BitCoin may always be more volatile than other currencies. That doesn't actually matter much as long as it's liquid with other commodities and currencies. Its primary purpose is transfer, not store value. It will however stabilize the more broadly it is held and the more real commerce it is involved in.
It was very comparable to bitcoin. Everybody has been complaining about bitcoin while the entire time it's been growing and growing and growing. It's still growing and people are still acting as if it's nothing.
As someone who was actually involved in ecommerce in 1995, I can tell this was one of if not the biggest concern for consumers.
In 20 years, perhaps you will tell us BitCoin was not a big leap since we were already used to electronic checks and fiat currency.
Of course banks are worried. If bitcoin grows just two more orders of magnitude (how many has it grown so far?) It will become a serious threat.
Facebook has indeed proved to be much more successful than MySpace but I still think its valuation will settle far below what it is today.
Volatile, sure. Depends if you want to invest long term with it, and you understand the risk.
> As a currency it's too impractical and there are serious hurdles involved with turning central bank currency into Bitcoin and vice versa.
I found it pretty easy. Coinbase was lovely; getting verified on Mt Gox was a bit of a pain.
> We think Wall Street plays a rigged game.
Yeah, because it does. On a personal level I find the finance industry as a whole too difficult to gain any insight in to. I wouldn't know if my bank was collapsing or not, or if the housing market was in a true bubble. I can fully understand bitcoin. Maybe it's a false sense of safety, but I don't think it is.
> worry a Government or a big bank they'll simply manipulate the market.
Possible. We'll see how it plays out.
Most importantly though,
>I just don't understand the purpose it serves.
Very low fee, near-instant, world-wide monetary transfers. It serves a purpose.
For example, let's say that the exchange rate is 100 USD per bitcoin at the moment and that you have tons of people who would absolutely sell their bitcoins if it went below 90. I'm not in the bitcoin game, but I think mtgox offers "stop on loss" features so that people could get out of bitcoins automatically.
If you're sure that you want to be in bitcoins, but you think that there are a lot of scared players who put their "stop on loss" too high, you might be able to provoke some kind of selling avalanche by selling sufficiently many bitcoins at once. The price drops below 90, which triggers a lot of automated selling. This makes the price drop even further, triggering other stop on loss barriers, driving the price to 80 and so on.
With your $5 millions you buy up all those bitcoins at a rate of 50 USD per bitcoin when the avalanche stops. Then people realize what just happened and the price of bitcoins crawls back to 100 because that was more or less the fair market price.
The point is, with $5 million dollars you might have the power to create digital panics, a "flash crash", and use that to your advantage.
I don't know if $5 million is enough for that, and it's not a guaranteed return.
Someone sold off 5k bitcoins (~USD $450k at the time).
That's exactly what happened. Big sell off from 95 to 80ish, and then it sprang back to ~$90 today.
There's low confidence in it right now, but that's because most players are actual players. They aren't using bitcoins for groceries, like a bank reserve (yet). They're playing them like stocks.
That just shows most people are hording it / not really selling or trading, and a few people are buying it, probably the majority of which are doing so because they need to spend it on SilkRoad or a gambling site.
The moment that goes away, or a few big holders decides to cash out, watch out.
Imagine a hedge fund with an order of magnitude more monetary mass trying to provoke those kind of sell offs and benefit from them.
Even if they were, take a look at what happened yesterday when someone dumped 5k bitcoins onto mtgox.
My personal (amateur) theory is that people were hovering over their "sell" buttons, looking to cash out as we approach the landmark $100 point. Once they thought someone with a lot of coins was bailing, they took that as a sign to head for the exit.
I also think that MtGox's horrible lag factors into the dips. Their trading engine was running as much as 8 minutes behind during this event, which causes people to not be able to modify or place orders. Along with not being able to see actual "current" trading info, this causes a certain segment of the trading population to go into full panic mode.
Placing market sell orders in an engine that's showing you ancient data during a crash seems suicidal, but for some reason people do it.
I'd love to see Gox upgrade its engine. I honestly think it would make a notable difference in price stability.
Even better, I'd like to see the market grow strong enough to support 3 or 4 primary trading sites. There are a number of others now, but the rest have such low volume that you should only use them to pursue specific opportunities (arbitrage).
Likewise you could hack the computers of early adopters who own a lot of bitcoins (back when mining was easy). For example, someone paid someone else 10,000 bitcoin for a pizza a few years ago.
You now own a significant portion all all the bitcoins.
Alternatively, hire security professionals and finds bugs in the bitcoin protocol or client software. You may be able to force another fork.
As an asset class it's far too volatile even for someone who plays naked options. Imagine putting $10,000 into an asset class that swings 20-30% daily on a regular basis. Trading curbs eat your heart out.
As a currency it's too impractical and there are serious hurdles involved with turning central bank currency into Bitcoin and vice versa.
We think Wall Street plays a rigged game. Manipulating the Bitcoin market would not only be possible for someone with a small amount of capital, but the regulatory boards(SEC/FSA) don't seem to be interested in coming within 50 parsecs of the stuff.
Bitcoin is an interesting idea with the potential to change the world, sadly the world just isn't ready. More importantly the people running the world aren't ready.
The moment Bitcoin starts to worry a Government or a big bank they'll simply manipulate the market. Oh, and you wouldn't even know.