Bitcoin hits $100

[productionhead]

Um, are you guys not in fact overlooking the blatantly obious fact that SOMEBODY HAD TO PAY THE SUM OF THOSE AMOUNTS TO GET THE PRICE UP THERE?
.

You're still not getting the point.

Nobody paid $1.4 billion for BitCoins.

I explained it to you once.

I sell an onion for $100.

Based on my transaction*, all onions on the planet are now worth $100 each.

Take the number of onions available on the planet and multiply it by $100.

That is the market capitalization for all onions, based on my transaction*.

* My transaction is analogous to the price paid for the last bitcoin sold.

Now, you are essentially saying, because I was able to sell one onion for $100, everyone in the world got $100 for each onion they have.
Replace onion with bit coins.

No.

Jesus Christ, market capitalization is an extrapolation based on the price movement of a small percentage of bitcoins, not that an aggregate of people paid that sum [the market capitalization] and established the value of all bitcoins with the sum paid.

Take off your BitCoin love for one second and look at the basic mistake in understanding you're making.

Also: https://www.khanacademy.org/science...d-investing/v/price-and-market-capitalization

 

[Unarmed Gunman]

Jesus fuck LukeP are you serious?

If I bought 10,000 Bitcoins last year when they were $1/ea the amount of money I "put into the BTC economy" as you say was $10,000. If the handful of people trading Bitcoins right now are exchanging them at a rate of $120/ea that DOES NOT mean I put $1.2 Million into the BTC economy.

It also doesn't mean I can get $1.2 million for my bitcoins but that's a different issue altogether.

 

[mattseh]

No, but in my defense I am one lazy motherfucker. Also, like everyone else I wish I would have liquidated all my shit and put it into Bitcoins 2 months ago, but that doesn't change the market fundamentals.

You're not the one who shits on bitcoin at every chance you get, but they exist on this forum. You'd assume if they had such conviction, they'd try to profit from it, since they already have a considerable amount of time invested.

 

[Fatbat]

There have been many articles on the BBC in the last few months including this one on the front page today...

BBC News - Hack attacks hit Bitcoin exchange rates

These are some of the others...

BBC News - Bitcoins: Could virtual cash replace money?
BBC News - Bitcoin miners hit back at cyber-thieves
BBC News - Canadian man to sell house for Bitcoin virtual currency
BBC News - Bitcoin virtual currency reaches all-time high price
BBC News - Megaupload sequel Mega to accept bitcoin currency
BBC News - Bitcoin virtual currency can now be used to pay for pizza
BBC News - Killing off cash: Could new tech mean the end of money?
BBC News - Rewards set to halve for digital money miners

You can't say that mainstream media isn't paying attention.

 

[Firelead]

Please post that graphic every time LukeP posts his "money" chart. :Yahoo_29:Buttcoin FTW!

the article on their site is hilarious:

What are Buttcoins?

What is a Buttcoin?

Buttcoin is a peer-to-peer butt. Peer-to-peer means that no central authority issues new butts or tracks butts. These tasks are managed collectively by the network. It’s like a bitcoin, but with butts instead.
Why call it Buttcoin?

Because butts are funny. And it kinda sounds like Bitcoin.
So, then what is a Bitcoin?

Here’s a great post by someone in Bitcoin’s very own forum.

