Bitcoin finally hits $10,000! — The Economist, Nov. 28th, 2017
Bitcoin surpasses the $10,000 milestone! — CNBC, Nov. 28th, 2017
BITCOIN SOARS ABOVE $11,000! — The Guardian, Nov. 29th, 2017
News outlets haven’t even had 24 hours to let the “10K” news simmer and it already climbed to $11,500. By the time they published the “11K” piece, it already dropped back to $9,000. Then, as soon as they entered the last word on their “Bitcoin is crashing!” article, it’s back at $11,000 per BTC.
Amazing! But this is not unprecedented.
We’ve seen this before, back in 2013, a media frenzy when Bitcoin was approaching $1,000 that fueled that year’s bubble. In January of that year, one bitcoin was trading at around $15.00, rocketed to $266 by April, and then crashed back to $50 really quick. By November, it had already broken $1,000, peaking at $1,242 on Mt.Gox. That’s an almost 100-fold increase in 11 months, an order of magnitude larger than this year’s (2017) 10-fold run up.
Funny thing is, the charts then are almost identical to the ones today, and news articles look exactly the same. Just add one zero.
The media gobbles this up because people are fascinated by this stuff. Stories of people finding 5000 BTC in an old hard drive that they bought for $25 in 2009, a man throwing away 7500 BTC by accident and scouring a landfill to try and find it, a man buying pizzas for 10,000 BTC — It’s the sizzle to the steak and it sells.
The Other Side
People love it when things go up, but what goes up must come down, and Bitcoin is not immune to this. History shows three major “Bitcoin Bubbles”, and a LOT of volatility in between. Swings of 20–30% in one day are not uncommon in the Bitcoin world, but to most people this can be quite terrifying. For example, in the same day when Bitcoin broke $11,500 a couple of days ago, Bitcoin crashed back to $9,600, and lost 20% of its value overnight.
It isn’t just that, there are more. There’s that time it crashed from $260 to $50. Bitcoin was declared dead. (...)
The Bitcoin Hype-Cycle
The peculiar thing about Bitcoin’s price is that it has these cycles. First, a slow and steady accumulation by people who understand the tech and buy it when it is ignored as worthless. This is usually after the price had just “crashed”. Then it starts to reach a point where the media picks up its growth. And then, a parabolic buying frenzy where even your grandma starts buying Bitcoins. Finally, after reaching a dramatic peak, it finally pops and drops, leaving only those who believe in the tech and support it even after a crash. Back to square one,with a bigger base price and a larger user base. Rinse, repeat.
The Obsession with the Price While Overlooking the Value
Price is not equal to value. The price of water is cheap, but it is pretty valuable. We will die without it! If water suddenly became scarce, its market price would skyrocket. In a zombie/nuclear holocaust apocalypse scenario, your gold would bet worth much less than water, guaranteed. Today, simple bottled water is, in a lot of places, more expensive than gasoline per liter, when two decades ago the idea of buying water at all was considered crazy. The market decides on the price, but the value of something lies outside its price.
In the same way, the value of Bitcoin has nothing to do with its exchange rate.
When Bitcoin was worth exactly zero dollars, it already essentially solved the previously unsolvable 30-year old computer science problem called the Byzantine General’s problem — how to reach agreement with other agents over an untrusted network of communication. That value proposition was there from day zero, even if the price of one Bitcoin was zero.
“A lot of people automatically dismiss e-currency as a lost cause because of all the companies that failed since the 1990s. I hope it’s obvious it was only the centrally controlled nature of those systems that doomed them. I think this is the first time we’re trying a decentralized, non-trust-based system.” Satoshi Nakamoto, 2009
Because of Bitcoin, we don’t need middlemen to transact — hell, we eliminated the need for trust. We can transfer value over the internet without asking permission from a gatekeeper. The internet did this for the transfer of information, whereas before, we had to go to the post office to send mail, through a telephone operator to call someone overseas, or a publisher to let the world read about our stories and ideas. Bitcoin is doing this today, letting us store value like never before and transfer value from one owner to another without permission, globally, and instantly.
Just like how the value of your paper money is not in the paper itself but in the government or authority that issues this paper, the value of Bitcoin is not in the tokens used to exchange with each other, but in the network that allows this exchange to happen.
