Do many Bitcoin boosters even care about BTC becoming a currency any more? Seems it has achieved much more success as a frenzied medium of global speculation than it ever dreamed of as a stable digital currency.

If BTC isn't valuable as a currency, then it is in fact a speculative bubble that will suffer a dramatic collapse, just like the tulip mania in the Netherlands in the 17th century.

What about the new "digital gold" store of wealth narrative?

Yes, but gold has been used as a currency for thousands of years and it does not share many of the problems of Bitcoin — for example it isn't so volatile.

Of course, it's a finite resource and mining it involves dynamiting mountains and cyanide poisoning the environment, but then again Bitcoin mining currently consumes enormous amounts of energy and it can only grow from here. Also countries with no gold reserves have been at a disadvantage, but then Bitcoin mining will require enormous resources as well and countries without those resources will remain at a disadvantage. So personally I don't see any benefits whatsoever.

If I had wealth to store, I'd invest in property simply because properties have intrinsic value. And yes, I'd still buy gold before Bitcoin or any other currency for storing wealth long term.

Bitcoin is currently only useful for speculative gains and I don't see that changing.

Digital gold term is utter nonsense and nothing more than wishful thinking of those involved. Gold has huge value, be it national reserves, jewelry, industries etc. and has never, ever lost much of its value.

Bitcoin is a classical ponzi, you don't have more than few bytes of otherwise meaningless data, and only emotions are keeping the value so high. And as we know, emotions change.

Don't insult gold. It will be around long after Bitcoin will become just another part of history.

I think you could fairly easily rationalise to yourself that Bitcoin _will_ one day be money, and we haven't reached its true value yet, so nobody wants to miss their piece of the pie when that happens.

A few years ago the Winklevoss' said their target is $600,000 per coin. When I heard that, I thought they were insane. Now, I'm not so sure.

That would be the price it bitcoin was used in about 10% of all transactions worldwide.

It could get there even with far fewer transactions, right? If people keep buying bitcoin just to hold it, then the lack of sellers could drive the price to insane levels without much transaction activity.

I remember the 2013-14 hype cycle. That's when BTC hit $1k and a lot of merchants started accepting it, mostly as a PR gimmick. That's when I bought my BTC and even bought a few domains with them.

Since then, I almost never see BTC as a payment option.

You underestimate the dreams of BTC Boosters.

Exactly. Until we pay rent, wages & stock with Bitcoin, it's essentially just digital gold bullion.

You'd be an idiot to pay for any service with Bitcoin. A million dollar pizza makes for a great news story, but it would suck knowing that you effectively let go of millions of dollars just to buy a pizza.

Bitcoin holders are disincentivized from spending it.

It's almost like being inherently deflationary is a negative property for a currency to have...but that can't be true, because lots of cryptobugs have explained to me at great length why this is actually Good For Bitcoin.

If transactions were confirmed quickly with low fees, you could just turn around the Bitcoin in a few minutes in the exchange for dollars, all automatically. The price won't change that much on the timescale of minutes, so add in a small buffer percentage to make up the leftover difference and you're done.

That's where IOTA and/or Stellar Lumen come into play.

How does one take a short position in Bitcoin?

If the futures markets at the CBOT or CME attract volume, you could use those. Otherwise, you'd have to do it over-the-counter. Borrow a bitcoin from someone and turn it into real money. When you have to repay, if BTC is down, you'll buy back a BTC at a profit. If it's up, you'll have to buy back at a loss.

Note that this gives you a maximum gain of whatever BTC/USD is today (assuming you denominate in greenbacks), while upside risk is theoretically unlimited.

Of course the lender has to trust or be ensured (or insured) that you will repay.

There must be people using Ethereum contracts to make options on BTC, and maybe trying to minimize counterparty risk through the judicious use of open-sourced smart contracts and digital collateral? Anyone know of interesting cases?

http://www.cmegroup.com/trading/bitcoin-futures.html http://cfe.cboe.com/cfe-products/xbt-cboe-bitcoin-futures

Apparently they will list on 18 Dec on CME, and 10 Dec on CBOE.

I get the feeling that there will be a fair bit of selling pressure as a result. That's usually the case on lockup expiries and it would make sense for the initiation of a volatile instrument that wasn't previously shortable on a listed basis.

I wonder how hedging transactions will affect the mechanics of the bitcoin market.

> I wonder how hedging transactions will affect the mechanics of the bitcoin market.

The bitcoin market is astonishingly shallow compared to most commodities and nearly unregulated, I assume hedge funds and other smart money can and will manipulate the price up and down to their own advantage.

Why would it be particularly easier to manipulate bitcoin pricing over other stocks/securities? Simply because the authorities don't understand it yet, or something to do with the nature of crypto-currency itself?

Because there are relatively few buyers and sellers in the market and the amounts of transactions are small, so one big mover can shift the price a lot.

According to some blockchain site[0] the average transaction volume for BTC is something like $2.25m USD equivalent

For comparison, on an average day, SPY[1], which is just one security (albeit a popular one) trades something around $17,160m (e.g. $17.16b).

[0] https://blockchain.info/charts/estimated-transaction-volume-...

[1] https://finance.yahoo.com/quote/SPY

Because there's fundamental value behind most traditional securities, even if it's well below the current market price. If you hold a bond, it will (usually) pay interest and principal. Equities carry the value of the cash holding of the company, plus the potential for future dividends. These cash flows act as an anchor on the value of those securities (in both directions, up and down.)

Couldn't you say the same about penny stocks? And won't this problem go away as BTC gets more popular?

> Couldn't you say the same about penny stocks?

Sure, but there are also laws and regulations that limit what you can do with stocks on a real exchange: https://en.wikipedia.org/wiki/Microcap_stock_fraud

> won't this problem go away as BTC gets more popular?

Maybe. It would have to get a lot more popular, and a lot more legitimate and regulated. At that point, it's lost all the cyberpunk appeal, and it's just another speculative asset.

Regarding penny stocks, this does happen all the time, although its expressly illegal (look up boiler room scams).

What you mean? You can short any crypto currency on many exchanges. Bitfinex and GDAX being the biggest right now.

And when bitcoin crashes, and the exchange "gets hacked", goes bankrupt, and the owners run away to some international destination, who do you claim your USD back from?

If you're shorting, you get the $ up front and have to supply the security when you "cover". Not having to "cover" the short would actually be better.

It would take some gut to do it.

I have the same thought myself sometimes, but then I remember this quote: "Markets can remain irrational a lot longer than you and I can remain solvent."

I think that's derriz's point. It's very difficult, and would be prohibitive for a small business to immediately convert bitcoin to cash.

Very soon (next week) bitcoin futures will start trading which will be an easy legitimate way to take a short position. You just need a futures account which you can get from regular financial institutions.

Most major exchanges offer margin trading.

IG will do it sometimes. (https://www.ig.com/au/forex/markets-forex/bitcoin-1)

You can lie to an exchange that supports it. Sign the paperwork making promises about things that aren't true.

Whaleclub

Bitfinex offers this.

> The price could crash by 25% before I sell the bitcoin and now I've a cash-flow problem

Well, the parent comment said "if the transactions were quick", meaning that you would exchange the bitcoin for something else as soon as you received them (within a second or minute, say).

Wouldn't that cost a huge amount in transaction fees, making the whole thing moot?

For a large enough sales volume, the transaction fee might be negligible, but I don't know the numbers.

The volatility of Bitcoin has been decreasing over time.

Recent price jumps tell a different story.

Do you have any data to back it up?

It's still far too volatile to be a reasonable currency.