# Last edited on 2014-09-02 12:32:33 by stolfilocal
# POSTED TO THE THREAD "rpietila Calling the Bottom" 2014-09-02

The original post is a valiant and well-argued defense of bitcoin, but it falls short in several points:

[quote author=rpietila link=topic=740394.msg8364522#msg8364522 date=1408107660]
Blockchain, as a technology, is indestructible. A reasonable starting point is to understand that crypto is here to stay, and no laws or wars can stop it. Any individual cryptocoin, Bitcoin included, has challenges particular to it, and local laws and wars may prove detrimental to individuals' wealth, as well as life. [ ... ] People can only learn more about Bitcoin, unlearning is not possible. 
[/quote]

Indeed technological ideas are "indestructible", but that also includes the slide rule, the solar-powered car, the backyard trash incinerator,  ...

People understanding a technology is largely independent of them adopting it. See the solar-powered car.

Governments cannot kill a technological idea, but can effectively ban its relevant use. See the trash incinerator.  (Or Bitcoin in China.)

Technological ideas that were widely adopted and understood at one time may go completely out of use, sometimes in a matter of months.  See the slide rule.

[quote]
This gives rise to the exponential trendline. There is only one way to draw a trendline with the best R^2 fit (follows from the fact that goodness-of-fit is a universal criterion), and [url=https://bitcointalk.org/index.php?topic=322058.msg8363476#msg8363476]it is shown here[/url]. [ ... ] The trendline shows how much behind we are currently. 
[/quote]

There is a contradiction there, isn't there?  The trendline is supposed to be inferred from the data, but then the data is claimed to be below the trendline.  Shouldn't it be more logical to say that the data no longer fits an exponential trendline?

The following price plot (sorry if some have seen it already) shows five straight years of steady exponential growth, with the log of share price fitting a straight line with much better R than bitcoin's.   But then the share price simply stopped following the trendline, and did not even apologize for it.

[img]http://www.ic.unicamp.br/~stolfi/temp/worldcomm-closing-price-log-extrap.png[/img]

In that plot, what was the difference between Jan/1998 and Jan/2000? 

In bitcoin's history, is the present situation like WorldCom's in Jan/1998, or in Jan/2000?

[quote]
The number of Bitcoin users is so small at 1-2 million that the trendline should stay exponential 2 more orders of magnitude minimum.
[/quote]

That is just a statement of faith, not supported by argument.  "It is not right. It is not even wrong."

As the poster himself wrote in another thread, it is not the current 1-2 million owners who will push the price up by another 1000%.  For that to happen, bitcoin needs the opening of another market, with a BTC demand 10x bigger than China's.  Where will that be?

Some people have claimed that the approval of COIN trading on NASDAQ will create such a demand, including in the US.  Perhaps. But COIN will probably start using the private hoards of the Winklevosses and other backing investors.  Moreover, investing in COIN will be attractive only if people believe that the price will rise.  So the demand for COIN may just ride the eventual next bubble, rather than lead it.  (SMBIT has stopped selling shares since the price stopped rising.  While some early investors made a profit, real or on paper, by my estimates it has been a bad investment so far on the average -- that is, the set of all outstanding shares are worth less than the total money clients paid for them.)

Bitcoin's "intrinsic value" is supposed to be its utility as a payment medium.  All predictions that the price will eventually rise "to the moon"  are based entirely on the assumption that there will be substantial and increasing demand for that use.  In particular, its value as an investment depends entirely on that premise.   

So, how is that demand going?  Unfortunately there seems to be no reliable data about use of bitcoin for e-payments (and the top bitcoin promoters do not seem to be interested in obtaining it).   AFAIK, Bitpay and Coinbase do not regularly post their processing volume.  Bitpay claimed to have processed 100 million USD in 2013,  but it is not clear how much was really payments for goods and services.  On the other hand, there are hints that the use of bitcoin for payments is much smaller than the volume traded at the exchanges.

Moreover, considering the costs and hassle of acquiring bitcoin, it seems likely that most of the payments processed by Bitpay and Coinbase is generated by people who already owned bitcoins, rather than people who bought bitcoins specifically for payment.  Therefore, instead of generating increased demand for payment use, those processors are only encouraging the moving of old hoards to the market.

Thus, as many have pointed out, bitcoin's price is sustained only by the vague hope of it "catching" for e-commerce in the future, and by speculative trade, at various time scales (from the day trader who expects to sell in a few hours, to the "old owners" who do not believe in lasting success but are holding in the hope for another bubble or two).  And the eventual listing of COIN will not affect its use in commerce, immediately or in the distants future.

[quote]
I am writing this from a castle that I bought with money earned by trading Bitcoin based on the very premise I have explained to you here.
[/quote]

It reminds me of this old joke:

  A guy is standing at a bus stop, when an expensive car goes by, brakes, and pulls back.

  'Mick, is that you?', says the driver to the man on the sidewalk. 'Do you remember me? Jeff, from high school?'

  'Why... yes, of course! Nice to see you, Jeff!'

  'Nice to see you too! How have you been doing? You were the brightest in our class, you must have gone far...'

  'Well, I did OK... I went to university, then got a PhD in math, now I'm teaching a public college... Not a great salary, but it's enough for a decent living, can't complain... But what about you? Look at your car, you must be doing very well.'

  'Oh, I'm doing OK too, I would say. As you remember, math was not my thing at all, so after high school I went into commerce. I don't really know much about business, all I do is the basic: buy for 10 bucks, sell for 20 -- and that 10% profit is good enough for me.'