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.
Volatility (Score:2)
Just plummeted from $20 to $13 in about 5 minutes. Now, not 30 minutes later, it's back to $19.5. Go figure.
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Aren't there still relatively few bitcoins in existence? Shouldn't this particular problem become less severe with time?
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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
Re:Volatility (Score:4, Interesting)
There is a lower bound to the number of BTC you can transact. More importantly, the number of coins in existence is very important --- the value of 1 BTC is going to be determined, at least to some extent, by the number of BTC in existence. The worry is that people will hoard coins in the expectation that supply won't keep up with demand.
This throttles the market because (a) the value of BTC is now based on speculation, and (b) huge sums could be dumped at any moment, leading to currency instability.
I said this in another comment but I'll say it here too: BTC should have an expiration date, and be rolled back into the market when they're not used. Alternatively the limits on coin creation should be adjusted.
Re:Volatility (Score:4, Insightful)
To put it another way, it is about demand, and the demand for bitcoins will not be very high in the long run (unless a government somewhere starts accepting bitcoins for tax purposes).
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This is known as the 'bull trap' period.
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Bitcoin has roughly the same r
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Value is created by scarcity coupled with demand. The demand for money is ultimately created by people who need money to settle a debt with the government; for most people that is called "paying taxes." We used to use gold for this purpose because it is difficult to counterfeit, it is durable, and it is scarce enough to ensure that
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I wanted to buy a few at $7 a couple of weeks ago. Any way you look at it, high price or low, I would have come out way ahead if I had.
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Any way you look at it, high price or low, I would have come out way ahead if I had.
This is the fallacy that gets people into so much trouble participating in speculative bubbles. "If only I had bought low, I surely could have sold high!"
The nature of speculative bubbles means that most of those who buy low don't sell high. The collapse may happen too suddenly. Or your attempt to sell may even trigger a crash before you can find a buyer. They always have to pop, for the exact same reason that pyramid schemes can't make the whole world rich. It's a kind of gambling game, like playing c
Any small market will be volatile (Score:2)
But Bitcoins? Who gives a fuck?
Go buy some silver coins, at least when the US government and Federal Reserve are done fucking the dollar over you'll be able to spend them.
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No you won't. Who will take them?
Who will be testing to see if they are real?
If the economy collapses that far foreign currency will be used long before gold or silver. Even then, expect prices to be very high as demand for good will be much higher than demand for stores of value.
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So how many troy oz does a wife cost?
So other than salt and child brides, what can you buy with gold?
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My wife keeps saying this, but at ~35 dollars an ounce, I think it's already a bubble price. Serious question: what's the real price of silver, in say, movie tickets or bags of groceries, and what's it going to be 18-24 months from now?
In 1964 a silver quarter bought a gallon of gas. Today it buys not quite two gallons of gas. Given all the advancement in exploration and production technology, this is about right. Just like computers get cheaper with better technology and higher production, all commoditie
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>Interestingly, average wages are only 10x of what they were in 1964 while commodities, like silver are up 25x or so. If the currency had been kept sound, today's wages would be seen to have decreased by about 60%. This is the erosion of the middle class that the Federal Reserve helps hide by inflating the Dollar.
That is absurd. Do you really think ounces of silver is a good measure of prosperity or capital? How much did an iPhone cost in 1964?
What did an ounce of silver buy in 1964 in terms of food, clothes, TV, cancer treatments, etc? Is the median person in 2011 really 60% worse off than the median person in 1964?
And you think this is due to the Fed?
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Very valid point, though I wouldn't use movie tickets to measure value as those prices aren't as closely tied to production costs and demand. Go for other commodities when trying to evaluate such things.
