Bitcoin falls from $266(data.mtgox.com)
data.mtgox.com
Bitcoin falls from $266
https://data.mtgox.com/api/0/png/24hours.png?Currency=USD
503 comments
On the contrary this is just the most pronounced in a series of recent coordinated DDOS / aggressive selling attacks designed to (successfully) inspire panic. The attackers unload their bitcoin before the price gets smashed and presumably buy it all back again from frightened speculators.
If anything it might be a positive sign for bitcoin that the attackers are keen to acquire it!
On another note, mtgox.com the main exchange is shockingly unfit for purpose. If real markets could get 1 hour behind in transaction processing because of a spike in volume it would be the end of capitalism as we know it. I hope a more able exchange arrives soon.
If anything it might be a positive sign for bitcoin that the attackers are keen to acquire it!
On another note, mtgox.com the main exchange is shockingly unfit for purpose. If real markets could get 1 hour behind in transaction processing because of a spike in volume it would be the end of capitalism as we know it. I hope a more able exchange arrives soon.
> On the contrary this is just the most pronounced in a series of recent coordinated DDOS / aggressive selling attacks designed to (successfully) inspire panic.
The bitcointalk forums and /r/bitcoin are full of paranoia like this. After months of stress trying to divine market patterns, people see market manipulation and conspiracies everywhere.
The simple truth is that there was an agressive bubble. The doubling period for the price was halving with each iteration[1]. If you looked at the log plot[2], it still looked exponential! A crash was inevitable.
> On another note, mtgox.com the main exchange is shockingly unfit for purpose.
They have a big update scheduled for April 17th[3].
[1] https://bitcointalk.org/index.php?topic=171312.0;all
[2] http://bitcoincharts.com/charts/mtgoxUSD#rg180ztgSzm1g10zm2g...
[3] https://mtgox.com/press_release_20130409.html
The bitcointalk forums and /r/bitcoin are full of paranoia like this. After months of stress trying to divine market patterns, people see market manipulation and conspiracies everywhere.
The simple truth is that there was an agressive bubble. The doubling period for the price was halving with each iteration[1]. If you looked at the log plot[2], it still looked exponential! A crash was inevitable.
> On another note, mtgox.com the main exchange is shockingly unfit for purpose.
They have a big update scheduled for April 17th[3].
[1] https://bitcointalk.org/index.php?topic=171312.0;all
[2] http://bitcoincharts.com/charts/mtgoxUSD#rg180ztgSzm1g10zm2g...
[3] https://mtgox.com/press_release_20130409.html
Why do you think I'm paranoid? It's my best guess. Despite my tender years I have seen many speculative bubbles in lots of asset classes and have traded them on a private and professional basis.
I agree there are plenty of people in bitcoin ready to be 'the greater fool' [1] but that's only if it fails... they will be self assured visionaries otherwise...
[1] http://www.amazon.co.uk/Devil-Take-Hindmost-Financial-Specul...
I agree there are plenty of people in bitcoin ready to be 'the greater fool' [1] but that's only if it fails... they will be self assured visionaries otherwise...
[1] http://www.amazon.co.uk/Devil-Take-Hindmost-Financial-Specul...
> paranoia
MtGox has said they were subject to DDoS attacks: https://twitter.com/MagicalTux/status/317423311174909954
> If you looked at the log plot[2], it still looked exponential!
Trying to divine future price movement from looking at a graph has been proven definitively, repeatedly to be foolish.
MtGox has said they were subject to DDoS attacks: https://twitter.com/MagicalTux/status/317423311174909954
> If you looked at the log plot[2], it still looked exponential!
Trying to divine future price movement from looking at a graph has been proven definitively, repeatedly to be foolish.
Divining that a price that is rising in a superexponential manner will be going down sometime soon is one of the least fooling things one can do when looking at a graph.
Define "soon". Anyone could have looked at the stock market in 1998 and said that it was sure to be going down soon but it took a few years for that to be the case. And anyone could have looked at the housing market even in 2003 and been waiting for it to go down "sometime soon", and been waiting half a decade for it.
Keynes may have been mistaken on a lot of things but he got one thing right: "The market can stay irrational longer than you can stay solvent."
Keynes may have been mistaken on a lot of things but he got one thing right: "The market can stay irrational longer than you can stay solvent."
What was Keynes wrong about? (Keynes, not Keynsians)
> Define "soon"
My specific prediction less than a day before this crash was "At this rate, the crash is a single-digit number of days away".
The market can NOT stay irrational for long when an asset's price doubles every few days.
https://news.ycombinator.com/item?id=5517460
My specific prediction less than a day before this crash was "At this rate, the crash is a single-digit number of days away".
The market can NOT stay irrational for long when an asset's price doubles every few days.
https://news.ycombinator.com/item?id=5517460
You are empirically wrong. Please, quantify your idea and go backtest it on the stock market.
The efficient-market hypothesis does not have an asterisk excluding cryptocurrencies.
The efficient-market hypothesis does not have an asterisk excluding cryptocurrencies.
So... going up super-exponentially is efficient-market, but a crash is an attack? Is that what I'm hearing?
Truly, the capacity for people to employ cognitive bias is staggering.
Truly, the capacity for people to employ cognitive bias is staggering.
Quantification: "An asset whose price has doubled several times, with the time between doublings growing shorter and having reached less than a week, will see an abrupt correction to less than 50% of the peak value within 10 days.
I think you'll find that I'm empirically right.
I think you'll find that I'm empirically right.
the efficient market is dead and always has been.
> the efficient market is dead and always has been.
This is what people mean when they say "efficient market" in this context:
> In finance, the efficient-market hypothesis (EMH) asserts that financial markets are "informationally efficient". In consequence of this, one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis, given the information available at the time the investment is made.
http://en.wikipedia.org/wiki/Efficient-market_hypothesis
There are variations of this hypothesis, so saying "it's dead" is meaningless unless you specify which one is "dead" and how it has failed.
This is what people mean when they say "efficient market" in this context:
> In finance, the efficient-market hypothesis (EMH) asserts that financial markets are "informationally efficient". In consequence of this, one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis, given the information available at the time the investment is made.
http://en.wikipedia.org/wiki/Efficient-market_hypothesis
There are variations of this hypothesis, so saying "it's dead" is meaningless unless you specify which one is "dead" and how it has failed.
There are generally arbitration opertunity's that offer short term rewards well beyond the standard risk reward curve. Which is how many algorithmic traders consistently return high double digit returns with ought leverage. The simplest being having a mix of buy and sell orders that straddle the average.
Which is exactly what the hypothesis says. Assume that others are using arbitrage to reduce your opportunities, leaving you with an efficient market.
Except arbitration requires more than just money + information, people doing arbitration must have low fees / latency for example so it's not available to all players in the market. Net result real world markets are not efficient due to various access levels.
Also: Empirical analyses have consistently found problems with the efficient-market hypothesis, the most consistent being that stocks with low price to earnings (and similarly, low price to cash-flow or book value) outperform other stocks. Which is presumably due to cognitive bias. http://en.wikipedia.org/wiki/Efficient-market_hypothesis
PS: It's a reasonable simplification that's useful for the average investor, but not policy makers for example.
Also: Empirical analyses have consistently found problems with the efficient-market hypothesis, the most consistent being that stocks with low price to earnings (and similarly, low price to cash-flow or book value) outperform other stocks. Which is presumably due to cognitive bias. http://en.wikipedia.org/wiki/Efficient-market_hypothesis
PS: It's a reasonable simplification that's useful for the average investor, but not policy makers for example.
Right.. Because a DDoS on their site should create a trading lag in their backend engine?
Are they running on 1 server?
Are they running on 1 server?
While it was not the cause of today's drop[1], that is a big part of the problem. While they are frantically working on decoupling their website from the trading engine, they are still connected, and DDoS attacks are still effective at causing extreme trading lag.[2] Such attacks have been the root cause of several mini-panics over the past couple weeks.[3]
Of course this is bad design, but you have to remember that this website started out as Magic the Gathering Online eXchange. It was built to trade playing cards, not to serve as a multi-million dollar currency exchange. The trading engine was retrofitted for bitcoin, and was stuck with several bad design decisions as a result. While I agree this should have been fixed long ago, MtGox has had its hands full recently. The massive growth in its userbase, the ever-growing verification queue, and the fact that it is expected to be online 24/7 have made things difficult.
However, I suspect the main cause of today's massive has to do with this: https://mtgox.com/press_release_20130409.html
It will interesting to see what effect this policy change will have.
[1] https://www.facebook.com/MtGox/posts/455962117821534
[2] https://www.facebook.com/MtGox/posts/453409538076792
[3] https://twitter.com/MagicalTux/status/320043013420249088
Of course this is bad design, but you have to remember that this website started out as Magic the Gathering Online eXchange. It was built to trade playing cards, not to serve as a multi-million dollar currency exchange. The trading engine was retrofitted for bitcoin, and was stuck with several bad design decisions as a result. While I agree this should have been fixed long ago, MtGox has had its hands full recently. The massive growth in its userbase, the ever-growing verification queue, and the fact that it is expected to be online 24/7 have made things difficult.
However, I suspect the main cause of today's massive has to do with this: https://mtgox.com/press_release_20130409.html
It will interesting to see what effect this policy change will have.
[1] https://www.facebook.com/MtGox/posts/455962117821534
[2] https://www.facebook.com/MtGox/posts/453409538076792
[3] https://twitter.com/MagicalTux/status/320043013420249088
It's unclear, but it seems in any case the separation is weak
http://www.facebook.com/MtGox/posts/453409538076792
"There are a few things that we can implement to help fight the attacks, such as disconnecting the trade engine backend from the Internet. By separating the data center from the Mt.Gox website, we will continue to be able to trade"
http://www.facebook.com/MtGox/posts/453409538076792
"There are a few things that we can implement to help fight the attacks, such as disconnecting the trade engine backend from the Internet. By separating the data center from the Mt.Gox website, we will continue to be able to trade"
That tweet is from more than a week ago. Any confirmation that they were under a massive DDoS today?
DDOS attacks are fairly common, even for completely unprofitable endeavors, right? Why is it unreasonable to assume that potentially lucrative DDOS attacks would also occur?
>The bitcointalk forums and /r/bitcoin are full of paranoia like this.
'The HN forums is full of smug dismissiveness like this'
It's a blip on the radar in the grand scheme of things, and tons of sites were DDOS'd and simultaneously going slow or down (bitcointalk, mtgox, bitcoincharts, bitstamp). The evidence is my own eyes and refreshing browser timeouts. Everything back to normal now.
Highly unlikely that all those sites would be bought down by "panicked" users alone.
Given profiteering DDOS attacks against casino operators are commonplace, I find it a stretch to think these attacks are not happening regularly against bitcoin sites.
'The HN forums is full of smug dismissiveness like this'
It's a blip on the radar in the grand scheme of things, and tons of sites were DDOS'd and simultaneously going slow or down (bitcointalk, mtgox, bitcoincharts, bitstamp). The evidence is my own eyes and refreshing browser timeouts. Everything back to normal now.
Highly unlikely that all those sites would be bought down by "panicked" users alone.
Given profiteering DDOS attacks against casino operators are commonplace, I find it a stretch to think these attacks are not happening regularly against bitcoin sites.
Yeah I'm sure some people do exaggerate.
However mtgox is a toy system and it has been attacked for a while on the recent days, it creates lag and panics.
Anyhow, there's a correction every once in a while. It then goes higher than before, I'm still not convinced it is a bubble afterall.
Anyhow, there's a correction every once in a while. It then goes higher than before, I'm still not convinced it is a bubble afterall.
Do you have any evidence at all of a coordinated attack against Bitcoin, or is this just an unsubstantiated conspiracy theory?
Do you even have to ask?
Don't the DDoS attacks count as evidence?
Depends on whether they're able to distinguish between a DDoS and a good old fashioned bank run.
What DDoS attacks? So far I've seen no compelling evidence that this is anything but high volumes of legitimate usage.
As a long-time (since 2010) miner, I can tell you first-hand that there are massive DDoS attacks taking place against not only MtGox (who has already described DDoS against their infrastructure) but the pools as well. In fact, Reddit's pool (MtRed.com) is completely DOWN at the moment because of a larger DDoS than we've ever seen.
You can keep drinking the "everything's fine" koolaid, or get with the reality that currency manipulators have arrived on the Bitcoin train, and are using all the tools they have available to do their job.
You can keep drinking the "everything's fine" koolaid, or get with the reality that currency manipulators have arrived on the Bitcoin train, and are using all the tools they have available to do their job.
I thought MtRed was down because they shut it down?
https://bitcointalk.org/index.php?topic=15929.msg1793833#msg...
Also, just because MtGox had a DDoS in the past, doesn't mean they are having one now. I know first hand as someone who runs a service that has been DDoSed in the past that the moment you have server issues, all the users scream "They are being DDoSed!".
My experience here is just as irrelevant as is your own.
https://bitcointalk.org/index.php?topic=15929.msg1793833#msg...
Also, just because MtGox had a DDoS in the past, doesn't mean they are having one now. I know first hand as someone who runs a service that has been DDoSed in the past that the moment you have server issues, all the users scream "They are being DDoSed!".
My experience here is just as irrelevant as is your own.
This news reveals then that they lied. It was stated repeatedly in #mtred on freenode -- which is where I started lurking when my rig was unable to connect to the pool -- that they brought the pool down in reaction to a very strong DDoS, and that they were rewriting the payment algorithm in the interim.
That being said, I'm not sure why you think they wouldn't be subject -- along with every piece of infrastructure in the bitcoin food chain -- to very large DDoS attacks. The currency manipulators are here to stay. To think otherwise is foolish and misguided, or hopeful beyond reason.
That being said, I'm not sure why you think they wouldn't be subject -- along with every piece of infrastructure in the bitcoin food chain -- to very large DDoS attacks. The currency manipulators are here to stay. To think otherwise is foolish and misguided, or hopeful beyond reason.
The fact that every bit of infrastructure is being "attacked" at once suggests that it is not a DDoS attack to me.
If the price starts going down, everyone will rush to their favorite bitcoin related site to see what is going on, even if they are not planning on panic selling. Would you say you have checked bitcoin related sites 5 times more than usual today? 10 times?
If the regular users of a site all decide to use it five to ten times more than usual, it is very likely to cause some slowdown.
On the other hand, if a single bitcoin related site was experiencing problems, that is when I suspect a targeted attack.
Lastly, the only thing that mtgox announcing that they have been DDoSed in the past tells us is that they are willing to announce the fact that they are being DDoSed. This would seem to make it less likely that they are being DDoSed in the absence of such an announcement.
If the price starts going down, everyone will rush to their favorite bitcoin related site to see what is going on, even if they are not planning on panic selling. Would you say you have checked bitcoin related sites 5 times more than usual today? 10 times?
If the regular users of a site all decide to use it five to ten times more than usual, it is very likely to cause some slowdown.
On the other hand, if a single bitcoin related site was experiencing problems, that is when I suspect a targeted attack.
Lastly, the only thing that mtgox announcing that they have been DDoSed in the past tells us is that they are willing to announce the fact that they are being DDoSed. This would seem to make it less likely that they are being DDoSed in the absence of such an announcement.
I think there's a lot of people who bought in during the last week or two that really want it to turn out to be an "attack". I haven't seen any actual stats or indication that that's actually the case, though.
Likewise, Mt. Gox made mention of "Being DDOS'd" at certain points, but I'm a little skeptical of the claim given that their own charts show a huge jump in trade volume at around the same time.
So no, there's no real "proof" yet of it being a DDOS or just lots of panicked traders, just lots of speculation (heh, heh).
Likewise, Mt. Gox made mention of "Being DDOS'd" at certain points, but I'm a little skeptical of the claim given that their own charts show a huge jump in trade volume at around the same time.
So no, there's no real "proof" yet of it being a DDOS or just lots of panicked traders, just lots of speculation (heh, heh).
Most likely it is being ddossed... by people trying to sell, but that's just my opinion.
There were many, many transactions with amounts of 0.02 BTC. I think P(attack|0.02 BTC * n) > P(~attack|0.02 BTC * n). The reality is probably six of panic sale, half a dozen of DDOS.
The thing with small BTC transactions is that it's more likely to be someone trying to prop up the market, not someone trying to DDOS it. Every time the price starts to go down you start to see a lot of very small buy transactions at a round number a fair amount above the current sell price start going in. The only reason for them appears to be just to keep the displayed "last sale" price on MtGox high.
that was the line mtgox was feeding people to explain why their trading platform gets so lagged out at times.
Tradehill reported it was a DDoS. http://www.itnews.com.au/News/339410,virtual-currency-bitcoi...
In the days before computers, believe it or not, price reporting often ran behind. In the 68 'paperwork crisis' the NYSE went to a four-day trading week for a while to give back offices time to catch up. Capitalism survived.
... but was that capitalism "as we know it"?
Though, to be fair, I don't have an answer myself. Many things have changed, many haven't; it depends which bits you care about how much...
Though, to be fair, I don't have an answer myself. Many things have changed, many haven't; it depends which bits you care about how much...
lol, you never step in the same stream twice, you're not the same person and it's not the same stream - Heraclitus or somesuch
you never step in the same steaming turd twice, you're not the same person and it's not the same steaming turd - RockyMcNuts
you never step in the same steaming turd twice, you're not the same person and it's not the same steaming turd - RockyMcNuts
Indeed - 'capitalism' is about the allocation of saved capital to investment in a largely unregulated marketplace of goods and services. The rise of capitalism and free markets spawned shared capital markets as investments got too large for even the wealthiest invididuals to solely fund.
The instant-casino-trading side of things came much later along the road. It's not crucial to capitalism to the level people might think it is.
The arch-capitalist Warren Buffet regularly says he'd be happy for markets to close for a year. Though that refers to equities and not forex, which obviously does need to stay open to allow trade to happen.
The instant-casino-trading side of things came much later along the road. It's not crucial to capitalism to the level people might think it is.
The arch-capitalist Warren Buffet regularly says he'd be happy for markets to close for a year. Though that refers to equities and not forex, which obviously does need to stay open to allow trade to happen.
> If real markets could get 1 hour behind in transaction processing because of a spike in volume it would be the end of capitalism as we know it.
The Facebook IPO was pretty damn similar and didn't end capitalism as we know it :)
The Facebook IPO was pretty damn similar and didn't end capitalism as we know it :)
That was not a spike in volume, rather a rocket.
It is hyperbole of course. Capitalism worked fine before split second trade resolution, but that happening in today's markets is a pretty big deal because a lot of people have gotten used to it. Also the Facebook IPO was isolated and shook/annoyed a lot of people it seemed. If that kind of thing happened regularly outside of huge IPOs I think NYSE would be in pretty bad shape.
> If real markets could get 1 hour behind in transaction processing because of a spike in volume it would be the end of capitalism as we know it.
That's (probably unintentionally) sad commentary on the state of our world today. After all, this trading is just finance. Truly forging the materials or implementing the algorithms that improve our standards of living happens in on a completely timescale, where a one hour delay of some financing operation (such as getting a loan approved) makes no difference at all.
That's (probably unintentionally) sad commentary on the state of our world today. After all, this trading is just finance. Truly forging the materials or implementing the algorithms that improve our standards of living happens in on a completely timescale, where a one hour delay of some financing operation (such as getting a loan approved) makes no difference at all.
>> "If anything it might be a positive sign for bitcoin that the attackers are keen to acquire it!"
I don't think it inherently implies anything of the sort. There is nothing to suggest that they believe in Bitcoin or care about it. If your suggestions are true, the only thing we know is that they are playing a very, very easy game of manipulation for financial gain. I don't see that as a positive for Bitcoin and think you're reaching with that statement.
I don't think it inherently implies anything of the sort. There is nothing to suggest that they believe in Bitcoin or care about it. If your suggestions are true, the only thing we know is that they are playing a very, very easy game of manipulation for financial gain. I don't see that as a positive for Bitcoin and think you're reaching with that statement.
If there's enough financial gain to be had by manipulating Bitcoin to interest market manipulators, that means the Bitcoin market has more money available in it than, say, two years ago.
Did you see Nasdaq's performance on Facebook's IPO day? I don't think there's an exchange in the world that can handle a serious amount of crushing volume (many times above normal) without some failure somewhere.
What evidence do you have of this claim?
Will a press release from the target suffice?
https://mtgox.com/press_release_20130404.html
https://mtgox.com/press_release_20130404.html
That's from a week ago. Is there any evidence that a DDOS happened today?
DDOS with malicious intent, or does a general usage spike count?
Just try loading mtgox.com -- it's slow. Try using it to trade. Even slower. Service is being denied. Confidence undermined. I would not take this as a vote that once the server issues are resolved, the price will continue to soar, but if I said that, it's possible that later I would be able to "told you so".
Just try loading mtgox.com -- it's slow. Try using it to trade. Even slower. Service is being denied. Confidence undermined. I would not take this as a vote that once the server issues are resolved, the price will continue to soar, but if I said that, it's possible that later I would be able to "told you so".
a site loading slow is in NO way evidence of DDOS
Lots and lots of tiny trades. <0.001
>the end of capitalism as we know it.
>I hope a more able exchange arrives soon.
I hope for both of those things!
>I hope a more able exchange arrives soon.
I hope for both of those things!
If you don't like capitalism, why do you want more exchanges? A exchange feels like a capitalists idea
> aggressive selling attacks
what's the difference between a "selling attack" and just "selling"?
what's the difference between a "selling attack" and just "selling"?
The parent is referring to people selling their bitcoins, then launching a DDOS attack on the exchange server to get the rest of the world to sell in panic, and then buying back bitcoins at the lower rate. I haven't been following the bitcoin news carefully, but presumably that's been going on recently.
I hope a more able exchange arrives soon.
It would be possible to create a GLD-style ETF around Bitcoin and it would be as an accurate reflection of the real price as possible. But why bother?
