A few thoughts - Friday, September 12, 2014

[Steve Sokolowski]

Good afternoon! A few thoughts for lunch today:

Trend towards adding new currencies

In the past, the altcoin markets have had a pattern typical of many other products. A coin was released, some time elapsed to allow people to determine if the coin was worthwhile to own or not, and then it possibly became listed on an exchange. People often competed to obtain as many of these new altcoins as possible in their initial mining in the hopes that they would someday be able to sell them for more than the electricity it cost to mine them. This was largely true regardless of whether the coin actually offered any new features or not. Coins like Emerald, which is a litecoin clone with a few unimportant features changed, were gobbled up at launch.

Now, however, competition between exchanges is emerging. Exchanges sign "exclusivity contracts" with coins, where certain altcoins are "officially" traded on a single exchange. Poloniex trades many coins that aren't traded by any other exchanges. However, in a game of trying to be the first, Cryptsy is now adding new coins almost immediately after launch, probably to prevent them from entering into agreements with their competitors.

That means that any programmer of low skill can duplicate the litecoin source code, change a few parameters to something different than was tried in any other coin, and announce a new altcoin on bitcointalk.org. He can then mine the coin in its initial stages before most people are aware of it, and contact Cryptsy. Because altcoins tend to rise in value immediately after being listed, he can start cashing out as few as 48 hours after launch. Cryptsy and other exchanges are offering a get-rich-quick scheme for altcoin developers, which is likely to lead to a stampede of altcoins if the exchanges continue to compete with each other in this way.


Most people are inherently evil: part 2

In early June, I posted a paragraph about ethics, where I asserted that most people are inherently evil, rather than being innately good. The question being asked was whether, if there were no consequences, people would treat others ethically or whether they would take advantage of others for their own benefit. People in /r/bitcoinmarkets criticized me for having what they perceived as a callous view of the world.

I can bring up many examples to disprove people who believe that most people would act ethically by default, but the greatest evidence to support the notion of evil is Utopia. The television show, which premiered on Sunday, is based upon a Dutch experiment where a group of random people are placed in a compound and told to live with each other for a year. In the Netherlands, the show is so popular that it airs everyday. Here, it is likely to be cancelled, even after three episodes. While not exceptional entertainment value, the show is a fascinating and revealing look into the reasons why society is the way it is today.

Consider the first episode, where the first thing everyone does is to get drunk and party. One person ends up in the hospital, one is nearly banned for assault, and others are arguing with each other about petty disagreements. Religious people are at odds with athiests. Hotheads who have difficulty controlling their emotions destroy the compound's resources. In fact, the only reason that the compound has not escalated into physical violence is likely because the police are still available outside in the real world. If the police weren't available, it's possible that one or more of these people would already be dead through their own actions or at the hands of others.

Some people might scoff at the idea on the grounds that the producers purposely chose people who would disagree on just about everything for the show. But in real life, people do disagree on just about everything, and all of the people chosen have to live together in the same world. One of the most striking occurrences on the show is how often people shout at each other and refuse to allow others to speak. The reason why strong governments evolved is demonstrated precisely in the show: if it weren't for an overriding order, most people would take what they could get. The few low-key contestants who are willing to listen to others and make some sacrifices would be killed or would die after having everything taken from them.


Bitcoin price nearing final drop

I've maintained since May 31 that we are in the downward phase of a new cycle. Most indicators have supported that idea: the double top in June, the feverish optimism in May, the good news having zero impact on the price since then, and the negative headlines in /r/bitcoin of people "divesting" from bitcoins. But, as with every bubble, there is always one last period of total destruction before the cycle switches.

With the breaking of the lower boundary in moral_agent's charts, and the speed at which the last cycle ended, it's difficult to predict exactly when the reversal for this cycle will occur. If bubbles are occurring more frequently than before (as would be expected because technology grows more quickly), then we would expect to see the final fallout soon. If this is a cycle like the previous cycles, then the final fallout would occur in late October or even in November.

There is an article at http://www.cryptocoinsnews.com/bitcoin- ... ing-break/ that takes CryptoCoinsNews's usual position of "we know something is coming, and it can be up or down," which is absolutely useless information. However, for once I do agree that the period of low volatility is going to continue for 2 weeks to 2 months. Unlike them, I am confident that the trend will be down; a final chaos like what occurred in April, what occurred with the Silk Road incident, and what occurred before every bubble in the past. I said in early July when prices failed to rise above $625 that this cycle would stabilize at $440, and I still agree with that assessment. Before the stabilization occurs, there will be that one-day spike down 10% or 20% when people are bailing out thinking that the world is going to end. If I hadn't already invested my maximum stake, that's when I would buy big. The trend reversal is coming, but it's not going to happen tomorrow like some /r/bitcoinmarkets contributors have been saying for a while now.