Actually, I think that's a very big part of the problem with the US economy lately. Production of real, tangible value is going down in the US. You still produce food, which is pretty good, some cars and a few other things but nowhere near as much as what you import. A country's currency is only worth so
Bitcoin is worthless in the long run (Score:2)
When someone can point me to the source of value for bitcoins, and demonstrate why bitcoin holders won't start dumping thei
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Exactly. Currencies of any kind have value for one reason and one reason only: people have confidence that they can trade them for something that they value. If I sell you something in exchange for some dollars, euros, yen, or little lumps of precious metal, then I'm confident that I can later exchange these tokens for something of approximately equal value later. If I took some kind of commodity in exchange (gold and silver are popular, but almost any commodity works equally well - the earliest recorded
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That's probably a good gamble in the short run, given how much press attention bitcoin is getting recently, but in the long run there's no reason to hang on to bitcoins. As soon as the speculators leave the market, the investors are going to find that they are left with something that has a value reflecting what backs it: nothing.
I'd agree with you except for one thing: the Silk Road. Like oil and dollars, it only accepts bitcoins for payment. There will always be some value in bitcoins as long as you can use them to trade for drugs. There will always be people willing to trade dollars for your bitcoins so that they can use them to buy drugs, even if you don't want drugs. For a while bitcoins have been just another small medium of exchange like e-gold, but with the Silk Road they are becoming more like another currency.
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So, if I manage to exclusively work to earn bitcoins, and exclusively pay with bitcoins, never touching a dollar, the US government will very kindly not tax me?
Sure, if you also own no property, run no services that are taxable by the government, produce no goods that require tax payments, etc. Taxes on not just on income.
Essentially, to live without paying taxes of any kind, you would need to be a homeless beggar who buys nothing and lives only on the charity of others.
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The ultimate value of Bitcoin does not seem to exist; Bitcoin is only worth something right now because of speculation about its future value. Eventually, either Bitco
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I don believe in it. (Score:5, Funny)
I think it is weird and irrational that we should let our lives be determined by a totally imaginary thing, this "value," where all wants and needs are collapsed into one measure, "value" and its accumulation. Now if you ask me, I will stick to real value like dollars which is the natural measure of Man and all his works, not some silly thing on the internet that is really just an electron representing some fucked-up historically determined concept for which millions starve and a few prosper.
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+1 - Beautiful sarcasm.
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Dollars... real dollars (Score:3)
What years were your dollars coined in? ;-)
Don't you just love that silvery ring when you hold them in the center, and tap the outer rim?
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Yeah exactly! Heavy, shiny metals were made by God to count and represent our worth to society and ourselves. It is so obvious that it requires no proof. Whereas wood pulp, that is fake value, it only exists in your head, I don't care WHOSE picture they print on it, even if it was Jesus giving George Washington a handjob while Abraham Lincoln and Adam Smith watched from behind a peephole!
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Re:I don believe in it. (Score:5, Insightful)
I have some tulips for sale.
Re:I don believe in it. (Score:4, Insightful)
Think it'll work with houses too?
Poocoin (Score:5, Funny)
I Now if you ask me, I will stick to real value like dollars which is the natural measure of Man and all his works.
I'm now selling my poo as a currency. Like bit coin it can only be mined at a steady rate so it can't be manipulated. My Poo is marked with my DNA so it can't be forged for less than it costs to make. It's Natural, and a work of Man.
Now rather than transport it to you in all it's glory, I have established a Poo Reserve. The Poo holding company issues signed electronic Goombah Poo Reserve Demand notes ("poocoin") backed, as gold once backed the dollar, with Poo, redeemable on demand of actual Poo.
I am also setting up the first Poo National Bank. The bank will accept deposits of your electronic Poo Demand notes. It even pays interest on your deposits.
The Bank will also manke loans against it's deposits. So you can take out a loan at a very modest interest rate, all payable in Poo Demand Notes.
What happens next is easy to anticipate. People will Borrow Poocoin and pay off their debts for goods and services. The people paid off, will naturally want to earn some interest so they will pretty much all deposit the poocoin back in the bank to get that interest rate until they need to spend it on something. IN the mean time, with all those fresh deposits, the bank can now make new loans.
After a time T, the total poocoin deposited in the bank has now doubled. The total amount of Poo has not doubled. But what has happened is there are the Liabilities (Deposited Poocoin) and the Assets (borrowed poo coin), that cancel allowing the effective amount of Poocoin in circulation to have doubled.
