BitCoin Value Collapses, Possibly Due To DDoS 605
hydrofix writes "The Bitcoin-to-USD exchange rate had been climbing steadily since January 2013, from around 30 USD to over 250 USD only 24 hours ago. Now, the value bubble seems to have burst, at least partially. The primary trading site MtGox reported a drop in value all the way down to 140 USD today, a loss of almost half in real value. With many sites unreachable or slow, there are also news of a possible DDoS attack on MtGox: 'Attackers wait until the price of Bitcoins reaches a certain value, sell, destabilize the exchange, wait for everybody to panic-sell their Bitcoins, wait for the price to drop to a certain amount, then stop the attack and start buying as much as they can. Repeat this two or three times like we saw over the past few days and they profit.'"
Re:Well the ultimate value of a dollar is (Score:4, Interesting)
Re:bottleneck (Score:4, Interesting)
Vulnerablity of single major channel (Score:4, Interesting)
MtGox owns too much of the Bitcoin conversion market. They need a solid competitor.
Right now, if you can harm MtGox, you harm the entire Bitcoin network. Slow it down and you slow down Bitcoin trades. Manipulate it and you manipulate the entire market. Regulate it and you regulate most of the market. Destroy it, and Bitcoin may completely die, at least in the short term.
I'm not saying any of this is MtGox's fault - they're doing a good job at what they do. But they're the closest thing Bitcoin has to a single point of failure. We need redundancy.
Re:talk (Score:5, Interesting)
we can get real good data from this experiment.
From that perspective, Bitcoin is fascinating. The Bitcoin world, tiny though it is financially, has seen just about every classic scam. Ponzi/HYIP schemes, pump and dump schemes, fake bank schemes, fake exchange schemes, fake stocks, and ordinary theft - it's all there. It makes the penny stock market look legit.
Someday, assuming they haven't lost them, the people who generated Bitcoins in the early days when it was easy will cash out. Most of the early Bitcoins are not being traded. Somewhere there are early adopters with substantial value. They can't exit yet without clobbering the price, though. Not enough suckers putting in real money.
So Much For DDoS Protection... (Score:2, Interesting)
Re:Tax payment (Score:2, Interesting)
"The other important thing to remember is that we will no longer accept cash at any of our branch locations -- no exceptions," http://www.kpbs.org/news/2012/nov/29/san-diego-property-taxes/ [kpbs.org]
Re:talk (Score:3, Interesting)
I think Bitcoins have value, I don't know what it is. Whoever wrote TFS here doesn't understand what 'collapse' is doesn't know anything about economics or mechanics of trading.
The volume is thin and there is no good way to take a short position, this is what MtGox needs to do if they are interested in a more stable current price against most currencies. People have to be able to take a short position, that's part of the balance that's missing. The Bitcoin protocol allows for trades, but it doesn't allow for borrowing that provides a contract back of some sort into the system, but it's not clear that a contract is possible in the protocol, so it has to be a central exchange for now to allow shorting of the coins.
The value moves like a thinly traded stock (Score:4, Interesting)
One where there's lots of speculation. These kind of shifts are NOT what you want for a currency. When a currency changes value by 10% in a YEAR that is a problem governments try to deal with (2-3% is the normal target), never mind doubling or halving in a day. Even a normal stock or commodity would be having some extreme problem for that kind of movement to happen.
It shows all the signs of sever speculation and a bubble. People playing it to try and make a big short term gain, at the expense of others.
Re:Well the ultimate value of Bitcoin is (Score:5, Interesting)
Bitcoin does have an intrinsic value: the computing time it takes to mine a bitcoin.
Stop. Bitcoins have an intrinsic COST. The computing time that goes into producing a bitcoin is comparable to the paper and ink used to print a physical US dollar, or the wages and electricity cost of the "creation" of purely electronic dollars. (Which are really debts, rather than currency, but that's an entirely different boneheaded idea that the one you're postulating.)
Once a bitcoin is produced, it cannot be redeemed for an equal amount of computer time. In fact, using a bitcoin requires SOMEONE ELSE to pay for the verification chain that makes this electronic currency at all feasible.
(you're right that it's a bubble, and I'm not here to argue the system's inherent merits or flaws.)
Having said all that: the dollar, in contrast, really does have no practical intrinsic value. Ever since 1971, when Nixon threw the last vestiges of any standard away. (And defaulted on U.S. debt in the process, by the way. People who said the "fiscal cliff" would be the first time the U.S. ever defaulted on debt simply don't know their history.)
The US dollar is backed up by an almost non-intuitive fact of modern society. It's legal tender for payment of debts. As in, if you don't pay your employees or pay for that meal in a restaurant, or if you just wrong someone more generally, the courts will denote whatever judgement is finally ordered against you in US dollars, and if your wealth is denominated in some other currency, you'll be subject to whatever market exchange rate you can manage to produce sufficient dollars to pay the debt.
Or, in short, "people who say the US dollar isn't backed up by anything don't know what they're talking about."
On a different note, though, I'd be interested if you could point to a US debt that was denoted in a weight of precious metal and not redeemed for sufficient value to satisfy the bond-holder. Just because in 1971 the President of the United States stopped offering gold for dollars doesn't mean the US "defaulted" any more than Wal-Mart selling out of ammo means they "defaulted' on that gift card you bought. (The phrase "Redeemable in gold on demand at the United States Treasury, or in gold or lawful money at any Federal Reserve Bank" was gone from bank notes decades before. And still did not specify the amount of gold.)