Bitcoin P2P Crypto-Commodity
OK, so Bitcoin is a medium of exchange. No one can question that. And it seems a very effective medium of exchange.
But is it a currency? Is it money, backed by a store of value to be redeemable from the issuer giving the issuer no option not to accept it to be redeemed? Or is it a secure accounting utility with a user allocated value due to market forces?
Can a Bitcoin site (bitcoin.org) decide individually whether to call Bitcoin a currency or not – because it has a decentralized nature?
Can a Bitcoin site (mtgox.com) decide individually whether to call Bitcoin an internet commodity or not – because it has a decentralized nature?
Can every Bitcoin holder, merchant, trader, etc. decide individually how they interpret Bitcoins?
Does Bitcoin allow for modern day barter transactions between the fairly secure Bitcoin Accounting Utility and a good/service?
See this legal ideas with regards to barter exchange as opposed to virtual currency (Scroll down to the end to Matthew C ‘s answer):
LinkedIn Answers - No Longer Supported | LinkedIn Help Center
Can Bitcoin be interpreted as an internet utility which can be bartered for any number of goods/services/other?
Is bitcoin.org ‘s blatant misrepresentation of Bitcoin not misleading?
“P2P Virtual Currency
Bitcoin is a peer-to-peer currency. Peer-to-peer means that no central authority issues new money or tracks transactions. These tasks are managed collectively by the network.”
“… no central authority … tracks transactions … ” – Can anyone not track transactions on the blockchain (provided Bitcoin was not laundered – and laundering Bitcoin would be illegal)?
P2P Virtual Currency – Does a currency not require a store of value backing it?
Does Bitcoin’s only value derive from its secure, transferable utility value as an internet commodity described by MtGox? Have we bought an internet commodity that we are bartering for goods/services/other as a medium of exchange? Or have we been issued a virtual currency with a backed store of value – to be redeemed, without option not to accept, from the backing entity on demand?
Would “P2P Crypto Accounting Utility” not be a more aptly description? Would it not be less incriminating to bitcoin.org ‘s author who identifies his Bitcoins as currency – even though it is not backed, or redeemable from an entity, without option not to accept?
​

And the answer to all those questions is “no”. Therefore all Bitcoins are Buttcoins.
That’s a whole lotta words I’m not going to read, do you have an infograph for me to stare at and furrow my brow in a vain attempt to understand what you’re trying to say?

Sure!

 

[lukep]

Nobody paid $1.4 billion for BitCoins.

No, but cumulatively, $1.4B had to be paid to get the price up to $135 in this case. The market cap reflects the VALUE.

Now, you are essentially saying, because I was able to sell one onion for $100, everyone in the world got $100 for each onion they have.

No, I'm not. That would also assume that the price is 1.4 billion too... Making the value of bitcoin only expressable in scientific notation.

Your onion analogy is not possible to apply to bitcoin, because they are mined. Let's go deeper:

Let's say The first 100 bitcoins are mined, in Satoshi's hands. There is no market cap at all, and no one has set a price yet.

Bob comes along and buys these 100 bitcoin from Satoshi for $0.01 cent each. This sets a precident.

At this point bitcoins Price is 1 cent, and we have a $1.00 market cap because 1 penny times 100 total bitcoins = 1 dollar.

Paid in total = 1 dollar.
MC = 1 dollar.

If only it were that simple... Continuing on...

Greg the miner sells his shiny new 100 coins to bob next. Bob wants to pay 9/10ths of a cent each for them, ($0.009) and Greg accepts.

Greg gets $0.90 cents for his coins. This was a price drop, but it's still more money into the fledgling bitcoin economy.

At this point bitcoins are worth $0.009, and we have a $1.90 market cap because ($0.01 times 100 btc) + ($0.009 times 100 btc) = $1.90.

The way to more easily calculate this amount of course is to take the new price and multiply it by the total BTC in existence...

Which would be: $0.009 x 200 btc = $1.90

Paid in total = $1.90
MC = $1.90

Price goes up, or price comes down, it doesn't matter. USD will keep getting paid for bitcoins and the sum of all of these transactions will always equal the market cap.

That's just calculating value.

Some would argue that Selling the bitcoin would remove the market cap from the bitcoin economy, but didn't we just see Bob sell Greg his bitcoin? That only brought more money into the economy, not reduce it.

Sales of bitcoins are the same transactions as purchases of bitcoins, they just move the price up and down a tiny bit at a time, to reflect the current NET VALUE.

# of bitcoins x Value of bitcoins = Value of all bitcoins

Just like:

# of bitcoins x current price of bitcoins = market cap

Same thing.

:action-smiley-052:


I do agree that in other industries it's not so simple. Bitcoin is arguably the most simple market since the stone ages because of the lack of regulation.

If I bought 10,000 Bitcoins last year when they were $1/ea the amount of money I "put into the BTC economy" as you say was $10,000. If the handful of people trading Bitcoins right now are exchanging them at a rate of $120/ea that DOES NOT mean I put $1.2 Million into the BTC economy.

No, but allllllll the people between then and now put money in that makes up for the difference.


Where did you guys learn economics, by the way?

Sounds like Keynes-based thinking to me.

