23 comments on “But, what is this use of “but”?

  1. They are only saying that because they’ve missed the bus on the big gains.

    Was at a talk from an economist at Coutts bank this week who said that Coutts don’t invest in it because it’s ‘not backed by anything real’. Possibly delusional

  2. Just another one for the textbooks – tulips, South Sea trading, Florida land, etc.
    It must be the peak, an office junior where I work has bought some.

  3. Too many people are talking about it now, including many people who have never invested before in their lives. It feels very much like a bubble. We are also ~10 years since the last recession so one is due right about now.

  4. But the important thing to look at is volume traded. The price rise implies not many sellers are being shaken out. For, unlike many other bubbles people are talking about, the stock of Bitcoin is effectively fixed. There’s no swamp being sold as farmland. No commodities being priced unrealistically. Nothing is being brought to the market that wasn’t already there.

    Presumably the increase in price makes the attraction of “mining” greater. But, as I understand it, the more are mined the harder it gets to mine. So that’s self limiting.

  5. For those considering “investing” in Bitcoin…


    • You can’t “mine a bitcoin”. What you can mine is a block, which is currently rewarded with 25 bitcoins (plus the fees of included transactions)

    • What most small miners do (and even some big ones) is pooled mining: you contribute your computing power to a pool, which does the actual mining and reward you with a fraction of the mined bitcoin. With this system, you will have earned 1 bitcoin when you have contributed about 1/25th of the computing power to mine a block (approximately; the details depend on the pool’s rules and the transaction fees too).

    • The problem is that the Bitcoin difficulty is constantly adjusting to keep the average time between two blocks more or less constant at 5 minutes. Which mean that the more computing power is dedicated to mining bitcoin (in total), the more computing power you will need to mine the next blocks. This has driven an insane arms race among the miners, which means that it is now practically impossible to mine anything significant with non-specialized hardware (regular PCs). Miners now use ASICs, specialised hardware designed to mine bitcoin (and cryptocurrencies with the same cryptographic basis) that can do nothing else but are several order of magnitude faster (and more energy efficient) than general purpose computers for that specific task.

    • An example: according to this chart, the typical high-end computer graphics card will give you a hashrate of a few hundreds of MH/s. Let’s say 500 MH/s (that may even be optimistic if you are using a laptop graphics card with no specific optimization or tweaking). According to this calculator this gives you a whooping 0.00000629 BTC per day. Which means it would take about 435 years to mine a single bitcoin. And that computation is not even worth anything because it assumes that the difficulty will remain constant, which it won’t.

    • More realistically, it means that in 1 month you would produce 0.00019130 BTC which (at the current market rate of about $11,500/BTC) is about $2.20. Leaving your laptop up and running continuously for 1 month will cost you much more that $2.20 in electricity. Not only mining on non-specialized hardware is ridiculously slow, but it is not even profitable.

    Conclusion: Mining bitcoin is now a business, in the hands of professional miners that have invested significant money in infrastructure. If you don’t want to be a professional miner and invest at very least a few thousands of €$£ in it, just give up mining.

  6. > There’s no swamp being sold as farmland.

    There’s Ethereum, LiteCoin, RoboCoin, … no shortage of swampland!

  7. Back in 2014, somebody tried to cash in on Kanye West’s mystifying popularity by launching an electronic currency called Coinye West. The rap artist’s lawyers were none to pleased, and the venture was swiftly abandoned.

    I called the peak of the alt-coin market around then; clearly I was far too early.

  8. John Galt’s comment should have started, “for those considering *mining* Bitcoin”. It’s not worth it. Just buy it if you want it.

    Anyway, I don’t see how we can know in advance if it is an unsustainable bubble at any given price. There are a fixed supply of Bitcoins but we don’t know in advance how many people would want to buy them.

  9. @Andrew M & John Galt
    Your comments fail to recognise the fundamental difference in a cryptocurrency. There’s no commodity requiring consumers to support the price. There’s nothing being consumed. There’s virtually no producers increasing the supply side. For every buyer, there has to be a seller of an existing Bitcoin.
    That’s why I say volume traded is an important factor. That the price has risen implies that buyers are not finding sellers. So few people can make real losses. The only thing at risk, at the moment, is paper profits.
    If there were a lot of existing Bitcoin holders cashing in, supply would be meeting demand & the price wouldn’t have risen to current levels.

  10. It’s somewhat reminiscent of one of those days on the stockmarket, puts large point headlines in the newspapers & makes market traders yawn. “Billions wiped off stockmarkets as share prices crash” Yeah, Right If share prices have crashed sellers weren’t finding buyers. So few shares were sold. Nothing’s happened. Tiny fraction of one percent of capitisations have changed hands. Vast majority of share holdings are exactly where they were when trading opened. Some paper profits now don’t look so good on paper. Next week they’ll be back where they started.
    It’s not even as if anyone was using Bitcoin as security against debt, is it? No banks are going to fail because lack of reserves.

  11. @BiS: you summarised what I was thinking. If a Bitcoin bubble exists then if it bursts it will be pretty much self-contained.

    (Of course second-order effects of people investing in bitcoin rather than elsewhere yadayadaya)

  12. If a Bitcoin bubble exists then if it bursts it will be pretty much self-contained.

    The Winklevii losing their shirts does have a certain humour to it.

  13. Since people can trade tinier and tinier fractions of a coin there is not, in practice, a fixed supply or maximum number of Bitcoins.

  14. @GlenDorran
    The stratospheric rise in the price of Bitcoin, by definition, tells you that there aren’t many people currently investing in Bitcoin.
    For someone needs to sell each Bitcoin bought.

  15. There’s supposed to be a futures market in Bitcoins starting. If it does, it’ll be interesting to see what that market looks like. Luboš Motl has been saying for a while that the intrinsic value of Bitcoin is zero and that opportunities to short it will start to hit its value. At least in the first instance shorters will probably find counterparties easily, as going long in a futures market may well be easier than buying the coins themselves for those who don’t think it’s a bubble.

  16. “Some 82pc of UK institutional investors believe that Bitcoin is an unsustainable bubble”

    18% don’t?

  17. The old “this time is different” line is being trotted out when suggested that since it is not backed by assets Bitcoin will fall.

    I always walk away fast from “this time is different”, as it almost never is.

    The big issue is that once it starts to fall Bitcoin will have no buyers, because unlike something backed by assets there is no reason to buy it on the way down.

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