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Mod note, this was written at 12:30am, see the current usd:bitcoin rate here here

Well, let's start this off by saying that today alone, the value of 1 BitCoin to USD has jumped $44.1 hitting a whopping $234.9 coin value and by the time I finished writing this, it went up another $3 — but of course this is due to the massive media hype and a rush to scoop these pacman pellets up at any cost hoping BitCoin value will continue to climb.

But, for all the pessimists forecasting the doom of our cryptocurrency friend, you can put money where your mouth is and bank on the falling of the BitCoin with New York startup "Coinsetter" which provides a Forex platform to bet with/against BitCoin (specifically geared to make leveraged trades on margin and short the market) but the kicker is that actually the company was started by a former Investment Banker named Jaron Lukasiewicz. But of course Coinsetter isn't the first in the space, it will be competing with a Hong Kong company named Bitfinex as well as another called ICBIT.

With margin trading introduced, obviously there's some money to be made, but I don't think now is essentially the time to even think about shorting BitCoins until the hype starts dying down and you can ride the freefall down to a plateau as soon as we can see some realistic market checks, rather than loop going on where each guy is paying more than the next to cash into the climb.

I believe the best way to emphasize the hype though is to embed the "Hype Cycle" from peinvestor2012 on the "Bitcoin - Believe the Hype" post and compare it to a chart of BitCoin price:

peinvestor2012:
Speaking of reddit, this post displays the Bitcoin hype perfectly.

Bitcoin overlayed against a hype cycle

Now, BitCoin Prices:

Hey! Doesn't that curve look familiar?

It's obvious BitCoin will be around for a few years, but it may be more obvious that with alternative cryptocurrencies reaching mainstream (such as LiteCoin and NameCoin) we may see fragmentation of the core BitCoin market because currently all that's driving the BitCoin price is the popularity of the network which drives this ever increasing value.

Although, you must remember the BitCoin relies on "miners" to extract and pull BitCoins from the system requiring an exponential rate of computing power and expensive computing rigs, eventually forcing most of the mass "miner" market who can't spend $30,000 on a dedicated BitCoin rig to switch over to these alternative cryptocurrencies with a lower computing difficulty rate allowing them to again mine in large amounts for less money that will accumulate into solid sums, thus causing them to tell their friends, who tell their friends, which causes a buzz, which drives up the price, which drives up the mining, which raises the difficulty, and which finally leads to a crash when the computing power required becomes intangible again.
(ex. mining BitCoin solo for 48 hours straight will currently only garner you around $2 - $4, which isn't worth the electricity bill you'll receive for that kind of drain.)

Any kid willing to write out a mimic BitCoin system will be able to "create" a currency and this will continue until we're saturated with cryptocurrencies and everyone realizes the aimlessness of shady cryptocurrencies.

Do I think we will adopt a "virtual currency", yes, I do. But, do I think BitCoin, or even his copycat successors for that matter is our guy? No. Personally, I believe that eventually, yes, we will develop a cryptocurrency, but most likely it will be born from a corporate effort in the F500, from the Government, or the UN who want a united form of currency for the developing world.

Comments?

Comments (46)

  • WellPlayed's picture

    How do you know there haven't been a massive forks and you're using rogue bitcoins?

  • john1's picture

    Why would a government (or the UN) want to develop a crypto-currency that would undermine its own ability to effectively tax? It's like asking Hollywood to develop a better version of Bittorrent. Wouldn't that be counter-productive? Bitcoin is more of an open-source initiative along the lines of Bittorrent.

    To be honest, I am not impressed by bitcoins yet. The day I see a fully functioning bitcoin denominated derivatives market (either available through TOR or some other service), that encompasses equity futures, options on futures, commodity futures, etc. you can call me interested.

    Imagine a fully open securities market, without having to go through the hassles of all the conventional regulatory processes. Forget about scanning/faxing ID documents, etc. Just set-up an anonymous account and start trading through FIX instantly.

  • blackthorne's picture

    The smart move here would be to just keep putting on straddles. This thing is either going to the moon or hitting rock bottom-no in between. And as for time decay-this thing isn't staying still for more than 2 minutes.

    Does this platform have anything available? I really don't like inheriting counterparty/platform risk, especially from China.

  • CountryUnderdog's picture

    It's a dog with fleas.

    Edit: actually I don't know what the hell it is.

    "They are all former investment bankers that were laid off in the economic collapse that Nancy Pelosi caused. They have no marketable skills, but by God they work hard."