It would be possible to create a GLD-style ETF around Bitcoin and it would be as an accurate reflection of the real price as possible. But why bother?
btc-e seems to be another big one.
http://bitcoincharts.com/markets/ will show prices in the major exchanges, if it's online. I had to use the Google cache.
http://bitcoincharts.com/markets/ will show prices in the major exchanges, if it's online. I had to use the Google cache.
Assuming that bit-coin is not passed over for a more useful digital currency at which point the network fails and the total value of all bit-coins falls to 0.
I wonder if the value would ever fall to precisely zero. Mightn't they still have value as a novelty or collector's item? Like, "Hey, a Bitcoin! I remember those... sure, I'll buy one, just to say I have one." It's unfortunate that you couldn't mount it in a decorative frame, though.
One guy made physical coins for bitcoin:
(https://www.casascius.com/)
(https://www.casascius.com/)
Indeed. My friend knows the man behind this. He owns another software company in Utah and gives his employees bonuses in BitCoin.
At some point it would probably be easier to mine one, if the value and interest drops low enough.
Unless we reach the mining gives you 0BTC limit.
It will never fall to zero, I'll personally buy every last one of them at $0.0001 each.
It would not make sense to buy EVERY one of them, as then you're guaranteeing they won't have value to anyone else.
Once you own 50% can't you create fake transactions to transfer the rest of the BTC to yourself?
No you need 50% of the mining capacity, not the bitcoins
Perhaps he sees minimal value in being the only person that has any.
I don't care, I'll buy them all. I'd be the sole owner of a piece of internet history.
It's until one-two major governments decides to make it illegal to deal in bit-coins that it's price will drop to zero.
It doesn't matter if they can't enforce it 100% (or even 1%). What matters is that it will kill almost all opportunities to use it as regular money for legitimate purchases by major companies etc in the future. And that it could also land your ass in jail (with ISP monitoring and such being what it is).
Why would a government do that? For one, because they don't like money systems they can not control. Second because they would argue it can be used for money laundering and such.
Time and again it has been proven that you cannot solve social issues with technology. For example a solution for private communication exists: cryptography. And yet, the government can limit what kind of cryptography you can use in your app or export, etc. And they can even throw your ass in jail if you have an encrypted file and you don't hand them the key. You have to go all the more deeper, and even that doesn't solve the issue of your dumb cousin exposing your secret in his plain text email to you.
It doesn't matter if they can't enforce it 100% (or even 1%). What matters is that it will kill almost all opportunities to use it as regular money for legitimate purchases by major companies etc in the future. And that it could also land your ass in jail (with ISP monitoring and such being what it is).
Why would a government do that? For one, because they don't like money systems they can not control. Second because they would argue it can be used for money laundering and such.
Time and again it has been proven that you cannot solve social issues with technology. For example a solution for private communication exists: cryptography. And yet, the government can limit what kind of cryptography you can use in your app or export, etc. And they can even throw your ass in jail if you have an encrypted file and you don't hand them the key. You have to go all the more deeper, and even that doesn't solve the issue of your dumb cousin exposing your secret in his plain text email to you.
"It's until one-two major governments decides to make it illegal to deal in bit-coins..."
I don't know about other governments, but I doubt the US will ever declare Bitcoin illegal (though I am told to never say never). Supporting my viewpoint, the US Treasury Department, through FinCEN, has recently tacitly approved Bitcoin: http://www.businessinsider.com/is-bitcoin-legal-2013-4
I think the US government would prefer to take the benefits of Bitcoin (startups springing up everywhere, taxable Bitcoin economic activity, etc), rather than banning it because the technology is used by a minority of users for illegal activity.
"For one, because they don't like money systems they can not control"
This is a broken argument. The US does not control the Euro, or Yen, etc, yet they do not make it illegal to trade in Euros/Yens within the borders.
I don't know about other governments, but I doubt the US will ever declare Bitcoin illegal (though I am told to never say never). Supporting my viewpoint, the US Treasury Department, through FinCEN, has recently tacitly approved Bitcoin: http://www.businessinsider.com/is-bitcoin-legal-2013-4
I think the US government would prefer to take the benefits of Bitcoin (startups springing up everywhere, taxable Bitcoin economic activity, etc), rather than banning it because the technology is used by a minority of users for illegal activity.
"For one, because they don't like money systems they can not control"
This is a broken argument. The US does not control the Euro, or Yen, etc, yet they do not make it illegal to trade in Euros/Yens within the borders.
>This is a broken argument. The US does not control the Euro, or Yen, etc, yet they do not make it illegal to trade in Euros/Yens within the borders.
They don't, but that's because Euros/Yens are backed by foreign governments that would mind this on a diplomatic level. Bitcoin is a much easier target. And most governments would agree to work together on banning it.
Also: the US might not "make it illegal to trade in Euros/Yens" but it does whatever it can to keep the Euro/Yen down. Especially before Euro got itself in trouble anyway. If any small country attempts to do mass business in Euros for example (e.g selling petrol in the currency), the US puts all of their diplomatic (and sometimes military) pressure on them to revert back to using the dollar.
>I think the US government would prefer to take the benefits of Bitcoin (startups springing up everywhere, taxable Bitcoin economic activity, etc)
Not very appealing advantages.
For one, the government doesn't care for "startups springing up everywhere", it mostly caters to established big corporate interests that can afford lobbying.
Second, the bitcoin economic activity will not be any more taxable than conventional economic activity. Actually, it would be even less. Plus, if bitcoin is banned, its economic activity will just migrate to conventional money again, it wont be lost.
Third, the US government needs to be able to print (inflated) money at will -- something which bitcoin doesn't allow.
They don't, but that's because Euros/Yens are backed by foreign governments that would mind this on a diplomatic level. Bitcoin is a much easier target. And most governments would agree to work together on banning it.
Also: the US might not "make it illegal to trade in Euros/Yens" but it does whatever it can to keep the Euro/Yen down. Especially before Euro got itself in trouble anyway. If any small country attempts to do mass business in Euros for example (e.g selling petrol in the currency), the US puts all of their diplomatic (and sometimes military) pressure on them to revert back to using the dollar.
>I think the US government would prefer to take the benefits of Bitcoin (startups springing up everywhere, taxable Bitcoin economic activity, etc)
Not very appealing advantages.
For one, the government doesn't care for "startups springing up everywhere", it mostly caters to established big corporate interests that can afford lobbying.
Second, the bitcoin economic activity will not be any more taxable than conventional economic activity. Actually, it would be even less. Plus, if bitcoin is banned, its economic activity will just migrate to conventional money again, it wont be lost.
Third, the US government needs to be able to print (inflated) money at will -- something which bitcoin doesn't allow.
"They don't, but that's because Euros/Yens are backed by foreign governments".
No, that is not the reason. Replace "Euros/Yens" with "gold" in my sentence, and my point stands with gold being backed by nothing. Basically the US government is totally fine with side markets that they cannot control directly and that exist in parallel with the USD (whether it is EUR, gold, Bitcoin, whatever).
Your other argument also fails to convince me that the government would want to declare Bitcoin illegal. You say it can be used for money laundering, but gold and cash can already be used for money laundering (and even more discreetly since trading gold or cash does not leave a trail like in the Bitcoin blockchain). The US govt does not make gold and cash illegal because they realize it is silly/unenforcable/pointless and would hurt the economy more than it would manage reducing illegal activity. Case in point: the US did attempt to criminalize possession of gold in 1933, but they eventually realized how silly and stupid this was, so they decriminalized it!
When the Internet was being developed throughout the world, were you the kind of person who looked at it and envisioned that its censorship-resistant decentralized aspect could be used to facilitate the transmission of potentially illegal information (software, data, child porn, ideas, etc, especially in countries with no freedom of speech) and said "geesh I bet governments are going to make Internet illegal"?
"For one, the government doesn't care for 'startups springing up everywhere'"
I think my point was clear that these startups are potentially the start of a big new economy complementing the current one that could financially benefit the government with revenues from taxes. So, yes, the government would love to see a big economy pop up.
"Plus, if bitcoin is banned, its economic activity will just migrate to conventional money again, it wont be lost."
No. The world economy is not a zero-sum game. It is possible to create wealth (wealth is stuff we want, not money, see http://www.paulgraham.com/wealth.html ) and Bitcoin and its economy would certainly create extra wealth. Another example showing how silly your assumption that the economy is a zero-sum game is: since the start of e-commerce, do you think that it has stolen commerce from or mostly added to the brick-and-mortar industry? Obviously, sometimes stolen (journals, etc) but e-commerce has mostly added wealth and economic activity on top of the brick-and-mortar one. In other word the size and richness and wealth of the current economy far surpases the one of the economy pre-Internet.
No, that is not the reason. Replace "Euros/Yens" with "gold" in my sentence, and my point stands with gold being backed by nothing. Basically the US government is totally fine with side markets that they cannot control directly and that exist in parallel with the USD (whether it is EUR, gold, Bitcoin, whatever).
Your other argument also fails to convince me that the government would want to declare Bitcoin illegal. You say it can be used for money laundering, but gold and cash can already be used for money laundering (and even more discreetly since trading gold or cash does not leave a trail like in the Bitcoin blockchain). The US govt does not make gold and cash illegal because they realize it is silly/unenforcable/pointless and would hurt the economy more than it would manage reducing illegal activity. Case in point: the US did attempt to criminalize possession of gold in 1933, but they eventually realized how silly and stupid this was, so they decriminalized it!
When the Internet was being developed throughout the world, were you the kind of person who looked at it and envisioned that its censorship-resistant decentralized aspect could be used to facilitate the transmission of potentially illegal information (software, data, child porn, ideas, etc, especially in countries with no freedom of speech) and said "geesh I bet governments are going to make Internet illegal"?
"For one, the government doesn't care for 'startups springing up everywhere'"
I think my point was clear that these startups are potentially the start of a big new economy complementing the current one that could financially benefit the government with revenues from taxes. So, yes, the government would love to see a big economy pop up.
"Plus, if bitcoin is banned, its economic activity will just migrate to conventional money again, it wont be lost."
No. The world economy is not a zero-sum game. It is possible to create wealth (wealth is stuff we want, not money, see http://www.paulgraham.com/wealth.html ) and Bitcoin and its economy would certainly create extra wealth. Another example showing how silly your assumption that the economy is a zero-sum game is: since the start of e-commerce, do you think that it has stolen commerce from or mostly added to the brick-and-mortar industry? Obviously, sometimes stolen (journals, etc) but e-commerce has mostly added wealth and economic activity on top of the brick-and-mortar one. In other word the size and richness and wealth of the current economy far surpases the one of the economy pre-Internet.
> You say it can be used for money laundering, but gold and cash can already be used for money laundering (and even more discreetly since trading gold or cash does not leave a trail like in the Bitcoin blockchain)
Spoken like a person who has never tried to launder millions of dollars in gold. You don't just go down to the pawn shop and redeem millions of dollars in gold.
Spoken like a person who has never tried to launder millions of dollars in gold. You don't just go down to the pawn shop and redeem millions of dollars in gold.
You are wrong. Gold is very often used by drug cartels for their laundering operations:
http://www.nytimes.com/2003/06/06/nyregion/drug-money-launde...
http://www.insightcrime.org/news-briefs/mexico-cartels-steal...
"Mexican authorities say that, since 2008, criminal gangs have robbed so many trucks carrying gold shipments that some mining companies have been forced to switch to aerial transportation"
http://www.nytimes.com/2003/06/06/nyregion/drug-money-launde...
http://www.insightcrime.org/news-briefs/mexico-cartels-steal...
"Mexican authorities say that, since 2008, criminal gangs have robbed so many trucks carrying gold shipments that some mining companies have been forced to switch to aerial transportation"
I don't really understand what stealing trucks full of gold has to do with any of this. He said that the US is "totally fine with side markets that they cannot control directly" and that "Your other argument also fails to convince me that the government would want to declare Bitcoin illegal." and I have to agree.
They need to be able to control the currency, thus bitcoin will never become more than it is now. I'd bet on the powers that be squashing it a million times.
>No, that is not the reason. Replace "Euros/Yens" with "gold" in my sentence, and my point stands with gold being backed by nothing.
For one, the US government has banned gold for decades. So it's not that "OK" with it. It also closely monitors gold deals for money laundering purposes. Not to mention that there are governments all over the world that still forbid the private gold ownership.
>Basically the US government is totally fine with side markets that they cannot control directly and that exist in parallel with the USD (whether it is EUR, gold, Bitcoin, whatever).
The US government is totally NOT-fine with anything it cannot control, especially side markets. Gold is a bad example: they already have banned it once in the past. EUR is also a bad example, because its a legitimate foreign currency (of 400 million people), not some "side market". And bitcoin is also a bad example, because it's insignificant at the time -- a very small niche. There are small software shops that make more money annually than bitcoin has at this point.
>You say it can be used for money laundering, but gold and cash can already be used for money laundering (and even more discreetly since trading gold or cash does not leave a trail like in the Bitcoin blockchain). The US govt does not make gold and cash illegal because they realize it is silly/unenforcable/pointless and would hurt the economy more than it would manage reducing illegal activity. Case in point: the US did attempt to criminalize possession of gold in 1933, but they eventually realized how silly and stupid this was, so they decriminalized it!
It's not that "eventually realized how silly and stupid it was". Like "oh, snap, why did we ever do such a thing? We are never to take the same decision again". It was just that another government, 4 decades removed from the one who took the original decision, and in different circumstances and economic climate, reverted the decision. We are 4 decades after that again, and things can change again if similar occasions to 1933 occur (which was in the "Great Depression" era).
Plus, the US still keeps very close tabs on gold, especially as it related to money laundering.
Something that they are willing to do for Bitcoin also. From the Wall Street Journal: "the U.S. is applying money-laundering rules to "virtual currencies," amid growing concern that new forms of cash bought on the Internet are being used to fund illicit activities. The move means that firms that issue or exchange the increasingly popular online cash will now be regulated in a similar manner as traditional money-order providers such as Western Union Co. They would have new bookkeeping requirements and mandatory reporting for transactions of more than $10,000. Moreover, firms that receive legal tender in exchange for online currencies or anyone conducting a transaction on someone else's behalf would be subject to new scrutiny, said proponents of Internet currencies".
>No. The world economy is not a zero-sum game. It is possible to create wealth (wealth is stuff we want, not money, see http://www.paulgraham.com/wealth.html ) and Bitcoin and its economy would certainly create extra wealth.
The economy might not be a "zero-sum game", but currency pretty much is. You kill a currency, activity and wealth migrates to another.
Plus, wealth is also destructed every day. A 0.0001% drop on Wall Street will destroy more wealth than all current bitcoins combined (which is a laughable amount, $150M, IIRC).
In my eyes, bitcoin is a geeky and early-adopter obsession slash fad, that attracts the wrong kind of people (the "gold-rush" types and techno-naive) and gives them false assurances.
For one, the US government has banned gold for decades. So it's not that "OK" with it. It also closely monitors gold deals for money laundering purposes. Not to mention that there are governments all over the world that still forbid the private gold ownership.
>Basically the US government is totally fine with side markets that they cannot control directly and that exist in parallel with the USD (whether it is EUR, gold, Bitcoin, whatever).
The US government is totally NOT-fine with anything it cannot control, especially side markets. Gold is a bad example: they already have banned it once in the past. EUR is also a bad example, because its a legitimate foreign currency (of 400 million people), not some "side market". And bitcoin is also a bad example, because it's insignificant at the time -- a very small niche. There are small software shops that make more money annually than bitcoin has at this point.
>You say it can be used for money laundering, but gold and cash can already be used for money laundering (and even more discreetly since trading gold or cash does not leave a trail like in the Bitcoin blockchain). The US govt does not make gold and cash illegal because they realize it is silly/unenforcable/pointless and would hurt the economy more than it would manage reducing illegal activity. Case in point: the US did attempt to criminalize possession of gold in 1933, but they eventually realized how silly and stupid this was, so they decriminalized it!
It's not that "eventually realized how silly and stupid it was". Like "oh, snap, why did we ever do such a thing? We are never to take the same decision again". It was just that another government, 4 decades removed from the one who took the original decision, and in different circumstances and economic climate, reverted the decision. We are 4 decades after that again, and things can change again if similar occasions to 1933 occur (which was in the "Great Depression" era).
Plus, the US still keeps very close tabs on gold, especially as it related to money laundering.
Something that they are willing to do for Bitcoin also. From the Wall Street Journal: "the U.S. is applying money-laundering rules to "virtual currencies," amid growing concern that new forms of cash bought on the Internet are being used to fund illicit activities. The move means that firms that issue or exchange the increasingly popular online cash will now be regulated in a similar manner as traditional money-order providers such as Western Union Co. They would have new bookkeeping requirements and mandatory reporting for transactions of more than $10,000. Moreover, firms that receive legal tender in exchange for online currencies or anyone conducting a transaction on someone else's behalf would be subject to new scrutiny, said proponents of Internet currencies".
>No. The world economy is not a zero-sum game. It is possible to create wealth (wealth is stuff we want, not money, see http://www.paulgraham.com/wealth.html ) and Bitcoin and its economy would certainly create extra wealth.
The economy might not be a "zero-sum game", but currency pretty much is. You kill a currency, activity and wealth migrates to another.
Plus, wealth is also destructed every day. A 0.0001% drop on Wall Street will destroy more wealth than all current bitcoins combined (which is a laughable amount, $150M, IIRC).
In my eyes, bitcoin is a geeky and early-adopter obsession slash fad, that attracts the wrong kind of people (the "gold-rush" types and techno-naive) and gives them false assurances.
Your argumentation attempts to compare Bitcoin to the fact there is a very real possibility that the US government will declare gold illegal again in the future... I am sorry but this makes me see you as a lunatic. If you believe that about gold, you may just as well believe they will make wearing red shirts illegal on Wednesdays. No amount of arguing will make you change your mind.
You say euros and gold are "bad examples", but I could cite tons of other examples. For example the US perfectly allows holding and trading in all (virtually all?) foreign currencies including countries it has strained relationships with (Iranian rial, Burmese kyat, etc) and these countries have economies as large as, if not larger than Bitcoin. And because none of these foreign exchanges or currencies are illegal, I doubt Bitcoin will be made illegal.
I await your reply explaining in a convoluted way why each and every foreign currency or commodity is somehow a "bad example", and why the US would allow them but not Bitcoin.
You say euros and gold are "bad examples", but I could cite tons of other examples. For example the US perfectly allows holding and trading in all (virtually all?) foreign currencies including countries it has strained relationships with (Iranian rial, Burmese kyat, etc) and these countries have economies as large as, if not larger than Bitcoin. And because none of these foreign exchanges or currencies are illegal, I doubt Bitcoin will be made illegal.
I await your reply explaining in a convoluted way why each and every foreign currency or commodity is somehow a "bad example", and why the US would allow them but not Bitcoin.
I'd love to see these startups springing up everywhere solely because of bitcoin :)
Coinbase, BitPay, BitSpend, BitcoinStore, CoinLab, etc. etc.
Marijuana and heroin were both legal in the USA at one point. Heroin itself is (was?) a trademarked brandname.
My point being that governments will allow somethign up until the point that a group of politicians either see a threat or some votes in banning it.
My point being that governments will allow somethign up until the point that a group of politicians either see a threat or some votes in banning it.
You're fighting an uphill battle. On a deeply, delusionally paranoid hill.
What a pessimist you are. I would not want to live in your world. In mine, in the hypothetical case we will need to fight for Bitcoin, we will, like we did against the SOPA bill.
The government is made for the people. Don't you forget that.
The government is made for the people. Don't you forget that.
>You misunderstand me. I meant it was an uphill battle to argue to all the paranoid people that the U.S. government has yet to outlaw trading in Yen, Euro, etc, even though it doesn't control those currencies either.
What exactly gave you the right to call me "paranoid"?
The fact that I said the US might ban the Bitcoin?
For one, the Bitcoin is NOT like the Euro or the Yen at all. It doesn't have any government to back it, and it has properties that make it not very likable to any large government.
Banning bitcoin wont be like banning Euro or the Yen, which are legitimate, sovereign national currencies.
It would be like banning or freezing assets in off-shore accounts (which governments have been known to do). Or like banning the private buying of gold (which the US had done, from 1933 to mid-seventies:
"Executive Order 6102 is an Executive Order signed on April 5, 1933, by U.S. President Franklin D. Roosevelt "forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates within the continental United States". The order criminalized the possession of monetary gold by any individual, partnership, association or corporation."
http://en.wikipedia.org/wiki/Executive_Order_6102
Private / alternative currencies have been banned in several cases all over the world. One example from Wikipedia:
In Australia, the Bank Notes Tax Act of 1910 practically shut down the circulation of private currencies by imposing a prohibitive tax on the practice. It was later repealed and a fine imposed for private currencies (Commonwealth Bank Act 1945). Many other nations have similar such policies to eliminate private sector competition.
Or:
The co-operative society Jord Arbejde Kapital was founded in Denmark during the Great Depression in 1931. The society issued a popular local currency which was subsequently outlawed by the Danish government in 1933.
Not to mention that the whole idea that the US doesn't care at all about Yen and Euros is flawed BS. The US would very much like to keep the dollar unthreatened as the "golden world standard". But those currencies belong to very large economies and countries for the US to be able to do anything about it. Not to mention that the Yen is tied to the dollar in intricate ways nowadays (Chinese own trillions of it).
Still, when any third world or developing country expresses a desire to do business in Euros (something that happened oftentimes before the Euro crisis), the US exerts as much political and diplomatic pressure as it can to have them revert course.
So, using the fact that the US does not ban the Yen and the Euro as an "argument" why it cannot ban bitcoin? Really, not the very best in informed thinking. To call one "paranoid" about arguing the possibility of the bitcoin ban? Even worse (and rude to top).
