Quote from: n8rwJeTt8TrrLKPa55eU on January 21, 2013, 06:06:36 PM

Correct. Bitcoin is a Veblen good, like gold, with a recursive virtuous cycle based on its own price. The higher the price goes (as long as the moves are slow and steady), the more people will believe in it, the more they will buy it, and the more the price will rise. Marginal demand is potentially infinite.

I suppose you exaggerate a bit about infinite demand. There are ways to quantify final demand, for example here:

http://cs702.wordpress.com/2011/05/29/on-the-potential-adoption-and-price-appreciation-of-bitcoin-in-the-long-run/

Quote from: n8rwJeTt8TrrLKPa55eU on January 21, 2013, 06:06:36 PM

As to how to create a sustainable mania in any market, surreptitiously: human beings are like rats. They won't trust big sudden changes, but they will believe with religious zeal and become very confident if a trend is confirmed consistently, day after day, with no significant negative feedback. So the best way to manipulate a market to the upside (assuming you've got the funds in reserve) isn't to spend money pushing for new highs, but to lend constant support on corrections so they never develop into anything too long or major. For instance, using this approach, the US Fed has created a 30 year UST bond bull market with a captive brainwashed audience which, rat-like, keeps pushing the "buy" lever, unable to conceive that on the 15649th push the spring will release a sharp blade that will slice them in half.

It is indeed possible to fake scarcity, artificially back a bogus "safe haven asset" and create a sustainable mania. If you have unlimited funds, you can even sustain this mania for 30+ years as US Fed did. But all such manias end badly sooner or later, as you seem to understand quite well.

An asset with real safe heaven characteristics (like gold), on the other hand, does not need any artificial backstops to hold its value long-term. Quite the opposite, it can even keep its value despite artificial suppression of price that most likely happened for many years.

My opinion is that bitcoin as an asset is closer in its characteristics to gold rather than UST paper. As such, it does not really need price pumping or artificial backstops to appreciate as its adoption grows.