implementations. One person one vote. Exchanges: Centralized exchanges listed on Coindesk Bitcoin Index, Winkdex, or NYSE Bitcoin index, with 30 days volume >100,000BTC are invited. This includes Bitfinex, BTC China, BitStamp, BTC-E, itBit, OKCoin, Huobi, Coinbase. Exchanges operated for at least 1 year with 100,000BTC 30-day volume may also apply to be a voter in this category. One exchange one vote. Merchants and service providers: This category includes all bitcoin accepting business that is not centralized fiat-currency exchange, e.g. virtual or physical stores, gambling sites, online wallet service, payment processors like Bitpay, decentralized exchange like Localbitcoin, ETF operators like Secondmarket Bitcoin Investment Trust. They must directly process bitcoin without relying on third party. They should process at least 100BTC in the last 30-days. One merchant one vote. Full nodes operators: People operating full nodes for at least 168 hours (1 week) in July 2015 are eligible to vote, determined by the log of Bitnodes. Time is set in the past to avoid manipulation. One IP address one vote. Vote must be sent from the node’s IP address. Voting system Single transferable vote is applied. (https://en.wikipedia.org/wiki/Single_transferable_vote). Voters are required to rank their preference with “1”, “2”, “3”, etc, or use “N” to indicate rejection of a candidate. Vote counting starts with every voter’s first choice. The candidate with fewest votes is eliminated and those votes are transferred according to their second choice. This process repeats until only one candidate is left, which is the most popular candidate. The result is presented as the approval rate: final votes for the most popular candidate / all valid votes After the most popular candidate is determined, the whole counting process is repeated by eliminating this candidate, which will find the approval rate for the second most popular candidate. The process repeats until all proposals are ranked with the approval rate calculated. Interpretation of results: It is possible that a candidate with lower ranking to have higher approval rate. However, ranking is more important than the approval rate, unless the difference in approval rate is really huge. 90% support would be excellent; 70% is good; 50% is marginal; <50% is failed. Technical issues: Voting by the miners, developers, exchanges, and merchants are probably the easiest. We need a trusted person to verify the voters’ identity by email, website, or digital signature. The trusted person will collect votes and publish the named votes so anyone could verify the results. For full nodes, we need a trusted person to setup a website as an interface to vote. The votes with IP address will be published. For bitcoin holders, the workload could be very high and we may need some automatic system to collect and count the votes. If people are worrying about reduced security due to exposed raw public key, they should move their bitcoin to a new address before voting. Double voting: people are generally not allowed to change their mind after voting, especially for anonymous voters like bitcoin holders and solo miners. A double voting attempt from these classes will invalidate all related votes. Multiple identity: People may have multiple roles in the Bitcoin ecology. I believe they should be allowed to vote in all applicable categories since they are contributing more than other people. original: http://lists.linuxfoundation.org/pipermail/bitcoin-dev/2015-August/009887.html
ETF’s are popular because they let investors trade shares that mimic the value of an underlying asset like gold or a basket of equities — or Bitcoin, in the case of SecondMarket. (To ensure the ETF shares maintain a value relative to the asset, the entity that controls the fund adds or destroys shares as needed.) A fund established to offer investors exposure to Bitcoin is holding around $65 million in the digital currency after two months in operation, its creator, SecondMarket Chief Executive Officer ... A bitcoin ETF would allow investors to invest in the digital coin without having to actually purchase or store it. But the SEC has yet to approve a single bitcoin ETF, citing ongoing fraud and ... Exchange traded funds made gold a more liquid commodity. Can they do the same for Bitcoin? SecondMarket says, yes, but at least one investors suggests the fund is a "turd." Winklevoss Bitcoin Trust. Despite the legal challenges the Winklevosses face, SecondMarket has already succeeded at launching a bitcoin ETF known as the Bitcoin Investment Trust. One notable difference between the two funds, is that SecondMarket’s offering is only open to high-income, institutional investors.
SEC rejects Winklevoss bitcoin ETF proposal for the second time
This video is unavailable. Watch Queue Queue The Bitcoin ETF has been delayed by the U.S. SEC. This news is having a dramatic effect on the Bitcoin market, so in this second video of the day, we'll discuss the Bitcoin ETF, and the possible ... Crypto news from NakamotoJedi today: - SEC chairman about Bitcoin ETF - Bakkt and Nasdaq BTC futures in early 2019 - McAfee under the conditions of bear market - Bitcoin crashing: btc keeping to ... JP Morgan analysts described the future launch of Bitcoin ETFs as the holy grail for Bitcoin investors.The problem is that while there are many proposed Bitc... The next BIG event, after the halving is the Bitcoin ETF!! & it's been confirmed and is coming soon! We have research that connects: The Fed, The Treasury, C...