The price of Bitcoin is the least interesting thing about it. The value of Bitcoin is in its ability to do what it set out to do, and do it best. When you truly understand the technology, you’ll realize it’s true value.
by Miguel Cuneta, Medium | Read more:
Bitcoin surpasses the $10,000 milestone! — CNBC, Nov. 28th, 2017
BITCOIN SOARS ABOVE $11,000! — The Guardian, Nov. 29th, 2017
News outlets haven’t even had 24 hours to let the “10K” news simmer and it already climbed to $11,500. By the time they published the “11K” piece, it already dropped back to $9,000. Then, as soon as they entered the last word on their “Bitcoin is crashing!” article, it’s back at $11,000 per BTC.Amazing! But this is not unprecedented.
We’ve seen this before, back in 2013, a media frenzy when Bitcoin was approaching $1,000 that fueled that year’s bubble. In January of that year, one bitcoin was trading at around $15.00, rocketed to $266 by April, and then crashed back to $50 really quick. By November, it had already broken $1,000, peaking at $1,242 on Mt.Gox. That’s an almost 100-fold increase in 11 months, an order of magnitude larger than this year’s (2017) 10-fold run up.
Funny thing is, the charts then are almost identical to the ones today, and news articles look exactly the same. Just add one zero.
The media gobbles this up because people are fascinated by this stuff. Stories of people finding 5000 BTC in an old hard drive that they bought for $25 in 2009, a man throwing away 7500 BTC by accident and scouring a landfill to try and find it, a man buying pizzas for 10,000 BTC — It’s the sizzle to the steak and it sells.
The Other Side
People love it when things go up, but what goes up must come down, and Bitcoin is not immune to this. History shows three major “Bitcoin Bubbles”, and a LOT of volatility in between. Swings of 20–30% in one day are not uncommon in the Bitcoin world, but to most people this can be quite terrifying. For example, in the same day when Bitcoin broke $11,500 a couple of days ago, Bitcoin crashed back to $9,600, and lost 20% of its value overnight.
It isn’t just that, there are more. There’s that time it crashed from $260 to $50. Bitcoin was declared dead. (...)
The Bitcoin Hype-Cycle
The peculiar thing about Bitcoin’s price is that it has these cycles. First, a slow and steady accumulation by people who understand the tech and buy it when it is ignored as worthless. This is usually after the price had just “crashed”. Then it starts to reach a point where the media picks up its growth. And then, a parabolic buying frenzy where even your grandma starts buying Bitcoins. Finally, after reaching a dramatic peak, it finally pops and drops, leaving only those who believe in the tech and support it even after a crash. Back to square one,with a bigger base price and a larger user base. Rinse, repeat.
The Obsession with the Price While Overlooking the Value
Price is not equal to value. The price of water is cheap, but it is pretty valuable. We will die without it! If water suddenly became scarce, its market price would skyrocket. In a zombie/nuclear holocaust apocalypse scenario, your gold would bet worth much less than water, guaranteed. Today, simple bottled water is, in a lot of places, more expensive than gasoline per liter, when two decades ago the idea of buying water at all was considered crazy. The market decides on the price, but the value of something lies outside its price.
In the same way, the value of Bitcoin has nothing to do with its exchange rate.
When Bitcoin was worth exactly zero dollars, it already essentially solved the previously unsolvable 30-year old computer science problem called the Byzantine General’s problem — how to reach agreement with other agents over an untrusted network of communication. That value proposition was there from day zero, even if the price of one Bitcoin was zero.
“A lot of people automatically dismiss e-currency as a lost cause because of all the companies that failed since the 1990s. I hope it’s obvious it was only the centrally controlled nature of those systems that doomed them. I think this is the first time we’re trying a decentralized, non-trust-based system.” Satoshi Nakamoto, 2009
Because of Bitcoin, we don’t need middlemen to transact — hell, we eliminated the need for trust. We can transfer value over the internet without asking permission from a gatekeeper. The internet did this for the transfer of information, whereas before, we had to go to the post office to send mail, through a telephone operator to call someone overseas, or a publisher to let the world read about our stories and ideas. Bitcoin is doing this today, letting us store value like never before and transfer value from one owner to another without permission, globally, and instantly.
Just like how the value of your paper money is not in the paper itself but in the government or authority that issues this paper, the value of Bitcoin is not in the tokens used to exchange with each other, but in the network that allows this exchange to happen.
The price of Bitcoin is the least interesting thing about it. The value of Bitcoin is in its ability to do what it set out to do, and do it best. When you truly understand the technology, you’ll realize it’s true value.
by Miguel Cuneta, Medium | Read more:
Image: uncredited
[ed. See also: Iced tea company rebrands as “Long Blockchain” and stock price triples. Insanity.]
[ed. See also: Iced tea company rebrands as “Long Blockchain” and stock price triples. Insanity.]
