reply to post by PhoenixOD
OK - let me clear up a bunch of misconceptions here.
Firstly there was a site 'hacked' which had Bitcoin (BTC) wallet on it or attached to it. It is almost certain that the wallet was not encrypted,
plus it was not on a private computer, rather it was on a server.
The theft would have had zero impact on the price, or on the faith in BTC's security. The value was too small, and the inadequate security measures
applied were the result of negligence on the part of the owner.
The movement in the price of BTC is a normal market function, BTC is new and expanding to new markets, the supply is fixed so moving into new markets
creates an increase in demand - but the supply is static. This leads to surges in price, which then gain momentum due to speculation - then they run
into a parabolic curve, this causes a short term top - then the price retraces until it hits solid support again.
Myself and others called this move almost exactly, when the move began I was thinking it would top out around $380 - but it over ran, so I knew that
the downside correction would be fairly dramatic. The faster it runs up, the faster and deeper it will fall - this is just normal market action.
BTC is still a relatively low cap asset, so its prone to volatility - as the market depth increases, volatility will fade.
BTC is not fiat currency because it is not created by a central authority - neither can it be created at will in any quantity.
BTC is not a ponzi scheme, because nobody is getting paid by new entrants. It is fixed asset that is new, and is experiencing increasing market
penetration and the volatility of a low market cap asset with broad instant market access.
BTC is real money because it satisfies the critical criteria of being a store of value; due to being relatively durable, limited supply and resistant
It is real money and has value because money is like a piece of capital - it has characteristics that give it value regarding the job it has to do.
Consider the question - how much is a freight aircraft worth? To assess how much it is worth, we need to answer some questions, we need to determine
its characteristics and see how well suited it is to do its task. We would need to know its cargo capacity, its fuel efficiency, its range, its
annual maintenance costs and so on - and how much demand and supply there is for this kind of aircraft.
So when we ask - what is BTC worth? Then we need to know its monetary characteristics - how fungible, portable, acceptable (market depth - demand),
divisible, limited in supply (supply) and is it a store of value (durable, resistant to monopoly or counterfeit) and if it has special properties
outside of being money - in the case of BTC it is also a public ledger and means of electronic payment. Gold btw has a special function of being
aesthetic, therefore in demand for jewelry - which adds something to its value.
Some people make the mistake of saying that BTC is 'backed by nothing', with the connotation that somehow that makes it worthless. Only money
receipts or placeholders need to be backed by something to have retain their value - so fiat currency is always at risk of falling to zero value, if
it is not redeemable into some kind of money. This is because receipts can be counterfeit at will.
Gold does not need to be 'backed by something' - because gold IS money. In the same fashion, BTC does not need to be backed by anything because it IS
money - it is not a money receipt or placeholder.
edit on 11-11-2013 by Amagnon because: (no reason given)