And pretty much every time T after that the assets and liabilities both grow by the same amount. forever. the BM2 money supply grows without bound even the BM1 amount of the intiall Poocoin the bank had has not changed.
Everything is fine unless of course too many of the people want to withdraw their deposits at the same time. Then unless all the loans can both be called and people can pay them instantly, there is a collapse.
Just like bitcoin but more natural and actually backed by something real and tangible, not "electronic work". You can redeem poocoin for manure but you can't redeem bitcoin for anything.
Re:Poocoin (Score:5, Funny)
It's true, many things are unique and tradable (Score:2)
The value comes from whether or not someone accepts it as valuable, period. Dollars happen to have a lot of people convinced at the moment, but that will change, empires rise and fall, one day they will become worthless to everyone except collectors. So I for one salute you in attempting to sell your shit as currency. Good luck with that.
Bitcoins are more convenient than trading sacks of shit. And they happen to be more convenient than trading dollars too. So I really hope that Bit
shitcoin (Score:2)
Bitcoins are more convenient than trading sacks of shit. And they happen to be more convenient than trading dollars too. So I really hope that Bitcoin can be given a chance as a currency. It would be great for my business (100% freelance online developer.)
How is bitvoin any less easily transacted than the electronically traded poocoin? Or Excahnge traded goldshares?
Of course Bitcoin can be manipulated (Score:2)
"Like bit coin it can only be mined at a steady rate so it can't be manipulated."
Bollocks, you clearly have no idea what money is.
Anything used as currency can be manipulated in a fractional reserve manner. Why the fuck do you think we have bubbles and crashes?
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Send me your paypal address and I'll invoice you for a baggie. I'm going to toss in a free bag of mucous for the first 1000 customers, so don't delay.
Bitcoins teach us a lesson. (Score:2)
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Yeah exactly! Why should the government try to regulate the market of values? Everyone knows that the market knows best because commodity production for the accumulation of value is bound to make everyone happy in the long run. It's human nature, after all. I learned that from Robinson Crusoe, which proves it. If the government would just let me beggar my neighbor in peace then we would all become wealthier, or at least as wealthy as we deserve to be. But now you've got these socialists in power who are all
roller coaster ride (Score:2)
if you have bitcoins, just hold on for the ride
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If everyone's hoarding them, then there will be very few transactions, which will only increase the volatility. If you want to stabilize the economy, use them.
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If everyone is hoarding bitcoins, there will be no volume on the exchanges. Right now, mtgox has about 100.000 bitcoins traded every day, which is about 1.5-2 million dollars.
I don't think hoarding will every became problem for bitcoin, unlike gold, bitcoin is easily transferable.
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.
Just one exchange (Score:3)
Even though MtGox is the largest BTC exchange, this dip in value seems to have affected only that one exchange. Tradehill for example was completely unaffected. Bitcoin is still a pretty small currency so these kind of events should be expected until more people buy into it to create stability. If nothing else, it may attract daytraders. :-)
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The cause of this is actually extremely simple, dwolla withdrawals from mtgox were down on mtgox for a few days, so nobody had any reason to sell BTC.
As soon as it came back up the volume of asks exploded.
The missing BTC (Score:4, Interesting)
One potential problem is that there are huge stores of Bitcoin floating around, and nobody knows who owns them. Some were created "back in the day" when the network was small and computation was easy. Others were probably picked up by curiosity seekers, who then lost interest.
Either way there are potentially plenty of Bitcoin that could come back on the market at any point, depressing the price and leading to a currency crash.
What the Bitcoin economy needs is an expiration date. Coins must see some transaction once every two years or they become invalid. Alternatively they could be rolled back to the community via through some new mechanism.
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There aren't 21 million USD, there's an ever increasing supply. The gov't constantly monitors the money supply --- through the imperfect proxy of monitoring prices --- and uses its powers to create more. The goal is to maintain stability plus some inflation.
Thus while it's possible that there are huge hoards of USD left over from the early days of the republic, it's quite unlikely that their sudden introduction wou
Bitcoin is imaginary (Score:5, Insightful)
Yes, yes, all currency is imaginary. But there's imaginary and frigging deluded.