You might as well say that since the US hasn't entered a war with China or EU, it will never enter a war with a terrorist group operating outside any government. Seeing that China and EU are huge countries/unions, whereas the Bitcoin community is just an ad-hoc random assembly of people investing on an alternative monetary system.
What exactly gave you the right to call me "paranoid"?
The fact that I said the US might ban the Bitcoin?
For one, the Bitcoin is NOT like the Euro or the Yen at all. It doesn't have any government to back it, and it has properties that make it not very likable to any large government.
Banning bitcoin wont be like banning Euro or the Yen, which are legitimate, sovereign national currencies.
It would be like banning or freezing assets in off-shore accounts (which governments have been known to do). Or like banning the private buying of gold (which the US had done, from 1933 to mid-seventies:
"Executive Order 6102 is an Executive Order signed on April 5, 1933, by U.S. President Franklin D. Roosevelt "forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates within the continental United States". The order criminalized the possession of monetary gold by any individual, partnership, association or corporation."
http://en.wikipedia.org/wiki/Executive_Order_6102
Private / alternative currencies have been banned in several cases all over the world. One example from Wikipedia:
In Australia, the Bank Notes Tax Act of 1910 practically shut down the circulation of private currencies by imposing a prohibitive tax on the practice. It was later repealed and a fine imposed for private currencies (Commonwealth Bank Act 1945). Many other nations have similar such policies to eliminate private sector competition.
Or:
The co-operative society Jord Arbejde Kapital was founded in Denmark during the Great Depression in 1931. The society issued a popular local currency which was subsequently outlawed by the Danish government in 1933.
Not to mention that the whole idea that the US doesn't care at all about Yen and Euros is flawed BS. The US would very much like to keep the dollar unthreatened as the "golden world standard". But those currencies belong to very large economies and countries for the US to be able to do anything about it. Not to mention that the Yen is tied to the dollar in intricate ways nowadays (Chinese own trillions of it).
Still, when any third world or developing country expresses a desire to do business in Euros (something that happened oftentimes before the Euro crisis), the US exerts as much political and diplomatic pressure as it can to have them revert course.
So, using the fact that the US does not ban the Yen and the Euro as an "argument" why it cannot ban bitcoin? Really, not the very best in informed thinking. To call one "paranoid" about arguing the possibility of the bitcoin ban? Even worse (and rude to top).
You might as well say that since the US hasn't entered a war with China or EU, it will never enter a war with a terrorist group operating outside any government. Seeing that China and EU are huge countries/unions, whereas the Bitcoin community is just an ad-hoc random assembly of people investing on an alternative monetary system.
"Or like banning the private buying of gold (which the US had done, from 1933 to mid-seventies"
...which proves my point! This was stupid and ultimately led to all sorts of negative economic consequences, therefore the US reverted the decision in the mid seventies. Now you are arguing that the US would somehow make the same mistake with Bitcoin?!
...which proves my point! This was stupid and ultimately led to all sorts of negative economic consequences, therefore the US reverted the decision in the mid seventies. Now you are arguing that the US would somehow make the same mistake with Bitcoin?!
If anything we should realize that the government is very willing and capable of making the same mistakes over and over again..
If anything, the history of government is full of governments making the EXACT same mistakes.
And the reason they dropped the gold ban was less that they found that "it was stupid and led to all sorts of negative economic consequences" and more to a changing political climate at the time and Nixon's monetary policy. Things that can easily change.
Btw, other governments still prohibit the private ownership of gold (except under special agreements and of course as jewelry).
And the reason they dropped the gold ban was less that they found that "it was stupid and led to all sorts of negative economic consequences" and more to a changing political climate at the time and Nixon's monetary policy. Things that can easily change.
Btw, other governments still prohibit the private ownership of gold (except under special agreements and of course as jewelry).
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If you're trying to do something that's already illegal (sending money to your grandmother in Iran) then you won't care if bitcoins are illegal.
The market for making politically sensitive transactions is huge. There's no need for Bitcoin to be the currency of choice for buying a Big Mac in New York.
The market for making politically sensitive transactions is huge. There's no need for Bitcoin to be the currency of choice for buying a Big Mac in New York.
I've been trying to figure out a way in which bitcoin could be useful for money laundering, and I just don't see it.
Classic money laundering schemes use businesses which typically have large amounts of anonymous customers paying in cash - the dirty money flows in as cash purchases that didn't really happen from customers that didn't exist. The pseudonymous bitcoin doesn't seem to support this use - it will be obvious from an examinination of the block chain where that money came from.
Can anyone describe a workable money laundering scheme using bitcoin?
Classic money laundering schemes use businesses which typically have large amounts of anonymous customers paying in cash - the dirty money flows in as cash purchases that didn't really happen from customers that didn't exist. The pseudonymous bitcoin doesn't seem to support this use - it will be obvious from an examinination of the block chain where that money came from.
Can anyone describe a workable money laundering scheme using bitcoin?
You could spread around small cash payments to establish a bitcoin network and then extract clean money when you managed to get enough outside interest.
I don't particularly think that is what is happening though.
I don't particularly think that is what is happening though.
A vast number of major governments have made it illegal to trade in, for example, heroin. Just making something illegal doesn't necessarily stop trade.
There is literally no fundamental value to bitcoins. Spikes and crashes are absolutely to be expected in such a situation.
That's not quite true is it? A distributed cryptographically-guaranteed ledger has fundamental value, no?
Its an interesting thought. What's the upper bound on what a ledger could be worth?
That said, the value of the ledger derives almost entirely from the value of the items transacted in the ledger. Therefore, I'd say that the ledger value is derivative of the market value and thus doesn't itself convey an intrinsic value to the coins.
That said, the value of the ledger derives almost entirely from the value of the items transacted in the ledger. Therefore, I'd say that the ledger value is derivative of the market value and thus doesn't itself convey an intrinsic value to the coins.
same as the dollar and euro then. They are not backed by anything except the status quo.
The dollar is backed by the word of the most powerful organization in the history of civilization. If that doesn't have value, what does?
First, the word of the powerful is worthless, because power corrupts. People might keep their word because they're honest, or because they're accountable, but the "most powerful organization in the history of civilization" is by definition not accountable, and being an organization, neither is it honest.
Second, the US government doesn't give its word that dollars are usable for anything other than paying dollar-denominated debts to people inside its jurisdiction. If you owe somebody in the US €100, that's currently US$130.50. But if the dollar collapses tomorrow, you might need US$1300 to pay that debt, even to somebody in the US.
The US government has not given its word that you can exchange those US$130.50 for €100 tomorrow, or for anything else, except for debts already denominated in dollars. It doesn't even require that businesses allow you to buy things with any particular currency (this is a FAQ on the Fed's web site) — just that they accept payment for debts already contracted.
Second, the US government doesn't give its word that dollars are usable for anything other than paying dollar-denominated debts to people inside its jurisdiction. If you owe somebody in the US €100, that's currently US$130.50. But if the dollar collapses tomorrow, you might need US$1300 to pay that debt, even to somebody in the US.
The US government has not given its word that you can exchange those US$130.50 for €100 tomorrow, or for anything else, except for debts already denominated in dollars. It doesn't even require that businesses allow you to buy things with any particular currency (this is a FAQ on the Fed's web site) — just that they accept payment for debts already contracted.
The very concept of debt, of exchange, is one enforced by the United States. If the United States says that I owe a million dollars or none, that is just as true whether it is measured in gold, or hens, or the capricious will of the Federal Reserve. What matters is the power of the United States to force me to pay, and that power is unparalleled by any other entity that has ever existed.
To say that the word of the United States is worthless is to ignore reality.
To say that the word of the United States is worthless is to ignore reality.
This may be news to you, but debt and exchange still take place internationally, have taken place internationally since long before there were superpowers, and also take place in zones where no law is enforced.
As for the word of the United States, I'm guessing you've never been to an Indian reservation.
As for the word of the United States, I'm guessing you've never been to an Indian reservation.
That only really goes for people on American soil. Of course, most governments that owe money to the US are in such deep shit that they couldn't pay the cleaning lady next week without a new loan this week. New loans tend to be problematic if you don't pay interest on your current loan.
That's just the tin foil talking.
Look at it this way if you must: the rich and the powerful, in the US, have vast amounts of wealth stored in USD and USD-demoninated instruments. It is therefore in their best interests to preserve the value of the USD, or at times slightly inflate it.
The risk of your second paragraph cuts both ways. If the euro collapses tomorrow, you might need only US$13 to pay that debt.
Look at it this way if you must: the rich and the powerful, in the US, have vast amounts of wealth stored in USD and USD-demoninated instruments. It is therefore in their best interests to preserve the value of the USD, or at times slightly inflate it.
The risk of your second paragraph cuts both ways. If the euro collapses tomorrow, you might need only US$13 to pay that debt.
That personal slur is uncalled-for and demonstrates that you are completely unfamiliar with me and my history.
You're suggesting that US elites are systematically long dollars and have the power to control the value of the currency, including overcoming coordination problems. If that were true, we'd be seeing dollar deflation. Instead, we've seen about eight decades of uninterrupted inflation. This means one or both of your premises are wrong. I suspect both.
As for the "risk", I didn't mean to suggest that USD is particularly risky, certainly not more risky than EUR. I was just pointing out that the USG isn't "backing" USD even in the sense of Bretton Woods.
You're suggesting that US elites are systematically long dollars and have the power to control the value of the currency, including overcoming coordination problems. If that were true, we'd be seeing dollar deflation. Instead, we've seen about eight decades of uninterrupted inflation. This means one or both of your premises are wrong. I suspect both.
As for the "risk", I didn't mean to suggest that USD is particularly risky, certainly not more risky than EUR. I was just pointing out that the USG isn't "backing" USD even in the sense of Bretton Woods.
> If that were true, we'd be seeing dollar deflation.
I disagree. There are a number of benefits to inflation - particularly to those who have large amounts of debt on the books. Mortgaged real estate benefits greatly. Interest rates go up. Who stands to gain the most by decreasing the real value of loans and increasing interest rates?
> I was just pointing out that the USG isn't "backing" USD
In the abstract, nobody can back anything, because all you're relying on is their word. You could back a currency with a precious metal, but even that assumes the metal is intrinsically worth something (which has compelling arguments both ways).
The USG backs the USD fundamentally because they have power over the USD. They could instantly crush the value of the dollar if they chose to. Personally, I believe that if/when that happened, we'd have a great deal more to worry about than our wallets.
I disagree. There are a number of benefits to inflation - particularly to those who have large amounts of debt on the books. Mortgaged real estate benefits greatly. Interest rates go up. Who stands to gain the most by decreasing the real value of loans and increasing interest rates?
> I was just pointing out that the USG isn't "backing" USD
In the abstract, nobody can back anything, because all you're relying on is their word. You could back a currency with a precious metal, but even that assumes the metal is intrinsically worth something (which has compelling arguments both ways).
The USG backs the USD fundamentally because they have power over the USD. They could instantly crush the value of the dollar if they chose to. Personally, I believe that if/when that happened, we'd have a great deal more to worry about than our wallets.
"Those who have large amounts of debt on the books" are short dollars, not long dollars, if you mean debtors (as suggested by your "real estate benefits") rather than creditors (as suggested by your "interest rates go up") — both groups have debt on the books, just on opposite sides of the ledger.
Creditors compensate by increasing interest rates on new loans, but that's, properly speaking, a response to expectations of future inflation, not a cure for past inflation.
> nobody can back anything
I can't tell if you're actually unable to understand the distinction between reserve-backed currencies and fiat currencies like the current dollar, or if you're intentionally bringing up irrelevancies to try to confuse the discussion. Your unwarranted personal attack earlier in the thread makes me want to assume the latter. In either case, shut the fuck up, because whether your ignorance is faked or not, you're not contributing to the conversation. You're just being an asshole.
Creditors compensate by increasing interest rates on new loans, but that's, properly speaking, a response to expectations of future inflation, not a cure for past inflation.
> nobody can back anything
I can't tell if you're actually unable to understand the distinction between reserve-backed currencies and fiat currencies like the current dollar, or if you're intentionally bringing up irrelevancies to try to confuse the discussion. Your unwarranted personal attack earlier in the thread makes me want to assume the latter. In either case, shut the fuck up, because whether your ignorance is faked or not, you're not contributing to the conversation. You're just being an asshole.
No, it's not backed in the sense that it has a concrete value. No one is guaranteeing that a US dollar will buy you exactly a gallon of gas, an ounce of gold, or a bushel of wheat or anything like that.
It is "backed" in the sense that people need it to pay taxes, but exactly how much value that gives it is completely uncertain and only determined by the supply and demand of people spending it/accepting it. If there were to be a major economic shift, the value could change to be literally anything relative to the value of other goods (without the supply and demand of those goods actually changing.) It could even completely collapse and be worth nothing under the right conditions.
If it was actually backed in the traditional sense it would be guaranteed to be worth some amount of some good or combination of goods, regardless what happens, regardless how many people are spending it or accepting it.
It is "backed" in the sense that people need it to pay taxes, but exactly how much value that gives it is completely uncertain and only determined by the supply and demand of people spending it/accepting it. If there were to be a major economic shift, the value could change to be literally anything relative to the value of other goods (without the supply and demand of those goods actually changing.) It could even completely collapse and be worth nothing under the right conditions.
If it was actually backed in the traditional sense it would be guaranteed to be worth some amount of some good or combination of goods, regardless what happens, regardless how many people are spending it or accepting it.
And who guarantees that an ounce of gold will buy me some amount of wheat? Or that a bushel of wheat will give me some amount of energy when eaten? Only a very powerful entity can make such guarantees.
On that basis I would say that the word of the United States is far more intrinsically valuable than any physical object.
On that basis I would say that the word of the United States is far more intrinsically valuable than any physical object.
Gold has generally had stable value throughout history, but you are right that it isn't guaranteed. Other commodities like wheat are a little harder to use to back a currency, but from year to year they are fairly stable and pretty much guaranteed to have some value whatever happens.
But US dollars aren't guaranteed to do anything for you either in such a situation. The currency could hyper-inflate tomorrow for all anyone knows, and it has no intrinsic value other than the requirement to pay taxes with it. It seems to work fine as a currency and maintain stable value, but the point is it really isn't backed by anything.
But US dollars aren't guaranteed to do anything for you either in such a situation. The currency could hyper-inflate tomorrow for all anyone knows, and it has no intrinsic value other than the requirement to pay taxes with it. It seems to work fine as a currency and maintain stable value, but the point is it really isn't backed by anything.
Gold has been stabilized through history because it has been used as currency by powerful governments. If the powerful governments of the world collapse, they will lose control of their large gold reserves at the same time they lose the ability to feed their citizens. What do you suppose will happen to the commodity markets then?
Nothing, neither gold nor grain, is backed by anything but power. Fiat currency is just the government accepting that responsibility de jure.
Nothing, neither gold nor grain, is backed by anything but power. Fiat currency is just the government accepting that responsibility de jure.
You do realize that modern fiscal policy near zero.
Ergo, a dollar today is guaranteed, on the average, to buy just under a today's dollar worth of things next year.
Ergo, a modern dollar is about the closest thing to a guaranteed exchange value that the world has ever seen.
Ergo, a dollar today is guaranteed, on the average, to buy just under a today's dollar worth of things next year.
Ergo, a modern dollar is about the closest thing to a guaranteed exchange value that the world has ever seen.
Yes, it is a huge economy that has decades to stabilize, unlike bitcoin. My point is that it still isn't backed by anything. There is absolutely no guarantee that it will buy anything next year except what people next year are willing to give you in exchange for it (which could change due to a lot of factors.)
Being stable in value, and being guaranteed to have value are two very different things.
Being stable in value, and being guaranteed to have value are two very different things.
Dollar/Euro are backed by central banks who dynamically maintain money supply to maintain a promise of low price inflation.
Their fundamental value is derived from fiat.
It's similar, but not the same.
Their fundamental value is derived from fiat.
It's similar, but not the same.
I am constantly amazed how little Bitcoin fans value large, stable, global financial and legal institutions like the US or EU.
Without them, Bitcoin, the Internet, and most of the other aspects of their comfortable lives would exist.
Without them, Bitcoin, the Internet, and most of the other aspects of their comfortable lives would exist.
- the legal system is a huge disappointment (CISPA, SOPA, etc.)
- the financial system is a huge disappointment (worldwide financial crisis)
It's not that we love Bitcoin (sure, it is an interesting piece of technology, but it's money, and money is a dirty word), we just dislike the alternatives.
- the financial system is a huge disappointment (worldwide financial crisis)
It's not that we love Bitcoin (sure, it is an interesting piece of technology, but it's money, and money is a dirty word), we just dislike the alternatives.
Of course they are disappointments. But are they worse than any known alternatives?
Democracy isn't promised to be perfect, just to be better than its predecessors.
Something can be the best-ever-made and still be disappointing.
Democracy isn't promised to be perfect, just to be better than its predecessors.
Something can be the best-ever-made and still be disappointing.
The people are just taking back some of the power they had previously delegated to banks and governments. Our leaders have become too far disconnected from us, they don't even understand that we are used to unprecedented freedom of actions and speech, to levels that sounded crazy before the Internet (some people grew up downloading data from military satellites and servers just for fun, not in any way out of malice - this is something they'll never understand).
Let the hive mind decide what is moral and worthy and what is not. Democracy must evolve and this will never happen as long as the old generation has power to stop it.
Let the hive mind decide what is moral and worthy and what is not. Democracy must evolve and this will never happen as long as the old generation has power to stop it.
There are a lot of reasons why people are skeptical of those systems. How could you not be at least a little? And I doubt the internet and life as we know it wouldn't exist if things were different, but it depends a lot what that means.
There's a fascinating potential circularity in what you're saying.
If you invest in bitcoin because you don't trust governments, but bitcoin relies upon the internet, and the internet requires governments to stay up; then there's a sad potential future where a government-skeptic bitcoin investor is exactly right but because of the prerequisites for bitcoin to maintain value ends up with nothing.
If you invest in bitcoin because you don't trust governments, but bitcoin relies upon the internet, and the internet requires governments to stay up; then there's a sad potential future where a government-skeptic bitcoin investor is exactly right but because of the prerequisites for bitcoin to maintain value ends up with nothing.
not 100% true. you have to pay taxes in dollars. the currency is backed by the value of not going to jail.
You may have hit on something here.
There is no guarantee that any item will be worth any amount of another item. You can make claims about the relative likelihood that some item will be exchangeable for some quantity of another item, but you cannot claim that in every future scenario your item will be exchangeable for any amount of another item.
Just because a transaction looks more like barter than commercial doesn't magically convert the ideas underpinning fundamental economics. At this level of understanding economics is more a study of sociological systems and less about banking, fiat currencies, and all the other modern mumbo-jumbo we go on about these days.
This is really key when discussing some utopian reality where we've untethered ourselves from any form of currency--an exchange of value is tied to the very earliest societal systems. Unless society shrinks back into nomadic wandering tribes some form of value exchange (aka: currency) will exist.
There is no guarantee that any item will be worth any amount of another item. You can make claims about the relative likelihood that some item will be exchangeable for some quantity of another item, but you cannot claim that in every future scenario your item will be exchangeable for any amount of another item.
Just because a transaction looks more like barter than commercial doesn't magically convert the ideas underpinning fundamental economics. At this level of understanding economics is more a study of sociological systems and less about banking, fiat currencies, and all the other modern mumbo-jumbo we go on about these days.
This is really key when discussing some utopian reality where we've untethered ourselves from any form of currency--an exchange of value is tied to the very earliest societal systems. Unless society shrinks back into nomadic wandering tribes some form of value exchange (aka: currency) will exist.
I've seen a lot of good arguments on the value/worthlessness of fiat currency, but I'd never seen fiat currency defended as having the value of not going to jail. That's an amusing and on its face compelling argument.
Actually this rule isn't limited to taxes. EVERY debt you may have in the united states HAS to accept a pre-agreed dollar amount as payment in full.
The value of the dollar is "guaranteed", in theory, by the law that states that anything for sale inside the borders of the united states can be bought for dollars, without exceptions.
As to how guaranteed that makes a dollar, that is a matter of opinion. It is a lot better than Bitcoin imho.
The value of the dollar is "guaranteed", in theory, by the law that states that anything for sale inside the borders of the united states can be bought for dollars, without exceptions.
As to how guaranteed that makes a dollar, that is a matter of opinion. It is a lot better than Bitcoin imho.
"Sell on news."
Thoughts on your essay:
Fractional reserve banking - if it's merely backed in BTC then what's the point of bitcoin? It entirely defeats the system as people will be back to fiat currency.
Early adopters and clever nation states have the opportunity to totally turn the world upside down in a BTC backed future. They should have a significant percentage of all existing (as it's finite) BTC which would distort their actual worth. A clever North Korea - estimated GDP of $40 billion, and about $4 billion each in exports and imports - could hold an incredible amount of BTC buying power. Why would any other nation want to acknowledge them? Similarly, they'd be holding onto a financial nuclear bomb if they held enough BTC. They'd be able to almost singlehandedly alter the value (in purchasing power) on a whim with a significant enough percentage.
---
Next, you focus heavily on hyperinflation, but never once seemed to mention deflation. Or the fact that under a scenario like above, hyperinflation is almost feasible as suddenly a large amount of BTC could reenter the market. Long term it would get absorbed, but short term impacts could be severe.
Fractional reserve banking - if it's merely backed in BTC then what's the point of bitcoin? It entirely defeats the system as people will be back to fiat currency.
Early adopters and clever nation states have the opportunity to totally turn the world upside down in a BTC backed future. They should have a significant percentage of all existing (as it's finite) BTC which would distort their actual worth. A clever North Korea - estimated GDP of $40 billion, and about $4 billion each in exports and imports - could hold an incredible amount of BTC buying power. Why would any other nation want to acknowledge them? Similarly, they'd be holding onto a financial nuclear bomb if they held enough BTC. They'd be able to almost singlehandedly alter the value (in purchasing power) on a whim with a significant enough percentage.