  • In reply to blackthorne
    Lambie's picture

    It has insurance from hacks and whatnot, just you're standard "safety" package. They received 500K for their startup costs, so I'm not sure at what the extent they can barrier.

    blackthorne:
    The smart move here would be to just keep putting on straddles. This thing is either going to the moon or hitting rock bottom-no in between. And as for time decay-this thing isn't staying still for more than 2 minutes.

    Does this platform have anything available? I really don't like inheriting counterparty/platform risk, especially from China.

  • In reply to blackthorne
    Bullet-Tooth Tony's picture

    blackthorne:
    The smart move here would be to just keep putting on straddles. This thing is either going to the moon or hitting rock bottom-no in between. And as for time decay-this thing isn't staying still for more than 2 minutes.

    Does this platform have anything available? I really don't like inheriting counterparty/platform risk, especially from China.

    Agree with this.

  • In reply to john1
    Lambie's picture

    Government or the UN would develop a cryptocurrency so they can tax transaction fees, which already happens in the BitCoin mining pools. They also most likely would develop a tracking method to be able to trace the movement of individual coins back and forth, unlike now where you can use BitCoins to buy anything shady or rob a trove and get away with it because BitCoins are nearly untraceable and unpinnable to their owners.

    john1:
    Why would a government (or the UN) want to develop a crypto-currency that would undermine its own ability to effectively tax? It's like asking Hollywood to develop a better version of Bittorrent. Wouldn't that be counter-productive? Bitcoin is more of an open-source initiative along the lines of Bittorrent.

    To be honest, I am not impressed by bitcoins yet. The day I see a fully functioning bitcoin denominated derivatives market (either available through TOR or some other service), that encompasses equity futures, options on futures, commodity futures, etc. you can call me interested.

    Imagine a fully open securities market, without having to go through the hassles of all the conventional regulatory processes. Forget about scanning/faxing ID documents, etc. Just set-up an anonymous account and start trading through FIX instantly.

  • In reply to Lambie
    john1's picture

    Lambie:
    Government or the UN would develop a cryptocurrency so they can tax transaction fees, which already happens in the BitCoin mining pools. They also most likely would develop a tracking method to be able to trace the movement of individual coins back and forth, unlike now where you can use BitCoins to buy anything shady or rob a trove and get away with it because BitCoins are nearly untraceable and unpinnable to their owners.

    To be honest, It's like asking the government to engineer a new Bittorrent protocol. Doesn't mean it will work, or anyone will be interested. How would they track it, unless they centralized it and set it similar to something like e-gold only with a fiat backing? Then, it wouldn't be a true 'crypto-currency'.

  • In reply to john1
    Lambie's picture

    But at the same time it would be our desired "e-currency".

    john1:
    Lambie:
    Government or the UN would develop a cryptocurrency so they can tax transaction fees, which already happens in the BitCoin mining pools. They also most likely would develop a tracking method to be able to trace the movement of individual coins back and forth, unlike now where you can use BitCoins to buy anything shady or rob a trove and get away with it because BitCoins are nearly untraceable and unpinnable to their owners.

    To be honest, It's like asking the government to engineer a new Bittorrent protocol. Doesn't mean it will work, or anyone will be interested. How would they track it, unless they centralized it and set it similar to something like e-gold only with a fiat backing? Then, it wouldn't be a true 'crypto-currency'.

  • In reply to Edmundo Braverman
    Lambie's picture

    Yep, that's why I recommended we wait until the mania blows over. Until then people can invest and ride the wave up and then turn around to short or just stay away from it until we see the decline.

    Edmundo Braverman:
    If you shorted BTC yesterday, you're getting your ass handed to you today.

    BitCoin goes over $250 today on Fed buying (according to ZeroHedge, lol):
    http://www.zerohedge.com/news/2013-04-10/bitcoin-h...

  • In reply to Lambie
    john1's picture

    Lambie:
    But at the same time it would be our desired "e-currency".

    john1:
    Lambie:
    Government or the UN would develop a cryptocurrency so they can tax transaction fees, which already happens in the BitCoin mining pools. They also most likely would develop a tracking method to be able to trace the movement of individual coins back and forth, unlike now where you can use BitCoins to buy anything shady or rob a trove and get away with it because BitCoins are nearly untraceable and unpinnable to their owners.

    To be honest, It's like asking the government to engineer a new Bittorrent protocol. Doesn't mean it will work, or anyone will be interested. How would they track it, unless they centralized it and set it similar to something like e-gold only with a fiat backing? Then, it wouldn't be a true 'crypto-currency'.

    It would be too politicized to work. You can already see the situation with the euro as it stands.
    How would that prevent funds from being seized in such a centralized e-currency as in the case of Cyprus?

  • Grayson's picture

    Just in case anyone wants to check it out, here the address for the StackExchange page.
    http://bitcoin.stackexchange.com/

    It's been around for a while and you might be able to dig up some more information on them there.

