My supply-side model, which I felt pretty smug about for the last couple of months, only calls for a price of $450-500, so it clearly can't account for the current price. So much for that.
Seems likely then that this is coming from an increase in demand. Does anyone have any good guesses about where that increase in demand is coming from?
The congressional hearings were very upbeat about Bitcoin. Once the word got out that there wasn't any intention to ban it, a lot more people got interested.
I agree - the hearings were great exposure. I disagree with the conclusions people take from them. Quite frankly I can imagine only two futures for Bitcoin: one in which the USG controls it, and one in which the USG destroys it. Still, no telling when it will happen and if its the first case the price may yet double a few more times.
Disclaimer: I have 4 BTC and probably will not cash out for less than $100K per.
It has to be speculative purchases. Demand for any real commodity or currency doesn't double in the real world without a major event of some kind [e.g. war, natural disaster].
People got exuberant with the fast ramp up to $500 and didn't want to get priced out. It happens often enough in other markets.
It's possible a speculative bubble would just fade into the supply-side trend.
I was expecting BTC to hit $1000 in a few months anyway, depending on how quickly difficulty increases. So what could happen is the buzz dies down and the price just sits at $1000 for a couple of months and then once the difficulty increased the price will be locked in.
Likewise, real user demand could increase fast enough to take the place of any speculative demand before the proposed speculative bubble collapses.
Honestly what I really want to see is what happens if the bottom falls out and the price stays well below the mining cost for a prolonged time period. Say, $100 for 3-6 months. There are a number of non-disastrous things which could happen, but it is hard to guess what will.
It's going to be way more exciting if when bitcoin hits $100 than if it hits $10000.
What sort of variables go into a model used to determine the price of something like bitcoin? And by "something like bitcoin" I mean something with no value beyond the trust people place in it. How do you determine a "true" value of something like that?
A supply-side model kinda sweeps all that under the rug. If everything else stays the same, and the difficulty of mining increases, the model predicts that the price will rise proportionally. Since it's rising really fast, that means something has changed on the demand side.
Ah, there's the kicker: "if everything else stays the same". Definitely not the case with the news going more and more crazy about bitcoin every time it spikes.
Speculation and true global interest. BTCChina has lots of activity which hasn't been as true in the past. I think it's mostly speculation fever opening in markets that had previously not been aware.
The Cryptolocker malware requires people to pay the ransom for their data in bitcoins. This may help drive up the price if enough people are infected.
However, one of the podcasts I was listening to said that a security company registered one of the random domains that Cryptolocker checks as its master control server so that they could measure the number of people who were infected. Their numbers showed around 15,000 unique IPs per week contacting their server. The ransom has been lowered to 0.5 BTC so if all 15k people paid the ransom this mean about $7.5 million dollars a week at current prices.
I'm not sure how much that would effect the price of bitcoin.
I remember a few years back there were stories about how broken the savings system was in China; something like the only two legal investments were state banks, which gave 1% interest when there was double-digit inflation, and real estate, where you could buy apartments in empty cities on the premise that it was really hard to do worse than the negative 10% real rate of return you got from banks. In that environment I could see how an investment vehicle like BTC could really take off.
My supply-side model, which I felt pretty smug about for the last couple of months, only calls for a price of $450-500, so it clearly can't account for the current price. So much for that.
Seems likely then that this is coming from an increase in demand. Does anyone have any good guesses about where that increase in demand is coming from?