 

[productionhead]

Mining has nothing to do with it. You're still missing a glaring, obvious fact. The market capitalization is based on the price movement of a very small percent of bitcoins changing hands, not all of them.

 

[lukep]

By the way, I'm loving it how none of my detractors here today will answer my long-standing question about bubbles going sideways.

We're still at $132... Stable as you could ever ask for.

 

[Pheasant]

By the way, I'm loving it how none of my detractors here today will answer my long-standing question about bubbles going sideways.

We're still at $132... Stable as you could ever ask for.

Can you really call it stable when it's been such a short time-period? Even during bubbles markets will go up, down, sideways when you're looking at things on a daily basis, no?

 

[lukep]

Mining has nothing to do with it. You're still missing a glaring, obvious fact. The market capitalization is based on the price movement of a very small percent of bitcoins changing hands, not all of them.

If all you care to focus on is the tiny movements between the price a minute ago and the price right now, then you are basically throwing away alllllllllllllllll the money ever spent on bitcoins before a minute ago.

Now address where all the money from the first $0.01 payment and the payment for today's trade price... Where did they go?

 

[productionhead]

If all you care to focus on is the tiny movements between the price a minute ago

But that's what the market capitalization is based on.

Now address where all the money from the first $0.01 payment and the payment for today's trade price... Where did they go?

Irrelevant. What we are discussing here is that, all of that money, does not sum up to $1.4 billion, just because the market cap is $1.4 billion.

Checkmate.

 

[Unarmed Gunman]

No, but allllllll the people between then and now put money in that makes up for the difference.

Where did you guys learn economics, by the way?

Sounds like Keynes-based thinking to me.

I tried.

 

[lukep]

But that's what the market capitalization is based on.

AT A FREAKING PRICE THAT HAS A HISTORY BEHIND IT.

I've got patience man, but this is getting ridiculous.

You seem to have been taught this concept by Keynes himself.

Please go back and read AND UNDERSTAND my step-by-step example and show me where I'm wrong about the pricing or how it represents value.

Irrelevant.

My buttcoin it is!

I am not going to respond to any more of this unless you address my example. Market cap is an indicator, if not an exact measure of value, then at least approximating value. (Not of a share but of the whole.)


Edit: What exactly is it about "Definition of 'Market Capitalization = The total dollar market value of all of a company's outstanding shares." don't you understand?

 

[productionhead]

How is market capitalization calculated?

 

[lukep]

How is market capitalization calculated?

At this point we have two options.

If you don't like my definition of a market cap, please go argue with investopedia for that one. I copypasta'd it for you.

I then walked you through, painstakingly step-by-step, how it arrives at a price because of that definition.

So I think I deserve a fucking medal for my work here today, & if you'd like to keep playing this game with me, you have to go back to my Satoshi ->Bob ->Greg example and show me what went wrong.

Otherwise, like I said, you should be arguing with Investopedia.

 

[lukep]

Holey Jeebus.

For the THIRD TIME: The Definition of 'Market Capitalization' = The total dollar market value of all of a company's outstanding shares.

See the word "Value" in there? You keep looking over it...


Edit: Hmm... Something missing here? Interesting.

 

[illeat]

If all you care to focus on is the tiny movements between the price a minute ago and the price right now, then you are basically throwing away alllllllllllllllll the money ever spent on bitcoins before a minute ago.

Now address where all the money from the first $0.01 payment and the payment for today's trade price... Where did they go?

Who knows - thats not what Market Capitalization addresses. Market Capitalization, the $1.4billion amount that you are throwing around, is simply the total amount of bitcoins * the current price. Thats it. It doesn't matter whether you are talking stocks or bitcoin, the definition is the same.

Price goes up, or price comes down, it doesn't matter. USD will keep getting paid for bitcoins and the sum of all of these transactions will always equal the market cap.

That's just calculating value.

Some would argue that Selling the bitcoin would remove the market cap from the bitcoin economy, but didn't we just see Bob sell Greg his bitcoin? That only brought more money into the economy, not reduce it.

By this rationale, me and you could trade the same 100 bitcoins back and forth all day long and that would 'bring more money into the economy' (Bob selling his coins to Greg, and then Greg selling it back in your analogy).

