Friday's Big Swings, Mostly Down, Illustrate Bitcoin Value Volatility 476
An anonymous reader writes "As cool as Bitcoin is, it looks like it lost 1/3 of its value in the last 24 hours. Lots of big sells, complaints of liquidity, and pissed off nerds." The linked article goes on to explain that the value rose again, so the aggregate loss was considerably less. The author also helps defuse claims that Bitcoin is untraceable or otherwise especially well suited to nefarious activities.
Re:roller coaster ride (Score:4, Informative)
Wow... my $1.59 equivalent of bitcoin just became $1.00 equivalent.... if I can ever spend it for something.
On the other hand my US Dollar (The real kind, coined in 1901) is worth $28.00 in Federal Reserve "Notes"
I'll keep stacking both kinds, as they each have their appeal to me.
Re:Volatility (Score:3, Informative)
You can transfer tiny fractions of a bitcoin, so the number of bitcoins in existance isn't that important for liquidity. It's not like a stock.
Right. The important number is the number of bitcoin traders. Stable markets are relatively stable because they have a large number of buyers and sellers. Liquidity isn't a problem when there's always lots of people looking to buy. When there's relatively few people in the market, it's easy for someone trying to sell to quickly chew through all the buy offers at or near the current rate. If they still want to sell more, price begins dropping precipitously as they can now only sell to people who put in relatively low buy offers, since they've exhausted everyone who wanted to buy near the market rate. Taken far enough, you can complete exhaust all the open buy offers, at which point your liquidity hits zero -- you can't sell if no one is buying. The problem is the size of the market...
Re:Bitcoin is imaginary (Score:5, Informative)
Re:Bitcoin is imaginary (Score:5, Informative)
Yes, yes, all currency is imaginary.
Not true; currency is a tool used by governments to manage the exchange of goods produced by citizens for services provided by the government. We pay for government services with taxes paid in currency (issued by the government), and the government pays for private sector goods and services will currency. Currency has value because citizens are required to pay taxes; you cannot opt out of paying for government services (one might argue that by virtue of being a citizen, you are receiving those services [e.g. the government is defending you from foreign enemies], and not paying would amount to theft).
Before currency, of course, taxes were collected by government agents taking goods directly from the citizens -- say, 2 head of cattle, or perhaps some fraction of the grain produced by your fields, etc. Currency is much more convenient, since government agents do not have to judge whether or not a piece of gold or some paper money or a check is healthy and disease-free (they would have to do this with cattle, of course). Currency also allows the government to provide a much broader array of services, because it simplifies the system of paying the cost of those services -- salaries paid in currency are a lot easier to compute than salaries paid in physical goods.
I know, in high school we are all told that currency gets its value because everyone in society agrees to it, as if some magical process occurred. The agreement is simply an part of the broader agreement to be governed; there is no magic here, just politics and economics.
Re:Bitcoin continues to drop (Score:5, Informative)
Update: The main "BitCoin exchange", Mt. Gox [mtgox.com], gives no information about the business entity behind the exchange, not even an address. The site has only "Tibanne Co. Ltd. (Japan)", which is an ISP in Tokyo.
Mt. Gox is a depository institution - you have to deposit BitCoins to sell them, and after the trade, you now have credit in some currency with Mt. Gox. Then you have to get the money out of Mt. Gox. The withdrawal process is slow [bitcoin.org]. Also, on one forum, there's the comment [bitcoin.org] from a Mt. Gox staffer (?) "If we have a lot of LR activity (like, about now), withdraws will be put on hold and executed later (ie. the next day) in the order they were received." That just screams "Ponzi scheme". They're an exchange; if they're honest, they should never have a cash flow problem.
The more I look at the BitCoin financial infrastructure, the more it looks like the High Yield Investment Program scams. Multiple offshore entities, withdrawal limits, unexpected delays in payouts, anonymous businesses. HYIP schemes are notable for being difficult to cash out of. They have to be, because they're Ponzi schemes.
Re:Bitcoin continues to drop (Score:4, Informative)
The delay is, indeed, a problem for MtGox to solve, with cooperation from Liberty Reserve—there is nothing the MtGox can do about LR transfer policies on their own. However, you were accusing them of delaying the transfers to further a scam, which is a very serious statement for which you have offered no compelling evidence. Moreover, there are already other means of withdrawing money from MtGox accounts which do not involve Liberty Reserve or their API restrictions; in fact, the preferred withdrawal system is Dwolla, not Liberty Reserve, and direct deposit is also available to EU accounts in the SEPA zone. It is unreasonable to blame MtGox for forcing users to employ Liberty Reserve, with its attendant limitations, when there are other options available.