1.
There was some discussion yesterday about what people who become rich from holding bitcoins over the next few years will do with them. Some users argued that they will be held until death, which is a good argument.
However, stating that people who are 32 now have a life expectancy of 50 years is shortsighted. As we've seen with bitcoins, technology changes rapidly and unexpectedly. People find it fantastical to believe that in 50 years it is possible or even likely that aging will be seen as another disease that can be treated. However, most things that seem impossible actually turn out to be much simpler than they were originally thought. Whether that is true for aging is unknown, but scientists are already discovering that the brain is massively redundant, meaning that it is not necessary to determine the purpose of every neuron because most are just backups.
What happens if, in 20 years, bitcoins are worth $2m, and life extension treatments are becoming available? If most bitcoin owners are young people who already have some money in their 30s and 40s, then those mega-rich people are going to be the ones who can afford to pay for those treatments long before they are affordable to the masses. We could be seeing the start of a system where people who buy bitcoins hold their wealth indefinitely, and since the system is deflationary, they live for hundreds of years in an unequal society while people who were not in on the initial redistribution of wealth have little opportunity to move up.
2.
The demise of Ripple could be the "catalyst" that some people were waiting for. Ripple was always a thorn in the side of bitcoins, but since it was a for-profit venture where the authors had no business plan other than to cash out, it was always doomed to failure.
Ripple isn't done yet, because as people here know, every crash is always followed by a rebound. However, it doesn't bode well when your founder sells out and starts a business based on your competitor's technology.
3.
I think we will also see a shakeout of weak altcoins during June. Altcoins always rise in value after the bitcoin bubble cycle, so the ones that survive may be good investments. People are starting to come around to the idea that bitcoins are the future, and that all the infrastructure is going to be built around the bitcoin network. After this bubble, it will be obvious that Wall St traders are not trading in dogecoins.
While some criticized me a few weeks ago for saying that litecoins would be worth $200 this bubble, I am still optimistic about the future of litecoins. The main problem that altcoins have is that they aren't bitcoins. The main problem that other scrypt coins have is that they aren't litecoins. Dogecoin's meme is not enough to sustain it long-term over litecoins. Everyone has seen what happened to "all your base are belong to us" and Rick Astley, for example.
Litecoins are doing a good job of that marketing of "silver to gold." They may not provide many advantages over bitcoins, but they have been around for a while, and the scrypt ASIC manufacturers have an incentive to buy up litecoins. Litecoins are unlikely to be a target of a 51% attack, as well. I'm not sure that it will be possible to make more money than you could by simply buying bitcoins, but people who want to gamble are not going to lose money over in litecoins.
4.
I don't understand the argument that bitcoins can be suppressed by governments. Not only will there always be another country where bitcoins can thrive, what exactly will come afterward if bitcoins are suppressed? If governments had suppressed the Internet, would technological progress have just stopped and people would have never used packet switching networks for the rest of history? No, because the Internet was the key requirement for most of the technology that came after is.
Bitcoins are the natural evolution of money. It doesn't make sense that they can be suppressed, because people don't just stop trying to make their lives better. Technology doesn't just die without anyone ever trying to use it or revive it.
5.
Developers are paid far too much. I used to work at the Olive Garden, where if I worked hard, I could bring home a hundred dollar bill after a 7-hour shift. I had blisters on my feet, burns on my hands, and got cut up by knives and other utensils. One time, I developed a case of wheezing after a sinus infection and nearly fainted, but pushed through because it was my job. When I got home, I felt like I had accomplished a hard day's work.
When I get home now, I don't feel like I've worked hard at all despite coming home with much more money. I get a lot of stuff done, but it doesn't take as much effort. A few months ago, I drove past a car wash where there were guys working outside when it was zero degrees (-18C), but I sat in a heated office watching the wind blow around leaves and dirt in what looked like a frozen desert.
Why is this important? Don't give me tips. I appreciate the generosity of people who have done so, but people like /u/nerdfightersean can put tips to better use than I can. They work a lot harder and need the money.
6.
Taxes should be a consideration when selling bitcoins, but only a minor one. Consider the case if I sold 50 bitcoins at $5000, and then the price of bitcoins falls by 20%. I would owe about $35% or $100,000 in taxes from the first sale, so I pay the taxes and I have to rebuy fewer bitcoins than I owned before.
I may have fewer bitcoins, but I've raised my cost basis on each bitcoin from $68 to $4000. That means that when I sell in the future, a smaller proportion of my bitcoins are owed in taxes.
The best way to think about taxes is to suppose that, if you have 50 bitcoins, then 15 of those bitcoins are "tax bitcoins." You owe 15 tax bitcoins regardless of the time you sell. If you are able to buy back in with 40 bitcoins, then you have a gain, not a loss, because you now have 40 bitcoins and zero tax bitcoins, compared to 35 actual bitcoins that you had before the sale and rebuy.
7.
If you are considering whether to buy bitcoins now, the decision shouldn't be based at all on what you think the end price of bitcoins will be. Instead, you care about whether the price will at any point rise above what it is now. Even if the price only rises to $600 at any point in the future, then you should buy.
The case for buying is strong, because even if people in /r/buttcoin are right and bitcoins somehow crash in the future, I'd say it's incredibly likely that the price of bitcoins will rise at least above what it is now.
8.
/u/moral_agent proposed that the bubble cycle will eventually transform into steady, strong but linear growth before bitcoins level off. While bitcoins will level off, I don't ever see a time when the growth becomes linear.
In fact, the opposite is more likely. At some point, when it becomes clear that bitcoins are going to become the world reserve currency, then everyone will want to get out of the weaker currencies at any price. Should that happen, the price of bitcoins will rise incredibly because nobody wants to be the last person left in the old system.
9.
Unless I'm missing something, there is still no progress on the 1MB transaction limit, or at least no progress that will be complete before the next bubble. I think we can safely say that the limit is locked in at this point.
Besides the difficulties in upgrading that I've discussed earlier, the bigger problem is that there are businesses springing up, and which will continue to spring up, that profit from the 1MB transaction limit. Shortly there will be companies that promise "we'll guarantee your transaction will confirm at some point during the next day, for a 1% fee." If the block size is increased, then the "we insure immediate confirmation even if the actual transaction takes 100 blocks" model becomes obsolete. Such companies will actively lobby against any proposed solution to the problem.
10.
Has anyone ever considered that the story of Mark Karpeles may go down as one of the greatest business mistakes in the history of the world? The man had 70% of the bitcoin market when bitcoins were worth less than $100, and was making $20m/yr. He had a fully functioning exchange with thousands of verified customers and was light years ahead of the competition. Some people valued Mt Gox, even at the time of the crash, already worth $1b.
Karpeles owned hundreds of thousands of bitcoins. Just like Gates, who bought DOS at the right time, Karpeles bought Mt Gox at the right time. If he continued to earn and store his profits in bitcoins, Karpeles could have become the richest person in the world. All he had to do was hire a competent CEO and step away from the day to day operations of the company, and he could have been unimaginably rich.
Other
- I'll be traveling to Philly this weekend to visit family. May 25 will be the first day I've taken off since December 25. I'll be back here on Tuesday.
- Days until July 24: 62