VC investment is astounding
I'm having difficulty reconciling the opinions of people who claim that bitcoins are a fad with those of the venture capitalists who are pouring ridiculous amounts of money into bitcoins. Looking at the numbers from Coindesk, there was some $50m invested January through April, and then another $50m in May.
I understand that some people can argue that these people are just wasting money on a bad technology, but after a while, it doesn't matter whether the technology is bad or not. When enough money gets thrown at something, you can repair things that are bad about it. The amount of money being invested in bitcoin companies at the moment is starting to pass the point where it just shows that people see a future. Now, there's enough money to suggest that people are interested in making bitcoin the future, not just being a part of it in case it becomes the future.
Reversal in semiconductor manufacturing
My brother, who I will be introducing here in the next few days since he will be a technical support specialist for the mining pool, brought to my attention last night that the semiconductor industry has hit a wall. Until recently, companies like IBM and Intel were incentivized to move to the next process size because it was cheaper to make the chip smaller to fit more transistors on it. Now, however, the economics have changed to make it cheaper to put more transistors on chips of existing die sizes, or to simply not advance the technology. Therefore, semiconductor manufacturers have hesitated to construct huge new factories to produce processors on smaller dies. These factories are expensive, around $1b each, and Intel spends $50b on research and development every year.
However, there does remain one advantage of smaller process sizes: electricity consumption. Even if these chips are more expensive, they use less power. Incidentally, bitcoin mining, where electricity is a greater cost than the initial investment, is already down to 22nm and undoubtedly the first ASIC manufacturer to go smaller will make a lot of money.
In two or three years, we could be approaching a future where bitcoin ASICs lead the semiconductor industry by providing the capital to construct factories to produce chips on smaller processes. It would then actually become cheaper to produce CPUs using the new smaller processes, because the cost of keeping the old factories open is higher than consolidating operations to produce what also happen to be better products. Some people say that Moore's law is dead, but bitcoins could change that.
Bubble charts resume track
After a few days during which debt-ridden traders lost everything and panic sellers lost money by selling at the low, /u/moral_agent's bubble charts are back on track. I've already predicted that the price will start to rise significantly by the weekend or next week in anticipation of this auction, and that would also be in line with the chart. I'll reiterate that I do not believe that this cycle has been aborted, and that people in /r/bitcoinmarkets who think that the cycle is broken are wrong.
Last week, I talked about how to determine if the cycle has broken. I decided that my criteria for a broken cycle is if the price crosses the lower boundary for more than a flash crash before the bubble. If, for example, we happen to find that the price is at $600 in mid-July, , which would be below the lower boundary, then the cycle has broken, many people and I were wrong, and all the assumptions about bitcoins need to be reevaluated. Notice that /u/moral_agent also defines that we would have never exited the "struggling" phase if we hit the lower boundary, so we would both agree that something has changed, although he probably would say that the bubble is just "delayed" rather than that the cycle has broken.
I would gladly take a bet that hitting the lower boundary so soon will not happen, except that I could make more money by investing in bitcoins, so such bets are only ever good for the person betting on the downside.
Effect of bitpay sponsorship
I find it interesting that bitpay has decided to brand this bowl game as the "bitcoin" bowl, rather than the "bitpay" bowl.
If they paid $400m for this bowl as they are reported to, then at their paltry 1% transaction fees, they have to expect $40b in business to come in as a result in the next three years. Businesses don't do things that aren't profitable, and someone at bitpay performed the calculations and believes they can rake in that much money.
If each person buys bitcoins for just one day and sends them through bitpay, and nobody holds them afterward, and nobody speculates on them, and bitpay only breaks even (why would any business want to do that?) that means that the price of bitcoins needs to increase by 5% just to support this deal alone. Since there will be speculators and many people will hold bitcoins for longer, multiply that number by whatever factor you want and you can see that someone sees some potential.
However, there will be zero impact of this news on the short-term price, because merchant adoption does not affect bitcoin prices (as we have seen many times before). The coming price rise will be due to other factors.
I'm accumulating litecoins
Even though the recent 85-degree (29C) heatwave is costing us a lot of money, we're paying dollars for electricity and using the coins from our mining pool testing to buy litecoins. One of these days, the trusts like the Bitcoin Investment Trust are going to announce diversification into other currencies, and these conservative banks will look to the longest-lasting coins, regardless of features or merit. Litecoins, already being used at exchanges as a reserve currency for all the other altcoins, are a prime candidate for diversification. Even if the fund consists of a "wallet" of several cryptocurrencies, litecoins will be the majority or at least the plurality of such a portfolio.
Don't be surprised to see a fund start to buy up litecoins in a few months. If they do, they'll do it well before they make an announcement that they are selling shares in the fund, causing an unexplained price rise, followed by another rise on the announcement.
Other
- Days until July 24: 37