---
Next, you focus heavily on hyperinflation, but never once seemed to mention deflation. Or the fact that under a scenario like above, hyperinflation is almost feasible as suddenly a large amount of BTC could reenter the market. Long term it would get absorbed, but short term impacts could be severe.
In the long run, yes, there could be a bright future for BTC.
In the short run, there are several big challenges, liquidity being a huge one. When it comes to BTC, the activities of speculators/hoarders, and the activities of free exchange and commerce, have shown themselves to be in direct opposition so far. The "store of value" and the "medium of exchange" are not mutually exclusive, of course, but for the time being, they're functionally mutually exclusive. It's not yet clear whether BTC is a currency, a buy-and-hold investment vehicle, or some schizophrenic combination of the two. It's in the best, long-term interests of BTC to stabilize and become the latter. But BTC is going to be the former for quite awhile, precisely because it's so mysterious in the public eye, there's such information asymmetry about how it works, and because the markets for BTC-based commerce are still fairly niche.
Stabilization is going to come when more businesses start accepting BTC, and accordingly, when BTC becomes more freely convertible for goods, services, and other currencies. Until then, it'll proceed apace slowly and steadily, with the occasional burst of volatility as public interest spikes and wanes, and as speculators jump in and out.
What the currency really needs is exchange volume -- not just from trading, but from commerce.
In the short run, there are several big challenges, liquidity being a huge one. When it comes to BTC, the activities of speculators/hoarders, and the activities of free exchange and commerce, have shown themselves to be in direct opposition so far. The "store of value" and the "medium of exchange" are not mutually exclusive, of course, but for the time being, they're functionally mutually exclusive. It's not yet clear whether BTC is a currency, a buy-and-hold investment vehicle, or some schizophrenic combination of the two. It's in the best, long-term interests of BTC to stabilize and become the latter. But BTC is going to be the former for quite awhile, precisely because it's so mysterious in the public eye, there's such information asymmetry about how it works, and because the markets for BTC-based commerce are still fairly niche.
Stabilization is going to come when more businesses start accepting BTC, and accordingly, when BTC becomes more freely convertible for goods, services, and other currencies. Until then, it'll proceed apace slowly and steadily, with the occasional burst of volatility as public interest spikes and wanes, and as speculators jump in and out.
What the currency really needs is exchange volume -- not just from trading, but from commerce.
> It's not yet clear whether BTC is a currency, a buy-and-hold investment vehicle, or some schizophrenic combination of the two.
Where is gold on that spectrum? As far as I can tell, Bitcoin seems to have all the properties of gold (except that it's easier to transport.)
I'm pretty sure that gold is not considered to be a "currency" in any sense in the modern era; it's traded as a commodity, like oil. But people still can use it (or any other commodity, like oil--or, say, laundry detergent[1]) for under-the-table anonymous transactions as well.
[1] http://www.thedaily.com/page/2012/03/12/031212-news-tide-the...
Where is gold on that spectrum? As far as I can tell, Bitcoin seems to have all the properties of gold (except that it's easier to transport.)
I'm pretty sure that gold is not considered to be a "currency" in any sense in the modern era; it's traded as a commodity, like oil. But people still can use it (or any other commodity, like oil--or, say, laundry detergent[1]) for under-the-table anonymous transactions as well.
[1] http://www.thedaily.com/page/2012/03/12/031212-news-tide-the...
"Bitcoin seems to have all the properties of gold"
It's an interesting analogy, though there are a few key differences. Gold is a physical good, it has industrial uses, and it can be made into other materials and value-added goods (jewelry, etc.). There's no intrinsic value to gold (aside from the aforementioned industrial uses), other than the fact that it's rare, shiny, and resistant to tarnish.
Once the world moved away from the gold standard, gold ceased to function like a currency and started functioning almost strictly as a commodity. The distinction between the two depends on liquidity, which depends on how freely gold can be converted for goods and services in most markets (it can't).
Interestingly, most people who buy "gold" don't actually take possession of the material; they buy and sell contracts based on gold, or they buy and sell funds invested in gold-mining operations. The idea that people can just buy strips or bars of gold, and use them to transact, is theoretically true, but practically very difficult.
[On a side note: quite a few of the people buying "gold" under the auspices that it'll hold its value if/when a Great Depression, WW3, nuclear apocalypse, etc., takes place, would be in for a rude awakening if such a scenario came to pass. Most of them don't have the actual metal, and they almost certainly wouldn't be able to access it if the shit hit the fan].
It's an interesting analogy, though there are a few key differences. Gold is a physical good, it has industrial uses, and it can be made into other materials and value-added goods (jewelry, etc.). There's no intrinsic value to gold (aside from the aforementioned industrial uses), other than the fact that it's rare, shiny, and resistant to tarnish.
Once the world moved away from the gold standard, gold ceased to function like a currency and started functioning almost strictly as a commodity. The distinction between the two depends on liquidity, which depends on how freely gold can be converted for goods and services in most markets (it can't).
Interestingly, most people who buy "gold" don't actually take possession of the material; they buy and sell contracts based on gold, or they buy and sell funds invested in gold-mining operations. The idea that people can just buy strips or bars of gold, and use them to transact, is theoretically true, but practically very difficult.
[On a side note: quite a few of the people buying "gold" under the auspices that it'll hold its value if/when a Great Depression, WW3, nuclear apocalypse, etc., takes place, would be in for a rude awakening if such a scenario came to pass. Most of them don't have the actual metal, and they almost certainly wouldn't be able to access it if the shit hit the fan].
The gold analogy is apt, but I think diamonds are a more apt analogy. Diamonds capture the "value is what people are willing to pay" aspect better than gold does.
Exactly
>>someone were to yell "fire!"
Who did yell this time?
>>the more people around the world who adopt it
Who shall be those people?
Are we, by any chance, thinking that we should count the people in mining bitcoins or adopting a currency based on algorithms(let alone the talk about encryption/bits/bytes/code) which they do not have an iota of idea about?
Or are we considering that "naah, it's not for them 'non-techies' anyway!"?
Well, in that case it's actually fine if bitcoin is to be restricted to paying for goods/services that we (the 'techies') shall buy and we'll buy from us (the 'techies'). But then, this will go nowhere.
But 'they' can buy the bitcoins at those exchanges, can't they? No, they shall not buy sth fluctuating in price(paid in dollars and rupees) which shames any share price fluctuation or currency value change except Zimbabwean dollar. And certainly not sth that they do not understand and sth where they have to remember a cryptic and random long string and if they misplace it, forget it or even change it accidentally - well, they just lost all their bitcoins!
There's no support number to call to, no branch manager to go to and tell "well, I just happened to have my id/pwd forgotten".
To me it doesn't even look like a currency. It just looks like, from an average person's point of view, another merchandise(if we do not call dollar a merchandise)/online-'stuff' that people(better say enthusiasts) are buying. Like some share which are generated by running more and more computers.
Who did yell this time?
>>the more people around the world who adopt it
Who shall be those people?
Are we, by any chance, thinking that we should count the people in mining bitcoins or adopting a currency based on algorithms(let alone the talk about encryption/bits/bytes/code) which they do not have an iota of idea about?
Or are we considering that "naah, it's not for them 'non-techies' anyway!"?
Well, in that case it's actually fine if bitcoin is to be restricted to paying for goods/services that we (the 'techies') shall buy and we'll buy from us (the 'techies'). But then, this will go nowhere.
But 'they' can buy the bitcoins at those exchanges, can't they? No, they shall not buy sth fluctuating in price(paid in dollars and rupees) which shames any share price fluctuation or currency value change except Zimbabwean dollar. And certainly not sth that they do not understand and sth where they have to remember a cryptic and random long string and if they misplace it, forget it or even change it accidentally - well, they just lost all their bitcoins!
There's no support number to call to, no branch manager to go to and tell "well, I just happened to have my id/pwd forgotten".
To me it doesn't even look like a currency. It just looks like, from an average person's point of view, another merchandise(if we do not call dollar a merchandise)/online-'stuff' that people(better say enthusiasts) are buying. Like some share which are generated by running more and more computers.
Agreed. I don't trust the dollar as investment and I don't understand why people consider bitcoin something worth investing in. Sure, for trading stuff between techies it looks fair enough but it'll never reach the general public.
The whole banking system works hard to earn the customers' trust and any small mistake damages that. Bitcoin doesn't provide any assurances, support, etc...
Looks like another fad the computer industry created for its own amusement. Let's see how long it lasts. I'm sure all the revolutionaries out there fighting the man will come up with solutions for the trust issues.
The whole banking system works hard to earn the customers' trust and any small mistake damages that. Bitcoin doesn't provide any assurances, support, etc...
Looks like another fad the computer industry created for its own amusement. Let's see how long it lasts. I'm sure all the revolutionaries out there fighting the man will come up with solutions for the trust issues.
>I don't understand why people consider bitcoin something worth investing in
You don't understand the power of frictionless micropayments and monetary privacy?
You don't understand the power of frictionless micropayments and monetary privacy?
Frictionless? Isn't the very definition of how bitcoin is secure the opposite of frictionless? It derives it's value from friction.
I was referencing the fact with Bitcoin micropayments are practical because there are no transaction fees.
The main friction IMO is exchanging fiat currency for btc. It's ridiculous. Sign up for gox, send a bunch of private identifying documents (to a site that's been hacked), send a wire transfer, wait a week... craziness.
I wanted to buy $10k of btc last week @ ~$100, I didn't have any open accounts anywhere, so I used coinbase... which limited the amount I could buy. I ended up with 0.2 BTC, which didn't post in my account until late last night.
Looking at today's quotes, it probably for the best.
I wanted to buy $10k of btc last week @ ~$100, I didn't have any open accounts anywhere, so I used coinbase... which limited the amount I could buy. I ended up with 0.2 BTC, which didn't post in my account until late last night.
Looking at today's quotes, it probably for the best.
For now. Once mining becomes slow enough (and it has to slow down over time), exchanges will have to charge transaction fees to make the "proof of work" worth their while.
You don't need to use an exchange to make a payment, though.
Its actually the miners who will be getting the transaction fees once the supply of bitcoins stops growing.
Its not panic if your first.
BTC crashed primarily because the market suddenly got flooded by Bitcoinbillionaire :
http://arstechnica.com/business/2013/04/bitcoin-crashes-losi...
This bares repeating...
The value of BTC is in the nature of the transaction; not the currency itself. People have turned BTC into a commodity instead of actually bloody spending it. Their old fashioned thinking still ties it to traditional fiat like a smoker trying to give up the habit.
Look, I don't want anyone to lose their money, but people have to stop thinking of BTC as something that has value. What's valuable is the transaction itself, not the means of transaction. To put it another way, fiat currency is just colorful paper until it gets distributed to banks and into your hands.
This original transaction and all future transactions give it value; without it, the paper means nothing.
Edit: Spelling. Ironically, I wrote "bears repeating" instead "bares repeating". BTC ain't a bear market ;)
http://arstechnica.com/business/2013/04/bitcoin-crashes-losi...
This bares repeating...
The value of BTC is in the nature of the transaction; not the currency itself. People have turned BTC into a commodity instead of actually bloody spending it. Their old fashioned thinking still ties it to traditional fiat like a smoker trying to give up the habit.
Look, I don't want anyone to lose their money, but people have to stop thinking of BTC as something that has value. What's valuable is the transaction itself, not the means of transaction. To put it another way, fiat currency is just colorful paper until it gets distributed to banks and into your hands.
This original transaction and all future transactions give it value; without it, the paper means nothing.
Edit: Spelling. Ironically, I wrote "bears repeating" instead "bares repeating". BTC ain't a bear market ;)
The value of BTC is in the currency itself.
How much is a three year old's scrawled drawing with the note "I love you Grandma" worth? To most people it is worthless, but to the recipient it has worth. Its utility and use value to the recipient is not measurable. The utility and use value of any commodity is not measurable. The drawing has a use value even if no one wants to buy it - it is useful to the recipient.
Commodity values also reflect the work put into them. Let's say I assemble PCs. I buy $600 worth of parts - motherboard, disk drive etc. I spend an hour assembling the parts into a PC. I now want to sell it for more than $600 since I want to be paid for my time, maybe $50 for the hour - it is now $650 total. Each of the components of the PC I paid $600 for the parts of is more expensive because of the labor costs associated with assembling that component. So the value of a commodity is also connected to its labor costs.
Utility can not be measured as it is subjective - like the child's painting. Exchange value can be measured though. I can buy an OK pair of headphones for $20, I can buy dinner for $20 as well. So a certain pair of headphones are worth the same as 20 dollars are worth the same as a certain dinner at a certain restaurant.
We have had currency for thousands of years. Currencies have always held value due to their inherit value as a commodity, not due to being an exchange medium. Attempts have been made over the centuries to try to change this, but it has never been long lasting. The US dollar was backed by gold until 1971. Now paper currency has value due to the US government accepting it for taxes, stamps and so forth, but such things have been relatively short-lived through history so far. Paper currencies like Confederate dollars, Reichmarks in 1945 and such depend on political factors for their worth( http://www.moneymuseum.com/moneymuseum/library/texts/text.js... ) . Gold and other precious metals have retained value over thousands of years, no matter which way the political winds blew.
How much is a three year old's scrawled drawing with the note "I love you Grandma" worth? To most people it is worthless, but to the recipient it has worth. Its utility and use value to the recipient is not measurable. The utility and use value of any commodity is not measurable. The drawing has a use value even if no one wants to buy it - it is useful to the recipient.
Commodity values also reflect the work put into them. Let's say I assemble PCs. I buy $600 worth of parts - motherboard, disk drive etc. I spend an hour assembling the parts into a PC. I now want to sell it for more than $600 since I want to be paid for my time, maybe $50 for the hour - it is now $650 total. Each of the components of the PC I paid $600 for the parts of is more expensive because of the labor costs associated with assembling that component. So the value of a commodity is also connected to its labor costs.
Utility can not be measured as it is subjective - like the child's painting. Exchange value can be measured though. I can buy an OK pair of headphones for $20, I can buy dinner for $20 as well. So a certain pair of headphones are worth the same as 20 dollars are worth the same as a certain dinner at a certain restaurant.
We have had currency for thousands of years. Currencies have always held value due to their inherit value as a commodity, not due to being an exchange medium. Attempts have been made over the centuries to try to change this, but it has never been long lasting. The US dollar was backed by gold until 1971. Now paper currency has value due to the US government accepting it for taxes, stamps and so forth, but such things have been relatively short-lived through history so far. Paper currencies like Confederate dollars, Reichmarks in 1945 and such depend on political factors for their worth( http://www.moneymuseum.com/moneymuseum/library/texts/text.js... ) . Gold and other precious metals have retained value over thousands of years, no matter which way the political winds blew.
[deleted]
> BTC crashed primarily because the market suddenly got flooded by Bitcoinbillionaire
From the Ars Technica link:
> At the moment, no evidence links the currency's plunge with this random reddit charity.
I'm going with Ars on this. $12,000 to 12 people on Reddit isn't enough to bring the market tumbling down.
From the Ars Technica link:
> At the moment, no evidence links the currency's plunge with this random reddit charity.
I'm going with Ars on this. $12,000 to 12 people on Reddit isn't enough to bring the market tumbling down.
Bitcoinbillionaire supposedly had waaaay more than $12k in Bitcoins. That was just the bitcoins he gave away for nothing. He supposedly had millions worth, if he sold a large chunk of that he could easily crash the price all on his own.
You had it the first time: "bears" is correct.
Definition 3 c: http://www.merriam-webster.com/dictionary/bear
Definition 3 c: http://www.merriam-webster.com/dictionary/bear
You actually had it right the first time—"bears repeating"
Could it be that Bitcoin is presently more well-suited as a digital store of value than a digital currency? Given the difficulty of transferring fiat into digital, a way to store value in the digital world is just as needed as a transactional system. And I suspect we'll see some systems emerging in the coming months that are better suited for transactions, with immediate verification, etc. It could be that Bitcoin's long-term role in the crypto currency ecosystem is as a store of value, with transfers only occurring when someone needs to deposit money into their version of a digital checking account, or else large transactions that are not extremely time sensitive, like buying a house or car.
Who is satoshi nakamoto?
He's the Yamaga Soko of modern digital currency. Basically wrote the book on the first plausibly practical means of exchanging currency for services and the edicts of transactions.
Also, I hear he plays a mean banjo.
Also, I hear he plays a mean banjo.
Who is Tyler Durden?
Who is John Galt?
This is so absolutely untrue. Those values move rather often.
Not that I'd wish monetary loss on anyone, but if the first Bitcoin crash is any indication, these things tend to have a positive side-benefit of driving out most of the speculators flooding in after all the news reports that fuel these cycles, and the people actually interested in the currency itself stay behind, with an influx of new folk.
After all the noise dies down, new businesses and services get built backed by the wider audience, and the ecosystem develops further.
It's not yet clear if this is a crash similar to the previous one, but if it comes, I don't think much will change in terms of Bitcoin's future for the next few years.
(Posted this in the other thread just before it got ethered)
After all the noise dies down, new businesses and services get built backed by the wider audience, and the ecosystem develops further.
It's not yet clear if this is a crash similar to the previous one, but if it comes, I don't think much will change in terms of Bitcoin's future for the next few years.
(Posted this in the other thread just before it got ethered)
Anecdotally, I have been waiting for prices to fall because I was looking to actually use some btc starting a month ago, but because Im planning on using a tumbler, I was afraid of where the price might be in a week.
Sold everything I had yesterday at ~$240
https://twitter.com/nikcub/status/321751009598791682
I was buying and selling BitCoins with a very simple theory. Each time the currency would rally I would check the stories on Google News and check the graph on Google Trends[1].
Other price peaks would correspond with a peak on the trends graph[2], a new peak in new stories (with more stories in more general media publications), and more traffic to the sites that are the top results for "BitCoin" (using Compete etc.)
The peak yesterday had no new interest driving it, and no new buyers coming in. It was clear what was going to happen next.
Previous price peaks would drive new news stories which would drive the next peak. Yesterday I logged into News and Trends and found the trends level at its lowest in 30+ days and no new large items in news and sold.
[1] https://twitter.com/nikcub/status/319427166817357824
[2] https://twitter.com/nikcub/status/315680085468405760
https://twitter.com/nikcub/status/321751009598791682
I was buying and selling BitCoins with a very simple theory. Each time the currency would rally I would check the stories on Google News and check the graph on Google Trends[1].
Other price peaks would correspond with a peak on the trends graph[2], a new peak in new stories (with more stories in more general media publications), and more traffic to the sites that are the top results for "BitCoin" (using Compete etc.)
The peak yesterday had no new interest driving it, and no new buyers coming in. It was clear what was going to happen next.
Previous price peaks would drive new news stories which would drive the next peak. Yesterday I logged into News and Trends and found the trends level at its lowest in 30+ days and no new large items in news and sold.
[1] https://twitter.com/nikcub/status/319427166817357824
[2] https://twitter.com/nikcub/status/315680085468405760
..and this is probably going to look foolish when it goes to $1000 later this year. Your actions looks like someone trying to pat themselves on the back and reassure the "right decision".
I wish online P2P wagers were legal in the US :) I was watching everything during the "crash". It's already back up to 170 in a few hours. Previous crash took months to recover.
I've been around the block and the same tired and worn arguments were being used at $10 then $20 and $100.
I wish online P2P wagers were legal in the US :) I was watching everything during the "crash". It's already back up to 170 in a few hours. Previous crash took months to recover.
I've been around the block and the same tired and worn arguments were being used at $10 then $20 and $100.
> later this year
I play a much shorter game than that. If it is justified, I will likely jump back in. This isn't the first time i've bought and then sold BitCoins.
It has run out of new buyers to drive it to that level. The support from those who believe in the currency isn't worth more than $100 - much less than that.
Everybody else is an amateur investor who read about BitCoin in USA Today and believes in it for the profit potential, not as a currency. These people scurried at the slightest smell of a price shock.
I play a much shorter game than that. If it is justified, I will likely jump back in. This isn't the first time i've bought and then sold BitCoins.
It has run out of new buyers to drive it to that level. The support from those who believe in the currency isn't worth more than $100 - much less than that.
Everybody else is an amateur investor who read about BitCoin in USA Today and believes in it for the profit potential, not as a currency. These people scurried at the slightest smell of a price shock.
You sound like every person who believed in the non-bubbleness of every bubble. What justifies the price of Bitcoins? They have no real value before they're widely accepted, and that won't happen until the price is stable.
"Widely accepted" isn't a binary value. As adoption increases bitcoins gain value. That's what justifies the price.
The problem is deciding just how much adoption implies how much value.
The problem is deciding just how much adoption implies how much value.
What I find funny about most of the comments on here and everywhere else is that many of it reminds me of the investment bulletin boards and forums I've been frequenting over the years. There is always a lot of people talking the price up (since they are invested in it), and when there is a dip it is a 'buying opportunity' (so that others can buy and help the value of their holdings)
What to me the most striking is the firm belief that demand will keep on growing, just like people believed property prices will keep on going up since the population is growing and land is finite. Sure, but demand spikes can still price these things too high.
What to me the most striking is the firm belief that demand will keep on growing, just like people believed property prices will keep on going up since the population is growing and land is finite. Sure, but demand spikes can still price these things too high.
> What to me the most striking is the firm belief that demand will keep on growing, just like people believed property prices will keep on going up since the population is growing and land is finite. Sure, but demand spikes can still price these things too high.
I don't think anyone really expected it to go up in one straight line all the way to the value that it should have during mainstream usage.
I don't think anyone really expected it to go up in one straight line all the way to the value that it should have during mainstream usage.
