I have money in bitcoin, I believe in its future, and I acknowledge we are in a bubble. Nothing to be terrified of; the aftermath of the last April bubble left the prices much higher than when it started. And with every single bubble bitcoin kept going no matter how big the crash was.
Those two things mean people can engage in bitcoin theft, fraud, laundering, cornering the market, setting up bogus or insecure exchanges/banks, with impunity and anonymity. Without proper regulation, insurance, compensation, which means identification of users and verification of transactions and everything that goes with that, I can't see bitcoin spreading beyond enthusiasts.
You have to consider that this is a new way of thinking of money. No regulation and a decentralized nature does not necesarily mean all sort of bad things will happen at once; this thought is what comes naturally when you think of money in a traditional sense, but people can adapt and start seeing and thinking of money in a different way.
Let me give you an example: Email. It's unregulated and decentralized, and anyone, anytime, can write anything to any email address with almost zero effort. In paper this sounds like a terrible idea, because the moment my email address is public anyone can send all sorts of crap to it, not to mention that malicious people could completely trash my inbox by sending thousands of crap emails having no repercussions. But, as a society, we still adapted and embraced it.
As long as you don't have significant money in it, it's no big problem, but say you had your savings in it or were paid a salary in it - at that point the volatility would be a nightmare and the prospect of a bubble seriously troubling (bubbles always burst badly, and frequently go through successive waves of euphoria before they do). That the price has returned to a new high does not mean it will stay that high.
To supplant other currencies bitcoin would have to deal with the volatility and perhaps more importantly the lack of regulation and verification - with the current setup and community that'll be a huge issue, and perhaps impossible. It'll be really interesting to follow the trajectory of bitcoin and similar currencies as they negotiate these problems but I don't trust them just yet.
I do think email is broken for precisely the same reason - it thrived in spite of its anonymous insecure nature, not because of it, they simply didn't think about having to verify identity at the start, which has led to all sorts of problems with phishing and spamming. A lack of verified identity is at the heart of both these systems and causes issues for both of them, so I think email is a great example of a system which has problems of abuse (spoofing, spamming, phishing, fraud) because of anonymity being allowed.
By and large I have made a lot more money holding bitcoins and not selling them, than by gambling or actual market activities like trading or selling actual goods and services. I can't say I trust it, but when you take your first $50 and turn it into $500, only to spend it all on mining equipment that doesn't expect to make you 5BTC because other people are out there betting extra zeros, well hell, sometimes you gotta double down and make money.
I have no illusion that it's not a bit risky. I could also be paying bank fees. Today it looks like the last three years there has never been a bad day to buy bitcoins.
Not so scary anymore! From what I understand, people should be looking at this sort of data on a log scale.
But look at the chart you posted. I see a sharp uptick on a nice linear trend since July. Now go look at the rest of the chart and ask yourself what happened every time there was a sharp uptick? Hmmm
I believe bitcoin will continue to grow, but I wouldn't tell people this is a good time to buy. Wait for the "correction" then buy.
Now is a good a time to buy as any. No one knows if the correction is going to drop below the current price or not. So it really doesn't matter when you buy, especially so if you're holding for the long term.
[1] http://unqualified-reservations.blogspot.com/2013/04/bitcoin...
I find bitcoin really interesting, love the idea of a cryptocurrency, and also find the idea of a deflationary currency interesting. I've no argument with that side of it. Obviously there are issues with things like exchanges which seem to be almost entirely run by amateurs who think that a VPS or leased server is secure enough for financial transactions, but those problems could go away in time, they are not inherent to the currency, though they're another reason to be cautious at present.
However there are a few issues with the use of the currency which can't easily be fixed. What I find more troubling is the commitment to anonymity and lack of accountability from the creators - it is designed to allow anonymous transactions, and the users seem to be resistant to regulation. Those two things mean people can engage in bitcoin theft, fraud, laundering, cornering the market, setting up bogus or insecure exchanges/banks, with impunity and anonymity. Without proper regulation, insurance, compensation, which means identification of users and verification of transactions and everything that goes with that, I can't see bitcoin spreading beyond enthusiasts.
I wouldn't use it for anything important because of the lack of regulation and controls, but do think it represents something of the future of currencies, after our latest experiment in hyper-inflationary fiat runs its course (see Fiat Money Inflation in France for a previous experiment). It'll be interesting to see if other cryptocurrencies are born which take a different direction and attempt to build in accountability and responsibility to secure transactions and allow them to be policed effectively by tying them to real world identity. Anyone know of any?