    "He chose money over power, a mistake nearly everyone makes. Money is the Mcmansion in Sarasota that starts falling apart after 10 years. Power is the old stone building that stands for centuries. I cannot respect someone who doesn't see the difference."

  • In reply to Lambie
    SvenS's picture

    Lambie:
    Yep, that's why I recommended we wait until the mania blows over. Until then people can invest and ride the wave up and then turn around to short or just stay away from it until we see the decline.

    Edmundo Braverman:
    If you shorted BTC yesterday, you're getting your ass handed to you today.

    BitCoin goes over $250 today on Fed buying (according to ZeroHedge, lol):
    http://www.zerohedge.com/news/2013-04-10/bitcoin-h...

    I concur. As investors it's always hard to let a "potential" investment go by and particularly one that has exceptionally high returns. For me though I have a hard time viewing Bitcoins as a legitimate investment. Where is the underlying value? Sure they are hard to mine and so demand is high especially as their popularity increases but if that is all it draws value from then as soon as they become unpopular or competitors pop up their value is threatened and likewise their price. I do have a friend though who bought $1000 worth of bitcoins back when they were worth $25 dollars and he still has them. Personally I'm all for the idea of a straddle as someone mentioned earlier. Just my 2 cents.

    "Successful investing is anticipating the anticipation of others". - John Maynard Keynes

  • In reply to Edmundo Braverman
    Augustus's picture

    Edmundo Braverman:
    If you shorted BTC yesterday, you're getting your ass handed to you today.

    BitCoin goes over $250 today on Fed buying (according to ZeroHedge, lol):

    And now down $50 in three hours.

  • CRE's picture

    Bitcoin is now around $186 off its intraday high of $266.

    Hilarious

  • In reply to Edmundo Braverman
    NorthSider's picture

    Edmundo Braverman:
    If you shorted BTC yesterday, you're getting your ass handed to you today.

    BitCoin goes over $250 today on Fed buying (according to ZeroHedge, lol):
    http://www.zerohedge.com/news/2013-04-10/bitcoin-h...

    Not anymore. If you shorted yesterday and are still holding, you're making a killing. Last trade at $148.

    "For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

  • blackrainn's picture

    And here we go to zero folks

  • NorthSider's picture

    Can we be real here, folks? No one wants to have their wealth denominated in a currency whose purchasing power can fluctuate >30% in a matter of hours. Goodbye, Bitcoin.

    "For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

  • CRE's picture

    I wish I had more knowledge when it comes to this stuff. Called this from the beginning and I wish I could have acted on it. I always feel like my finance knowledge is everything but actual markets.

  • blackrainn's picture

    Welp that was interesting. Lost over 50% of its value in about 4 hours...

  • In reply to NorthSider
    Lambie's picture

    I'd throw you a banana if the moderators could rain some down on me.

    NorthSider:
    Can we be real here, folks? No one wants to have their wealth denominated in a currency whose purchasing power can fluctuate >30% in a matter of hours. Goodbye, Bitcoin.

  • In reply to SvenS
    john1's picture

    SvenS:

    I concur. As investors it's always hard to let a "potential" investment go by and particularly one that has exceptionally high returns. For me though I have a hard time viewing Bitcoins as a legitimate investment. Where is the underlying value? Sure they are hard to mine and so demand is high especially as their popularity increases but if that is all it draws value from then as soon as they become unpopular or competitors pop up their value is threatened and likewise their price. I do have a friend though who bought $1000 worth of bitcoins back when they were worth $25 dollars and he still has them. Personally I'm all for the idea of a straddle as someone mentioned earlier. Just my 2 cents.

    What's the underlying value of fiat currency?

  • Bull_Ish's picture

    I cannot wait for the correction.

    The safest way to double your money is to fold it over twice and put it in your pocket.

  • NorthSider's picture

    This just about sums it up. Bitcoin trading for the last two weeks:

    "For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

  • In reply to john1
    jec's picture

    john1:
    SvenS:

    I concur. As investors it's always hard to let a "potential" investment go by and particularly one that has exceptionally high returns. For me though I have a hard time viewing Bitcoins as a legitimate investment. Where is the underlying value? Sure they are hard to mine and so demand is high especially as their popularity increases but if that is all it draws value from then as soon as they become unpopular or competitors pop up their value is threatened and likewise their price. I do have a friend though who bought $1000 worth of bitcoins back when they were worth $25 dollars and he still has them. Personally I'm all for the idea of a straddle as someone mentioned earlier. Just my 2 cents.