Sure, but I don't think everyone takes into account that the price could collapse down to $20 or below and could take, say, over 5 years or more to get above $300 with a lot of volatility along the way.
There hasn't been a buying opportunity this attractive since less than 48 hours ago!
Someone supposedly sold $10+ million worth of bitcoins.
http://blockchain.info/address/1HQ3Go3ggs8pFnXuHVHRytPCq5fGG...
http://blockchain.info/address/1HQ3Go3ggs8pFnXuHVHRytPCq5fGG...
Well, transferred. Can't even say for sure if the BTC changed owners.
In case anyone else was confused like me, you click the green button in the bottom right to covert it to dollars.
That's probably a transaction resulting from MtGox's shuffling coins around.
We can laugh at Bitcoin but real guys, in real basements, are losing real fake money right now.
https://twitter.com/DavidClinchNews/status/32205973231779430...
https://twitter.com/DavidClinchNews/status/32205973231779430...
A currency set up to be deflationary and swings at 50% daily? This sounds like a great investment - I also have a slot machine I'd like to get you to invest dollars on.
Basically this is watching a whole lot of people getting into FX game without even knowing they're in the FX game or even know about FX. I wonder if senior FX sharks sniffed blood and gamed bitcoin into this. My 2c says it's gamed exactly by FX pros, that's why I'm not into it.
See also: Tulip Mania in the 17th century.
http://en.wikipedia.org/wiki/Tulip_mania
http://en.wikipedia.org/wiki/Tulip_mania
Those who read that article to the end will learn that Tulip Mania isn't much like what they think it is (summary: http://www.reddit.com/r/Economics/comments/1bm9fl/the_bitcoi... ).
That's crazy, I have my money hedged into Beanie Babies.
Something bad is happening at MtGox - they quote a price of $156 for the last trade - yet my order at $200 was not filled and is still marked as "pending".
It's just lagging horribly, as in, taking more than one hour between receiving an order and executing it: https://data.mtgox.com/api/1/generic/order/lag
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HILARIOUS.
Note: I think Bitcoin is a cool idea, and a cool implementation, but I've recently noticed it tends to create zealots who spew crazy whenever there is an article that questions its suitability for specific purposes (gold alternative, replace the US dollar, etc.)
From what I can tell, its the same type of people I used to associate with libertarian+goldbugs+ronpaul, for whom 'fiat' is the worst four-letter word in the English language.
Note: I think Bitcoin is a cool idea, and a cool implementation, but I've recently noticed it tends to create zealots who spew crazy whenever there is an article that questions its suitability for specific purposes (gold alternative, replace the US dollar, etc.)
From what I can tell, its the same type of people I used to associate with libertarian+goldbugs+ronpaul, for whom 'fiat' is the worst four-letter word in the English language.
This is amazing timing because I received a text message from my mother roughly 3 hours ago wondering if I mine bitcoin and if it is something she should look into.
If you ever wanted evidence that this was a bubble driven by speculation look no further than how closely it resembles the dotcom bubble, right up to Joe and Jane Mainstreet looking to get involved right as the whole thing crashes down.
If you ever wanted evidence that this was a bubble driven by speculation look no further than how closely it resembles the dotcom bubble, right up to Joe and Jane Mainstreet looking to get involved right as the whole thing crashes down.
Here is the thing I can't get around... If Bitcoin is open source, what's stopping someone from setting up a competing currency? Perhaps it could have the promise of a more optimal growth mechanism over time, or some other feature. Once it's in use, the value of Bitcoin drops quickly, no? And what if there are many Bitcoin-like currencies?
There are. Probably the #2 most popular coin is 'litecoin' (http://litecoin.org/). It uses scrypt instead of sha256 in order for it to be harder/more expensive to use GPU clusters and FPGA/ASIC hardware to mine them. Mining using GPU is still somewhat quicker/more efficient than CPU, but the delta is much less than exists for bitcoin.
There are other coins as well, but I'm less familiar with them.
There are other coins as well, but I'm less familiar with them.
Because a currency is basically a _convention_ within a _community_. Bitcoin has a _community_, whereas an arbitrarily cryptocurrency launched next week probably wont have, unless a lot of groundwork is done first.
Right, but it can be done so perpetual scarcity is a fallacy, no?
no - if you started your own 'bitcoin' chainblock, the existing bitcoin chainblock shouldn't (as far as i understand it) be interoperable. That is, its like printing your own currency - no one else will reckonize it, unless you somehow own vast amounts of resources, and is willing to exchange that with the new bitcoin.
It is not clear to me why Mt Gox did not suspend trading when the order lag reached 20 minutes and/or once the webpage began returning "Database error" messages.
A lot of people are commenting that this will be remembered as the day btc crashed the second time. In my opinion a more accurate characterization would be that today is the day that Mt. Gox crashed.
A lot of people are commenting that this will be remembered as the day btc crashed the second time. In my opinion a more accurate characterization would be that today is the day that Mt. Gox crashed.
When Mt. Gox was hacked, everyone assumed they were done, and folks like TradeHill were the future of BTC exchange. Mt. Gox came back, TradeHill got out (though they recently relaunched after several months), and I'm sure that led to a feeling of bulletproofness on Mt. Gox's part.
Just for reference: as of 2:26ET last trade I can get from the mtGox API was for $157.
EDIT:
2:52:00 last trade: $142
2:56:58 last trade: $135
3:10:10 last trade: $117.57
3:20:52 last trade: $106.00 (this is the lowest price I've seen)
3:42:ish trades between $125-$150
EDIT:
2:52:00 last trade: $142
2:56:58 last trade: $135
3:10:10 last trade: $117.57
3:20:52 last trade: $106.00 (this is the lowest price I've seen)
3:42:ish trades between $125-$150
Looks like paranoia is over. Spread returned to reasonable amount (1$) and price is steady going up - at the moment 190$.
Fun day for Bitcoin holders. And someone made a lot of money today.
I'm sure it's been stated already... And well, I'm no Bitcoin fanboy, but didn't the price just go back up to what it was 2 days ago? That hardly sounds like a "crash" to me.
>didn't the price just go back up to what it was 2 days ago? That hardly sounds like a "crash" to me.
Every fucking time.
Oh look, Bitcoins are worth what they were two or three days ago. "BITCOIN CRASHED!"
Jesus people, really?
Every fucking time.
Oh look, Bitcoins are worth what they were two or three days ago. "BITCOIN CRASHED!"
Jesus people, really?
I signed up for mt.gox about a week ago, at that time the verification queue was >10,000 and I'm still about 5000 now. My plan was to buy one bitcoin to gamble with; presumably that was the plan of the several thousand others in the queue as well. So, based on that, with something like 1000 new verified (hence able to easily trade) people coming into mt.gox a day, I'd expect this to go on for a while...
So if someone decides to sell 1 bitcoin at $157, immediately the lowest price falls to $157, causes panic among other bitcoin-ers and they all start selling, is that how the market works? I am not sure what is going on, I placed an order to buy at $210 but that is still pending since yesterday.
I'm afraid bitcoin will always be too volatile to be used as a currency because it's not backed by anything, and can't be inflated/deflated. The government actually serves a useful function by controlling money in circulation, even though it's not backed by gold anymore, at least it's stable (as long as inflation rates are maintained) which allows it to be used as currency. Sure everyone complains that USD is being printed, but at least that gets people spending - using the currency, instead of hoarding/saving which is what's happening with BTC. At current levels of volatility, merchants will abandon the currency.
Perhaps there's a some theoretical solution out there, whereby the inflation rate of BTC is a function of volatility ... ?
Perhaps there's a some theoretical solution out there, whereby the inflation rate of BTC is a function of volatility ... ?
This sudden drop sounds like an intentional attack on Bitcoin to lower the price. I have heard stories of hackers trying to sabotage the price of Bitcoin by forcing the price lower and then buying a whole heap of Bitcoin, sounds like one of those attacks finally worked. Looks like all of the Bitcoin publicity from the likes of Business Week and The New York Times has attracted some good old fashioned currency manipulators who want a piece of the pie.
Although there is no evidence to suggest this isn't an old fashioned bank-run, there appears to be quite a few reports of mining pools being attacked as well. Something is definitely going on here, but overall it won't stop the remarkable progress Bitcoin has made this year so far.
Although there is no evidence to suggest this isn't an old fashioned bank-run, there appears to be quite a few reports of mining pools being attacked as well. Something is definitely going on here, but overall it won't stop the remarkable progress Bitcoin has made this year so far.
At this point I'm just flagging bitcoin price updates. We don't need these here.
To be fair, this isn't just a price update. This is an event that many people have been waiting anxiously to play out - if this were just a "Bitcoin is at $250" post, fine, I agree. But this is news - the bubble may be popping and that's newsworthy.
To buy a bitcoin you need to buy it from someone?
Does that mean a miner can only 'create' a bitcoin (or partial bitcoin) when there is a transaction.
So how did it start in the beginning? Someone would have had to be able to create bitcoins.
Does that mean a miner can only 'create' a bitcoin (or partial bitcoin) when there is a transaction.
So how did it start in the beginning? Someone would have had to be able to create bitcoins.
You get new bitcoins by creating a new block in the block chain (mining). If there are no other transactions in the block that's fine.
The first block is known as the Genesis block. You might find this useful: https://en.bitcoin.it/wiki/Genesis_block
The first block is known as the Genesis block. You might find this useful: https://en.bitcoin.it/wiki/Genesis_block
This is interesting. But I think it's only test to see how they can actually crash it to zero later on.
And if we're voting here in Comments too, yes, let's have the Bitcoin submissions. Hacking a currency is interesting.
And if we're voting here in Comments too, yes, let's have the Bitcoin submissions. Hacking a currency is interesting.
A downvote? Should I have capitalized They? As in all those in power who do not want to see alternative currencies succeed and have therefore infiltrated it to see what They can do to stop it? Does that make it better? (Yes, I expect a downvote now here too. Que sera sera...)
Dance, monkey, dance!
As I've said before, daily volume is the stat to watch. There's been a huge spike in trading today: 2.3m btc on Mt Gox alone, up from 150k yesterday. If markets stay this liquid (or some multiple of their normal liquidity) it'll be a hugely positive sign. We're up to $200m+ of BTC traded on Mt Gox today, and that's a huge fraction of the total value of bitcoin (~$1b). Great sign if volume stays high from here on: the volatility should be dampened quite a bit.
http://bitcoincharts.com/markets/
http://bitcoincharts.com/markets/
I have a casual interest in economics, markets, currencies, etc, but I don't understand why DDOS attacks would cause the price to drop as opposed to just causing trade and prices to halt altogether?
Someone else mentioned panic and that I suspect is right and part of the source for bitcoin that differs from traditional exchanges is that it is a much more risky currency at this point. It is very susceptible to panics, and rightly so. I don't think anyone could seriously invest in bitcoins; it would be the dumbest thing you could do with your money. You'd be better off eating your money and get the caloric value. I'm just being honest about it; maybe it will change one day.
People buy less, so those wanting to sell have to lower their prices, which makes others panic and sell at a low price, and there you go.
The CME (and other futures exchanges) avoid "DDOS"-like situations (basically, I'm talking about hyperactive algos taking up too much bandwidth) by penalizing them monetarily when they go over a limit. The penalties are large. The same could be applied to Bitcoin exchanges and would definitely improve performance. I'm not a buyer of cryptocurrencies, but if you're discounting the concept because of these events, your not considering the system's potential to evolve beyond them.
A good chart on price-spikes:
https://twitter.com/BarbarianCap/status/322071032934584320/p...
https://twitter.com/BarbarianCap/status/322071032934584320/p...
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I know very little about BTC. I have a few grand and would like to but some at around 100.00 each in hopes of doubling and cashing out. Is there a good step by step for beginners?
I'm not worried about secrecy and track ability, more ease of use, being able to do this all from the comfort if my computer without trips to Walgreens or doing wire transfers. J have no intention of buying anything other than perhaps donations to reddit and Wordpress.
I'm not worried about secrecy and track ability, more ease of use, being able to do this all from the comfort if my computer without trips to Walgreens or doing wire transfers. J have no intention of buying anything other than perhaps donations to reddit and Wordpress.
All I can think about is this image, that my macroeconomics professor showed to me : http://goo.gl/zBkCr
If I read that chart correctly, price fluctuated from 266 to ~100 during one day?!?!?
That tells a bit about the correlation of volume and volatility.
That tells a bit about the correlation of volume and volatility.
I'm not sure what's more upsetting, the fact that so many people are careless enough to create speculative positions in such an unconventional and abstract financial product on short notice, or that despite all the media hype over Bitcoins recently and what should've been foresight that this would happen, that I didn't try to catch the wave up myself.
Can someone explain me why this could happen? Large amounts of BTCs moving at the same time? What are your theories?
> Can someone explain me why this could happen?
The market value of a speculative commodity can move for any reason at all, as its entirely a consensus among the people buying and selling as to what other people will be willing to accept for it in the future.
> Large amounts of BTCs moving at the same time
The charts from mtgox seem to show that volume picked up after the price had plateaued and maybe dropped a little bit and then volume shot up further again after it went through a trough and a lower peak and started back down again, and once it got down around 200 volume dropped briefly and then picked way up (with a lot more price volatility) again when it dropped further to below 175.
Intuitively say that the first volume pickup was largely profit taking from the plateau and maybe the slight drop, after the slight rebound and smaller peak, I suspect the longer drop was panic selling, and right now (or, given the apparent delay, an hour or so ago) the high volume, high volatility oscillation is a combination of panic selling, bargain shopping for investment, and people taking advantage of arbitrage opportunities between the low price at mtgox and higher prices on other exchanges. But that's mostly just guesswork based on the look of the price and volume graphs.
Where it goes from here...well, we'll see.
The market value of a speculative commodity can move for any reason at all, as its entirely a consensus among the people buying and selling as to what other people will be willing to accept for it in the future.
> Large amounts of BTCs moving at the same time
The charts from mtgox seem to show that volume picked up after the price had plateaued and maybe dropped a little bit and then volume shot up further again after it went through a trough and a lower peak and started back down again, and once it got down around 200 volume dropped briefly and then picked way up (with a lot more price volatility) again when it dropped further to below 175.
Intuitively say that the first volume pickup was largely profit taking from the plateau and maybe the slight drop, after the slight rebound and smaller peak, I suspect the longer drop was panic selling, and right now (or, given the apparent delay, an hour or so ago) the high volume, high volatility oscillation is a combination of panic selling, bargain shopping for investment, and people taking advantage of arbitrage opportunities between the low price at mtgox and higher prices on other exchanges. But that's mostly just guesswork based on the look of the price and volume graphs.
Where it goes from here...well, we'll see.
The simple answer is that sellers kept taking the 'ask' prices on the exchange until the only ones left were significantly lower. See this graph of current 'market depth' (existence of bids and asks):
http://bitcoincharts.com/markets/mtgoxUSD_depth.html
In a double auction market, there are bids (offers to buy) and asks (offers to sell). The 'market price' is the last price at which a bid or an ask was taken by a market buyer. Taking a bid or ask removes that bid or ask, queueing up the next in line. In an illiquid market, there aren't many bidders and/or askers, leading to price volatility. In a liquid market (such as for US Govt bonds) there are many bidders and askers, meaning the price swings are much more likely due to a significant change in information.
Hence my contention that daily volume is the most important stat to watch on the BTC market. It's a proxy for market depth, which is a precondition for liquidity and relative price stability.
In a double auction market, there are bids (offers to buy) and asks (offers to sell). The 'market price' is the last price at which a bid or an ask was taken by a market buyer. Taking a bid or ask removes that bid or ask, queueing up the next in line. In an illiquid market, there aren't many bidders and/or askers, leading to price volatility. In a liquid market (such as for US Govt bonds) there are many bidders and askers, meaning the price swings are much more likely due to a significant change in information.
Hence my contention that daily volume is the most important stat to watch on the BTC market. It's a proxy for market depth, which is a precondition for liquidity and relative price stability.
I guess most people were buying BTC because its value was rising really fast. Any price drop could cause them to lose their faith in it and want to sell them. And the drop (or at least growth end) was inevitable, because the price was rising faster than exponentially.
My theory is that it's far easier to sell bitcoins than it is to buy or mine them.
So I am wondering.
Perhaps Bitcoins volatility which seems to potentially be huge is a great win for people who study economics and bubbles?
I am aware there are several difference between a crypto currency like bitcoin and the rest of the currencies out there but for a layman like me it seems like it's a perfect tool for research?
Perhaps Bitcoins volatility which seems to potentially be huge is a great win for people who study economics and bubbles?
I am aware there are several difference between a crypto currency like bitcoin and the rest of the currencies out there but for a layman like me it seems like it's a perfect tool for research?
It's a crazy un-regulated trading market were you can get in some old fashioned market manipulation from some smart dudes and no one can do anything about it.
Personally I think Tulips were prettier, but I know most of you coders like bits.
Personally I think Tulips were prettier, but I know most of you coders like bits.
Thank you sillysaurus, I was about to go buy BTC at 270 to a local guy (I don't have any other way for buying bitcoin here). I forgot to check the price again, but I didn't forget to check HN ;)
Its going down hard now.
Well looks like it tried to come back (I saw it touch $200) but the media and twitter picked up its fall and started the panic more than ever. Right now at $140.
I don't understand how anyone would purchase Bitcoin 'to make a quick buck' when it was running at an all-time high. Good way to run up a deficit.
If it doesn't recover today I'm buying another bitcoin tomorrow!
UPD: Actually it did and now is traded >200$
UPD: Actually it did and now is traded >200$
It's now at $159. It was at $164 one minute ago, and $142 a minute before that. This volatility is making some people really really rich, I imagine.
It's also making it very dangerous to use BTC as a way to shuttle money.
It's also making it very dangerous to use BTC as a way to shuttle money.
Funny that the value it "recovered" to (~$200 from your post -- looks like its about $190 now) is the value that the original headline on this thread noted it crashing to from $266.
I predict that Bitcoin will be banned in the U.S. before it would be adopted by any countries.
Someone is making out like a bandit on this deal.
[deleted]
Surprise!
[deleted]
Called it (sort of): https://news.ycombinator.com/item?id=5522100
Actually, I have no idea whether there's any causality, and I certainly would not have predicted the effects to be felt today, as opposed to months later when a more mature margin system came into place.
Actually, I have no idea whether there's any causality, and I certainly would not have predicted the effects to be felt today, as opposed to months later when a more mature margin system came into place.
[deleted]
Two of the largest exchanges seems to be under DDOS (mtgox and bitstamp). And it wasn't 6 hours it was more like 1 hour.
Is that the likely root of that fall?
Any idea who/why someone is DDOSing them? And why they are so effective at it? Can't they just use Cloudfront which supposibly 'fixes' DDOS issues?
Any idea who/why someone is DDOSing them? And why they are so effective at it? Can't they just use Cloudfront which supposibly 'fixes' DDOS issues?
[deleted](5)
Mtgox engine has a 40 minute lag, things will eventually go back to normal.
I think the big question is whether normal is $300 or $30... or $3.
Seriously. It was at $30 a few weeks ago. It's hard to say what's normal when things are changing that quickly.
normal is when there's no lag. Now you can't trust those numbers
last post i heard said it was $90.. bitcoin fluctuates more often than most girls i know change clothes.
When real-time trading data is available from MtGox these sites show up to date charts and seem to be the most up-to-date.
http://coinlab.com http://bitcoin.clarkmoody.com/
http://coinlab.com http://bitcoin.clarkmoody.com/
Wasn't Bitcoin at $100 just a couple of days ago? I feel like I'm watching a penny stock; and, while I would have enjoyed something like a 10x stock value worth if I'd gotten in when I thought to, this variability is scary
There was a lot of BitCoin related press coverage. This is probably related.
Volatility is high which will harm the adoption of BitCoin by vendors, which will in turn drive the price down when people realize they can't do anything with their BitCoins, etc.
Volatility is high which will harm the adoption of BitCoin by vendors, which will in turn drive the price down when people realize they can't do anything with their BitCoins, etc.
Bitcoin isn't really in the adoption by vendors stage yet. Two things are happening right now that are driving the price:
1) Adoption in politically sensitive markets (drug dealers, disaporas, people in corrupt states, etc) who have no other options.
2) The slow process of the finance world understanding what Bitcoin is, and how to value it.
The first is happening because there is demand for it. The second is happening because global finance organizations seek out and exploit any and all market opportunities.
I think what we'll see in the next few years is that #1 will keep growing, and #2 will cause wild swings in bitcoin prices as we develop the technologies and scholarship necessary to truly reckon Bitcoin's value.
At that point, the markets will have a good bead on the true adoption rate and the market mechanics, which will allow them to converge on a more stable value. Only then will Bitcoin start to become a good medium for broader consumer exchange.
That said, even if it's only ever used for politically sensitive transactions, and it never takes off as a consumer payment service, it will be a very big economy.
1) Adoption in politically sensitive markets (drug dealers, disaporas, people in corrupt states, etc) who have no other options.
2) The slow process of the finance world understanding what Bitcoin is, and how to value it.
The first is happening because there is demand for it. The second is happening because global finance organizations seek out and exploit any and all market opportunities.
I think what we'll see in the next few years is that #1 will keep growing, and #2 will cause wild swings in bitcoin prices as we develop the technologies and scholarship necessary to truly reckon Bitcoin's value.
At that point, the markets will have a good bead on the true adoption rate and the market mechanics, which will allow them to converge on a more stable value. Only then will Bitcoin start to become a good medium for broader consumer exchange.
That said, even if it's only ever used for politically sensitive transactions, and it never takes off as a consumer payment service, it will be a very big economy.
Get ready for the massive pop sound...
I'm going to believe that will happen soon. However, right now, it seems to me that Bitcoin is really just going "SHIFT".