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To varying degrees. US currency is legal tender for all debts public and private, well within the US, so as long as you have the bills to pay the debt they have to accept it no matter what the ultimate outcome might be, even if they would make more money requiring a different form of payment. But, you can still see massive inflation when the Fed decides that the rich aren't rich enough and starts printing money to give the rich interest free loans.
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so as long as you have the bills to pay the debt they have to accept it
That's true, but the prices will rise to match actual value.
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US currency is backed by the treasury department of the united states of america.
O RLY? It USED to be backed by the US Treasury but that ended when Nixon took us off the gold standard. Now its backed by the faith people place in the ability to exchange it for useful goods and services in the future.
Some people mistrust this and put their money into gold, land, stocks, other currencies etc. Of course this is really no different because they are evidencing faith in the idea that they will be able to exchange
Re:Bitcoin is imaginary (Score:5, Informative)
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Libertarian stupidity. That's something pretty durable.
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It means that they will accept it in payment for debts. Bank notes are backed by the bank that issued them, for example. In the UK, that's actually written on the notes: the Bank of England (or Scotland, depending on the note) promises to pay the bearer, on demand, the sum on the note. The US treasury department will accept the US dollar in payment for all debts, most especially for taxes. This means that there is a demand for dollars, because there are lots of people who owe the US government money (i.
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.
Don't feed the trolls (Score:2)
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Pick your poison. (Score:2)
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It's because nobody is that old, the original ones being issued near the end of the 18th century. So, unless you're very long lived, the actual loss of purchasing power over that period isn't a big deal. Up until relatively recently wages would go up by a similar figure, and typically somewhat more than inflation as increases to productivity would take effect. The dollar itself is just a place holder, the only reason to care about inflation at all is if you're the type of person that's in the position to ho
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Inflation at a modest rate (2-3%) is actually a good thing for the economy. It encourages present consumption, lending, or investment over currency hoarding. Noticeable changes in currency's purchasing power over a time scale of minutes, days, or weeks, however, is a bad thing because it causes major economic distortions and lots of wasted activity trying to avoid the negative consequences of these changes in value.
Re:Pick your poison. (Score:4, Interesting)
I used to buy into that fairytale as well, but it's not true. There is no correlation between inflation and economic health beyond the number being relatively stable. Modest inflation or deflation is a tolerable evil, but one is not better than the other and certainly neither is more desirable than being rid of both completely. You're not going to do that with a fiat currency ever, a fiat currency will tend towards a small amount of inflation.
Inflation itself has been the means of stealing from the poor to give to the rich. In the US we've had insufferably low interest rates on the types of accounts that the poor can afford to have, whereas we've had insufferably low taxes on capital gains for the rich. Leading to a perverse situation where the banks are taking the money from the poor and paying it out as dividends and capital gains to the rich.
If you really want to encourage investment or savings in savings accounts over currency hoarding, then there are better ways to do that. Such as preventing the federal reserve from giving low interest loans during boom times. People are going to spend when interest rates are lower than inflation and they haven't got enough money to properly invest. I'm not sure what other result one would expect. If you want interest rates to be low, then you pretty much have to eliminate inflation, and possibly even start destroying currency to bring yourself into a situation where that interest rate is somewhat higher than inflation.
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While your posting is quite insightful this here: Modest inflation or deflation is a tolerable evil is not really correct.
A modest inflation is easy to handle and control by the federal banks (usually). The goal is to keep it at a low rate, getting it high is bad for the poorer people, getting ti to low opens the chance for deflation. Deflation is very very very bad for current economies/currencies. Say you have a contract to buy flour every month for your bakery chain. The contract is running out in 3 mon
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Silk Road (Score:2)
This "Silk Road" website seems to be the crux of the problem, but I can't even verify it's existence. No search engines turn up links for anything other than a Silk Road videogame, a forum, and a few other innocuous venues. As far as I can tell, the senators complaining about it must be smoking product from this mythological website.
