You are welcome. I thought bitcoiners would want to know what the press says, whether they agree with it or not.

For example I believe that the mini(?)crash that is happening now is due to the Chinese TV program, that must have reached - and scared - many people in China.  Arbitrage would explain why the other non-Chinese exchanges are falling too.

One point that struck me in the second article is the comparison of Bitcoin to bearer bonds. They too were once an anonymous international "currency" outside the reach of governments and banks. For that reason (it says) banks have been forbidden to deal with them.

More recent bad press:

Aussie Mum In Anti-Bitcoin Crusade After Son's Death
http://www.gizmodo.com.au/2014/01/aussie-mum-in-anti-bitcoin-crusade-after-sons-death/

Investors beware of Bitcoin
http://www.livemint.com/Opinion/fEXo8r2OcAIZHWOMbZmmfO/Investors-beware-of-Bitcoin.html

The point is that the Chinese press is insisting on the Ponzi aspect.  If that is the government position, Bitcoin trading may become illegal in China.

(Bitcoin may have good intentions, but trading it is a zero-sum game, whether it blooms or collapses.  One man's proft is necessarily another man's loss.)

More bad press from China. (Note at bottom says it was published in a Chinese newspaper, doesn't say when):
http://www.scmp.com/comment/insight-opinion/article/1404497/bitcoin-bubble-wont-last-without-beijings-approval

Perhaps the negative piece on China's TV?

Doesn't this equation assume that all payments are made by exchanging the actual currency (banknotes in the case of dollars, blockchain transaction for BTC)?

How does one define V when most dollar payments are made by moving numbers from one bank ledger to another?  Wouldn't the same issue arise with BTC?

(Sorry for the stupid question, but when BTC are traded at an exchange, is each transaction immediately realized on the blockchain, or are transactions tracked in internal accounts, to be combined and realized at a later time?)


Er, sorry again, what is V now for bitcoins? How is it expected to change as PQ increases?

That is the market price (currently ~850 dollars per BTC), including the effect of speculation.  

For example, the base price for steel plate (simplifying a lot) is defined by the price/suply curve of steel plate factories and the price/demand curve of the industries that use steel plate.  That base price may be magnified or reduced by speculative trade, to yield the market price.

For bitcoins, if the price of each BTC is P, then obviously to have M dollars of payments per day one must transfer M/P bitcoins per day.  But that volume will include multiple uses of the same bitcoin in the same day.  It will also include "virtual" uses where payments in BTC are made by transfers between bank-like Bitcoin accounts, with only occasional transactions realized in the blockchain (just as today most dollar payments are made without any transfer ofr paper money).

So, a key unknown parameter is the factor F that relates the total payment volume in BTC (M/P) to the number of distinct bitcoins needed to realize that volume.

Since the market price is now largely determined by the combined expectations of all traders, with no clear "base value", is hard to predict which way it will go.  My feeling is that it will not rise much above its all-time high of ~1200 USD.

But of course it is just a feeling, although I believe it is justified by what I understand of economy and politics.

That is one of the things I still don't understand.  Suppose that Bitcoin is used to make payments equivalent to a total of M dollars per day, worldwide.  How does one derive from that number a "base value" (market price apart from speculation) for 1 BTC in dollars?

I am Brazilian. I will spare you the history of Brazilian inflation, suffices to say that the currency was devaluated by a factor of 2.75 quintillion (2.75 x 10¹⁸) in my lifetime. So I do know something about the world of "fiat". 


Yes, IF I knew at the time that bitcoins were going to appreciate that way, I would certainly have bought them.  Ditto for gold or Apple stock. But with my luck I would probably have invested in Enron or the Madoff fund instead...

But right now Bitcoin does not look like such a good investment, does it?   It may be a gold mine for day traders, but to prosper one must be smarter and quicker than all the other smart guys, which I am not. 

Basically yes. I do not expect to make any great discoveries, but as a computer scientist I am supposed to understand Bitcoin (and have a reasoned opinion about it). 