We have countries like Cyprus yanking money out of banks, so you get some people shifting their money out of country. So, what does it matter what a bitcoin costs if you are going to launder some cash out? 1:1 is a fabulous laundering rate.
Buy 200 Euro worth of Bitcoin from an account in Cyprus -> Instantly (or asap) sell for 200 Euro to an account in London. The current price doesn't matter as long as you exchange fast enough or at a profit.
We have countries like Cyprus yanking money out of banks, so you get some people shifting their money out of country. So, what does it matter what a bitcoin costs if you are going to launder some cash out? 1:1 is a fabulous laundering rate.
Buy 200 Euro worth of Bitcoin from an account in Cyprus -> Instantly (or asap) sell for 200 Euro to an account in London. The current price doesn't matter as long as you exchange fast enough or at a profit.
How is someone in Cyprus going to buy bitcoins? If the exchange is out of the country, then it doesn't help, because you already have to move the money out of the country to get it to the exchange. If the exchange is within the country, then the rate offered is likely to be far less favorable than elsewhere in the world, because demand is higher.
If the exchange allows international traders then the price will equalise with the rest of the world due to arbitrage.
Arbitrage here implies the ability to move money in or out of the country using ways other than bitcoin.
First world people give so many things for granted. =/
No it doesn't if you take your profits in bitcoin you can move them freely between exchanges to a friendly local jurisdiction.
There needs to be at least two things to exchange.
Let's assume that bitcoin is the only way to move money in or out of the country. Let's further assume that a purported arbitrage opportunity arises: The hypothetical Cypriot bitcoin exchange is selling bitcoins for 200EUR, while other exchanges are selling them for 100EUR. So you:
Buy bitcoins on other exchanges for 100EUR each. Sell those bitcoins on the Cypriot bitcoin exchange for 200EUR each. You've now doubled your money.
Except your money is now trapped in Cyprus. You can't get it out directly. The only way to get it out is to use bitcoins. Because you can't move the money directly, the only way to convert your Cypriot euros into bitcoins is to buy them on the local exchange, for 200EUR each. If you do that, then you're back where you started, minus whatever transaction fees you incurred.
For arbitrage to equalize exchange rates across exchanges, you need to be able to move both currencies involved. If you disagree, then please outline your procedure for how you'd make money in the scenario given.
Let's assume that bitcoin is the only way to move money in or out of the country. Let's further assume that a purported arbitrage opportunity arises: The hypothetical Cypriot bitcoin exchange is selling bitcoins for 200EUR, while other exchanges are selling them for 100EUR. So you:
Buy bitcoins on other exchanges for 100EUR each. Sell those bitcoins on the Cypriot bitcoin exchange for 200EUR each. You've now doubled your money.
Except your money is now trapped in Cyprus. You can't get it out directly. The only way to get it out is to use bitcoins. Because you can't move the money directly, the only way to convert your Cypriot euros into bitcoins is to buy them on the local exchange, for 200EUR each. If you do that, then you're back where you started, minus whatever transaction fees you incurred.
For arbitrage to equalize exchange rates across exchanges, you need to be able to move both currencies involved. If you disagree, then please outline your procedure for how you'd make money in the scenario given.
[deleted]
I don't think you should coalesce money laundering and bank tranfers into one concept.
Before crying wolf, understand that bitcoin exchanges are unfortunately not battle hardened internet businesses. Two of the largest exchanges MtGox and bitstamp are both under DDOS. This may be an attempt by someone to make a large buy at a cheaper price. Due to lack of trading, prices are going downward.
However, BTC China is still trading at above $275! That's the beauty of bitcoin, it isn't restricted to just one region in the world.
Yes, the exchanges need to toughen up and it's sad that someone can manipulate prices so easily but bitcoin is still very geek centric and as long as geeks understand and hold their BTCs this can't succeed. Of course, now that regular people are jumping on the bandwagon it'll be interesting to see how events unfold..
However, BTC China is still trading at above $275! That's the beauty of bitcoin, it isn't restricted to just one region in the world.
Yes, the exchanges need to toughen up and it's sad that someone can manipulate prices so easily but bitcoin is still very geek centric and as long as geeks understand and hold their BTCs this can't succeed. Of course, now that regular people are jumping on the bandwagon it'll be interesting to see how events unfold..
> However, BTC China is still trading at above $275! That's the beauty of bitcoin, it isn't restricted to just one region in the world.
Bitcoin does have alot of advantages over existing currencies it, but this isn't one of them. I can buy and sell USD/CAD/AUE/GBP in many markets around the world
Bitcoin does have alot of advantages over existing currencies it, but this isn't one of them. I can buy and sell USD/CAD/AUE/GBP in many markets around the world
Yes, but that's because those governments have allowed their currencies to be free float currencies or something like that. Buying and selling an Indian Rupee for example is quite heavily restricted. Probably to prevent instability caused from speculation.
BTC never had that from the start because it's pretty much unregulated from the get go.
BTC never had that from the start because it's pretty much unregulated from the get go.
>"However, BTC China is still trading at above $275! That's the beauty of bitcoin, it isn't restricted to just one region in the world."
This is a flaw, not a benefit. I want to know what the value of my BTC are. Not what they are here, vs China, vs Canada, vs Australia...
>"Buying and selling an Indian Rupee for example is quite heavily restricted. "
What do you mean, "quite heavily restricted"? It's far harder for me to buy BTC, especially with these ongoing issues, than it is to buy Rupees in my forex account.
This is a flaw, not a benefit. I want to know what the value of my BTC are. Not what they are here, vs China, vs Canada, vs Australia...
>"Buying and selling an Indian Rupee for example is quite heavily restricted. "
What do you mean, "quite heavily restricted"? It's far harder for me to buy BTC, especially with these ongoing issues, than it is to buy Rupees in my forex account.
The Indian rupee is not a free float currency. That means that the reserve bank of India tries to make sure it doesn't fluctuate too much in value. While India is trying to move the currency towards free float, it isn't done yet. Basically, if anyone tries to speculate large amounts in rupees, the reserve bank will try to prevent fluctuations by speculating as well, or placing some sort of controls. This happened last year when the rupee started crashing and lost about 20%.
http://en.wikipedia.org/wiki/List_of_countries_with_floating...
In that respect BTC is similar to the USD/Euro/etc.
Also, Indian citizens are pretty heavily restricted from selling large amounts of rupees for dollars, etc. You need a lot of permissions and clearances for large amounts. (>$1M equivalent, earlier the limit used to be $1000!!)
http://en.wikipedia.org/wiki/List_of_countries_with_floating...
In that respect BTC is similar to the USD/Euro/etc.
Also, Indian citizens are pretty heavily restricted from selling large amounts of rupees for dollars, etc. You need a lot of permissions and clearances for large amounts. (>$1M equivalent, earlier the limit used to be $1000!!)
Free floating has nothing to do with whether or not I can buy Rupees on the open market. If I choose to buy a ton, it could cause problems with their central bank who will have to produce supply in order to maintain the exchange peg.
My point is simply that it's pretty easy buy international currencies on the forex. IMHO easier than buying bit coins.
My point is simply that it's pretty easy buy international currencies on the forex. IMHO easier than buying bit coins.
Is it possible to buy from MtGox at $200 and sell in BTC China shortly thereafter at $275?
I know nothing about BTC.
I know nothing about BTC.
Keep in mind you're playing 'musical chairs' here. If you do this with money you need and the music stops you might possibly be in deep trouble. Only do this with money that you don't actually need, and only do it if you understand all the risks that come with playing arbitrage over exchanges with flaky connectivity. If your initial trade goes through but your offload does not you have a problem.
If you do have a verified account at both, yes, it should be fairly simple. As of now though it's unlikely that your trades will go through.
Also, the price has started falling on BTC China as well.
Also, the price has started falling on BTC China as well.
Yeah but you need to perform the sales with matching funds on both trading platforms. Selling here and transferring BTC/USD to another trading platform is not the method due to the swings and time for verification.
Yup, the arbitrage opportunities are real. Just yesterday the Canadian exchange (cavirtex) was trading $40CAD/BTC higher than MtGox (CAD); if you had an account with both, and free money to spare, you could take a handsome profit (minus fees, usually around 3% each, so 6% roundtrip)
Doesn't that cause the currency to collapse - only limited by the transaction rate? With no transaction limit you can pump for infinite BTC.
If I can do one transaction per minute for an hour at 6% return that's 10 BTC -> 370 BTC using standard compound interest formula. In 10 hours you're a quadrillionaire.
Edit: of course it's limited by the trades available ...
If I can do one transaction per minute for an hour at 6% return that's 10 BTC -> 370 BTC using standard compound interest formula. In 10 hours you're a quadrillionaire.
Edit: of course it's limited by the trades available ...
You'll run out of people willing to sell at the lower price, or buy at the higher price, eventually.
In theory, yes.
It happens even in the real world. http://en.wikipedia.org/wiki/Arbitrage
It happens even in the real world. http://en.wikipedia.org/wiki/Arbitrage
Once the transaction is processed and you have your BTC, then yes. I don't know how fast MtGox releases BTC from the wallets they control though (or similarly, how long it takes BTC China to give you access via their controlled wallets).
As others have stated due to the DDOS your trades will have low likelihood of going through (in fact some people may be doing this as we speak).
I have been following BTC China along side MtGox, and it seems that BTC China is starting to fall also. Price was ¥1700 ($274) 15 minutes ago, and now it runs at ¥1,386.00 ($223). I'm still not sure if this is due to MtGox being DDOS or people panicking and selling everything.
Other exchanges tend to tail MtGox.
> However, BTC China is still trading at above $275
Spreads for fungible commodities are generally not good. They mean that either a) somebody is getting massively screwed by paying a price that's way off the mark, or b) nobody's actually trading, which means the asset is illiquid. That is, unless there is some real reason why a BTC should be worth double in China what it is in the US.
Spreads for fungible commodities are generally not good. They mean that either a) somebody is getting massively screwed by paying a price that's way off the mark, or b) nobody's actually trading, which means the asset is illiquid. That is, unless there is some real reason why a BTC should be worth double in China what it is in the US.
Perhaps a pseudoanonymous currency's value is correlated with the oppressiveness of the local govt? I can imagine circumstances where someone might be willing to pay a premium for BTC solely based on their desire for the privacy of their transactions.
But even if they are willing to pay a premium, at a $100 spread there should be a lot of traders willing to jump into the market which would close the gap, unless they are prevented from doing so. If there are capital controls they are surely on USD not BTC, so if anything USD should be more valuable within China.
It's not just MtGox and bitstamp. Pretty much every other exchange, as well as bitcointalk.org and trackers like bitcoinity are under attack simultaneously. It's a pretty obvious attempt at manipulating the market by causing widespread panic, so that the attackers can buy in at a conveniently low price the moment the attack is halted.
A genuine crash in which everyone was trying to sell at once might look like a DDoS. How do you know this is not that? (No opinion, just curious.)
All bitcoin sites, whether they are forums or exchanges went down. It was a widespread DDOS on pretty much anything bitcoin related. For example: bitcointalk.org was also down.
I'm going to vote on the side of "people hitting bitcoin related sites to figure out why the price is dropping so fast", as opposed to an "actual" DDOS.
The result, however, amounts to the same thing.
The result, however, amounts to the same thing.
At about the same time as mtgox was slammed with a DDOS, Dwolla (which is a common intermediary to get money in and out of mtgox) was too. The timing seems highly suspicious.
just to keep the discussion going, I'm also going to vote on the side of "people hitting bitcoin related sites to bring money in and out of it", as opposed to an "actual" DDOS.
That still does not verify beyond a reasonable doubt that there was a widespread DDoS on "pretty much anything bitcoin related". Can you please explain why such attackers would bother spreading their DDoS volume across such a wide range of sites instead of focusing it on the one site that handles 80% of btc <-> usd conversions?
What exactly causes reasonable doubt here ?
If 80% of bitcoin sites unrelated to each other are down at once, there's obviously some sort of attack going on. Several unrelated sites (but sharing a common theme) don't normally go down ... unless there's an Amazon outage :P (which there wasn't..).
The question was, whether the DDOS was caused by a large volume of trades. The answer is, no, because there wasn't a larger than normal volume of trades occurring, it wasn't possible due to the lag on the exchanges.
I don't know why all those bitcoin sites were down, but the fact is that the largest bitcoin sites were all down for at least a few minutes each.
The intention though was probably to trigger a market reaction to buy in at lower prices. It appears to have worked temporarily.
If 80% of bitcoin sites unrelated to each other are down at once, there's obviously some sort of attack going on. Several unrelated sites (but sharing a common theme) don't normally go down ... unless there's an Amazon outage :P (which there wasn't..).
The question was, whether the DDOS was caused by a large volume of trades. The answer is, no, because there wasn't a larger than normal volume of trades occurring, it wasn't possible due to the lag on the exchanges.
I don't know why all those bitcoin sites were down, but the fact is that the largest bitcoin sites were all down for at least a few minutes each.
The intention though was probably to trigger a market reaction to buy in at lower prices. It appears to have worked temporarily.
There's actually a huge volume of trades during the dips, at least according to bitcoinity.
I still don't understand why they would bother spreading their attack volume across multiple sites. Hitting Mt.Gox with everything they've got offers two potential strategies:
- trigger a crash, buy low, stop the attack and watch it go back up
- trigger a price drop and profit massively from arbitrage with other exchanges still trading higher(BTC China for example)
I still don't understand why they would bother spreading their attack volume across multiple sites. Hitting Mt.Gox with everything they've got offers two potential strategies:
- trigger a crash, buy low, stop the attack and watch it go back up
- trigger a price drop and profit massively from arbitrage with other exchanges still trading higher(BTC China for example)
"If 80% of bitcoin sites unrelated to each other are down at once, there's obviously some sort of attack going on"
This doesn't follow in the event of a run.
This doesn't follow in the event of a run.
Wouldn't it make sense that everyone is logging onto those forums and comment about the price changes? I would think anything bitcoin related has a high volume today. Including HN.
How do they manage to make the DDOS only target buyers and not sellers?
Seems to me a DDOS would just make no bitcoins available for sale, but would not change the price. It doesn't matter if the price is low if they can't actually buy anything.
Seems to me a DDOS would just make no bitcoins available for sale, but would not change the price. It doesn't matter if the price is low if they can't actually buy anything.
How can you confirm this?
Agreed, it is geek centric both in terms of early adopters, people who will support this even under attacks, and people who build it: https://news.ycombinator.com/item?id=5526118
Those people who converted their USD to BTC yesterday just got screwed. If only there were a central authority to regulate bitcoins volatility. oh wait...
Not necessarily. They might have bought to hold - expecting BTC to be worth more in a year. Not caring about day-to-day fluctuations.
That will depend on fundamentals - is it being used as a trading currency or store of value currency by millions of people for a long period, or not?
That will depend on fundamentals - is it being used as a trading currency or store of value currency by millions of people for a long period, or not?
Those that cashed in, though, are in the money. Even if they bought a few days ago, they still made a 33% markup. And the real winner is the exchange, who takes a certain percentage for each transaction.
[deleted]
See, it's times like this people should remember that bitcoin is not yet a currency and is rather a toy for things like http://bitcoinpyramid.com/r/91 and http://satoshidice.com, or for speculators.
Oh weird, you accidentally left your referral ID attached to the URL for the pyramid site.
It is sorta a currency; you can buy things in selected outlets. But sure, right now the large movements of bitcoins seem to be speculators who treat it as an investment for capital appreciation rather than a currency, and that's not sustainable until it has some objective worth outside of itself.
> bitcoin is not yet a currency
Bitcoin is just as much a currency as Ithaca Hours are.
http://en.wikipedia.org/wiki/Ithaca_Hours
Bitcoin is just as much a currency as Ithaca Hours are.
http://en.wikipedia.org/wiki/Ithaca_Hours
Am I the only one who thinks of Bitcoin as purely a speculative commodity which is leveraged mostly by the fact that it is in a financial grey area?
The currency itself is very grey, yes, however the transaction network is excellent and high-quality.
It's unfortunate that the currency so loudly dominates the news surrounding it. Personally I find the technological achievement of a major, reliable, and international transaction network more impressive.
It's unfortunate that the currency so loudly dominates the news surrounding it. Personally I find the technological achievement of a major, reliable, and international transaction network more impressive.
"the transaction network is excellent and high-quality."
Really?
I thought the transaction network was already struggling with SatoshiDice and the volume of transactions it's caused? If that is the case then the network is going to have a lot of trouble coping with increased use in future.
Really?
I thought the transaction network was already struggling with SatoshiDice and the volume of transactions it's caused? If that is the case then the network is going to have a lot of trouble coping with increased use in future.
No, that's pretty much a summary of the primary criticism of bitcoin as a currency.
I think you are largely correct (and no, you are without doubt not the only person to think that ;). However I do think that to some degree the ability to buy drugs with it plays a role in its value; it is not just a financial toy.
No, that's basically what it is.
I'm interested in the price of Bitcoin, but we don't need these daily submissions.
If you're interested in following the price, I suggest these links:
- https://bitcoinity.org/markets
- http://bitcoincharts.com/charts/mtgoxUSD
- http://bitcoin.clarkmoody.com/
If you're interested in talking about the price, try #bitcoin-pricetalk on Freenode.
If you're interested in following the price, I suggest these links:
- https://bitcoinity.org/markets
- http://bitcoincharts.com/charts/mtgoxUSD
- http://bitcoin.clarkmoody.com/
If you're interested in talking about the price, try #bitcoin-pricetalk on Freenode.
I appreciate the daily submissions because I am only slightly curious about the price of bitcoin as long as it's interesting and newsworthy (i.e. rising or falling significantly). If the price of bitcoin stabilized it would cease to be newsworthy and I'm sure the daily submissions would stop. I suspect many people feel the way I do, which is why these submissions get upvoted.
I'd argue that HN has a built-in mechanism for determining what's interesting to its users. If a Bitcoin related story gets voted up to appear in the top page every day, then maybe it should be there.
This. There's been so much talk about curation/deletion of posts lately. Letting the algorithm do it's job is the only way to determine what's HN worthy in my view.
Mostly agreed.
There is value in curating HN. People come to HN because it has a reasonably high signal to noise ratio in a certain realm. Highly charged topics tend to drive upvotes, even if it's just a 'like' or a, 'yeah, that's important, I'll up-vote it'. I didn't really start visiting HN for politics or shocking stories; those tend to disproportionately draw upvotes. I'm not in favor of downmodding non-tech articles, but there's something to be said for those who do.
There are more important things in the world than Bitcoin, but I'm happy to see a bitcoin article, perhaps two, on the front page anytime something interesting is happening.
There is value in curating HN. People come to HN because it has a reasonably high signal to noise ratio in a certain realm. Highly charged topics tend to drive upvotes, even if it's just a 'like' or a, 'yeah, that's important, I'll up-vote it'. I didn't really start visiting HN for politics or shocking stories; those tend to disproportionately draw upvotes. I'm not in favor of downmodding non-tech articles, but there's something to be said for those who do.
There are more important things in the world than Bitcoin, but I'm happy to see a bitcoin article, perhaps two, on the front page anytime something interesting is happening.
What's worse, as I understand the algorithm's explanation here previously, flagging stories that are much upvoted counts against the flagger. So if the attempt to flag it off fails, those who tried will be penalized.
Disclaimer: I have no idea if that explanation is true. But if so, then you don't want to be the kid with his finger in the dike.
Disclaimer: I have no idea if that explanation is true. But if so, then you don't want to be the kid with his finger in the dike.
The difference here might be that people who own bitcoin have a financial interest in keeping interest in bitcoin up, so they form a kind of implicit voting cartel, regardless of the real interestingness of the items?
No, there aren't downvotes. If 20% of users really love something, and 80% hate it (assuming they only use flagging for spam) it will still keep making the top page.
The guidelines suggest that people flag for spam or off-topic:
> Please don't submit comments complaining that a submission is inappropriate for the site. If you think something is spam or offtopic, flag it by going to its page and clicking on the "flag" link. (Not all users will see this; there is a karma threshold.) If you flag something, please don't also comment that you did.
Some people (but not me) flag all Bitcoin articles. Other people appear to flag many of them.
Bitcoin is fascinating. Lots of the technical stuff is poorly understood. Lots of the economics stuff is poorly understood. Unfortunately most of the threads are more heat than light, so I understand why people do flag Bitcoin threads.
> Please don't submit comments complaining that a submission is inappropriate for the site. If you think something is spam or offtopic, flag it by going to its page and clicking on the "flag" link. (Not all users will see this; there is a karma threshold.) If you flag something, please don't also comment that you did.
Some people (but not me) flag all Bitcoin articles. Other people appear to flag many of them.
Bitcoin is fascinating. Lots of the technical stuff is poorly understood. Lots of the economics stuff is poorly understood. Unfortunately most of the threads are more heat than light, so I understand why people do flag Bitcoin threads.
I lost my flagging rights without further notice when I thought I was flagging well, so be careful.
That would seem to confirm what I noted adjacent: https://news.ycombinator.com/item?id=5528118
It's rumored that flagging something when the majority don't want it flagged will likely backfire.
It's rumored that flagging something when the majority don't want it flagged will likely backfire.
It's interesting that the flagging rights would be removed instead of being ignored.
I thought the flagging system used a scale of importance based on the users history. If you show good history of flagging, your action is more important. Same goes if you show poor history of flagging.
I thought the flagging system used a scale of importance based on the users history. If you show good history of flagging, your action is more important. Same goes if you show poor history of flagging.
This is HUGE news on Bitcoin - nothing like this has ever happened in it's history. Market went from $250 to $110 in 5 hours. MtGox was down for 30 minutes today. Trading lag was 600 seconds for orders placed at market prices. April 10th, 2013 may be the day that will be remember for the next 20 years as the day that Bitcoin crashed and either (A) never recovered or (B) kept progressing after an incredible Blip.