Edit: What exactly is it about "Definition of 'Market Capitalization = The total dollar market value of all of a company's outstanding shares." don't you understand?

You seem to conveniently have omitted some important parts of the definition. Here is the full:

Market capitalization is the total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.
----
Market Cap has nothing to do with the amount of money a company or economy has - It is simply what the market perceives it is worth. Just look at ZYNGA - they have a market cap of $2.7 billion, yet they lost $50 million Q1 of this year.

Value is simply the agreed upon worth of something. If I pay $1 for a Honus Wagner rookie card in 1910 and that card sells for $2 million in 2013, the value is $2 million, but that does not change the fact that only $1 was put into that card's economy.

The market believes that bitcoin is now worth $1.4billion - an impressive figure at that, but that does not mean that is the amount of USD(or Euro or Yen) that has been infused into the system.

 

[malloc]

My problem with bitcoins it each time I get interested in them I end up reading for hours about them and then do nothing.

 

[lukep]

Market Capitalization, the $1.4billion amount that you are throwing around, is simply the total amount of bitcoins * the current price. Thats it. It doesn't matter whether you are talking stocks or bitcoin, the definition is the same.

We are agreed on the calculation, but not the meaning.

We also agree that the calculation is done the same on stocks v/s bitcoins, but again, with bitcoin, that changes the meaning because of the unregulated economy it is in.

By this rationale, me and you could trade the same 100 bitcoins back and forth all day long and that would 'bring more money into the economy' (Bob selling his coins to Greg, and then Greg selling it back in your analogy).

First of all, thank you for addressing the analogy.

Yes, there is some room for a circular drive-up, but with bitcoin, everyone from CNN to these very ppl arguing with me are arguing that we're hoarding bitcoin (Which I admit to) so obviously there isn't a lot of circular selling going on in bitcoin, is there?

Again, stock markets are driven up by day traders, but this isn't a stock, it's a currency, and one we're sitting on because more and more people keep throwing their (non-bitcoin) money into the pot on a minutely basis.

You seem to conveniently have omitted some important parts of the definition. Here is the full:

Market capitalization is the total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.

If this was a stock I'd see the connection to the bold print there.

Bitcoin has no assets. It is an empty, fiat unit of value, and its going price is all anyone is going to be getting for it.

Ironic that I'd be the one arguing here that bitcoin's not backed by anything but trust, but if I must...

Market Cap has nothing to do with the amount of money a company or economy has - It is simply what the market perceives it is worth.

Is there some kind of an echo in here?

Nevertheless, IT GOT PERCEIVED THAT WAY BECAUSE SO MANY PEOPLE BEFORE BOUGHT IT.

The market believes that bitcoin is now worth $1.4billion - an impressive figure at that, but that does not mean that is the amount of USD(or Euro or Yen) that has been infused into the system.

It does if there hasn't been a lot of circular selling, like stocks do.

I won't claim that every last penny of the $1.4 B is "new money," but obviously the vast majority of it is because so many people are sitting on it and speculating.


Let's get back to basics... I don't want to argue with you about what productionhead was saying... That's unfair to you.

This all started when a Matt said: "You and other miners are the only ones who currently consider BTC money." -To which I replied: "If that's so, then where did the $1.4 BILLION USD come from that was given TO us?"

So I don't know what productionhead thinks he's arguing about, but obviously I was using the current Market Cap as an approximate estimation of how much of other currencies have been cumulatively traded for bitcoins, and therefore their value now exists as part of the bitcoin economy.

Given that no one is denying that this young currency is highly speculated with at this point, wouldn't you agree that $1.4 Billion is pretty close to the amount of other currencies that cumulatively have been traded for bitcoins to date?

 

[MSTeacher]

By the way, I'm loving it how none of my detractors here today will answer my long-standing question about bubbles going sideways.

We're still at $132... Stable as you could ever ask for.

Dude you must be smoking too much of that Thai stick. I don't know what you consider stability but btc seems to be about the least stable thing in the world at the moment. Even its strongest proponents should be able to recognize that.

Also please sell me some btc in exchange for my old Magic card collection and I'll immediately sell them back to you for Second Life lichen. If we do this a few million times over the next few days we might be able to pull the world out of the current economic depression by next Monday.