As I said before, I am satisfied that the technical part is sound, but I still cannot see how it can succeed economically.  I am still trying to understand how the market works (if it does).


Methinks that 1800 dollars is too much money to gamble. (My betting limit is a pizza and a beer, and I have made only three or four such bets in my life.)  I would rather spend that money on tools or other grown-up toys.


That too, I suppose.

Deflation means change in price, so that is not "base value" but the very unknown variable that the market has to define.

Savings is not "destructive" because the bitcoins saved will be traded again depending on expected price.  Indeed every bitcoin is always someone's "savings" except for an instant while it is being traded.

(Perhaps one may consider that bitcoins are "destroyed" temporariliy while a transaction is awaiting confirmation from the net, if they cannot be traded or used for commerce in that interval.  From that "consumption" and predicted volume of commerce one may be able to compute a "base value" that does not depend on speculation, assuming that Bitcoin will be the only cryptocoin in use.  However, the volume of "consumption" depends on the speed of confimation.  Is that predictable?)

I will be very disappointed, indeed.

As I will be if and when gold reaches 1,000,000 USD/ounce, or Apple stock rises to 1,000,000 USD/share.

I understand that many people like gambling; fine, but I don't. 

I understand that many people are optimistic about the future of Bitcoin; fine, but I am not.

Now it is about 2:00 AM in China; all the Chinese traders (and their robots) must be sleeping, since Huobi's volume is (relatively) almost zero.

We should be able to see now what the price trend would be without China. 

It is actually quite simple: the current market price is a kind of mean of the guesses of all traders about what will be the market price in the future.

Yes, mathematically that would be called a recursive definition with no basis (i.e. without a non-recursive "bottom case").

In the stock market, analysis of a company's business and market provides an estimate of its future profits, and those in turn provide a base value that can be considered the "bottom case" of that recursion.

In the commodity market, predictions of the "destructive" demand for the commodity (by industry and consumers, as opposed to traders) play the same role.

Of course the base value predictions may be quite wrong, and (as in the case of gold and tulips) the speculative value may swamp the base value.

Cryptocurrencies pay no dividends and have no "destructive" demand. So they have no base price to anchor the speculation, even remotely.

That is why their prices are so volatile and unpredictable.

Sorry to repeat, but a transaction can be considered fake only if the same person or organization is selling to himself.

If the two sides are distinct and competing traders, the transaction is legitimate volume, whether it is done manually or through robots.

Is there evidence that truly fake transactions are occurring on Huobi (more than on MtGox or other exchanges)?

Day traders obviously prefer to trade on zero-fee exchanges; that alone seems a good explanantion of why Huobi has such a large volume.

I have made a few (not dozens) of posts about the small "creeping ping-pong" trades on MtGox (which seem to have stopped a while ago). Thanks for your explanations.

This is a different "phenomenon": a much larger order that is being continuously repositioned on the ask side only, apparently without any transaction. Unless there is a sudden increase in price (more than 50 USD in less than 10 minutes), those coins would never be sold. Could it be a safety measure against excessive volatility? A trap for random impulse buyers?

Below is the latest Chartbuddy image of MtGox's order book history for 1 hour, sampled every 10 minutes.  Note the changes along my yellow highlight line.  There seems to be a robot that continuously repositions a sell order of 150-200 BTC at exactly 50 USD above the last transaction price.  What could be the purpose of that robot?

Maybe he typed "buy 860 BTC at 991.7" instead of "buy 860 BTC at 911.7". Oops.

What we know:

There were two accounts through which one coud put money into Huobi, a personal one that supported ATM deposits and Zhifubao (?) transfers, and a corporate one, on a different bank, that did not. The first way was closed.

We do not know whose decision it was (Lilin's, the bank's, or the central bank).  Nowhere it is said that the second way was explicitly (re)approved by the second bank or by the central bank.

The only certainty is that some ways of moving money into Huobi were closed.  It may be slightly bad news, but it is clearly bad news, not good news. 

The market seems to agree.

(By the way, I believe that OKCoin has been operating all along with their business account only.)