Definitely HN fodder today.
Definitely HN fodder today.
> nothing like this has ever happened in it's history
Completely false. The curve mirrors the speculative run-up from $0.50 to $30 pretty closely... the LAST time bitcoin's market scaled an order of magnitude.
It's happened before. It will happen again.
Completely false. The curve mirrors the speculative run-up from $0.50 to $30 pretty closely... the LAST time bitcoin's market scaled an order of magnitude.
It's happened before. It will happen again.
I stand corrected - this has happened once before in Bitcoin's history, so apparently there have been two times in which Bitcoin price changes have been suitable HN fodder.
Though, now, it's a $1B+ valuation and in the New York Times.
Though, now, it's a $1B+ valuation and in the New York Times.
> Definitely HN fodder today.
Maybe, but my own unscientific, vague sense is that I've been seeing multiple bitcoin related submissions to HN every day for quite some time now. At this stage all of the arguments have been hashed and rehashed (ho ho) in the comment threads to the extent that they're getting pretty repetitive and tedious (especially since so many of them are so political).
So, sure, it was marginally interesting a few days ago that bitcoin was up a significant amount so we had multiple articles about that, and then it was up the next day too so we had some articles, and then there were opinion pieces about why it was a bad idea / good idea, none of which really said anything much new, then there were columns about how it was becoming mainstream (which was obvious if you'd been following all the bitcoin startups that also get posted to HN), then today we find it's down an unusual amount. Surely you can see how this is becoming a little grating even for someone who started out with an interest in the topic.
Maybe, but my own unscientific, vague sense is that I've been seeing multiple bitcoin related submissions to HN every day for quite some time now. At this stage all of the arguments have been hashed and rehashed (ho ho) in the comment threads to the extent that they're getting pretty repetitive and tedious (especially since so many of them are so political).
So, sure, it was marginally interesting a few days ago that bitcoin was up a significant amount so we had multiple articles about that, and then it was up the next day too so we had some articles, and then there were opinion pieces about why it was a bad idea / good idea, none of which really said anything much new, then there were columns about how it was becoming mainstream (which was obvious if you'd been following all the bitcoin startups that also get posted to HN), then today we find it's down an unusual amount. Surely you can see how this is becoming a little grating even for someone who started out with an interest in the topic.
We could go back to talking about Aaron Swartz if you'd prefer.
The big crash that mathematically had to happen, happened today.
The 50% drop is larger than usual, but 30% falls have regularly been seen during the current rally, and they recovered as fast as they occurred.
Furthemore, the trade volume in Bitcoin is unexceptional.
Edit, 10:56PM CET: It went down to ~$100, and it is already back up to $180. I predict another drop in the next few hours, then a recovery around at least 200. That's the usual pattern.
Furthemore, the trade volume in Bitcoin is unexceptional.
Edit, 10:56PM CET: It went down to ~$100, and it is already back up to $180. I predict another drop in the next few hours, then a recovery around at least 200. That's the usual pattern.
Should bitcoin continue from here as topic of noteworthy discussion, I can say with absolute certainty this will not be the last time it crashes.
You must be new to bitcoin. Take a look at what the price did over the Summer of 2011.
It's hard to treat this re-pricing as a huge crash given that it was preceded by an equally unprecedented boom.
It's not surprising but everyone sensible was wondering when it would happen.
Bitcoin has been through worse than this at least twice.
Last time it crashed 50% (which I think has only happened once, in 2011) it took more than a few hours.
Which made it a lot worse.
It looked pretty much like the end of the system to a lot of people.
Whoever bought at 250 and was looking all day at the graph to see how to scalp some dough, got exactly what he deserved.
Sometimes you win, sometimes you lose.
It looked pretty much like the end of the system to a lot of people.
Whoever bought at 250 and was looking all day at the graph to see how to scalp some dough, got exactly what he deserved.
Sometimes you win, sometimes you lose.
I like this prettier and easier to read interface: http://realtimebitcoin.info/
I've been watching it drop from $200 to $157 over the last hour or so.
I've been watching it drop from $200 to $157 over the last hour or so.
What do the numbers in the background mean? I've seen everything from $0.01 to $8000+ in about 30 seconds.
EDIT: Realtime transactions? Impressive range if they are.
EDIT: Realtime transactions? Impressive range if they are.
Yeah the biggest I've seen so far was $94,000.00 It doesn't specify whether that was a sell or a buy though. Either way someone made or lost a lot of money.
Neither. That number is just a Bitcoin transaction. The value changed hands. It was probably someone sending coins to an exchange, or an exchange shuffling coins around within its internal wallet. Though I do think that site tries to filter out those network transactions.
It's both. One person sells and another buys.
How many sellers caused this? Was it a whale cashing out or multiples panic jumping the ship?
No, thanks. I prefer getting the relevant updates from HN.
Agreed. I'm going to start flagging them. Due to their volume they've become spam.
for what its worth, i lost my flagging privileges doing the same thing in the bitcoin bubble two years ago
I think part of the issue is that it's kind of a slow news period right now. There are not a whole lot of really exciting other stories hitting HN's front page so far in April.
That'd be a great opportunity to read and comment on some of the better submitted articles. Unfortunately it's been seen as an opportunity to submit many articles. Nearly 40 articles with Bitcoin in the title have been submitted in the past 24 hours.
I understand a few Bitcoin posts. But there are a lot at the moment.
I understand a few Bitcoin posts. But there are a lot at the moment.
It's interesting how quickly its fallen even since this article was posted. It looks like it's around 150 now.
..and 5 minutes later, its back up to $190 USD/BTC.
It's not a matter of being up $40 in 5 minutes. The spread is actually $40.
Edit: Erm, the above was true a while ago. More recently there were standing orders on both sides around $190, but only 20 btc of liquidity on the bid side between $190 and $150.
Edit more: Seeing this again, $44 spread from $106 to $150.
Edit: Erm, the above was true a while ago. More recently there were standing orders on both sides around $190, but only 20 btc of liquidity on the bid side between $190 and $150.
Edit more: Seeing this again, $44 spread from $106 to $150.
Probably a result of the lag of the trading engine. Neither side of the transactions have up to date information and if there is more selling than buying in such a situation then the spread will be great.
>I'm interested in the price of Bitcoin, but we don't need these daily submissions.
Bitcoin markets are having unprecedented volume and volatility. This is a relevant current event. You don't need to click the links if you don't want to.
>try #bitcoin-pricetalk on Freenode.
The discussion quality on IRC is almost as bad as it is here.
Bitcoin markets are having unprecedented volume and volatility. This is a relevant current event. You don't need to click the links if you don't want to.
>try #bitcoin-pricetalk on Freenode.
The discussion quality on IRC is almost as bad as it is here.
My reply was a lot more relevant at the time of posting and when the original title was, "Bitcoin drops from $260 to $230". :/
http://realtimebitcoin.info/ is another good one to watch
Don't worry! It won't ever fall below its intrinsic value!
Serious question: Is that really a fair criticism of BTC? Because afterall, our beloved US currency is fiat based, and often subject to whims of geopolitical games.
Actually, you can set a price floor on Bitcoin. It's the dollar value of the transaction float at The Silk Road.
USD are backed by the fact that US citizens have to pay in USD to pay their taxes. Bitcoins have no such imperative.
My Econ 101 understanding is that the value of USD is not primarily due to taxes, i.e. if the government stopped collecting taxes (or started forcing people to pay taxes in gold or Euros) the value of the dollar would not tank. Instead, we're in a Nash equilibrium where we're all accepting dollars as a means of exchange and it would be costly and have little benefit for individuals to defect. The intrinsic value of the dollar is roughly set by the value of all good and services exchanged in a given time period divided by the number of dollars in circulation.
That said, the tax part does add a bit of stability in the form of an additional friction to any hypothetical plan for everyone in the US to coordinate to start exchanging gold or Euros in lieu of dollars.
That said, the tax part does add a bit of stability in the form of an additional friction to any hypothetical plan for everyone in the US to coordinate to start exchanging gold or Euros in lieu of dollars.
You are talking about slightly different things. A lot of the reason why fiat money has value is obviously circular logic: You can use it to buy money at the store, because the store needs to pay its suppliers in the same currency, who needs to pay its employees in the same currency, who are happy (more or less) to work for the same currency because they can use it to buy the things that they need.
The vast volume of why the value is there is clearly because of such thinking, so you are right.
But the parent post is also right, because circular logic tends to be awfully inadequate at explaining things. This is where taxation comes in, because it serves as the "induction base case", so to speak. Taxation is what sets the wheel in motion initially; the additional momentum then builds gradually, but the continued existence of the base case is what gives it stability.
Take taxation away, and the wheel will still continue because loan repayment acts as a "secondary base case". But once that secondary base case disappears as well, it is just a matter of time until collapse - kind of like the cartoon characters that keep running over the edge of the cliff, until they look down and notice gravity.
So if you want to understand why money has value in the first place, the parent comment gives the better answer. But that doesn't mean your reply is wrong, either.
The vast volume of why the value is there is clearly because of such thinking, so you are right.
But the parent post is also right, because circular logic tends to be awfully inadequate at explaining things. This is where taxation comes in, because it serves as the "induction base case", so to speak. Taxation is what sets the wheel in motion initially; the additional momentum then builds gradually, but the continued existence of the base case is what gives it stability.
Take taxation away, and the wheel will still continue because loan repayment acts as a "secondary base case". But once that secondary base case disappears as well, it is just a matter of time until collapse - kind of like the cartoon characters that keep running over the edge of the cliff, until they look down and notice gravity.
So if you want to understand why money has value in the first place, the parent comment gives the better answer. But that doesn't mean your reply is wrong, either.
OK, I kind of agree. I think "circular logic" is a very bad term here, because it suggests a mistake in logical reasoning, when in fact you just mean that the Nash equilibrium is only meta stable. Similarly, "induction base case" is bad because it again suggests reasoning, but I think here you recognize that and put it in quotes to show that it's just an analogy (and a neat one at that).
But I disagree that you need taxation as a bootstrap to get you to the equilibrium. Indeed, in the actual history of the US it was the backing by gold that established the dollar; initial taxation was minimal. Now that backing has been removed, and the dollar still functions. Then, I infer, you would argue that taxation has replaced gold-backing as the stabilizer.
Your penultimate paragraph is an interesting suggestion, but I'm not convinced. Could you point me toward some place where it was fleshed out? I can easily imagine a world where people keep writing new contracts denominated in dollars, whose street value is set by the process that I described. Where is the motivation for people to defect? One answer is that a new currency (like Bitcoin) comes along that has special properties that make it useful enough for people to absorb transaction costs and to start exchanging alongside the original fiat currency. Then things could unravel. And indeed, taxation could suppress this by providing additional friction like I mentioned in my original comment. But in the absence of such a new currency I don't expect the dollar to spontaneously start to unravel on its own simply because there are no taxes. People would continue to need a medium of exchange and the dollar is very good.
But I disagree that you need taxation as a bootstrap to get you to the equilibrium. Indeed, in the actual history of the US it was the backing by gold that established the dollar; initial taxation was minimal. Now that backing has been removed, and the dollar still functions. Then, I infer, you would argue that taxation has replaced gold-backing as the stabilizer.
Your penultimate paragraph is an interesting suggestion, but I'm not convinced. Could you point me toward some place where it was fleshed out? I can easily imagine a world where people keep writing new contracts denominated in dollars, whose street value is set by the process that I described. Where is the motivation for people to defect? One answer is that a new currency (like Bitcoin) comes along that has special properties that make it useful enough for people to absorb transaction costs and to start exchanging alongside the original fiat currency. Then things could unravel. And indeed, taxation could suppress this by providing additional friction like I mentioned in my original comment. But in the absence of such a new currency I don't expect the dollar to spontaneously start to unravel on its own simply because there are no taxes. People would continue to need a medium of exchange and the dollar is very good.
"My Econ 101 understanding"
Go just a bit past Econ 101, and you'll discover that economists do not universally agree on these things. That being said, here is one popular view:
https://en.wikipedia.org/wiki/Modern_monetary_theory
From wiki:
"[Knapp] argued the state could create pure paper money and make it exchangeable by recognising it as legal tender, with the criterion for the money of a state being "that which is accepted at the public pay offices"."
Or in other words, taxes, torts, and other laws give money its value.
Go just a bit past Econ 101, and you'll discover that economists do not universally agree on these things. That being said, here is one popular view:
https://en.wikipedia.org/wiki/Modern_monetary_theory
From wiki:
"[Knapp] argued the state could create pure paper money and make it exchangeable by recognising it as legal tender, with the criterion for the money of a state being "that which is accepted at the public pay offices"."
Or in other words, taxes, torts, and other laws give money its value.
> Or in other words, taxes, torts, and other laws give money its value.
i think legitimacy is more correct than value - value is a result of what people demand in exchange for their goods/services. Legitimacy is the trust that people have on the currency (ie, the trust that others woudl also accept the currency).
i think legitimacy is more correct than value - value is a result of what people demand in exchange for their goods/services. Legitimacy is the trust that people have on the currency (ie, the trust that others woudl also accept the currency).
correct in a sense- the US dollar is backed by the full faith and credit of the US Government, nothing more. Would I still have that faith in the US $ if the government did not collect taxes / did not seem like a stable entity? Probably not, but your point is still valid
Um, no. The US dollar is backed by US law guaranteeing that it must be accepted as payment for all debts and by US law requiring taxes to be paid in USD. All of which, as the parent post points out, is dwarfed by the backing provided by all the merchants, banks, and consumers in the world who are using USD today. The corner grocery store in Pottsville, PA backs the USD by accepting it as payment for frozen pizza and toothpaste. The drug dealer in Venezuela backs the USD by accepting payment in $100 USD bills. These are the most important backing for the USD (the "Nash equilibrium" that the parent post mentioned.
And that kind of backing is what the community is TRYING to build for BTC.
And that kind of backing is what the community is TRYING to build for BTC.
> The US dollar is backed by US law guaranteeing that it must be accepted as payment for all debts
I believe this doesn't stop people from creating special obligations through contracts that are denominated in other currencies. It more means that if I run over your mailbox and a judge orders me to compensate you, I can use dollars.
I believe this doesn't stop people from creating special obligations through contracts that are denominated in other currencies. It more means that if I run over your mailbox and a judge orders me to compensate you, I can use dollars.
Precisely. It means that if you sue me for ANY reason (including failure to live up to my end of a contract) the state will allow me to pay in dollars.
Ahh, this is a good point. Thanks.
> The US dollar is backed by US law guaranteeing that it must be accepted as payment for all debts
If you're referring to the 'legal tender for all debts public and private' clause on the notes themselves, that means that it can be used for such purposes, not that it must be accepted. If we agree that I'll do your deck and you'll give me your car, you can't just say 'I want to keep my car, here's some cash instead'.
If you're referring to the 'legal tender for all debts public and private' clause on the notes themselves, that means that it can be used for such purposes, not that it must be accepted. If we agree that I'll do your deck and you'll give me your car, you can't just say 'I want to keep my car, here's some cash instead'.
> it can be used for such purposes, not that it must be accepted
Before the contract is agreed to, the parties can make any arrangement they want, including agreeing to pay in bitcoins. But if one party fails to deliver and they wind up in court, then the court (as kragen pointed out) will almost never require them to deliver the item, the court will instead require that the victim be compensated and will allow dollars to be used to compensate them.
Now, if bitcoins were worth $250 each at the time the deck got painted and are only worth $160 each by the time the court case completes, there is a fairly good chance that the court will demand the $250 price be used to determine what the compensation should be.
Before the contract is agreed to, the parties can make any arrangement they want, including agreeing to pay in bitcoins. But if one party fails to deliver and they wind up in court, then the court (as kragen pointed out) will almost never require them to deliver the item, the court will instead require that the victim be compensated and will allow dollars to be used to compensate them.
Now, if bitcoins were worth $250 each at the time the deck got painted and are only worth $160 each by the time the court case completes, there is a fairly good chance that the court will demand the $250 price be used to determine what the compensation should be.
Generally speaking, if I say that and you take me to court to get my car, the court will award you damages, which I can pay with some cash. The alternative, where the court orders me to give you my car, is called "specific performance" and is very rare.
> the US dollar is backed by the full faith and credit of the US Government
Huh? What does this mean? This phrase can be applied to government bond ("The US gov't promises to pay you back") or to FDIC insurance ("The US gov't promises to refund your money if your bank closes"). But it doesn't have any meaning for dollars, unless it were to mean that the gov't would exchange it for gold, which of course is false.
Huh? What does this mean? This phrase can be applied to government bond ("The US gov't promises to pay you back") or to FDIC insurance ("The US gov't promises to refund your money if your bank closes"). But it doesn't have any meaning for dollars, unless it were to mean that the gov't would exchange it for gold, which of course is false.
Not true. The fact that you're somewhat informed on these matters is working against you here.
If the US Gov't stopped collecting taxes -- or had some other substantial liquidity crisis -- the very real issue is debt service. Since the USD is the global reserve currency, we are in the rather unique situation of having our debt denominated in our own currency under control of our own central bank. This is where the "full faith and credit" of the USA enters the discussion of our currency. If we had issues servicing our public debt, the government has the option of devaluing our currency. In other words, inflating away our debt. In such a scenario, the value of USD plunges against foreign currencies, and there would be a massive effort by everybody with substantial USD holdings to sell.
This, among other reasons, is why Keynes envisioned a super-national reserve currency traded among central banks. If the US public debt was denominated in Bancor, the option of inflating it away wouldn't exist.
If the US Gov't stopped collecting taxes -- or had some other substantial liquidity crisis -- the very real issue is debt service. Since the USD is the global reserve currency, we are in the rather unique situation of having our debt denominated in our own currency under control of our own central bank. This is where the "full faith and credit" of the USA enters the discussion of our currency. If we had issues servicing our public debt, the government has the option of devaluing our currency. In other words, inflating away our debt. In such a scenario, the value of USD plunges against foreign currencies, and there would be a massive effort by everybody with substantial USD holdings to sell.
This, among other reasons, is why Keynes envisioned a super-national reserve currency traded among central banks. If the US public debt was denominated in Bancor, the option of inflating it away wouldn't exist.
First, I think the interesting question is just about fiat currencies, not the US in particular. The global reserve currency aspect is a secondary effect. Let's concentrate on a generic fiat currency issued by a government.
So you're saying that "full faith and credit" just means "The gov't promises not to crazily inflate the money by printing lots of it". Fine. (That doesn't explain what process determines the street value, it just acknowledges that the government can destroy it.)
I don't really see how the rest of what you are talking about applies to my comment. Are you claiming that fiat currencies are impossible in countries without debt?
So you're saying that "full faith and credit" just means "The gov't promises not to crazily inflate the money by printing lots of it". Fine. (That doesn't explain what process determines the street value, it just acknowledges that the government can destroy it.)
I don't really see how the rest of what you are talking about applies to my comment. Are you claiming that fiat currencies are impossible in countries without debt?
No, you don't have to have debt to have good credit.
It sounds like you are suggesting that fiat currency functions like debt, but I've never understood this claim.
That situation is not rather unique at all. Most developed nations issue debt in a currency controlled by their central bank, with the notable exception of the Eurozone.
Your point is a little misleading I think. How big is the list of "most developed nations" after you remove the US and Euro Zone from the list?
Yes, every country CAN issue national debt. But issuing sovereign debt is more common largely because investors prefer it.
Either way, I didn't mean to sound misleading by calling it "rather unique." Thanks for helping me clarify.
Yes, every country CAN issue national debt. But issuing sovereign debt is more common largely because investors prefer it.
Either way, I didn't mean to sound misleading by calling it "rather unique." Thanks for helping me clarify.
"it doesn't have any meaning for dollars, unless it were to mean that the gov't would exchange it for gold, which of course is false."
It means, "The government will accept it for tax payment," and for the payment of various other debts and fees.
It means, "The government will accept it for tax payment," and for the payment of various other debts and fees.
it means it is not backed by a hard asset or a promise - the dollar is not redeemable for anything.
As a game theorist, I got happy when you used Nash equilibrium in your explanation.
bullets.
US currency isn't backed by gold- it is in a sense backed by the US government. BTC is wholly unbacked.
US currency is backed by the land the US is built on and the means to defend that land, as well as the ability of US citizens to expend their time in a productive way.
And to some extent it is currently based on the ability of the United States to protect its interests overseas, the trading of oil in the US dollar and significant trade partners accepting the US dollar as a means of exchange for goods shipped to the US.
And that works as long as significant portion of the world continues to believe in all of the above, if that should ever stop I hope I won't be there to watch the carnage. That's the kind of 'interesting times' that one would hope to avoid.
And to some extent it is currently based on the ability of the United States to protect its interests overseas, the trading of oil in the US dollar and significant trade partners accepting the US dollar as a means of exchange for goods shipped to the US.
And that works as long as significant portion of the world continues to believe in all of the above, if that should ever stop I hope I won't be there to watch the carnage. That's the kind of 'interesting times' that one would hope to avoid.
I'd like to point out that this is the same for just about every country.
Not really. The USD benefits greatly from being the global reserve currency.
Yes. THis is true because the Fed reserve can print more USD, and an overseas oil vendor would actually sell the goods in exchange for the said USD. However, you noticed that the Fed reserve hasn't actually produced any actual value/productivity - they merely printed some pieces of paper.
There for, the US gov't (or more correctly, the Fed reserve) can print their way out of debt that they owe to third parties, until those third parties all wise up. But then you got 11 air craft carriers paroling the world, untold number of submarines and missiles, massive air force etc, and if the US gets a whiff that you are no longer denominating your goods (e.g., oil) in USD, you might find yourself being called the axis of evil.