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Traditional drug dealers may be harder to find, but you're just another anonymous face passin
Still an ad (Score:5, Insightful)
The gst of the article is "Bitcoin is important. It's just like real money. See, it even has a market like real money, but the problems of the market aren't too bad." Despite the Slashdot headlne mentioning the volatility, the article goes out of its way to say to say that the problems aren't all that bad and goes on to emphasize how much it is like real money. It then goes for four sections (out of five total) explaining exactly what Bitcoin is, why people might want to have it, how it's being attacked for no fault of its own, and how some people don't like it but it's just paranoia.
It's a disguised ad It's like having an article whose headline says that a popular diet doesn't always work, then reading the text and finding that the reason it doesn't work is because it's too natural and some people refuse to obey the diet because they don't like natural things. Then followed by paragraphs of details about the diet, where to buy a book about it, and complaining about how the media doesn't like the diet.
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You mean an article explains what some esoteric new thing is that not everyone might have heard of? It even puts the explanation after the description of the covered event, so that seasoned readers can skip that part without missing anything? You mean, it's like a real article written by a real journalist?
I mean, yes, there's always a risk of astroturfing. But at least understand what you complain about. The alternative is articles that never mention what that new thingamajigg is they are talking about... o
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Actually writing an article about Bitcoin problems would require maybe 4 lines describing what Bitcoin is, and *no* lines referring to "misconceptions" that people have about how bad Bitcoin is, nothing referring to "unfunded paranoia", and no market-speak.
Not a currency yet (Score:4, Insightful)
These swings are fairly meaningless since Bitcoin hasn't achieved its goal of becoming a currency yet.
The markets have turned it into a volatile foreign exchange game, and people are just trying to make a quick buck playing the market. There currently isn't any 'currency' aspect to it, since there's damn near nothing you can buy with bitcoins.
Since they failed to achieve any intrinsic value of their own, they are currently just bad, unreliable representations of legal tender. As long as that is true, nobody will ever accept them as payment for real goods or services.
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Which it won't. The main purposes of Bitcoins at the moment are scamming and money laundering. I'd be surprised if there weren't already a few governments investigating the legality of the whole thing as I type. Especially given the utility it has in buying illegal goods and or services.
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Nefarious Activities? (Score:4, Funny)
The best currency is still Legislative votes. Untraceable and the people in charge of the tracing have a vested interest in keeping it that way.
Perhaps... (Score:2)
Bitcoin is not worthwhile as a currency (Score:3)
I discussed this in my post from May 19th:
http://slashdot.org/comments.pl?sid=2167958&cid=36176946 [slashdot.org]
Still applies. That chart isn't the chart of a proper currency pair (USD/Bitcoin), it's the chart of the price of a speculative asset in a bubble.
The people who set up Bitcoin had some good ideas, but they didn't think things through properly and they need to start over. The way they set up the allocation of a fixed amount of bitcoin per day was bound to create huge value distortions as more people started trying to create bitcoins and entered the market for buying and selling bitcoins.
The value of a bitcoin is therefore actually not a direct function of calculation work performed, but rather a function of the number of users/number of total computing cycles used to compute bitcoins (because the number of bitcoins issued per day is nearly constant as workload to find them increases - it's not actually constant, but rather a gradually decreasing series over time, but the amount of computing power dedicated to it has grown much faster than this function).
This is completely nonsensical. It is making the asset more and more scarce and driving up prices, but also making it less and less likely that anybody real would ever want to accept the asset as a currency replacement.
Good computer science, bad economics. Bitcoin has already failed because of this. Nobody looking at these charts would ever want to accept this stuff as currency.
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IANAE, nor have I even properly studied economics, but it does seem like bitcoins by design can't help but become a bubble. I may not know much about economics, but it's telling that on seeing how increasingly slowly new coins were generated I had to resist the urge to buy up a bunch before adoption became widespread and they became valuable. A quick inspection of the bitcoin system reveals that since the number of bitcoins in existence is in no way related to the number of people using them, their value sh
Bitcoin bubble (Score:5, Interesting)
Look at the Bitcoin price chart [bitcoincharts.com] . This is a price-only 90 day chart. The site normally displays the price on top of the volume, which obfuscates the trend. Displayed in this form, the chart just screams "bubble".