    What's the underlying value of fiat currency?

    liquidity. bitcoin is not a currency

  • Lambie's picture

    Honestly guys, the downfall of BitCoin is the fact that now it's gained so much publicity, every idiot with a laptop is trying to mine them out, they quickly find out their tiny CPU's only gain a burnt out fan/cooling system, they don't gain money, and they leave BitCoin.

    What's funny is that BitCoin difficulty doesn't reverse. Once all the basic users leave, power players and institutions will stack up their equipment and end up brinking the difficulty past their reach, and by then BitCoin value will be at a few dollars, those power players and institutions will go belly up and every investor who shot money into this sham will have a hole in their leg.

    With no constant flow, it won't be accepted anymore on a commerce level and go back to being used in the blackmarket.

    I should edit my post and just say this thing isn't going to see 2014.

  • In reply to jec
    john1's picture

    jec:

    liquidity. bitcoin is not a currency

    There is no mechanism to generate a fractional-reserve banking system from bitcoins, however a currency is ultimately only a tool that is used as a medium of exchange, so provided the later is in force, the former is irrelevant (regardless of economic structure).

  • In reply to Edmundo Braverman
    NorthSider's picture

    Edmundo Braverman:
    Back up to $195 off a low of the day of $105. You can call BitCoin a lot of things, but boring ain't one of 'em.

    To me, this thing is over. The volatility is absurd for something that claims to be a store of wealth. It can jerk wildly back and forth for the next few weeks; but, mark my words, it will be back in its original range (couple dollars per) in a matter of time.

    "For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

  • In reply to NorthSider
    Edmundo Braverman's picture

    NorthSider:
    Edmundo Braverman:
    Back up to $195 off a low of the day of $105. You can call BitCoin a lot of things, but boring ain't one of 'em.

    To me, this thing is over. The volatility is absurd for something that claims to be a store of wealth. It can jerk wildly back and forth for the next few weeks; but, mark my words, it will be back in its original range (couple dollars per) in a matter of time.

    I think we're seeing some of the old timers coming out of the woodwork and getting liquid on the coins they minted back in 2010 for a penny apiece. Also, some goofball who obviously owns them for pennies was giving them away on Reddit earlier today.You gotta love how bizarre this whole subset of humanity is. It just sucks that the rest of the world got involved and probably ruined it going forward.

  • In reply to Edmundo Braverman
    NorthSider's picture

    Edmundo Braverman:
    NorthSider:
    Edmundo Braverman:
    Back up to $195 off a low of the day of $105. You can call BitCoin a lot of things, but boring ain't one of 'em.

    To me, this thing is over. The volatility is absurd for something that claims to be a store of wealth. It can jerk wildly back and forth for the next few weeks; but, mark my words, it will be back in its original range (couple dollars per) in a matter of time.

    I think we're seeing some of the old timers coming out of the woodwork and getting liquid on the coins they minted back in 2010 for a penny apiece. Also, some goofball who obviously owns them for pennies was giving them away on Reddit earlier today.You gotta love how bizarre this whole subset of humanity is. It just sucks that the rest of the world got involved and probably ruined it going forward.

    Maybe. But the trading volume on these things is so thin that the 60 second ticks are ~5% of the currency's value. In 45 minutes it's back down to $168 from the $195 that you mentioned earlier. Be real: the people putting money into Bitcoins aren't looking for a store of wealth or an inflation hedge or a new currency system - they are idle, uninformed speculators. Because that's all that you can do with a "currency" that is fluctuating more than micro-penny stocks.

    "For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

  • In reply to NorthSider
    Edmundo Braverman's picture

    NorthSider:
    Maybe. But the trading volume on these things is so thin that the 60 second ticks are ~5% of the currency's value. In 45 minutes it's back down to $168 from the $195 that you mentioned earlier. Be real: the people putting money into Bitcoins aren't looking for a store of wealth or an inflation hedge or a new currency system - they are idle, uninformed speculators. Because that's all that you can do with a "currency" that is fluctuating more than micro-penny stocks.

    I don't think that was ever a question. When I met with the Paymium guys a few weeks ago it had gone from $35 to $70 over the previous two weeks. Since no one owned any of them, and there was no mechanism to short them, the only way a speculator could play was to buy in and drive the price up. A little known fact about BTC is that only about 25% of the total coins mined to date are circulating (in the float, so to speak). The rest are just being sat on by a small number of players who own a HUGE percentage of the total supply.

    It's not a pretty situation from an investment standpoint, but if you're just looking for a smash and grab you're as likely to get lucky with this as anything else.

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  • NorthSider's picture

    "For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

  • Nouveau Richie's picture
  • NorthSider's picture

    "For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

  • In reply to NorthSider
    NorthSider's picture

    "For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."