There for, the US gov't (or more correctly, the Fed reserve) can print their way out of debt that they owe to third parties, until those third parties all wise up. But then you got 11 air craft carriers paroling the world, untold number of submarines and missiles, massive air force etc, and if the US gets a whiff that you are no longer denominating your goods (e.g., oil) in USD, you might find yourself being called the axis of evil.
when Europe falls things will change eventually.
Bitcoin is backed by a faith in the algorithms that enable Bitcoin.
The same geopolitical games also back the US currency. So it is no longer gold back but ICBM backed.
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So, what do you think the intrinsic or non-monetary price of gold is?
Gold is useful stuff in all sorts of electronic applications... I'd say at least 4x that of Bismuth or around $50/pound.
So, about 0.2% of its actual value.
That's ridiculous. Gold is far more valuable as a mammalian decoration than as a conductor.
Gold is a very significant part of electronics manufacturing, especially high end/high rel work. A couple of examples are plating on connectors and switch contacts (corrosion resistance) and ENIG PCB finishes, but there's a lot more where those came from.
So while you may feel its value is higher as jewelry etc., its utility is still quite high in electronics.
So while you may feel its value is higher as jewelry etc., its utility is still quite high in electronics.
Part of me is pulling for Bitcoin, but dang was that funny.
In some ways the price is tied to the cost of electricity needed to mine a coin. Granted, the mining "price" is usually about two weeks behind the actual price, and the electricity required is variable based on the current sum of computational power being used by all the miners, so there's certainly some disconnect.
So if I shock a turd with a thousand dollars worth of electricity from my electric utility company, can I sell it for $1,000? Or add some non-intrinsic worth by calling it "art" and sell it for $2,000? Actually, make those figures $1,010 and $2,010 -- my turds also have intrinsic value.
no, because throwing electrons at turds doesn't generate currency. in contrast, throwing electrons at a chip does generate bitcoins. that's the relationship being alluded to: there's the possibility of arbitrage between electricity (compute cycles) and currency.
You explained exactly what the intrinsic value of the currency is: the usefulness of the currency itself. BTCs have value over turds for use as a currency for many obvious reasons. The amount of electricity it takes to create that currency can perhaps be seen as a price floor, which is perhaps corollary to the intrinsic value, but is not the intrinsic value itself.
So if something improbable or drastic happened tomorrow that made the currency not useful (e.g. governments outlawing it, a bug in the code) then the price would fall well below what it costs in electricity to mine it and the currency would become mostly defunct, i.e. it's intrinsic value plummeted because it's usefulness did.
tl;dr the intrinsic value is the usefulness of the currency not how many electrons you pump into it (though there is likely some corollary between them)
So if something improbable or drastic happened tomorrow that made the currency not useful (e.g. governments outlawing it, a bug in the code) then the price would fall well below what it costs in electricity to mine it and the currency would become mostly defunct, i.e. it's intrinsic value plummeted because it's usefulness did.
tl;dr the intrinsic value is the usefulness of the currency not how many electrons you pump into it (though there is likely some corollary between them)
> The amount of electricity it takes to create that currency can perhaps be seen as a price floor, which is perhaps corollary to the intrinsic value, but is not the intrinsic value itself.
Cost of production should be a price ceiling, not floor: if I can make it for $X, why would I buy it for $Y >> $X?
Edited: To hopefully head off further misunderstandings, by "should" here I mean "it makes the most sense to expect" - not any ethical imperative - and I'm speaking in broad terms, in the long run.
Cost of production should be a price ceiling, not floor: if I can make it for $X, why would I buy it for $Y >> $X?
Edited: To hopefully head off further misunderstandings, by "should" here I mean "it makes the most sense to expect" - not any ethical imperative - and I'm speaking in broad terms, in the long run.
There's also the cost of setting it all up, the time in learning the tech involved or hiring those who do. If it cost you $X to produce, why would you sell it to me for less than $X? You'd be losing money on the production side.
The lower bound ought to be at least the cost to the miner that produced the new bitcoin (when they try and sell it or use it in the market).
The upper bound is essentially nonexistent. If I have $3000 to invest in bitcoin, what is the possibility of me getting a decent return on $3000 worth of mining hardware? Vs (based on the recent explosive growth) spend $3000 on BTC directly at $200 a piece and you have 15BTC. If it continues to generally rise in value against the dollar a portion of that can be turned back into USD later and spent on a more worthwhile rig, or just used in the BTC economy itself (to the extent that it exists).
The lower bound ought to be at least the cost to the miner that produced the new bitcoin (when they try and sell it or use it in the market).
The upper bound is essentially nonexistent. If I have $3000 to invest in bitcoin, what is the possibility of me getting a decent return on $3000 worth of mining hardware? Vs (based on the recent explosive growth) spend $3000 on BTC directly at $200 a piece and you have 15BTC. If it continues to generally rise in value against the dollar a portion of that can be turned back into USD later and spent on a more worthwhile rig, or just used in the BTC economy itself (to the extent that it exists).
> If it cost you $X to produce, why would you sell it to me for less than $X? You'd be losing money on the production side.
"Cost of production", in an economic sense, includes opportunity cost - that is, the amount of money I could be making if I did something else with the time instead, which can be more or less taken to mean a reasonable accounting "profit".
Edit: Also, I may sell it to you at a loss because I can't do anything better with it, if the price fell since I produced it.
> The lower bound ought to be at least the cost to the miner that produced the new bitcoin (when they try and sell it or use it in the market).
Yes, if the price of bitcoins falls below the cost of producing them, more won't be produced, but that won't actually prevent the price from falling further.
"Cost of production", in an economic sense, includes opportunity cost - that is, the amount of money I could be making if I did something else with the time instead, which can be more or less taken to mean a reasonable accounting "profit".
Edit: Also, I may sell it to you at a loss because I can't do anything better with it, if the price fell since I produced it.
> The lower bound ought to be at least the cost to the miner that produced the new bitcoin (when they try and sell it or use it in the market).
Yes, if the price of bitcoins falls below the cost of producing them, more won't be produced, but that won't actually prevent the price from falling further.
We may have misunderstood each other. I didn't mean to say that there was a strict lower bound on the price of bitcoins. It absolutely could zero out in a worst case scenario (for some people at least). I suppose what I was intending to refer to was a (somewhat) healthy bitcoin economy. Inefficient miners will be driven out of the market as the cost to participate exceeds their returns.
There isn't any ought to be for the lower bound. (In a successful bitcoin world) There is eventually going to be a clear relationship between the cost of mining and the reward available, but if some miner switches to mining his own variety of digital money, we don't suddenly owe him something for the effort.
If we end up with a very competitive market for using cryptography to clear digital transactions, miners might well face a situation where it is barely worth it to burn electricity.
If we end up with a very competitive market for using cryptography to clear digital transactions, miners might well face a situation where it is barely worth it to burn electricity.
I meant to say that was the per miner cost. A more efficient miner would see a lower production cost for their bitcoins. They'd then be able to either take advantage of their position (sell with a significant margin) or drive the other miners out of business (sell at a small margin that puts bitcoins at an uncompetitively low value). In either case they'd be able to expand their mining operation (or accounting operation once mining itself has low returns) to improve their odds and yield.
Because not everyone is able to hit the same Cost of Production, or wants to put down the upfront investment in equipment, or has the technical know how, etc. If the cost of production was the price ceiling why would anyone start producing? They'd just break even at best.
Besides people buy things for $Y >> $X everyday simply for convenience. You could go buy ingredients and make a sandwich for $X dollars, but instead you go to the food truck and buy one for $Y dollars because it's convenient. It's not like food truck guy is selling his product at cost.
Besides people buy things for $Y >> $X everyday simply for convenience. You could go buy ingredients and make a sandwich for $X dollars, but instead you go to the food truck and buy one for $Y dollars because it's convenient. It's not like food truck guy is selling his product at cost.
You read me as being more precise than I'd meant it. But it's basic economics that competition drives the cost down toward the cost of production (including labor cost and opportunity cost), and there's nothing in bitcoins that's preventing people from competing.
And regardless, there's absolutely no conceptual reason cost of production would represent any kind of floor.
And regardless, there's absolutely no conceptual reason cost of production would represent any kind of floor.
>And regardless, there's absolutely no conceptual reason cost of production would represent any kind of floor.
Well no sane/rational entity would want to sell for less than cost of production because that would entail a loss (let's keep this simple and say there aren't any ulterior reasons one would receive gains/benefits from selling at below cost).
Since competition drives the price towards the cost of production it's reasonable to consider it or a price just above it as the floor.
Edit: I guess I should state, I'm not trying to say there is a 'hard' floor in which the price can't possibly drop below. I'm more saying it's a relative benchmark for where the lowest price would tend to settle given a healthy bitcoin market/environment.
Well no sane/rational entity would want to sell for less than cost of production because that would entail a loss (let's keep this simple and say there aren't any ulterior reasons one would receive gains/benefits from selling at below cost).
Since competition drives the price towards the cost of production it's reasonable to consider it or a price just above it as the floor.
Edit: I guess I should state, I'm not trying to say there is a 'hard' floor in which the price can't possibly drop below. I'm more saying it's a relative benchmark for where the lowest price would tend to settle given a healthy bitcoin market/environment.
A rational entity would absolutely sell at a loss. They would not acquire with the goal of selling at a loss, but once they already have the thing what they paid to get it is a sunk cost, which a sane or rational agent ignores in making future decisions.
If bitcoins were overproduced, say during a bubble, they could well remain low long-term - there is no particular pressure driving them up.
If bitcoins were overproduced, say during a bubble, they could well remain low long-term - there is no particular pressure driving them up.
>If bitcoins were overproduced, say during a bubble, they could well remain low long-term - there is no particular pressure driving them up.
Well if the cost to produce them was higher than the price, people would simply stop mining. Perhaps my understanding of bitcoins isn't correct, but I thought that if there were no miners then transactions would stop being processed and the currency would basically stop working and die.
I know right now bitcoins are still being created/produced by miners, but at some point in the future that will stop happening and miners will be compensated through transaction fees as a percentage of each transaction. At that point if price of bitcoins falls below the cost to mine we likely will see people stop mining and transactions ceasing until the price rises enough for it to be worthwhile.
Of course bitcoin is a bit special in that there are a lot of fans of it that will likely be completely willing to accept a loss to keep the currency going. As we all know humans don't act as perfect economic-minded rationalists. But I still think the cost of production is a good bottom metric to keep an eye on. If the price falls below that we will know that the currency is in rather dire straits and being artificially propped up by those with an interest in keeping it going.
Well if the cost to produce them was higher than the price, people would simply stop mining. Perhaps my understanding of bitcoins isn't correct, but I thought that if there were no miners then transactions would stop being processed and the currency would basically stop working and die.
I know right now bitcoins are still being created/produced by miners, but at some point in the future that will stop happening and miners will be compensated through transaction fees as a percentage of each transaction. At that point if price of bitcoins falls below the cost to mine we likely will see people stop mining and transactions ceasing until the price rises enough for it to be worthwhile.
Of course bitcoin is a bit special in that there are a lot of fans of it that will likely be completely willing to accept a loss to keep the currency going. As we all know humans don't act as perfect economic-minded rationalists. But I still think the cost of production is a good bottom metric to keep an eye on. If the price falls below that we will know that the currency is in rather dire straits and being artificially propped up by those with an interest in keeping it going.
If you do this let me know. I want to buy tickets.
It's the other way around. The cost of electricity needed to mine a coin will tend towards the price that coin can be sold for. If the bitcoin price drops significantly, then the least efficient miners will become unprofitable and drop out, and the difficulty will reduce.
The value of gold, and bitcoins is that their scarcity and inflation serve as an accurate proxy for the real economy of goods and services.
neither gold nor bitcoins are inflationary. In fact, both are deflationary.
What is it's intrinsic value? Nothing?
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I just thought about something I'd never thought before:
Could it be said that bitcoins _do_ have an intrinsic value equal to the marginal amount of electricity and equipment needed to produce one?
Could it be said that bitcoins _do_ have an intrinsic value equal to the marginal amount of electricity and equipment needed to produce one?
> Could it be said that bitcoins _do_ have an intrinsic value equal to the marginal amount of electricity and equipment needed to produce one?
No, that's an intrinsic cost. It would only be an intrinsic value if that electricity and equipment could inherently be extracted back from the bitcoin. The intrinsic value of gold comes from what you can use gold for other than a medium of exchange. Bitcoin has neither the intrinsic value of commodity currencies nor the sovereign backing of fiat currencies.
No, that's an intrinsic cost. It would only be an intrinsic value if that electricity and equipment could inherently be extracted back from the bitcoin. The intrinsic value of gold comes from what you can use gold for other than a medium of exchange. Bitcoin has neither the intrinsic value of commodity currencies nor the sovereign backing of fiat currencies.
That isn't an intrinsic value. Waste heat does not have an intrinsic value equivalent to the cost of producing it- it is waste heat.
Intrinsic value is derived from what you can do with something, not what you did to get it.
Intrinsic value is derived from what you can do with something, not what you did to get it.
The intrinsic value is the bitcoin protocol which provides a framework where transactions become effectively irreversible in about an hour, you don't have to go through a middle-man to pay someone, and it provides anonymity if you need it.
Not sure you can consider that an intrinsic value. I could be wrong, but my understanding of intrinsic value is essentially that it is the value of an item when the market value is zero. The bitcoin protocol does you no good if the market value of a bitcoin is zero.
You do present an interesting conundrum though.
You do present an interesting conundrum though.
> my understanding of intrinsic value is essentially that it is the value of an item when the market value is zero
That seems like a fairly artificial mental exercise. Why would market value be zero if intrinsic value is greater than zero? I suppose the only situations would be if a good has a unique property that can provide utility to you but no one else, like a food that for some reason only provides nutrients for you, or any good in a truly post-scarcity society or region, or if the market is extremely uninformed or irrational.
I think the real problem is with the metaphysical implications inherent in the word "intrinsic." You can always go "one level higher" and say that the value at the previous level was not intrinsic or "as intrinsic." Does an apple have intrinsic value if there are no humans alive anymore, and if not, is the value really "intrinsic" in the apple?
As far as I can tell, the specific term used in finance is based on predictions of the future value that can be derived from the good, regardless of its current market price. Of course, I would suspect that most market participants already make predictions about the future and that those predictions affect the price they are willing to buy or sell a good at. Granted, some people will be able to predict the future more accurately than other people, but does that mean we can only tell what the intrinsic value of something was in hindsight?
That seems like a fairly artificial mental exercise. Why would market value be zero if intrinsic value is greater than zero? I suppose the only situations would be if a good has a unique property that can provide utility to you but no one else, like a food that for some reason only provides nutrients for you, or any good in a truly post-scarcity society or region, or if the market is extremely uninformed or irrational.
I think the real problem is with the metaphysical implications inherent in the word "intrinsic." You can always go "one level higher" and say that the value at the previous level was not intrinsic or "as intrinsic." Does an apple have intrinsic value if there are no humans alive anymore, and if not, is the value really "intrinsic" in the apple?
As far as I can tell, the specific term used in finance is based on predictions of the future value that can be derived from the good, regardless of its current market price. Of course, I would suspect that most market participants already make predictions about the future and that those predictions affect the price they are willing to buy or sell a good at. Granted, some people will be able to predict the future more accurately than other people, but does that mean we can only tell what the intrinsic value of something was in hindsight?
I think the real problem is with the metaphysical implications inherent in the word "intrinsic."
There it is, folks. We aren't talking about a simple concept, we are talking about the metaphysical and the deeper implications of words. What is a "word", anyway? Let's take a moment to consider.
There it is, folks. We aren't talking about a simple concept, we are talking about the metaphysical and the deeper implications of words. What is a "word", anyway? Let's take a moment to consider.
No, let's not at all consider the meaning of words, because the meaning of words is of no importance in a discussion.
You've really got in in for me, don't you. You're like half the comments in this comment block.
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> Intrinsic value is derived from what you can do with something
So then, the market price of any good is its intrinsic value? Under this definition, if I can sell a bitcoin for x USD, then its intrinsic value is x USD.
So then, the market price of any good is its intrinsic value? Under this definition, if I can sell a bitcoin for x USD, then its intrinsic value is x USD.
The ability to sell an item for x USD is not one of the "things" you can do with it that contribute to intrinsic value. Let's put it a different way; if the market value for a bitcoin was $0, what could you do with it? Compare that to an apple. If the market value for an apple was $0, you could eat it. Thus (unless someone has a clever use for bitcoins outside of currency) an apple has greater intrinsic value than a bitcoin.
I'd say that's use-value. Intrinsic implies it's not relative to each person, which clearly isn't true in that case (e.g., I could be allergic to apples, then the value would be nil to me).
...which illustrates the inherent absurdity of the word "intrinsic." If allergies make some quality extrinsic, then doesn't the very existence of humans also make all qualities extrinsic? If humans are extinct, the apple can't even be eaten by any humans, so it must have no intrinsic value.
Fine, not water. Apples. Are you allergic to water?
What if I'm not thirsty? What if I have plenty of water already? What if I'm trying to commit suicide by not drinking water?
That's a new definition of "intrinsic," not the one I was responding to.
Intrinsic value and market price are slightly different. I imagine the difference brings us back to the fact that bitcoin is unbacked by any government. There is a worst case scenario that bitcoins are worthless. Government backed currencies despite not being tied to the standard of a physical good have a sovereign entity responsible for their value thus they are as valuable as your trust in that sovereign.
What does it mean to trust in a sovereign in this case? If I take a $20 from my wallet down to the county court house, or any other government building you like, what should I trust to happen?
Actually when I used the word "trust" I was thinking of countries with their own currency that have unstable governments and/or economies. So imagine country X exists in South America and you have 20 country X dollars. A week ago one country X dollar was worth 2 US dollars. But today country X decided to introduce into circulation hundreds of trillions of dollars in new currency to deal with their massive debts and it completely devalues your 20 country X dollars.
Or today there is a communist coup in country X and the new regime declares the old currency worthless.
That's what I meant by "trust."
Or today there is a communist coup in country X and the new regime declares the old currency worthless.
That's what I meant by "trust."
No, because you can't go from Bitcoin back to electricity in the same way you could smelt a gold coin.
Maybe you could give someone a bitcoin and they'd give you x amount of compute time on their cluster equal to the time they'd need to generate a new bitcoin. ?
That's a transaction based on market value, not intrinsic value. Someone might take you up on that, but it would depend on their valuation of your bitcoin, not some kind of inherent equivalence between bitcoins and other assets.
Intrinsic value doesn't have anything to do with cost/effort necessary to produce something.
I don't know if intrinsic value is the right term, but I've been thinking along the same line.
A Bitcoin is essentially a tradable hashcash, which has direct value in spam filtering.
"Isn't it enough that I ruined a pony, making a gift for you?
A Bitcoin is essentially a tradable hashcash, which has direct value in spam filtering.
"Isn't it enough that I ruined a pony, making a gift for you?
To everyone claiming that bitcoin isn't a currency, no shit!
Currency doesn't happen overnight, it's a process to get there. Just like anything revolutionary, it takes time before anyone knows what it will be come. By the time (with a very big IF) bitcoin becomes a viable currency, it's price won't be $200 anymore. It'll be at least a few thousand per coin and people will be transacting in micro bitcoins.
What bitcoin is going through right now, is puberty. If you invest early, you reap profits. If you invest after it is stable, there is very little profit to be made.
Love and give every new idea a chance until you've used it and have a personal reason to hate it.
Negative speculation is for chumps
Currency doesn't happen overnight, it's a process to get there. Just like anything revolutionary, it takes time before anyone knows what it will be come. By the time (with a very big IF) bitcoin becomes a viable currency, it's price won't be $200 anymore. It'll be at least a few thousand per coin and people will be transacting in micro bitcoins.
What bitcoin is going through right now, is puberty. If you invest early, you reap profits. If you invest after it is stable, there is very little profit to be made.
Love and give every new idea a chance until you've used it and have a personal reason to hate it.
Negative speculation is for chumps
I don't hate Bitcoin, in fact I think it's a really cool idea, but I think the mindset you are portraying is very bad. Ignoring all but positive speculation is pretty much the definition of a bubble.
How is positive speculation any more admirable?
It's the speculators! Where have I heard that before?
I have a personal reason to hate it: it thinks it's revolutionary when it's actually just... money.
It solves no problems because it carries greed with it.
It solves no problems because it carries greed with it.
"It" is just a system. It doesn't think anything. It's the people who think it's worth using it for something. So really you hate the people that use it.
Fair (though a bit pedantic :P).
And to be clear, I don't really _hate_ them (or the system). I had to phrase it that way as a rejoinder to his statement; but I am deriving _so_ much amusement out of this whole debacle.
And to be clear, I don't really _hate_ them (or the system). I had to phrase it that way as a rejoinder to his statement; but I am deriving _so_ much amusement out of this whole debacle.
It solves two huge problems merchants face
1. Ultra low transaction fees 2. No chargebacks/reversals
1 and 2 are features of Credit Cards and Paypal which make ads up to a sizable % to anyone trying to sell online.
1. Ultra low transaction fees 2. No chargebacks/reversals
1 and 2 are features of Credit Cards and Paypal which make ads up to a sizable % to anyone trying to sell online.
It solves the problem of giving Libertarians something to feel good about?
greed, when directed with proper force, is how progress is made.
unchecked greed, of course, is when progress happens unevenly for society.
unchecked greed, of course, is when progress happens unevenly for society.
The naive souls who recently bought bitcoins to make a 'quick buck' are in for a rude surprise. In the short run, no one knows how Bitcoin's price will fluctuate.
In the long run, however, if Bitcoin continues to work as intended, the more people around the world who adopt it as a store of value and/or medium of exchange, the more demand there will be for it, and with supply being fixed, growing demand will be reflected in a rising price.[1]
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[1] My full thoughts on the matter: http://cs702.wordpress.com/2011/05/29/on-the-potential-adopt...