Yesterday's drop takes the price back to where it was on June 6. Which is twice the price of June 1. Which is twice the price of May 1. Which is three times the price of April 4. Yesterday just happened to be the first big drop.
Patterns like that in something that doesn't generate revenue are usually associated with "High Yield Investment Programs" and Ponzi scams. One wonders how many Bitcoins the people behind this bought early.
Ob. Hitchhikers Guide quote (Score:2)
As ever, Douglas Adams saw this coming:
Bottom line, bitcoin is still rangebound (Score:3)
I don't know if bitcoin is a good store of value, but I do know that it is worth considering as a transaction currency, because it is unregulated and range-bound.
We all know bitcoins can't go to infinity, because there is a infinite amounts of goods out there, but we also should know that bitcoin will unlikely go to zero. In fact, I can guarantee that it will not go to zero, because I can take a few K of my own money and guarantee an exchange value for all the bitcoins in existence. Now, why would somebody do that? Well, because bitcoin can be useful as a private transaction currency. As long as it is useful for transactions, it will probably be worth it for somebody somewhere to back it, for something.
I don't know if it is in a bubble, or how volatile it will be, but as long as it's range bound, the market will be able to compensate for that and make it useful. Even if the nature of bitcoin makes it deflationary, and susceptible to wild fluctuation. As long as it's range-bound, and useful for transactions, I don't believe the market will fail. However, it may change its pricing structure. People may price their stuff dollars, euros, or gold, and then complete the transaction in bitcoins. Even if that's the best that bitcoin can do, its still a major improvement.
Another very important thing. When governments screw with the currency, they almost always accompany it with things like capital controls, legal tender laws, limited withdraws, forced exchange rates, and so on. Bitcoin has none of that getting in the way, meaning the market will probably be extremely flexable about bitcoin use.
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because there is a FINITE amounts of goods out there
$2MM+ worth of nerds just got played (Score:5, Insightful)
Bitcoin continues to drop (Score:3)
Opened today at $23.95, current price $16.75.
I'd worry about getting a real currency out of the system. After you've "sold" BitCoins, you have to get settlement in another currency. This is done through rather flakey outfits like Liberty Reserve [libertyreserve.com], which requires arbitration in Costa Rica, or Dwolla, Inc [dwolla.org], which gives no business address on their web site but is incorporated in Iowa with a business address of 1312 Locust St, Des Moines, IA 50309 - a boarded up building in Google StreetView.
Re:Bitcoin continues to drop (Score:4, Interesting)
Bitcoin now at $11.01, down from $28.92 at Friday's open. No further comment necessary.
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.
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Why does an exchange need a physical location, apart from some hosting or colocation?
Because you need someone with identifiable assets whom you can sue. A "perception of trustworthiness" is not enough. Ponzi schemes have happy customers right up to the crash. See Bernard Madoff [wikipedia.org].
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It's great for money laundering.
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Where do I sign up?
Here. [atf.gov]
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It does not matter that they could at one time be turned in for gold. What matters is that I can buy things I want or need with currency. Try actually doing that with gold. Go to your local gold-seller, get a real gold coin and try to buy groceries with it, or a computer or anything else. When that fails go back to the gold-seller, sell the coin to him and see how much value you just lost so you could get your currency back. It would literally be cheaper to buy foreign currency and exchange it when you need
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"No one out there is foolish enough to trade gold for bitcoins."
I'm surprised nobody's been buying those $100 American Platinum Eagle coins in bulk and then using them in Utah, which has just recently set up a weekly price quote per ounce of platinum to set the weekly value of that coin. $100 investment gets you a $1500-1800 token in Utah. Bullion coin is getting recognized in Utah, take advantage of it while you can!
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Why anyone would pay real money for this fake virtual money? It's just not logical.
Easy: because people are not logical, and because they think that there will be a greater fool than them somewhere down the line. If you'd bought BitCoins yesterday at their $10 rate and sold them today at the $20 rate, you'd have made a profit. If you bought them at $10 and hold on to them until people realise that they've run out of suckers, then you will make a loss.